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 September30,
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 November 14, 2008, there were
12,678,885 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 QUARTER ENDED SEPTEMBER 30, 2008
 
 TABLE
OF CONTENTS
  PagePart
      1
              Financial
      InformationItem
      1
              Financial
      Statements (Unaudited)Condensed
      Consolidated Balance Sheets  as of September 30, 2008
      (Unaudited)and
      December 31, 2007
              1Condensed
      Unaudited Consolidated Statements of Operations for the Three and Nine
      Months ended September 30, 2008 and 2007
              3Condensed
      Unaudited Consolidated Statement of Shareholders’ Equity (Deficiency) for
      the Nine  Months Ended September 30, 2008
              4Condensed
      Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended
      September 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
              23Item
      3
              Controls
      and Procedures
              31Part
      II
              Other
      InformationItem
      1
              Legal
      Proceedings
              31Item
      2
              Changes
      in Securities
              31Item
      3
              Defaults
      Upon Senior Securities
              31Item
      4
              Submission
      of Matters to a Vote of Security Holders
              31Item
      5
              Other
      Information
              31Item
      6
              Exhibits
      and Reports on Form 8K
              31Signatures
              32CEO
      Certifications
              AttachedCFO
      Certifications
              Attached




PART
1 - FINANCIAL INFORMATION
 
 Item
1.  Financial Statements.
 
 GENERAL
ENVIRONMENTAL MANAGEMENT, INC. AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED BALANCE SHEETS
  September
      30,
              
              
              December
      31,2008
              
              
              2007(Unaudited)ASSETSCURRENT
      ASSETS:Cash
              
              $
              604,526
              
              
              $
              954,581Accounts
      receivable, net of allowance for doubtfulaccounts
      of $178,779 and $236,781, respectively
              
              
              6,209,475
              
              
              
              6,495,736Prepaid
      expenses and other current assets
              
              
              654,557
              
              
              
              156,340Total
      Current Assets
              
              
              7,468,558
              
              
              
              7,606,657Property
      and Equipment – net of accumulated depreciation $2,506,196 and
      $1,854,141,  respectively
              
              
              7,847,706
              
              
              
              3,950,253Restricted
      cash
              
              
              1,198,450
              
              
              
              1,184,835Intangibles,
      net
              
              
              905,586
              
              
              
              1,028,044Deferred
      financing fees
              
              
              561,545
              
              
              
              394,082Deposits
              
              
              503,804
              
              
              
              282,070Goodwill
              
              
              946,119
              
              
              
              946,119TOTAL
      ASSETS
              
              $
              19,431,768
              
              
              $
              15,392,060
 (Continued)
  See
accompanying notes to condensed consolidated financial
statements.
 1
  GENERAL
ENVIRONMENTAL MANAGEMENT, INC. AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED BALANCE SHEETS (Continued)
 
 September
      30,
              
              
              December
      31,2008
              
              
              2007(Unaudited)LIABILITIES
      AND STOCKHOLDERS’ EQUITY (DEFICIENCY)CURRENT
      LIABILITIES:Accounts
      payable
              
              $
              3,214,047
              
              
              $
              4,314,515Accrued
      expenses
              
              
              2,884,265
              
              
              
              2,780,121Payable
      to related party
              
              
              513,115
              
              
              
              31,871Current
      portion of financing agreement
              
              
              812,500
              
              
              
              662,719Current
      portion of long term obligations
              
              
              43,763
              
              
              
              1,274,464Current
      portion of capital lease obligations
              
              
              613,857
              
              
              
              187,015Current
      portion of convertible notes payable
              
              
              495,848
              
              
              
              -Total
      Current Liabilities
              
              
              8,577,395
              
              
              
              9,250,705LONG-TERM
      LIABILITIES :Financing
      agreements, net of current portion
              
              
              8,538,084
              
              
              
              3,708,694Long
      term obligations, net of current portion
              
              
              1,296,633
              
              
              
              79,842Capital
      Lease obligations, net of current portion
              
              
              1,904,590
              
              
              
              1,046,920Convertible
      notes payable, net of current portion
              
              
              -
              
              
              
              520,208Total
      Long-Term  Liabilities
              
              
              11,739,307
              
              
              
              5,355,664STOCKHOLDERS’
      EQUITY (DEFICIENCY)Common
      stock, $.001 par value, 1,000,000,000 shares authorized,12,673,885
      and 12,473,885 shares issued and outstanding
              
              
              12,674
              
              
              
              12,474Additional
      paid in capital
              
              
              53,168,600
              
              
              
              50,151,615Accumulated
      deficit
              
              
              (54,066,208
              )
              
              
              (49,378,398
              )Total
      Stockholders' Equity (Deficiency)
              
              
              (884,934
              )
              
              
              785,691TOTAL
      LIABILITIES & STOCKHOLDERS’ EQUITY (DEFICIENCY)
              
              $
              19,431,768
              
              
              $
              15,392,060
  See
accompanying notes to condensed consolidated financial statements.
  2
  GENERAL
ENVIRONMENTAL MANAGEMENT, INC. AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
 (UNAUDITED)
  Nine
      months ended
              
              
              Three months
      endedSeptember
      30, 2008
              
              
              September
      30, 2007
              
              
              September
      30, 2008
              
              
              September
      30, 2007REVENUES
              
              $
              24,989,210
              
              
              $
              21,415,043
              
              
              $
              8,630,972
              
              
              $
              8,555,831COST
      OF REVENUES
              
              
              20,327,989
              
              
              
              17,023,247
              
              
              
              6,860,275
              
              
              
              6,878,235GROSS
      PROFIT
              
              
              4,661,221
              
              
              
              4,391,796
              
              
              
              1,770,697
              
              
              
              1,677,596OPERATING
      EXPENSES
              
              
              5,651,106
              
              
              
              10,782,081
              
              
              
              1,845,179
              
              
              
              3,034,039OPERATING
      LOSS
              
              
              (989,885
              )
              
              
              (6,390,285
              )
              
              
              (74,482
              )
              
              
              (1,356,443
              )OTHER
      INCOME (EXPENSE):Interest
      income
              
              
              15,894
              
              
              
              30,056
              
              
              
              6,082
              
              
              
              10,641Interest
      and financing costs
              
              
              (3,748,992
              )
              
              
              (1,815,131
              )
              
              
              (2,087,673
              )
              
              
              (574,998
              )Costs
      to induce conversion of related party  debt
              
              
              -
              
              
              
              (6,737,413
              )
              
              
              -
              
              
              
              (3,189,726
              )Other
      non-operating income
              
              
              35,173
              
              
              
              93,568
              
              
              
              18,480
              
              
              
              25,329Net
      Loss
              
              $
              (4,687,810
              )
              
              $
              (14,819,205
              )
              
              $
              (2,137,593
              )
              
              $
              (5,085,197
              )Net
      loss per common  share, basic and diluted
              
              $
              (.37
              )
              
              $
              (1.53
              )
              
              $
              (.17
              )
              
              $
              (.43
              )Weighted
      average shares of common stockoutstanding,
      basic and diluted
              
              
              12,673,885
              
              
              
              9,661,979
              
              
              
              12,673,885
              
              
              
              11,737,377
  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 NINE MONTHS ENDED SEPTEMBER 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 for value of vested options
              
              
              
              
              
              
              
              
              
              
              634,213
              
              
              
              
              
              
              
              634,213Issuance
      of stock to related party for extension of debt
              
              
              200,000
              
              
              
              200
              
              
              
              219,800
              
              
              
              
              
              
              
              220,000Fair
      value of warrants issued to related party for extension of
      debt
              
              
              
              
              
              
              
              
              
              
              402,482
              
              
              
              
              
              
              
              402,482Issuance
      of warrants related to financing
              
              
              
              
              
              
              
              
              
              
              1,674,035
              
              
              
              
              
              
              
              1,674,035Issuance
      of warrants to related party
              
              
              
              
              
              
              
              
              
              
              57,405
              
              
              
              
              
              
              
              57,405Issuance
      of warrants for services
              
              
              
              
              
              
              
              
              
              
              29,050
              
              
              
              
              
              
              
              29,050Net
      loss for  the nine  months ended September
      30,  2008
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (4,687,810
              )
              
              
              (4,687,810
              )Balance,
      September 30,  2008
              
              
              12,673,885
              
              
              $
              12,674
              
              
              $
              53,168,600
              
              
              $
              (54,066,208
              )
              
              $
              (884,934
              )
  See
accompanying notes to consolidated financial statements
  4
  GENERAL
ENVIRONMENTAL MANAGEMENT, INC. AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
 (UNAUDITED)
 
 Nine Months
      EndedSeptember 30,2008
              
              
              2007OPERATING
      ACTIVITIESNet
      Loss
              
              $
              (4,687,810
              )
              
              $
              (14,819,205
              )Adjustments
      to reconcile net loss to cash used in operating activitiesDepreciation
      and amortization
              
              
              827,861
              
              
              
              559,525Amortization
      of discount on notes
              
              
              210,281
              
              
              
              21,863Fair
      value of vested options
              
              
              634,213
              
              
              
              752,291Issuance
      of warrants and common shares for services
              
              
              57,405
              
              
              
              1,606,395Common
      stock issued for services
              
              
              
              
              
              
              530,225Amortization
      of discount on convertible debts
              
              
              2,141,610
              
              
              
              612,405Amortization
      of deferred financing fees
              
              
              410,127
              
              
              
              187,314Costs
      to induce conversion of debt
              
              
              -
              
              
              
              6,737,413Warrants
      issued to modify debt
              
              
              -
              
              
              
              279,202Accrued
      interest on notes payable
              
              
              -
              
              
              
              67,755Changes
      in assets and liabilities:Accounts
      Receivable
              
              
              1,365,335
              
              
              
              (1,558,205
              )Inventory
              
              
              16,831
              
              
              
              -Prepaid
      and other current assets
              
              
              (264,700
              )
              
              
              (143,016
              )Deposits
      and restricted cash
              
              
              (51,527
              )
              
              
              -Accounts
      Payable
              
              
              (1,477,501
              )
              
              
              580,955Payable
      to related party
              
              
              -
              
              
              
              7,999Accrued
      interest on convertible notes
              
              
              28,141
              
              
              
              -Accrued
      expenses and other liabilities
              
              
              (256,861
              )
              
              
              756,067NET
      CASH USED IN OPERATING ACTIVITIES
              
              
              (1,046,595
              )
              
              
              (3,815,017
              )INVESTING
      ACTIVITIESIncrease
      in deposits and restricted cash
              
              
              -
              
              
              
              (413,404
              )Acquisitions, net of cash received, andnotes
      payable issued to seller
              
              
              (2,150,000
              )
              
              
              -Additions to property and equipment
              
              
              (290,946
              )
              
              
              (518,893
              )NET
      CASH USED IN INVESTING ACTIVITIES
              
              
              (2,440,946
              )
              
              
              (932,297
              )FINANCING
      ACTIVITIESNet
      advances from ComVest
              
              
              10,925,200
              
              
              
              -Net
      advances from (repayment of) Laurus notes
              
              
              (6,413,604
              )
              
              
              844,822Advances
      from related parties
              
              
              32,601
              
              
              
              3,355,243Payment
      for deferred financing fees
              
              
              (147,607
              )
              
              
              -Issuance
      of notes payable to related party
              
              
              472,500
              
              
              
              -Payment
      of notes payable
              
              
              (1,279,536
              )
              
              
              142Repayment
      of convertible notes
              
              
              (52,500
              )
              
              
              -Payment
      on capital leases
              
              
              (399,568
              )
              
              
              -Proceeds
      from exercise of warants
              
              
              -
              
              
              
              119Proceeds
      from issuance of common stock
              
              
              -
              
              
              
              1,888NET
      CASH PROVIDED BY FINANCING ACTIVITIES
              
              
              3,137,486
              
              
              
              4,202,214INCREASE
      (DECREASE) IN CASH AND CASH EQUIVALENTS
              
              
              (350,055
              )
              
              
              (545,100
              )Cash
      at beginning of period
              
              
              954,581
              
              
              
              618,654CASH
      AT END OF PERIOD
              
              $
              604,526
              
              
              $
              73,554SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION:Cash
      paid for:Interest
      Expense
              
              $
              852,648
              
              
              $
              669,811
 
 See
accompanying notes to the condensed consolidated financial
statements
  5
  GENERAL
ENVIRONMENTAL MANAGEMENT, INC. AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
 (UNAUDITED)
  Nine Months
      EndedSeptember 30,2008
              
              
              2007SUPPLEMENTAL
      DISCLOSURE OF NON – CASH INVESTING AND FINANCING
    ACTIVITIES:Conversion
      of related party debt to common stock
              
              $
              -
              
              
              $
              3,902,700Conversion
      of investor interest to common stock
              
              
              -
              
              
              
              196,772Issuance
      of capital lease obligations
              
              
              
              
              
              
              981,327Issuance  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
              
              
              
              -Valuation
      of warrants allocated to deferred fees
              
              
              179,982
              
              
              
              451,602Acquisition
      of leased equipment and capital lease obligations
              
              
              1,658,066Value
      of warrants issued in connection with lease
              
              
              
              
              
              
              187,128Conversion
      of fees due in related party to common stock
              
              
              
              
              
              
              220,000Issuance
      of note payable on acquisition
              
              
              1,250,000
              
              
              
              -Closing
      fees due to related party included as deferred financing
    fees
              
              
              250,000
              
              
              
              -
  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 NINE MONTHS ENDED SEPTEMBER 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
$4,687,810 and utilized cash in operating activities of $1,046,595 during the
nine  months  ended September 30, 2008, and as of September
30, 2008 the Company had current liabilities exceeding current assets by
$1,108,837. 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.
 
 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.
  8
 
 (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 nine months ended September 30, 2008 and 2007, one customer accounted for
13% and 15.5% of revenues, respectively. During the three months ended September
30, 2008 and 2007, one customer accounted for 9% and 25.6% of revenue. As of
September 30, 2008 and December 31, 2007 there was one customer that accounted
for 6% 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 nine months ended September 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 nine months ended September 30, 2008 and
2007.
 
 At
September 30, 2008 and 2007, potentially dilutive securities consisted of
convertible securities, outstanding common stock purchase warrants and stock
options to acquire an aggregate of 16,233,735 shares and 9,312,594 shares,
respectively.
  9
  (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 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.
  10
 
 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.
 
 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.
ACQUISITIONS
  On August
31, 2008, the Company entered into a stock purchase agreement with Island
Environmental Services, Inc. of Pomona, California ("Island"), a privately held
company, pursuant to which the Company acquired all of the issued and
outstanding common stock of Island, a California-based provider of hazardous and
non-hazardous waste removal and remediation services to a variety of private and
public sector establishments. In consideration of the acquisition of the issued
and outstanding common stock of Island, the Company paid $2.25 million in cash
to the stockholders of Island and issued $1.25 million in three year promissory
notes (“Notes”).  Other consideration is payable based on the
performance of the acquired entity.  The Notes bear interest at 8%,
payable quarterly, and the entire principal is due 36 months after closing. As a
result of the agreement, Island becomes a wholly-owned subsidiary of the
Company.
 
 The
purchase price was allocated based upon the fair market values at the date of
purchase as follows:
  Current
      assets and liabilities
                
                
                846,197Property
      and Equipment
                
                
                2,653,803Total
                
                $
                3,500,000
 
 11
  The
Company allocated the excess of net assets acquired to property and equipment
based upon a preliminary valuation performed by a third party valuation company.
The Company has not yet finalized the purchase price allocation which may change
upon the completion of the independent third party evaluation of the assets
purchased.
 
 The
following sets out the pro forma operating results for the nine months ended
September 30, 2008 and 2007 for the Company had the acquisition occurred as of
January 1, 2007:
  Unaudited
 Three
and Nine months ended September 30, 2008
 Proforma
(Unaudited)
  Nine
      months ended
              
              
              Three months
      endedSeptember
      30, 2008
              
              
              September
      30, 2007
              
              
              September
      30, 2008
              
              
              September
      30, 2007Net
      sales
              
              $
              32,286,729
              
              
              $
              27,402,420
              
              
              $
              13,128,576
              
              
              $
              10,827,358Cost
      of sales
              
              
              24,861,224
              
              
              
              20,615,739
              
              
              
              9,633,772
              
              
              
              8,069,368Gross
      profit
              
              
              7,425,505
              
              
              
              6,786,681
              
              
              
              3,494,804
              
              
              
              2,757,990Operating
      expenses
              
              
              9,711,211
              
              
              
              12,582,240
              
              
              
              4,544,580
              
              
              
              3,728,887Operating
      loss
              
              
              (2,285,706
              )
              
              
              (5,795,559
              )
              
              
              (1,049,776
              )
              
              
              (970,897
              )Other
      income (expense):Interest
      income
              
              
              52,922
              
              
              
              61,634
              
              
              
              28,424
              
              
              
              30,542Interest
      expense and amortization of deferred financing costs
              
              
              (3,755,800
              )
              
              
              (1,815,131
              )
              
              
              (2,091,082
              )
              
              
              (574,998
              )Cash
      to induce conversion of related party  debt
              
              
              -
              
              
              
              (6,737,413
              )
              
              
              -
              
              
              
              (3,189,726
              )Other
      non-operating income
              
              
              113,188
              
              
              
              65,275
              
              
              
              77,929
              
              
              
              27,701Net
      Loss
              
              $
              (5,875,396
              )
              
              $
              (14,221,194
              )
              
              $
              (3,034,505
              )
              
              $
              (4,677,378
              )Loss
      per weighted average share, basic and diluted
              
              $
              (.47
              )
              
              $
              (1.48
              )
              
              $
              (.24
              )
              
              $
              (.40
              )
  12
  4. 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:
 
 September 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
              
              
              (436,444
              )
              
              
              (314,031
              )$
              905,586
              
              
              $
              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.
  5.
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 September 30,
2008.  The following summarizes the transactions with GPP during the
nine months ended September 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 nine months ended September 30, 2007 amounted to $55,500.
There were no amounts paid or accrued under this agreement during
2008.
  13
 Advances from Related
Party
  September 30,
                2008
              
              
              December
      31,
                2007(Unaudited)Notes
      from GPP
              
              $
              472,500
              
              
              $
              -Advances
      to Lapis
              
              
              (15,255
              )
              
              
              -Financing
      Fees
              
              
              250,000
              
              
              
              -Accrued
      Interest
              
              
              81,782
              
              
              
              31,871Valuation
      Discount
              
              
              (275,912
              )
              
              
              -$
              513,115
              
              
              $
              31,871
  From time
to time, GPP has made advances to the Company for working capital purposes.
During the nine months ended September 30, 2008, General Pacific Partners or its
affiliated entities 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 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 dividend yield, a
risk free interest rate of 4.78 %, expected volatility of 75.88% and an expected
term for the warrants of 7 years.
 
 During
the nine months ended September 30, 2008, GPP provided services related to the
financing completed with CVC California, LLC. Pursuant to these services the
Company agreed to pay GPP $250,000 and issue a warrant to purchase up to 250,000
shares of the Company’s common stock at an exercise price of $.60 for a period
of six years valued at $179,982 using the Black-Scholes calculation, the Company
assumed no dividend yield, a risk free interest rate of 4.78%, expected
volatility of 78.57% and an expected term for the warrants of 6 years. The value
of the warrant and the cash paid has been reflected as part of deferred
financing fees on the accompanying balance sheet at September 30,
2008.
  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.
 
 Letter of Credit
Fees
 
 During
the third quarter ended September 30, 2008 the Company entered into an agreement
with GPP wherein GPP would provide funds to the Company’s bank and instruct the
bank to issue letters of credit to support various projects contracted to GEM.
As compensation for this service the Company will pay a 2% commitment fee based
on the value of the letter of credit, interest at a rate to be negotiated and a
warrant to purchase shares of the Company’s common stock at $0.60 per share for
a term of seven years. Costs related to letters of credit issued during the
third quarter ended September 30, 2008 are $19,945.
  14
 
 Software
Support
 
 During
the nine months ended September 30, 2008, the Company entered into a three year
agreement with Lapis Solutions, LLC, (Lapis) a company managed by a prior member
of the Board of Directors of the Company’s wholly owned subsidiary, General
Environmental Management, Inc. of Delaware, wherein Lapis would provide support
and development services for the Company’s proprietary software GEMWARE. Services
costs related to the agreement total $10,800 per month. As of September 30,
2008, $15,255 of the fees related to the fourth quarter had been prepaid to
Lapis.
  6. SECURED
FINANCING AGREEMENTS
 
 During
the period 2006 through 2008, the Company entered into a series of financings
with Laurus Master
Fund (“Laurus”) and CVC California, LLC (“CVC”).
 
 The
amounts due under these financings at September 30, 2008 and December 31, 2007
are as follows:
 
 September
      30,
              
              
              December
      31,2008
              
              
              2007(Unaudited)(a)
      Secured notes from Laurus and affiliated entities
              
              $
              -
              
              
              $
              6,413,604(b)
      Secured Notes from CVC California
              
              
              12,830,202
              
              
              
              -Valuation
      Discount
              
              
              (3,479,618
              )
              
              
              (2,042,191
              )9,350,584
              
              
              
              4,371,413Less
      current portion
              
              
              (812,500
              )
              
              
              (662,719
              )Financing
      agreement, net of current portion
              
              $
              8,538,084
              
              
              $
              3,708,694
  (a)
Agreements with Laurus Master Fund and affiliated entities.
 
 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 and a
Secured Non-Convertible Revolving Note (“Revolving Note”) of up to $5.0
million.  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”), whereby the Company issued to
these companies secured convertible term notes ("Valens Notes") in the principal
amount of $1.25 million.
 
 (i).
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.  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
Secured Convertible Term Loan agreement was changed as follows (i) Monthly
principal payment was reduced from $60,606 to $30,303 (from February 2008 to
February 2009), (ii) 4-months grace period for principal payment (monthly
payment started in March 2008), (iii) Interest is to be paid monthly (based
on prime +3.5%), and; (iv) Balloon payment in February 2009 for the remaining
balance of the loan. As of December 31, 2007, the Company had outstanding
borrowings of $973,623 against the Note.
  15
 
 (ii). The
revolving note allowed the Company to borrow a maximum amount of $5,000,000,
based on a borrowing base of 90% of all eligible receivables, which were
primarily accounts receivables under 90 days. The interest rate on this line of
credit was in the amount of prime plus 3.5%, but in no event less than 8% per
annum.   As of December 31, 2007, the Company had outstanding
borrowings of $ $4,194,771 against the Revolving Note.
 
 (iii).
The principal amount of the $1,250,000 Valens Notes and accrued interest thereon
was 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, monthly
principal payment amount of approximately $30,303, plus the monthly interest
payment (together, the "Monthly Payment"), was payable in either cash or, if
certain criteria were 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 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
did 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 balance outstanding
under these notes at December 31, 2007 was $1,245,210.
 
 The Notes
were 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 owned 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
aggregate amount due under these notes at December 31, 2007 was $6,413,604. On
September 4, 2008 the entire amount due on these notes was paid in full with the
proceeds of CVC notes described below.
 
 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 of the convertible notes to be $1,368,397. The closing fees, the value
of the warrants and the calculated beneficial conversion feature was reflected
by the Company as a valuation discount and offset to the face amount of the
Notes, and was being amortized to interest expense over the life of the loan
based upon the effective interest method.  During the nine months
ended September 30, 2008 and 2007 the Company amortized $1,166,968 and $612,405
of this amount which is included in interest expense in the accompanying
statement of operations.  Unamortized valuation discount was
$2,042,191 as of December 31, 2007. The remaining balance of the valuation
discount was fully amortized in September 2008 as part of the new financing
agreement with CVC California described below.
 
 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 were reflected as
deferred financing costs in the accompanying balance sheet and were amortized
over the life of the loan.  During the nine months ended September 30,
2008 and 2007 the Company amortized $394,082 and $187,416,
respectively,  which is included in interest expense in the
accompanying statement of operations.  Unamortized deferred financing
fees were $394,082 as of December 31, 2007. The remaining balance of deferred
financing fees was fully amortized in September 2008 as part of the new
financing agreement with CVC California described below.
  16
 
 (b) Note Agreements with CVC
California
 
 On
September 4, 2008 General Environmental Management, Inc. (the “Company”) entered
into a series of agreements with CVC California, LLC, a Delaware limited
liability company (“CVC”), each dated as of August 31, 2008, whereby the Company
issued to CVC (i) a secured convertible term note ("Note") in the principal
amount of $6.5 million and (ii) a secured non-convertible revolving credit note
("Revolving Note") of up to $7.0 million; (iii) 6 year warrants  to
purchase 1,350,000 shares of our common stock at a price of $0.60 per share;
(iv) 6 year warrants to purchase 1,350,000 shares of our common stock at a price
of $1.19 per share; and, (v) 6 year warrants to purchase 300,000 shares of our
common stock at a price of $2.25 per share.   The principal
amount of the Note carries an interest rate of nine and one half percent,
subject to adjustment, with interest payable monthly commencing October 1, 2008.
The Note further provides that commencing on April 1, 2009, the Company will
make monthly principal payments in the amount of $135,416. Although the stated
principal amount of the Term Loan was $6,500,000, the Lender was only required
to fund $5,000,000 with  the difference being treated as a discount to
the note.
 
 (i). The
principal amount of the Note and accrued interest thereon is convertible into
shares of our common stock  at a price of $3.00 per share, subject to
anti-dilution adjustments. Under the terms of the Note, the monthly principal
payment amount of approximately $135,416 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 our common stock into which the
Note is convertible, through the issuance of our common stock. The Company has
agreed to register all of the shares that are issuable upon conversion of the
Note and exercise of warrants. As of September 30, 2008 the Company had an
outstanding balance of $6,500,000.
 
 (ii). The
revolving note allows the Company to borrow a maximum amount of $7,000,000,
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 2.0%, but in no event less than 7% per
annum. The Revolving Note is secured by all assets of the Company and is subject
to the same security agreement as discussed in (e) above. The note is due August
31, 2011. As of September 30, 2008 the Company had an outstanding balance of
$6,330,202.
 
 The Notes
are secured by all of our assets and the assets of our 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 owned by General Environmental
Management of Rancho Cordova LLC), GEM Mobile Treatment Services Inc., Island
Environmental 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, GEM Mobile Treatment Services Inc. and Island
Environmental Services, Inc.
 
 In
connection with the CVC financing, the Company paid closing fees of $405,000 and
 issued warrants to acquire an aggregate of 3,000,000 shares of our common
stock as described above to CVC.  The Company calculated that the fair
value of the warrants issued was $1,674,035, 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 78.57
% and an expected term for the warrants of 7 years. The relative value of the
warrants of $1,674,035 and the $1,500,000 discount on issuance has been
reflected by the Company as a valuation discount at issuance and offset to the
face amount of the Notes.  The Valuation discount is being amortized
to interest expense over the life of the loan based upon the effective interest
method. Unamortized valuation discount was $3,479,618 at September 30,
2008.
  17
  The
Company also incurred expenses of approximately $100,000 to various professional
firms as reimbursement for CVC's due diligence and legal fees and expenses
incurred in connection with the transaction.  The aggregate amount of
these costs have been reflected as deferred financing fees and are being
amortized to interest expense over the life of the loan based upon the effective
interest method.
  7.
LONG TERM OBLIGATIONS
  Long term
debt consists of the following at September 30, 2008 and December
2007:
 
 September
      30,
                2008
              
              
              December
      31,
                2007(Unaudited)(a)
      Vehicle notes
              
              $
              15,242
              
              
              $
              22,303(b)
      Notes Payable, Alliance
              
              
              -
              
              
              
              1,250,000(c)
      Equipment notes
              
              
              75,154
              
              
              
              97,628(d)
      Notes Payable, Costales
              
              
              1,062,500
              
              
              
              -(e)
      Notes Payable, NCF Charitable Trust
              
              
              187,500
              
              
              
              -1,340,396
              
              
              
              1,369,931Loan
      Discount
              
              
              -
              
              
              
              (15,625
              )1,340,396
              
              
              
              1,354,306Less
      current portion
              
              
              43,763
              
              
              
              1,274,464Notes
      payable, net of current portion
              
              $
              1,296,633
              
              
              $
              79,842
 
 (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 arrangement 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.  The loan was paid in full
on August 31, 2008 as part of the refinancing agreement with CVC
California, LLC as detailed in section 6.
 
 (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.
  18
 
 (d), (e)
On August 31, 2008, the Company entered into a stock purchase agreement with
Island Environmental as detailed in note 3.  As part of the
consideration for the purchase the Company, issued two three year promissory
notes totaling $1.25 million.
 
 The first
note is payable to the former owners in the amount of $1,062,500.  The
second note is payable to NCF Charitable Trust in the amount of
$187,500.  The notes bear interest at eight percent (8%) with interest
only payments payable quarterly and the entire balance of interest and principal
payable August
31, 2011.
  8.
OBLIGATIONS UNDER CAPITAL LEASES
  The
Company has entered into various capital leases for equipment with monthly
payments ranging from $598 to $26,500 per month, including interest, at interest
rates ranging from 9.8% to 19.7% per annum. At September 30, 2008, monthly
payments under these leases aggregated $70,953. The leases expire at various
dates through 2014. The amounts outstanding under the capital lease obligations
were $2,518,447 and $1,233,935 as of September 30, 2008 and December 31, 2007,
respectively.
 
 Minimum
future payments under capital lease obligations are as follows:
  Years
      Ending December 31,2008
                
                $
                224,7502009
                
                
                895,4762010
                
                
                723,8222011
                
                
                674,4552012
                
                
                566,8592013
                
                
                193,361Thereafter
                
                
                56,275Total
      payments
                
                
                3,334,998Less:
      amount representing interest
                
                
                (816,551
                )Present
      value of minimum lease payments
                
                
                2,518,447Less:
      current portion
                
                
                (613,857
                )Non-current
      portion
                
                $
                1,904,590
 19
  9.
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.
 
 On July
1, 2008 the Stock Option Committee approved the issuance of 45,000 options to
fifteen employees. The exercise price for the options was $1.05 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
              
              
              110,000
              
              
              
              1.49
              
              
              
              9.31Options
      exercised
              
              
              -
              
              
              
              -
              
              
              
              -Options
      cancelled
              
              
              (180,047
              )
              
              
              1.57
              
              
              
              -Options
      outstanding, September 30, 2008
              
              
              4,930,146
              
              
              
              1.64
              
              
              
              8.59Options
      exercisable, September 30, 2008
              
              
              2,940,863
              
              
              
              1.77
              
              
              
              8.49
  The
aggregate intrinsic value of the 4,930,146 options outstanding as of September
30, 2008 was $2,213. The aggregate intrinsic value for the options is calculated
as the difference between the price of the underlying shares and quoted price of
the Company's common shares for the options that were in-the-money as of
September 30, 2008.
 
 For the
nine months ended September 30, 2008 and 2007, the fair value of options vesting
during the period was $634,213 and $758,290 respectively, and has been reflected
as compensation cost. As of September 30, 2008, the Company has unvested options
valued at $1,408,799 which will be reflected as compensation cost over the
estimated remaining vesting period of 9.83 years.
  20
  Warrants
  A summary
of the warrant activity during the period is as follows:
 
 Range
      of
                exercise
      prices
              
              
              Weighted
      Avg.
                in
      YearsWarrants
      outstanding, January 1, 2008
              
              
              5,981,635
              
              
              $
              0.60-$120.00
              
              
              
              3.93Warrants
      granted
              
              
              3,574,500
              
              
              $
              0.60-$2.25
              
              
              
              4.07Warrants
      exercised
              
              
              -
              
              
              
              -
              
              
              
              -Warrants
      expired
              
              
              (210,741
              )
              
              $
              1.20-
      $120.00
              
              
              
              -Warrants
      outstanding, September 30, 2008
              
              
              9,345,394
              
              
              $
              0.60-$120.00
              
              
              
              4.13
 
 The
aggregate intrinsic value of the 9,345,394 warrants outstanding as of September
30, 2008 was $2,261,565. 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 September 30, 2008.
  10.
INCOME TAXES
 
 The
Company's net deferred tax assets consisted of the following at September 30,
2008 and December 31, 2007:
 
 September
      30,
                2008
              
              
              December 31, 2007(Unaudited)Deferred
      tax asset, net operating loss
              
              $
              13,344,893
              
              
              $
              11,677,897Less
      valuation allowance
              
              
              (13,344,893
              )
              
              
              (11,677,897
              )Net
      deferred tax asset
              
              $
              -
              
              
              $
              -
 
 As of
September 30, 2008, the Company had federal net operating loss carry forwards of
approximately $39,249,686 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 September 30, 2008 or December 31, 2007.
  21
    Nine
      months ended
                September30,2008
              
              
              
              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 September 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 September 30, 2008 the Company has no accrued
interest or penalties related to uncertain tax positions.
  22
  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 10-Q 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”).
  23
  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.
 
 On August
31, 2008, the Company entered into a stock purchase agreement with Island
Environmental Services, Inc. of Pomona, California ("Island"), a privately held
company, pursuant to which the Company acquired all of the issued and
outstanding common stock of Island, a California-based provider of hazardous and
non-hazardous waste removal and remediation services to a variety of private and
public sector establishments.
  24
  COMPARISON OF
THREE  MONTHS ENDED SEPTEMBER  30, 2008 AND
2007
 
 Revenues
 
 Total
revenues were $8,630,972 for the three months ended September 30, 2008,
representing an increase of $75,141 or .9% compared to the three months ended
September 30, 2007.  The increase in revenue can be attributed to
increased revenue 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 September 30, 2008 were $6,860,275 or 79.5%
of revenue, as compared to $6,878,235 or 80% of revenue for the three months
ended September 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
implementation of additional operating cost controls
in the third quarter.
  Operating
Expenses
 
 Operating
expenses for the three months ended September 30, 2008 were $1,845,179 or 21.3%
of revenue as compared to $3,034,039 or 35.5% 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 September 30, 2008 were
$360,765 or 4.1% of revenue, as compared to $196,199 or 2.3% 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 September 30, 2008 were
$2,087,673 or 24.1% of revenue, as compared to $574,998 or 6.7% 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 and the refinancing described in section
6.
  25
 
 Other
Non-Operating Income
 
 The
Company had other non-operating income for the three months ended September 30,
2008 of $18,480 or 0.21 %
of  revenue, and $25,329  or .3% of revenue for the same
period in 2007.  Non-Operating income for the three months ended
September 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 September 30, 2008 was $2,137,593 or 24.7% of
revenue as compared to a loss of $5,085,197, or 59.4% 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 NINE MONTHS
ENDED SEPTEMBER 30, 2008 AND 2007
  Revenues
 
 For the
nine months ended September 30, 2008, the Company reported consolidated revenue
of $24,989,210 representing an increase of $3,574,167 or 16.7 % compared to the
nine months ended September 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 nine months ended September 30, 2008 were $20,327,989 or 81.3 %
of revenue, as compared to $17,023,247 or 79.5 % of revenue for the nine months
ended September 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 nine months ended September 30, 2008 were $5,651,106 or 22.6%
of  revenue  as compared to $ 10,782,081 or 50.3% 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.
  26
  Depreciation
and Amortization
 
 Depreciation
and amortization expenses for the nine months ended September 30, 2008 were
$827,861 or 3.3% of revenue, as compared to $559,525 or 2.6% 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 nine months ended September 30, 2008 were $3,748,992
or 15% of revenue, as compared to $ 1,815,131 or 8.5% 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 and deferred fees
related to the August 31, 2008 refinancing with CVC California,
LLC.
  Other
Non-Operating Income
 
 The
Company had other non-operating income for the nine   months
ended September 30, 2008 of $35,173, or .14% of revenue, and $93,568 or .43% for
the same period in 2007. Non-Operating income for the nine months ended
September 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 nine months ended September 30, 2008 was $4,687,810, or 18.7% of
revenue as compared to a loss of $14,819,205, or 69.1% 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 September 30, 2008 was $156,806 as compared to $2,154,455 for the
same period in 2007.  Net cash used in operations for the nine months
ended September 30, 2008 was $1,046,595 as compared to $3,815,017 for the same
period in 2007.
  27
 
 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 $4,687,810 and utilized cash in operating activities of $1,046,595
during the nine months ended September 30, 2008. As of September 30, 2008 the
Company had current liabilities exceeding current assets by $1,108,837. 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.
  Cash
Flows for the Nine Months Ended September 30, 2008
 
 Operating
activities for the nine months ended September 30, 2008 used $1,046,595 in cash.
Accounts receivable, net of allowances for bad debts, were reduced by $1,365,335
as of September 30, 2008 and accounts payable were reduced
by $1,477,501.  Depreciation and amortization for the nine months
ended September 30, 2008 totaled $827,861. The net loss of $4,687,810
included a number of non-cash expenses incurred by the Company including
$410,127 representing amortization of deferred financing fees. Prepaid expenses
increased by $264,700 primarily due to insurance premiums that will be amortized
in 2008. Accrued expenses were reduced by $256,861.
 
 The
Company used cash for investment in plant, property and equipment and deposits
totaling approximately $2,440,946 for the nine months ended September 30, 2008.
Capital expenditures increased due to the acquisition of Island Environmental
and the issuance of capital lease obligations for the expansion of our
transportation assets. Financing activities provided $3,137,486 for the nine
months ended September 30, 2008 primarily from the new financing agreement with
CVC California, LLC.
 
 These
activities resulted in a $350,055 reduction in cash balances from year end
December 31, 2007 to the end of the quarter September 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.
  28
 
 (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.
  (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.
  29
 
 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 September
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 September 30, 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.
  30
 
 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  September
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.
 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
 
 1. Stock Purchase agreement Island Environmental Svcs.; filed with the
Commission on 9/24/08
 
 2. Material definitive agreement and Sales of Equity; filed with the
Commission on 9/24/08
  31
  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, INCDated:
      November
      14, 2008
              By:
              /s/ Timothy
      J. KoziolTimothy
      J. Koziol
                CEO
      and Chairman of the Board of Directors


Dated:
      November
      14, 2008
                By:
                /s/ Brett
      M. ClarkBrett
      M. Clark
                  Executive
      Vice President of Finance, Chief Financial Officer
 
  32