ex10-39.htm


    
      

      

    

    Exhibit
10.39

     

     

    
      ISLAND
ENVIRONMENTAL SERVICES, INC.

      FINANCIAL
STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2007

      AND
THE EIGHT MONTHS ENDED AUGUST 31, 2008 AND 2007 (UNAUDITED)

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      ISLAND
ENVIRONMENTAL SERVICES, INC.

       

       

      CONTENTS

       

      
        	
                PAGE

              	
                1

              	
                REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

              
	 
      	 
      	 
      
	
                PAGE

              	
                2

              	
                BALANCE
      SHEETS AS OF DECEMBER 31, 2007 AND AUGUST 31, 2008
    (UNAUDITED)

              
	 
      	 
      	 
      
	
                PAGE

              	
                3

              	
                STATEMENTS
      OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2007 AND FOR THE EIGHT
      MONTHS ENDED AUGUST 31, 2008 AND 2007 (UNAUDITED)

              
	 
      	 
      	 
      
	
                PAGE

              	
                4

              	
                STATEMENT
      OF CHANGES IN STOCKHOLDERS’ EQUITY FOR THE YEAR ENDED DECEMBER 31, 2007
      AND FOR THE EIGHT MONTHS ENDED AUGUST 31, 2008
  (UNAUDITED)

              
	 
      	 
      	 
      
	
                PAGE

              	
                5

              	
                STATEMENTS
      OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2007 AND FOR THE EIGHT
      MONTHS ENDED AUGUST 31, 2008 AND 2007 (UNAUDITED)

              
	 
      	 
      	 
      
	
                PAGES

              	
                6

              	
                NOTES
      TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2007 AND FOR THE
      EIGHT MONTHS ENDED AUGUST 31, 2008 AND 2007
  (UNAUDITED)

              


      

      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      REPORT
OF INDEPENDENT REGISTERED PUBLIC ACOUNTING FIRM

      


      


      


      The Board
of Directors

      Island
Environmental Services, Inc.

      


      


            We
have audited the accompanying balance sheet of Island Environmental Services,
Inc. (the "Company") as of December 31, 2007, and the related statements of
operations, stockholders' equity and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

      


            We
conducted our audit in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

      


            In
our opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Island Environmental Services, Inc.
as of December 31, 2007, and the results of its operations and its cash flows
for the year then ended, in conformity with accounting principles generally
accepted in the United States of America.

      


           As
discussed in Note 8, on August 31, 2008, the Company entered into a stock
purchase agreement with General Environmental Management, Inc. (GEM) pursuant to
which GEM acquired all of the issued and outstanding common stock of the
Company.

      


      


      


      Weinberg
& Company, P.A.

      


      Los
Angeles, Ca.

      December
23, 2009

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

       

       ISLAND
ENVIRONMENTAL SERVICES, INC.

      BALANCE
SHEETS

       

       

      
        	 
      	 	
                August
      31,

                2008

              	 	 	
                December
      31,

                2007

              	 
	 
      	 	
                (Unaudited)

              	 	 	 	 
	
                ASSETS

              
	
                CURRENT
      ASSETS

              	 	 	 	 	 	 
	
                Cash

              	 	$	207,772	 	 	$	617,053	 
	
                Accounts
      receivable, net of allowance for doubtful accounts of

              	 	 	 	 	 	 	 	 
	
                     $14,596
      and $114,618 respectively

              	 	 	1,064,478	 	 	 	1,272,759	 
	
                Total
      Current Assets

              	 	 	1,272,250	 	 	 	1,889,812	 
	 
      	 	 	 	 	 	 	 	 
	
                PROPERTY
      AND EQUIPMENT – net of accumulated depreciation

              	 	 	 	 	 
	
                       of
      $3,571,085 and $3,227,386 respectively

              	 	 	1,231,359	 	 	 	1,575,149	 
	 
      	 	 	 	 	 	 	 	 
	
                TOTAL
      ASSETS

              	 	$	2,503,609	 	 	$	3,464,961	 
	 
      	 	 	 	 	 	 	 	 
	
                LIABILITIES
      AND STOCKHOLDERS’ EQUITY

              
	 
      	 	 	 	 	 	 	 	 
	
                CURRENT
      LIABILITIES

              	 	 	 	 	 	 	 	 
	
                Bank
      Overdraft

              	 	$	400,215	 	 	$	514,002	 
	
                Accrued
      Expenses

              	 	 	81,865	 	 	 	62,133	 
	
                Current
      portion of notes payable

              	 	 	-	 	 	 	53,860	 
	
                Total
      Current Liabilities

              	 	 	482,080	 	 	 	629,995	 
	 
      	 	 	 	 	 	 	 	 
	
                LONG-TERM
      LIABILITIES

              	 	 	 	 	 	 	 	 
	
                Notes
      payable, net of current portion

              	 	 	-	 	 	 	40,792	 
	 
      	 	 	 	 	 	 	 	 
	
                COMMITMENTS
      & CONTINGENCIES

              	 	 	 	 	 	 	 	 
	 
      	 	 	 	 	 	 	 	 
	
                STOCKHOLDERS’
      EQUITY

              	 	 	 	 	 	 	 	 
	Common
      stock, no par value, 100,000 shares authorized, 	 	 	 	 	 	 	 	 
	
                10,000
      shares issued and outstanding,

              	 	 	 35,439	 	 	 	35,439	 
	
                Retained
      Earnings

              	 	 	1,986,090	 	 	 	2,758,735	 
	
                Total
      Stockholders' Equity

              	 	 	2,021,529	 	 	 	2,794,174	 
	 
      	 	 	 	 	 	 	 	 
	
                TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY

              	 	$	2,503,609	 	 	$	3,464,961	 


      

       

       

      
        See
accompanying notes to financial statements.

         

        
          
            
            

          

          
            2

            
              

            

          

          
            
            

          

           

        

      

      ISLAND
ENVIRONMENTAL SERVICES, INC.

      STATEMENTS
OF OPERATIONS

      FOR
THE YEAR ENDED DECEMBER 31, 2007 AND

      FOR
THE EIGHT MONTHS ENDED AUGUST 31, 2008 AND 2007 (UNAUDITED)

       

       

      
        	 
      	 	
                Eight
      Months Ended

              	 	 	
                Year
      ended

              	 
	 
      	 	
                August
      31,

              	 	 	
                August
      31,

              	 	 	
                December
      31,

              	 
	 
      	 	
                2008

              	 	 	
                2007

              	 	 	
                2007

              	 
	 
      	 	
                (Unaudited)

              	 	 	
                (Unaudited)

              	 	 	 	 
	
                REVENUES

              	 	$	4,014,940	 	 	$	5,128,830	 	 	$	7,697,167	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                COST
      OF REVENUES

              	 	 	2,356,037	 	 	 	2,903,254	 	 	 	4,623,766	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                GROSS
      PROFIT

              	 	 	1,658,903	 	 	 	2,225,576	 	 	 	3,073,401	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                OPERATING
      EXPENSES

              	 	 	2,413,922	 	 	 	2,026,105	 	 	 	3,591,588	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                OPERATING
      INCOME (LOSS)

              	 	 	(755,019	)	 	 	199,471	 	 	 	(518,187	)
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                OTHER
      INCOME (EXPENSE):

              	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Interest
      income

              	 	 	 	 	 	 	27,396	 	 	 	57,606	 
	
                Interest
      and financing costs

              	 	 	(21,030	)	 	 	(3,943	)	 	 	(34,214	)
	
                Loss
      on Disposal of Fixed Assets

              	 	 	-	 	 	 	-	 	 	 	(8,003	)
	
                Other
      non-operating income

              	 	 	3,404	 	 	 	16,661	 	 	 	20,134	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                Net
      income ( loss )

              	 	$	(772,645	)	 	$	239,585	 	 	$	(482,664	)


      

       

       

       See
accompanying notes to the financial statements

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      ISLAND
ENVIRONMENTAL SERVICES, INC.

      STATEMENT
OF CHANGES IN STOCKHOLDERS’ EQUITY

      FOR
THE YEAR ENDED DECEMBER 31, 2007

      AND FOR THE EIGHT MONTHS ENDED
AUGUST 31, 2008 (UNAUDITED)

       

       

      
        	 
      	 	
                Common
      Stock

              	 	 	
                
                  Retained

                

              	 	 	 	 
	 
      	 	
                Shares

              	 	 	
                Amount

              	 	 	
                Earnings

              	 	 	
                Total

              	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                Balance,
      January 1, 2006

              	 	 	10,000	 	 	$	35,439	 	 	$	4,216,255	 	 	$	4,251,694	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Distributions	 	 	-	 	 	 	 -	 	 	 	(974,856	)	 	 	(974,856	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Net
      loss for the year ended December 31, 2007

              	 	 	 	 	 	 	 	 	 	 	(482,664	)	 	 	(482,664	)
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Balance,
      December 31, 2007

              	 	 	10,000	 	 	 	35,439	 	 	 	2,758,735	 	 	 	2,794,174	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Net
      loss for the eight months ended August 31, 2008

              	 	 	 	 	 	 	 	 	 	 	(772,645	)	 	 	(772,645	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Balance,
      August  31, 2008  (Unaudited)

              	 	 	10,000	 	 	$	35,439	 	 	$	1,986,090	 	 	$	2,021,529	 


      

       

       

      See
accompanying notes to the financial statements

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      ISLAND
ENVIRONMENTAL SERVICES, INC

      STATEMENTS
OF CASHFLOWS

      FOR
THE YEAR ENDED DECEMBER 31, 2007

      AND
FOR THE EIGHT MONTHS ENDED AUGUST 31, 2008 AND
2007  (UNAUDITED)

       

       

      
        	 
      	 	
                Eight
      Months Ended

              	 	 	
                Year
      Ended

              	 
	 
      	 	
                August
      31,

              	 	 	
                August
      31,

              	 	 	
                December
      31,

              	 
	 
      	 	
                2008

              	 	 	
                2007

              	 	 	
                2007

              	 
	 	 	(Unaudited)	 	 	(Unaudited)	 	 	 	 
	
                CASHFLOWS
      FROM OPERATING ACTIVITIES :

              	 	 	 	 	 	 	 	 	 
	
                Net
      income (loss)

              	 	$	(772,645	)	 	$	239,585	 	 	$	(482,664	)
	Adjustments
      to reconcile net income (loss) to net cash 	 	 	 	 	 	 	 	 	 	 	 	 
	
                provided
      by operating activities:

              	 	 	 	 	 	 	 	 	 	 	 	 
	
                Depreciation
      and Amortization

              	 	 	343,790	 	 	 	394,572	 	 	 	588,780	 
	
                Changes
      in operating assets and liabilities:

              	 	 	 	 	 	 	 	 	 	 	 	 
	
                (Increase)
      decrease in:

              	 	 	 	 	 	 	 	 	 	 	 	 
	
                Accounts
      receivable

              	 	 	208,281	 	 	 	648,822	 	 	 	816,161	 
	
                Increase
      in:

              	 	 	 	 	 	 	 	 	 	 	 	 
	
                Bank
      Overdraft

              	 	 	(113,787	)	 	 	 	 	 	 	514,002	 
	
                Accrued
      expenses and other liabilities

              	 	 	19,732	 	 	 	93,137	 	 	 	(8,987	)
	
                Net
      cash  provided by (used in) Operating Activities

              	 	 	(314,629	)	 	 	1,376,116	 	 	 	1,427,292	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                CASHFLOWS
      FROM INVESTING ACTIVITIES:

              	 	 	 	 	 	 	 	 	 	 	 	 
	
                Purchase
      of property and equipment

              	 	 	-	 	 	 	(119,572	)	 	 	(318,432	)
	
                Net
      Cash Used In Investing Activities

              	 	 	-	 	 	 	(119,572	)	 	 	(318,432	)
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                CASHFLOWS
      FROM FINANCING ACTIVITIES:

              	 	 	 	 	 	 	 	 	 	 	 	 
	
                Payments
      of notes payable

              	 	 	(94,652	)	 	 	(38,222	)	 	 	(55,795	)
	Distributions	 	 	 -	 	 	 	 (108,556	) 	 	 	(974,857	) 
	
                Net
      Cash used in Financing Activities

              	 	 	(94,652	)	 	 	(146,778	)	 	 	(1,030,652	)
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                NET
      INCREASE (DECREASE) IN CASH

              	 	 	(409,281	)	 	 	1,109,766	 	 	 	78,208	 
	
                CASH
      – BEGINNING OF YEAR

              	 	 	617,053	 	 	 	538,845	 	 	 	538,845	 
	
                CASH
      – END OF PERIOD

              	 	$	207,772	 	 	$	1,648,611	 	 	$	617,053	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 
	
                SUPPLEMENTAL
      DISCLOSURE OF CASHFLOW INFORMATION:

              	 	 	 	 	 	 	 	 	 	 	 	 
	
                Cash
      paid for:

              	 	$	-	 	 	$	-	 	 	$	-	 
	
                Interest
      expense

              	 	$	2,025	 	 	$	4,068	 	 	$	34,215	 


      

       

       

      See
accompanying notes to the financial statements

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

         

      

      
        ISLAND
ENVIRONMENTAL SERVICES, INC.

        NOTES
TO THE FINANCIAL STATEMENTS

        FOR
THE YEAR ENDED DECEMBER 31, 2007

        AND
FOR THE EIGHT MONTHS ENDED AUGUST 31, 2008 AND 2007 (UNAUDITED)

        


         

        
          	
                  NOTE
      1

                	
                  ORGANIZATION AND
      PRINCIPAL ACTIVITIES

                


        

         

        Island
Environmental Services, Inc. (the “Company”) was incorporated inCalifornia, on
February 20, 1992 for the purpose of providing transportation and hauling
services for non-hazardous and  hazardous waste
services.  The Company currently performs services in seven Western
states.

        


        
          	
                   NOTE
      2

                	
                  SUMMARY
      OF PRINCIPAL ACCOUNTING
POLICIES

                


        

        


        (a) Use of
Estimates

         

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

        


        (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 determinable,
and collection is reasonably assured.

        


        The
Company is a fully integrated service firm structured to provide field services,
technical services and transportation. Through our services, we assist
clients in meeting regulatory requirements from the designing stage to the waste
disposition stage. 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.

        


        (c) Concentrations of Credit
Risks

        


        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 may have exceeded FDIC insured
levels at various times during the year.  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.

        


        The
Company had one customer that accounted for 12% and 17% of revenue for the eight
months ended August 31, 2008 and 2007 and 29% for the year ended December 31,
2007.

         

        
          
            
            

          

          
            6

            
              

            

          

          
            
            

          

        

        
           

          ISLAND
ENVIRONMENTAL SERVICES, INC.

          NOTES
TO THE FINANCIAL STATEMENTS

          FOR
THE YEAR ENDED DECEMBER 31, 2007

          AND
FOR THE EIGHT MONTHS ENDED AUGUST 31, 2008 AND 2007
(UNAUDITED)


        

        


         

        (d) Fair Value of Financial
Instruments

        


        The
Company believes that the carrying value of its cash, accounts receivable, note
payable, bank draft, accounts payable, and  accrued liabilities, as of
August 31, 2008 and December 31, 2007 approximates their respective fair values
due to the demand or short-term nature of those instruments.

        


        (e)
Cash

        


        Cash in
bank and short term investments with maturities fewer than thirty days are
recorded as cash balances.

        


        (f)Trade
Receivables

        


        Trade
receivables are recorded at net realizable value, consisting of the carrying
amount less an allowance for uncollectible accounts, as needed.

        


        The
Company uses the allowance method to account for uncollectible trade receivable
balances. Under the allowance method, if needed, an estimate of uncollectible
customer balances is made based upon historical loss trends and specific account
balances that are considered uncollectible. Factors used to establish an
allowance include the credit quality of the customer and whether the balance is
significant. Accounts are considered past due once the unpaid balance is 90 days
or more outstanding, unless payment terms are extended by
contract.  When an account balance is past due and attempts have been
made by legal or other means, the amount is considered uncollectible and is
written off against the allowance balance. At August 31, 2008 and December 31,
2007 trade receivables had a net balance in the amount of $1,064,478 and
$1,272,759 net of allowances of $14,596 and $114,618, respectively.

        


        (g) Property and
Equipment

        


        Property
and equipment is stated at cost.  Depreciation is computed using
straight line methods based on the estimated useful lives of the assets,
generally as follows:

        


        
          	
                  Vehicles

                	
                  5  Years

                
	
                  Equipment

                	
                  5  Years

                
	
                  Furniture
      and fixtures

                	
                  5  Years

                


        

         

        (h) 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 includes 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 and asset as held-for-sale.  The Company periodically reviews
such assets for possible impairment and expected losses, if any, are recorded in
the period when such impairment is determined.

         

        
          
            
            

          

          
            7

            
              

            

          

          
            
            

          

        

        


        (i) Income
Taxes

        


        The
Company accounts for income taxes using the asset and 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 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.

        


        
          	
                  NOTE
      3

                	
                  NEW ACCOUNTING
      PRONOUNCEMENTS

                


        

        


        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.

        


        In June
2009, the FASB issued authoritative guidance on accounting standards
codification and the hierarchy of generally accepted accounting principles.” The
FASB Accounting Standards CodificationTM (“Codification”) has become the source
of authoritative accounting principles recognized by the FASB to be applied by
nongovernmental entities in the preparation of financial statements in
accordance with GAAP. All existing accounting standard documents are superseded
by the Codification and any accounting literature not included in the
Codification will not be authoritative. However, rules and interpretive releases
of the Securities Exchange Commission (“SEC”) issued under the authority of
federal securities laws will continue to be sources of authoritative GAAP for
SEC registrants. The FASB authoritative guidance is effective for interim and
annual reporting periods ending after September 15, 2009. Therefore, beginning
with our quarter ending September 30, 2009, all references made by it to GAAP in
its consolidated financial statements now use the new Codification numbering
system. The Codification does not change or alter existing GAAP and, therefore,
it does not have an impact on our financial position, results of operations and
cash flows.

        


        On July
1, 2009, the Company adopted authoritative guidance issued by the FASB on
business combinations. The guidance retains the fundamental requirements that
the acquisition method of accounting (previously referred to as the purchase
method of accounting) be used for all business combinations, but requires a
number of changes, including changes in the way assets and liabilities are
recognized and measured as a result of business combinations. It also requires
the capitalization of in-process research and development at fair value and
requires the expensing of acquisition-related costs as incurred. We will apply
this guidance to business combinations completed after July 1,
2009.  Adoption of the new guidance did not have a material impact on
our financial statements.

         

        
          
            
            

          

          
            8

            
              

            

          

          
            
            

          

        

        


        In
October 2009, the FASB issued authoritative guidance on revenue recognition that
will become effective for the Company beginning July 1, 2010, with earlier
adoption permitted.  Under the new guidance on arrangements that
include software elements, tangible products that have software components that
are essential to the functionality of the tangible product will no longer be
within the scope of the software revenue recognition guidance, and
software-enabled products will now be subject to other relevant revenue
recognition guidance.  We believe adoption of this new guidance will
not have a material impact on our financial statements.

         

        In May
2009, the FASB issued new requirements for reporting subsequent events. These
requirements set forth the period after the balance sheet date during which
management of a reporting entity should evaluate events or transactions that may
occur for potential recognition or disclosure in the financial statements, the
circumstances under which an entity should recognize events or transactions
occurring after the balance sheet date in its financial statements, and
disclosures that an entity should make about events or transactions that
occurred after the balance sheet date. Disclosure of the date through which an
entity has evaluated subsequent events and the basis for that date is also
required.

        


        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.

        


        
          	
                  NOTE
      4

                	
                  PROPERTY
      AND EQUIPMENT

                


        

        


        Property
and Equipment consists of the following as of:

        


        
          	 
      	 	
                  August
      31,

                  2008

                	 	 	
                  December
      31,

                  2007

                	 
	
                  Vehicles

                	 	$	84,484	 	 	$	84,710	 
	
                  Furniture
      & Fixtures

                	 	 	43,101	 	 	 	43,091	 
	
                  Machinery
      & Equipment

                	 	 	3,203,927	 	 	 	3,203,702	 
	
                  Roll
      Off Bins

                	 	 	1,110,291	 	 	 	1,110,291	 
	
                  Office
      Equipment

                	 	 	91,701	 	 	 	91,701	 
	
                  Leasehold
      Improvements

                	 	 	268,940	 	 	 	269,040	 
	 
      	 	 	4,802,444	 	 	 	4,802,535	 
	
                  Less
      accumulated depreciation

                	 	 	3,571,085	 	 	 	3,227,386	 
	
                  Property
      and equipment net of accumulated depreciation

                	 	$	1,231,359	 	 	$	1,575,149	 


        

        


        Depreciation
expense was $343,790 and $394,572 for the eight months ended August 31, 2008 and
2007, respectively and $588,780 for the year ended December 31, 2007.

         

        
          
            
            

          

          
            9

            
              

            

          

          
            
            

          

        

        


        
          	
                  NOTE
      5

                	
                  NOTES
      PAYABLE

                


        

        


        Notes
payable consist of the following :

        


        
          	 
      	 	
                  August
      31,

                	 	 	
                  December
      31,

                	 
	 
      	 	
                  2008

                	 	 	
                  2007

                	 
	
                  (a)
      Note payable, Ed Butts Ford

                	 	$	-	 	 	$	53,860	 
	
                  (b)
      Note payable, Ed Butts Ford

                	 	 	-	 	 	 	4,661	 
	
                  (c)
      Note payable, Ed Butts Ford

                	 	 	-	 	 	 	9,500	 
	
                  (d)
      Note payable, Center Capital Corp

                	 	 	-	 	 	 	26,631	 
	
                  Total
      notes payable

                	 	 	-	 	 	 	94,652	 
	
                  Less
      current portion

                	 	 	-	 	 	 	53,860	 
	
                  Notes
      payable, net of current portion

                	 	$	-	 	 	$	40,792	 


        

        


        (a)
Equipment note, payable in monthly installments of $434.05 beginning in May 2005
including interest of 0.00% per annum through April 2010.  The note
was paid off during the eight months ended August 31, 2008.

        


        (b)
Equipment note, payable in monthly installments of $423.72 including interest of
0.00% per annum through November 2008.  The note was paid off during
the eight months ended August 31, 2008.

        


        (c)
Equipment note, payable in monthly installments of $654.48 including interest of
3.90% per annum through March 2009.  The note was paid off during the
eight months ended August 31, 2008.

        


        (d)
Equipment note, payable in monthly installments of $3,281.74 including interest
of 5.79% per annum through October 2009. The note was paid off during the eight
months ended August 31, 2008.

        


        
          	
                  NOTE
      6

                	
                  COMMITMENTS AND
      CONTINGENCIES

                


        

        


        OPERATING
LEASES

        


        The
Company leases its warehouse and office facility under separate five year, and
month-to-month operating lease agreements.  Under terms of each of the
leases, the company pays the cost of repairs and maintenance.

        


        Future
minimum lease commitments under these leases at December 31, 2007 are as
follows:

        


        
          	
                  Year
      Ended December 31,

                	 	 	 
	
                  2007

                	 	$	462,000	 
	
                  2008

                	 	 	492,000	 
	
                  2009

                	 	 	667,500	 
	
                  2010

                	 	 	667,500	 
	
                  2011

                	 	 	667,500	 
	 
      	 	 	 	 
	 
      	 	$	2,956,500	 


        

         

        
          
            
            

          

          
            10

            
              

            

          

          
            
            

          

        

         

        Rent
expense for the eight months ending August 31, 2008 and 2007 was $308,000 and
$308,000 and $ 462,000 for the year ending December 31, 2007 .

        


        LEGAL
PROCEEDINGS

        


        The
Company is party to legal proceedings that arise through the normal course of
business.  The outcomes of these proceedings are not expected to have
a material impact on these financial statements.

        


        
          	
                  NOTE
      7

                	
                  INCOME
      TAXES

                


        

        


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

         

        
          	
                   

                	 	
                  August
      31,

                  2008

                	 	 	
                  December
      31,

                  2007

                	 
	 
      	 	
                  (Unaudited)

                	 	 	 	 
	
                  Deferred
      tax asset, net operating loss

                	 	$	1,255,308	 	 	$	482,664	 
	
                  Less
      valuation allowance

                	 	 	(1,255,308	)	 	 	(482,664	)
	
                  Net
      deferred tax asset

                	 	$	-	 	 	$	-	 


        

         

        As of
August 31, 2008, the Company had federal net operating loss carry forwards of
approximately $1,255,308 expiring in various years through 2024, 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.


        
          


          
            	
                    NOTE
      8

                  	
                    SUBSEQUENT
      EVENT

                  


          

           

        

        On August
31, 2008, the Company entered into a stock purchase agreement with General
Environmental Management, Inc. (GEM), a publicly held company, pursuant to which
GEM acquired all of the issued and outstanding common stock of the
Company.  In consideration of the acquisition of the issued and
outstanding common stock of the Company GEM paid $2.25 million in cash to the
stockholders of Island Environmental Services, Inc. (IES) and issued $1.25
million in three year promissory notes.  As a result of the agreement,
Island Environmental Services, Inc. (IES) becomes a wholly-owned subsidiary of
GEM.

         

         

        11