SOURCE: General Environmental Management

May 22, 2006 05:30 ET

General Environmental Management, Inc. Announces First Quarter 2006 Results

First Quarter Revenue Grew 11% and Gross Profits Increased 88% Compared to the First Quarter 2005; Company Reiterates Guidance of 20% to 25% 2006 Annual Revenue Growth

POMONA, CA -- (MARKET WIRE) -- May 22, 2006 -- General Environmental Management, Inc. ("GEM") (OTCBB: GEVM), a leading environmental and waste remediation company, today announced financial results for the first quarter ended March 31, 2006.

"We are pleased with our first quarter results, which clearly demonstrate growth and our ability to drive leverage in our business," stated Tim Koziol, chairman and CEO of GEM. "During the first quarter, revenue grew by approximately 11 percent over the first quarter of 2005, even though seasonality traditionally impacts our industry at the beginning of the calendar year. We managed cost of goods sold and operating expenses, thereby, improving gross profits by approximately 88 percent and reducing our operating loss by approximately 32 percent compared to the first quarter of 2005.

"We anticipate increasing sales throughout the remainder of the year, through additional contracts with existing customers, new customer relationships and new product lines. Late in the first quarter, we acquired K2M Mobile Treatment Services, Inc., now called GEM Mobile Treatment Services (GEM-MTS), which extended our geographic presence and added mobile wastewater treatment and vapor recovery services to our product offerings. Integration is on track, we have already expanded our sales team, and now we are cross-selling K2M's services and solutions. We have begun making a strong push in the Gulf Coast region where we see significant opportunity to further leverage our business. With these expectations in mind, we are reiterating our guidance of an expected 20 percent to 25 percent increase in annual revenue for 2006."

Total revenue for the quarter ended March 31, 2006 was $3.6 million, up approximately 11 percent compared to $3.3 million in the same quarter of 2005. Gross profit as percentage revenue for first quarter of 2006 was approximately 24 percent, compared to approximately 14 percent in the first quarter of 2005. Net loss for the first quarter of 2006 was $1.1 million, or $0.04 per common share, compared to a net loss of $1.4 million, or $0.06 per common share, in the first quarter of 2005.

Brett Clark, chief financial officer of GEM, added, "By concentrating on operating efficiencies, we have reduced our loss as well as improved our working capital. During the quarter, cash used in operations was $866,000 compared to $2.2 million in the same period last year. We look forward to increased success in future quarters as we continue to monitor and control our costs with the long term goal of sustainable profitability."

Recent Highlights

--  Participated in the 2006 Environmental Trade Fair and Conference
    sponsored by the Texas Commission on Environmental Quality (TCEQ) in
    Austin, TX in May.  At the well-attended event, GEM gained exposure to new
    markets needing mobile water treatment, vapor control and waste management
    service.  GEM's high capacity tank degassing services were of specific
    interest, given the trend toward tightening air regulations in the Gulf
    Coast.
    
--  Awarded a three-year federal contract worth $5.8 million from the
    Defense Logistics Agency (DLA), based in Battle Creek, MI, as announced in
    May.
    
--  At the request of TCEQ, presented GEM-MTS' technology employed to
    control vapor emissions from petroleum storage tank filling and removal
    operations at an Air Quality conference also sponsored by TCEQ in March.
    Statewide representatives from TCEQ Air Quality division attended.
    
--  Completed the acquisition of K2M, a California-based provider of
    mobile wastewater treatment and vapor recovery services, for $1.5 million
    in March.
    
--  Completed financing agreements with Laurus Master Fund, Ltd, securing
    $7 million in funding, as announced in March.
    
Mr. Koziol continued, "To best position GEM for future growth and profitability, management continues to monitor and evaluate opportunities for strategic acquisitions that would add high-margin niche business segments while expanding our services and/or extending our reach into new markets. We are encouraged by our recent sales activities and are confident GEM's best-in-class services will play an increasingly significant part in the marketplace. Management is focused on shareholder value, and, in the first quarter of 2006, we have accomplished a great deal in our strategy to broaden and strengthen GEM's base platform and increase our presence in the United States."

About General Environmental Management, Inc.

General Environmental Management, Inc. (www.go-gem.com) is a full service hazardous waste management and environmental services firm providing integrated environmental solutions managed through its proprietary web-based enterprise software, GEMWare, including the following service offering: management and transportation of waste; design and management of on-site waste treatment systems; management of large remediation projects; response to environmental incidents and spills; and environmental, health and safety compliance. Headquartered in Pomona, California, GEM operates five field service locations and one Treatment, Storage and Disposal Facility (TSDF), servicing all markets in the Western U.S.

Statements made in this press release that are not historical in nature constitute forward-looking statements within the meaning of the Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995. Such statements are based on the current expectations and beliefs of the management of GEM. No forward-looking statement can be guaranteed. GEM undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. Forward-looking statements in this press release should be evaluated together with the many uncertainties that affect GEM's business.

-Tables to follow-

      GENERAL ENVIRONMENTAL MANAGEMENT, INC. AND SUBSIDIARIES
              CONDENSED CONSOLIDATED BALANCE SHEETS

                                                March 31,      December 31,
                                                  2006            2005
                                              ------------    ------------
                                               (Unaudited)
CURRENT ASSETS:

Cash in bank                                 $     196,469   $      47,995

Accounts receivable, net of allowance
 for doubtful accounts of
 $236,021 and $236,021, respectively             3,791,791       5,143,754

Supplies inventory                                  38,608          35,921

Prepaid expenses and current other assets          687,125          90,347
                                              ------------    ------------

Total Current Assets                             4,713,993       5,318,017
                                              ------------    ------------

Property and Equipment - Net of accumulated
 depreciation $932,632 and $865,814
 respectively                                    2,789,728       2,478,556
Restricted cash                                    572,046         566,698
Intangibles                                      1,684,220         306,996
Deferred financing fees                            583,722              --
Deposits                                           108,581          59,120

Goodwill                                           644,647         644,647
                                              ------------    ------------
TOTAL ASSETS                                  $ 11,096,937    $  9,374,034
                                              ============    ============

              LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Notes payable - financing agreement           $    418,041    $  1,094,780

Accounts payable                                 2,572,558       3,920,923

Accrued expenses                                 1,133,186         414,616

Accrued Disposal costs                             307,286         789,414

Payable to related party                           136,123         121,123

Deferred rent                                       15,394          16,255

Current portion of notes payable                    64,809          83,106
Notes payable to investors                       1,420,469       1,359,448
                                              ------------    ------------
Total Current Liabilities                        6,067,866       7,799,665
                                              ------------    ------------
Financing agreement, net of current portion      1,828,743              --
                                              ------------    ------------

Notes payable, net of current portion            1,670,570       1,536,652
                                              ------------    ------------
STOCKHOLDERS' EQUITY
Series A convertible preferred stock, net
 of offering costs of $ 37,732, 10% dividend,
 liquidation, preference $1 per share, $.001
 par value, 50,000,000 shares authorized,
 250,000 shares issued and outstanding             212,628         212,628

Common stock, $.001 par value, 200,000,000
 shares authorized, 28,250,635 and
 27,893,576 shares issued and outstanding           28,252          27,895
Additional paid in capital                      15,718,305      13,083,970
Accumulated deficit                            (14,429,427)    (13,286,776)
                                              ------------    ------------
Total Stockholders' Equity                       1,529,758          37,717
                                              ------------    ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY    $ 11,096,937    $  9,374,034
                                              ============    ============



      GENERAL ENVIRONMENTAL MANAGEMENT, INC. AND SUBSIDIARIES
          CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS


                                                  Three months ended
                                              ----------------------------
                                             March 31, 2006  March 31, 2005
                                              ------------    ------------


REVENUES                                      $  3,647,918    $  3,294,461

COST OF REVENUES                                 2,788,369       2,836,526
                                              ------------    ------------

GROSS PROFIT                                       859,549         457,935

OPERATING EXPENSES                               1,751,277       1,762,677
                                              ------------    ------------

OPERATING LOSS                                    (891,728)     (1,304,742)

OTHER INCOME (EXPENSE):
Interest income                                      5,348           1,489
Interest and financing costs                      (286,257)       (145,099)
Other non-operating income                          29,986          75,910
                                              ------------    ------------
Net Loss                                        (1,142,651)     (1,372,442)

Beneficial conversion feature on the
 series A convertible preferred stock
                                              ------------    ------------
Net Loss applicable to common share holders   $ (1,142,651)   $ (1,372,442)
                                              ============    ============

CALCULATIONS OF NET LOSS PER COMMON SHARE,
 BASIC AND DILUTED:
  Net loss applicable to common               $     (0.04)    $      (0.06)
                                              ============    ============


Weighted average shares of common stock
 outstanding, basic and diluted                 28,085,007      24,762,267
                                              ============    ============

Contact Information

  • Company Contact:
    General Environmental Management (GEM)
    Tim Koziol
    909-444-9500
    Email Contact

    Investor Contact:
    Lippert / Heilshorn & Associates, Inc.
    Moriah Shilton / Kirsten Chapman
    415-433-3777
    Email Contact