SOURCE: General Environmental Management

April 13, 2007 15:08 ET

General Environmental Management, Inc. Announces Fourth Quarter and Full Year 2006 Results

Annual 2006 Revenues Increase 19% Over 2005; 2006 Operating Margins Improve 28% Over 2005; Company Expects National Expansion in 2007

POMONA, CA -- (MARKET WIRE) -- April 13, 2007 -- General Environmental Management, Inc. ("GEM") (OTCBB: GEVI), a leading environmental and waste remediation company, today announced its financial results for the fourth quarter and year-ended December 31, 2006.

"In 2006, the company accomplished a number of strategic goals and created the foundation for a national footprint," stated Tim Koziol, Chairman and CEO of GEM. "We established a core hub in the Western region of the U.S. Through our acquisition of K2M Mobile Treatment Services, we expanded our product portfolio to include mobile wastewater treatment and vapor recovery services and broadened our reach into the Gulf Coast region. K2M was the main force behind our 19 percent year-over-year revenue growth. We also dedicated additional project management and business development resources to our EnviroConstruction group. This key competency delivered contracts worth $6.1 million since August of 2006 and will be one of the key elements in our continued national expansion. Additionally, the company expended $4.7 million in an attempt to acquire Pollution Control Industries (PCI). After fully evaluating the PCI opportunity and the cost of capital required to complete the acquisition, the board elected to abandon the efforts to complete the acquisition and instead pursue an alternative strategy management believes will provide a better return for all shareholders."

"It is our long-term goal to build upon our existing services and facilities to create a company operating under a broker volume model with national reach," Koziol continued. "We are working to expand our footprint with strategically located Treatment, Storage, Disposal Facilities (TSDFs) and related supporting service centers that will be able to offer a wide-ranging portfolio of products and services. Already in 2007, we have expanded our reach with the opening of our Denver service center, as announced in February."

Revenue for the quarter ended December 31, 2006 was $6.7 million, compared to $5.6 million in the same quarter of 2005. Gross margin for fourth quarter of 2006 was approximately 19 percent, on par with the fourth quarter of 2005. Net loss for the fourth quarter of 2006 was $12.6 million, or $11.87 per common share, and included interest and financing costs of $5.7 million, $4.9 million of which was a non-cash charge taken on the amortization of valuation discounts related to a secured financing, amortization of valuation discounts related to convertible notes, amortization of valuation discounts created from warrants issued to advisors on convertible notes, and the cost of additional shares issued to convertible note holders reflecting a change in the conversion price approved by the Board of Directors, and $4.7 million in non-operating costs related to the cancelled acquisition of PCI. This compares to a net loss of $575,000, or $0.62 per common share, in the fourth quarter of 2005 that included interest and financing costs of $213,000.

Revenue for the year-ended December 31, 2006 was $21.8 million, compared to $18.3 million for 2005. Gross margin for the 2006 year was approximately 23 percent, compared to approximately 18 percent in 2005. The increase in gross margin was due to higher margin business added from the company's acquisition of the mobile water treatment and degassing operation and lower disposal costs due to efficiencies gained at the company's TSDF in Rancho Cordova, CA. Operating expenses for the year-ended December 31, 2006 were $9.6 million, compared to $7.5 million for 2005. In 2006, operating expenses included costs associated with the cancelled acquisition of PCI.

Net loss attributable to common shareholders for the full year 2006 was $20.0 million, or $9.59 per common share, and included $8.9 million in interest and financing costs, $6.9 million of which was a non-cash charge related to the amortization of valuation discounts on a secured financing, amortization of valuation discounts related to convertible notes, amortization of valuation discounts created from warrants issued to advisors on convertible notes, and the cost of additional shares issued to convertible note holders reflecting a change in the conversion price approved by the Board of Directors, and the aforementioned non-operating costs related to an abandoned acquisition. This compares to a net loss of $4.9 million, or $5.90 per common share, in the year ended December 31, 2005 that included interest and financing costs of $746,000.

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 seven field service locations and one Treatment, Storage, 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.

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

                                             December 31,    December 31,
                                                 2006            2005
                                            --------------  --------------
CURRENT ASSETS:
Cash                                        $      618,654  $       47,995
Accounts receivable, net of allowance for
 doubtful accounts of $285,000 and $236,021
 respectively                                    5,540,069       5,143,754
Prepaid expenses and current other assets          428,018         126,268
                                            --------------  --------------
Total Current Assets                             6,586,741       5,318,017
                                            --------------  --------------

Property and Equipment - Net of accumulated
 depreciation  $1,248,088 and $865,814
 respectively                                    2,918,690       2,478,556
Restricted cash                                    911,168         566,698
Intangibles, Net                                 1,191,217         306,996
Deferred Financing Fees                            291,529               -
Deposits                                           147,742          59,120
Goodwill                                           946,119         644,647

                                            --------------  --------------
TOTAL ASSETS                                $   12,993,206  $    9,374,034
                                            ==============  ==============

    LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable - financing                   $            -  $    1,094,780
Accounts payable                                 3,755,264       3,920,923
Accrued expenses                                 2,149,178         414,616
Accrued Disposal costs                             593,575         789,414
Payable to related party                           824,783         121,123
Deferred rent                                       25,150          16,255
Current portion of secured financing
 agreement                                       1,017,048          83,106
Current Portion of notes payable                   125,432       1,359,448

                                            --------------  --------------
Total Current Liabilities                        8,490,430       7,799,665

LONG-TERM LIABILITIES:
Financing Agreements, net of current
 portion                                    $    2,050,588  $            -
Notes payable, net of current portion            1,704,892       1,536,652
Convertible Notes payable                          601,161               -
                                            --------------  --------------
Total Long-Term Liabilities                      4,356,641       1,536,652

STOCKHOLDERS' EQUITY
Series A convertible preferred stock, 8% of
 dividend, liquidation preference, $1 per
 share, $.001 par value, 100,000,000 shares
 authorized, 250,000 shares issued and
 outstanding at December 31, 2005                        -             250
Series B convertible preferred stock,
 liquidation preference, $1 per share,
 $.001 par value, 100,000,000 shares
 authorized, 2,480,500 shares issued and
 outstanding at December 31, 2006                    2,481               -
Common stock, $.001 par value,
 1,000,000,000  shares authorized,
 5,920,408 and 27,893,576  shares issued
 and outstanding, respectively                       5,920             930

Additional paid in capital                      33,430,095      13,323,313
Accumulated deficit                            (33,292,361)    (13,286,776)
                                            --------------  --------------
Total Stockholders' Equity                         146,135          37,717
                                            --------------  --------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $   12,993,206  $    9,374,034
                                            ==============  ==============


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


                       For the three months ended     For the year ended
                              December 31,              December 31,
                            2006         2005         2006         2005


REVENUES                  6,741,021    5,633,486   21,760,569   18,335,953

COST OF REVENUES          5,444,498    4,587,566   16,761,057   15,104,537
                        -----------  -----------  -----------  -----------

GROSS PROFIT              1,296,523    1,045,920    4,999,512    3,231,416

OPERATING EXPENSES        3,046,106    1,435,371    9,578,895    7,544,456
                        -----------  -----------  -----------  -----------

OPERATING LOSS           (1,749,583)    (389,451)  (4,579,383)  (4,313,040)

OTHER INCOME (EXPENSE):
Interest income              10,768        4,661       26,378       14,128
Interest and financing
 costs                   (5,687,467)    (212,936)  (8,861,700)    (746,108)
Gain/Loss on Disposal
 of Fixed Assets             (3,308)           -       (3,308)           -
Other non-operating
 income                      26,138       22,913      105,968      154,792
Non-operating costs
 expired acquisition     (4,653,029)           -   (4,653,029)           -
                        -----------  -----------  -----------  -----------

NET LOSS                (12,056,481)    (574,813) (17,965,074)  (4,890,228)

Beneficial conversion
 feature on the series
 A convertible
 preferred stock                  -            -            -     (157,414)
Dividend on Series A
 Preferred Stock on
 conversion term                  -            -     (522,500)           -
Issuance of additional
 shares based on
 amended conversion
 price- Series A
 Preferred                  (50,000)           -      (50,000)           -
Beneficial Conversion
 feature on the series
 B convertible
 preferred stock                  -            -     (955,040)           -
Dividend on Series B
 Preferred Stock on
 modification of
 conversion term           (491,100)           -     (491,100)           -
Preferred stock
 dividend                         -            -      (21,871)           -
Net loss applicable to
 common stockholders    (12,597,581)    (574,813) (20,005,585)  (5,047,642)
                        ===========  ===========  ===========  ===========

CALCULATIONS OF NET
 LOSS PER COMMON SHARE,
 BASIC AND DILUTED:

Net loss applicable to
 common stockholders         (11.87)       (0.62)       (9.59)       (5.85)
                        ===========  ===========  ===========  ===========

Weighted average shares
 of common stock
 outstanding              1,060,815      928,179    2,085,325      862,262
                        ===========  ===========  ===========  ===========

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