Summary of GENERAL ENVIRONMENTAL MANAGEMENT, INC

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").

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.

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.

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.

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.

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.

(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.

The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable, and collection is reasonably assured.

The Company is a fully integrated environmental service firm structured to provide field services, technical services, transportation, off-site treatment, on-site treatment services, and environmental health and safety ("EHS") compliance services. Through our services, we assist clients in meeting regulatory requirements from the designing stage to the waste disposition stage. The technicians who provide these services are billed at negotiated rates, or the service is bundled into a service package. These services are billed and revenue recognized when the service is performed and completed. When the service is billed, expected costs are accumulated and accrued.

Our field services consist primarily of handling, packaging, and transporting a wide variety of liquid and solid wastes of varying amounts. We provide the fully trained labor and materials to properly package hazardous and non-hazardous waste according to requirements of the Environmental Protection Agency and the Department of Transportation. Small quantities of laboratory chemicals are segregated according to hazard class and packaged into appropriate containers or drums. Packaged waste is profiled for acceptance at a client's selected treatment, storage and disposal facility (TSDF) and tracked electronically through our systems. Once approved by the TSDF, we provide for the transportation of the waste utilizing tractor-trailers or bobtail trucks. The time between picking up the waste and transfer to an approved TSDF is usually less than 10 days. The Company recognizes revenue for waste picked up and received waste at the time pick up or receipt occurs and recognizes the estimated cost of disposal in the same period. For the Company's TSDF located in Rancho Cordova, CA, costs to dispose of waste materials located at the Company's facilities are included in accrued disposal costs. Due to the limited size of the facility, waste is held for only a short time before transfer to a final treatment, disposal or recycling facility. Revenue is recognized on contracts with retainage when services have been rendered and collectability is reasonably assured.

Effective January 1, 2007, the Company adopted Financial Accounting Standards Board Interpretation No. 48, "Accounting for Uncertainty in Income Taxes ("FIN 48"). -an interpretation of FASB Statement No. 109, Accounting for Income Taxes." The Interpretation addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under FIN 48, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. FIN 48 also provides guidance on derecognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. At the date of adoption, and as of 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.

The Company does not believe that the adoption of the above recent . . .