Date: November 20, 2006
Source: General Environmental Management, Inc.
General Environmental Management, Inc. Announces Third Quarter 2006 Results
Core Business Drives 36% Revenue Growth Third Quarter 2006 Compared to Third Quarter 2005
Continues Progress Toward PCI Acquisition
General Environmental Management, Inc. "GEM" (OTCBB: GEVM), a leading environmental and waste remediation company, today announced financial results for the third quarter and nine months ended September 30, 2006.
"During the third quarter, we grew our core remediation service, transportation, and disposal businesses, resulting in a revenue increase of 36 percent compared to the third quarter of 2005," stated Tim Koziol, chairman and CEO of GEM. "Our broader product offerings attracted a larger customer base, particularly in the western region of the U.S. Additionally, our higher margin services, especially the wastewater treatment and degassing/vapor control products we acquired with our acquisition of K2M in the second quarter of this year, increased our gross margin to 26 percent in this quarter. We are on track to meet our 2006 full year revenue growth target of 20 percent to 25 percent as compared to 2005, which will bring us closer to our goal of sustainable profitability."
Total revenue for the third quarter was $7.0 million, compared to $5.2 million in the same quarter of 2005. Gross profit as a percentage of revenue for the third quarter of 2006 was approximately 26 percent, compared to approximately 22 percent in the third quarter of 2005. For the third quarter of 2006, net loss applicable to common shareholders was $4.4 million or $0.07 per common share. Included in net loss applicable to common shareholders for the third quarter of 2006 were $2.2 million in non-cash financing charges, $1.5 million in non-cash charges related to Series A and Series B Preferred Stock, $108,000 of non-cash advisory fees and $62,000 of non-cash stock-based compensation. For the third quarter of 2005, net loss applicable to common shareholders was $780,000, or $0.03 per common share. Included in net loss applicable to common shareholders for the third quarter of 2005 was $157,000 in non-cash charges related to preferred stock conversion and $7,000 in non-cash financing related.
Total revenue for the nine months ended September 30, 2006 was $15.0 million, compared to $12.7 million in the same period of 2005. For the nine months ended September 30, 2006, net loss applicable to common shareholders was $7.4 million or $0.19 per common share. Included in net loss applicable to common shareholders for the nine months ended September 30, 2006 were $2.9 million in non-cash financing related charges, $1.5 million in non-cash charges related to Series A and Series B Preferred Stock, $144,000 of non-cash advisory fees and $173,000 of non-cash stock-based compensation. For the same period of 2005, net loss applicable to common shareholders was $4.4 million, or $0.18 per common share. Included in net loss applicable to common shareholders for the nine months ended September 30, 2005 was $611,000 in non-cash advisory fees, $157,000 in non-cash charges related to preferred stock and $7,000 in non-cash financing related charges.
Financing and Pollution Control Industries, Inc. Acquisition Update
On August 16, 2006, GEM executed a definitive agreement to acquire Pollution Control Industries, Inc. (PCI) for $35 million in cash subject to various standard closing conditions, including applicable regulatory approvals. Also in August, the company secured $25 million in financing from Laurus Master Fund, Ltd. to fund the acquisition. The company is required to raise an additional $16 million and has secured approximately $6 million to date. The company has until November 29, 2006, to complete the acquisition of PCI. The companies continue to honor the terms of the definitive agreement and are working toward completion.
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.
| GENERAL ENVIRONMENTAL MANAGEMENT, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) |
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| Three months ended September 30, |
Nine months ended September 30, |
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| 2006 | 2005 | 2006 | 2005 | |
| REVENUES | $ 7,021,791 | $ 5,161,211 | $ 15,019,548 | $ 12,702,467 |
| COST OF REVENUES | 5,189,863 | 4,010,194 | 11,316,559 | 10,516,971 |
| GROSS PROFIT | 1,831,928 | 1,151,017 | 3,702,989 | 2,185,496 |
| OPERATING EXPENSES | 2,590,040 | 1,635,368 | 6,532,789 | 6,109,085 |
| OPERATING LOSS | (758,112) | (484,351) | (2,829,800) | (3,923,589) |
| OTHER INCOME (EXPENSE): Interest income | 3,939 | 3,335 | 15,610 | 9,467 |
| Interest and financing costs | (2,277,346) | (166,420) | (3,174,233) | (533,172) |
| Other non-operating income | 27,018 | 24,649 | 79,830 | 131,879 |
| NET LOSS | $ (3,004,501) | $ (622,787) | $ (5,908,593) | $ (4,315,415) |
| Preferred stock dividend | (5,000) | - | (21,871) | - |
| Modification of terms of Series A Convertible preferred stock upon conversion | (505,629) | (157,414) | (522,500) | (157,414) |
| Beneficial converion feature on issuance of Series B convertible preferred stock | (955,040) | - | (955,040) | - |
| Net Loss applicable to common stock holders | $ (4,470,170) | $ (780,201) | $ (7,408,004) | $ (4,472,829) |
| CALCULATIONS OF NET LOSS PER COMMON SHARE, BASIC AND DILLUTED: | ||||
| Net Loss applicable to common stock holders | $ (0.07) | $ (0.03) | $ (0.19) | $ (0.18) |
| Weighted average shares of common stock outstanding | 61,222,046 | 27,566,236 | 39,269,845 | 25,201,622 |
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