MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PART I, ITEM 2

Forward-looking Statements
Certain statements in this report may be deemed "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended (collectively, the "Private Securities Litigation Reform Act of 1995"). All statements in this report other than a statement of historical fact are forward-looking statements that are subject to known and unknown risks, uncertainties and other factors, which could cause actual results and Company performance to differ materially from such statements. The words "believe," "expect," "anticipate," "intend," "will," and similar expressions identify forward-looking statements. Forward-looking statements herein include, among other things,

· ability to continue and improve operations and achieve profitability on an annualized basis;
· ability to retain or receive certain permits, licenses, or patents;
· ability to comply with the Company's general working capital requirements;
· ability to continue to meet our fixed charge coverage ratio in 2008;
· ability to be able to continue to borrow under the Company's revolving line of credit;
· we plan to fund any repurchases under the common stock repurchase plan through our internal cash flow and/or borrowing under our line of credit;
· ability to generate sufficient cash flow from operations to fund all operations;
· ability to remediate certain contaminated sites for projected amounts;
· despite our aggressive compliance and auditing procedures for disposal of wastes, we could, in the future, be designated as a Partially Responsible Party ("PRP") at a remedial action site, which could have a material adverse effect;
· ability to fund budgeted capital expenditures of $3,100,000 during 2008 through our operations or lease financing or a combination of both;
· growth of our Nuclear Segment;
· we believe that our cash flows from operations and our available liquidity from our line of credit are sufficient to service the Company's current obligations;
· we expect backlog levels to continue to fluctuate in 2008, depending on the complexity of waste streams and the timing of receipts and processing of materials;
· the high levels of backlog material continue to position the segment well for increases in future processing material prospective;
· we anticipate disposal of the legacy waste at PFNWR by March 31, 2009;
· our contract with LATA/Parallax is expected to be completed in 2008 or extended through some portion of 2009;
· we believe full operations under this subcontract will result in revenues for on-site and off-site work of approximately $200.0 million to $250.0 million the five year base period;
· revenue from these Fluor Hanford contracts should increase during fiscal year 2009 unless DOE budget cuts impact their funding due to the contract objectives of the engineering firm's new contract;
· our inability to continue under existing contracts that we have with the federal government (directly or indirectly as a subcontractor) could have a material adverse effect on our operations and financial condition;
· as with most contracts relating to the federal government, LATA/Parallax can terminate the contract with us at any time for convenience, which could have a material adverse effect on our operations;
· although we have seen smaller fluctuation in government receipts between quarters in recent years, as government spending is contingent upon its annual budget and allocation of funding, we cannot provide assurance that we will not have larger fluctuations in the quarters in the near future;
· we do not expect any impact or reduction to PFO's operating capability from the sale of property at PFO;

---

· we anticipate spending $164,000 in the remaining three months of 2008 to remediate the PFMI site, with the remainder over the next six years;
· under our insurance contracts, we usually accept self-insured retentions, which we believe is appropriate for our specific business risks;
· we believe we maintain insurance coverage adequate for our needs and which is similar to, or greater than the coverage maintained by other companies of our size in the industry;
· in the event of a failure of AIG, this could materially impact our operations and our permits which we are required to have in order to operate our treatment, storage, and disposal facilities;
· we do not expect future inflationary changes to differ materially from the last three years;
· except for Michigan and Pittsburgh facilities, we have no current intention to close any of our facilities;
· we do not anticipate making any further working capital adjustments on the sale of PFD;
· an increase or decrease in demand for the existing disposal areas could significantly affect the actual disposal costs either positively or negatively;
· as of the date of this report, we estimate receiving approximately $141,000 from the buyer in working capital adjustment from the sale of PFMD by the fourth quarter of 2008, subject to finalization;
· we anticipate paying the remaining expenses relating to the sale of PFMD, PFTS, and PFD by the fourth quarter of 2008;
· irrespective of the fact no amounts have been deposited into the escrow account, the parties have verbally agreed that the former shareholders of Nuvotec (including Mr. Ferguson, a member of our Board of Director) will pay to us $152,250 of the agreed penalty in satisfaction of their obligation under the indemnity provision in connection with the settlement with the EPA, subject to the execution of a definitive agreement;
· if either buyer is unable to substitute its financial assurance for ours pursuant to the regulations, the appropriate regulatory authority could take action against the buyer, including, but not limited to action to limit or revoke its permit to operate the facility, and could take action against our bond including drawing down on our bond to remediate or close the facility in question, and would be limited to bringing legal action against the buyer for any losses we sustain or suffer as a result;
· turmoil in the financial markets is straining the availability of credit which could limit our customers' ability to obtain adequate financing which could decrease the demand for our services, thereby negatively impacting our results of operations;
· consumers' concerns of the recession period extending into 2009 could also reduce or halt their spending which could negatively impact our results of operations;
· funding for certain governmental remediation projects at DOE and DOD sites could be cut off or curtailed thereby negatively impacting our results of operations and liquidity;
· we anticipate that the material weakness at certain of our Industrial Segment will be remediated by December 31, 2008;
· the Company expects SFAS No. 141R will have an impact on its consolidated financial statements when effective, but the nature and magnitude of the specific effects will depend upon the nature, terms and size of acquisitions it consummates after the effective date;
· the Company does not expect SAB No. 110 to materially impact its operations or financial position;
· the Company does not expect the adoption of FSP FAS 142-3 to materially impact the Company's financial position or results of operations;
· the Company does not expect EITF 07-5 to materially impact the Company's future consolidated financial statements;
· the Company does not expect SFAS 161 to materially impact the Company's future consolidated financial statements;
· it is not expected that the FSP will materially impact the Company's current disclosure process;
· the implementation of SFAS No. 162 will not have a material impact on our consolidated financial position and results of operations;
· it is not expected that FSP FAS 133-1 and FIN 45-4 will materially impact the Company's disclosure process; and
· we do not expect standards in SFAS 160 to materially impact the Company's future consolidated financial statements.

---

While the Company believes the expectations reflected in such forward-looking statements are reasonable, it can give no assurance such expectations will prove to have been correct. There are a variety of factors, which could cause future outcomes to differ materially from those described in this report, including, but not limited to:

· general economic conditions;
· material reduction in revenues;
· ability to meet PNC covenant requirements; ability to collect in a timely manner a material amount of
· receivables;
· increased competitive pressures; ability to maintain and obtain required permits and
· approvals to conduct operations; ability to develop new and existing technologies in the
· conduct of operations;
· ability to retain or renew certain required permits;
· discovery of additional contamination or expanded contamination at any of the sites or facilities leased or owned by us or our subsidiaries which would result in a material increase in remediation expenditures;
· changes in federal, state and local laws and regulations, especially environmental laws and regulations, or in interpretation of such;
· increases in equipment, maintenance, operating or labor costs;
· management retention and development;
· financial valuation of intangible assets substantially different than expected;
· the requirement to use internally generated funds for purposes not presently anticipated;
· ability to continue to be profitable on an annualized basis;
· ability of the Company to maintain the listing of its Common Stock on the NASDAQ;
· terminations of contracts with federal agencies or subcontracts involving federal agencies, or reduction in amount of waste delivered to the Company under the contracts or subcontracts;
· disposal expense accrual could prove to be inadequate in the event the waste requires re-treatment; and
· DOE obtaining the necessary funding to fund all work under its contracts.

The Company undertakes no obligations to update publicly any forward-looking statement, whether as a result of new information, future events or otherwise.

Overview
We provide services through three reportable operating segments: Nuclear Waste Management Services Segment ("Nuclear Segment"), Consulting Engineering Services Segment ("Engineering Segment"), and Industrial Waste Management Services Segment ("Industrial Segment"). The Nuclear Segment provides treatment, storage, processing and disposal services of mixed waste (waste containing both hazardous and low-level radioactive materials) and low-level radioactive wastes, including research, development and on-site and off-site waste remediation. Our Engineering Segment provides a wide variety of environmental related consulting and engineering services to both industry and government. These services include oversight management of environmental restoration projects, air, soil, and water sampling, compliance reporting, emission reduction strategies, compliance auditing, and various compliance and training activities. Our Industrial Segment provides on-and-off site treatment, storage, processing and disposal of hazardous and non-hazardous industrial waste and wastewater.

On September 26, 2008, our Board of Directors approved retaining our Industrial Segment facilities/operations at Perma-Fix of Fort Lauderdale, Inc. ("PFFL"), Perma-Fix of South Georgia ("PFSG"), and Perma-Fix of Orlando, Inc. ("PFO"). As previously disclosed, on May 18, 2007, our Board of Directors authorized the divestiture of our Industrial Segment. The decision to retain operations at PFFL, PFSG, and PFO within our Industrial Segment is based on our belief that these operations are self-sufficient, which should allow senior management the freedom to focus on growing our nuclear operations, while benefiting from the cash flow and growth prospects of these three facilities and the fact that we were unable in the current economic climate to obtain the values for these companies that we believe they are worth. In May 2007, our Industrial Segment met the held for sale criteria under SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", and therefore, certain assets and liabilities of the Industrial Segment were classified as discontinued operations in the Consolidated Balance Sheets, and we ceased depreciation of these facilities' long-lived assets classified as held for sale. In accordance with SFAS No. 144, the long-lived assets were written down to fair value less anticipated selling costs and we recorded $6,367,000 in impairment charges (including $507,000 for PFO and $1,329,000 for PFSG recorded in the fourth quarter of 2007), which were included in "loss from discontinued operations, net of taxes" on our Consolidated Statement of Operations for the year ended December 31, 2007.

---

As a result of our Board of Directors approving the retention of our PFFL, PFO, and PFSG facilities/operations, we restated the condensed consolidated financial statements for all periods presented to reflect the reclassification of these three facilities/operations back into our continuing operations. During the third quarter of 2008, we classified one of the two properties at PFO as "net property and equipment held for sale" within our continued operations in the Consolidated Balance Sheets in accordance to SFAS No. 144. The Company plans to continue to market this property for sale. PFO has transferred its operating permit to the property not held for sale. We do not expect any impact or reduction to PFO's operating capability from the sale of the property at PFO. We evaluated the fair value of PFO's assets and as a result, recorded a credit of $507,000 related to the recovery of previous impairment charges for PFO, which is included in "Asset Impairment Recovery" on the Condensed Consolidated Statements of Operations for the quarter ended September 30, 2008. As the long-lived assets for PFFL, PFSG, and PFO, (excluding the property subject to sale at our PFO facility as described above), no longer meets the held for sale criteria under SFAS No. 144, "Accounting for the Impairment of Disposal of Long-Lived Assets", the long-lived assets for these facilities are reported individually at the lower of their respective carrying amount before they were initially classified as held for sale, adjusted for any depreciation expense that would have been recognized had these assets been continuously classified as held and used or the fair value at the date of the subsequent decision not to sell. As a result of our decision to retain PFFL, PFSG, and PFO facilities, we incurred incremental depreciation of $486,000, which is included in our Condensed Consolidated Statements of Operations for the three and nine months ended September, 30, 2008.

The third quarter of 2008 reflected a small revenue decrease of $317,000 or 1.9% from the same period of 2007. We saw revenue increases within our Engineering and Industrial Segment of $217,000 or 34.5% and $158,000 or 6.4%, respectively. Our Nuclear Segment saw a decrease of approximately $692,000 or 5.2%; however, revenue from our Perma-Fix Northwest Richland, Inc. ("PFNWR") which we acquired in June 2007, saw an increase in revenue of $1,170,000 or 33.3% in the third quarter of 2008 as compared to the corresponding period of 2007. The decrease of revenue within our Nuclear Segment is primarily the result of reduction in the volume of waste receipts in both mixed waste and hazardous/non hazardous wastes. Revenue for the third quarter of 2008 from the Engineering Segment increased $217,000 or 34.5% to $846,000 from $629,000 for the same period of 2007. This increase is attributed mainly to an increase in average billable rate and number of billed hours. Industrial Segment revenue increased $158,000 or 6.4% due primarily to higher oil sales. This increase in revenue was partially offset by lower government revenue due to termination of a government contract in July 2007 at our PFSG facility. Gross profit for the Nuclear Segment as a percentage of revenue decreased to 25.3% from 30.5%. The decrease in gross profit was due primarily with the Nuclear Segment's lower revenue and revenue mix. Our Engineering Segment's gross profit increased approximately $116,000 or 50.2% due to increased revenue resulting from higher external billable hours at higher average hourly rate. Gross profit for our Industrial Segment increased $243,000 or 70.0% despite the incremental cost of goods sold depreciation of approximately $356,000 incurred in the third quarter resulting from the reclassification of PFFL, PFO, and PFSG facilities into continuing operations. This increase is primarily the result of higher margin oil revenues. SG&A for the quarter increased approximately $20,000. This increase is due primarily to the SG&A depreciation of approximately $130,000 incurred in the third quarter of 2008 resulting from the reclassification of the Industrial Segment facilities noted above into continuing operations as noted above. Excluding this depreciation expense, SG&A decreased approximately $110,000 or 2.3% as we continue our efforts in streamlining our costs. Our working capital position in the quarter continues to be negatively impacted by the acquisition of PFNWR in 2007 with payment of approximately $2.0 million in financial assurance coverage at our PFNWR facility; however, our working capital position has improved in 2008 with the sale of our PFMD, PFTS, and PFD facilities in the first and second quarter of 2008 and with the pay down of certain current liabilities resulting from the restructuring of our credit facility in the third quarter of 2008.

---

Outlook
Declining consumer confidence is now impacting the U.S. economy. Turmoil in the financial markets is straining the availability of credit which could limit our customers' ability to obtain adequate financing which could decrease the demand for our services, thereby negatively impacting our results of operations. Consumers' concerns of the recession period extending into 2009 could also reduce or halt their spending which could negatively impact our results of operations. In addition, a significant amount of our revenues within our Nuclear Segment stem from U.S. government contracts or subcontracts involving the U.S. government. With government deficit at an all time high and the urgency of our government to balance this budget in light of the uncertainty in the current economy, funding for certain governmental remedation projects at DOE and DOD sites could be cut off or curtailed thereby negatively impacting our results of operations and liquidity. The Company remains cautious of the future due to this heightened financial market turmoil.