Certain statements contained within this "Management's Discussion and Analysis of Financial Condition and Results of Operations" 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"). See "Special Note regarding Forward-Looking Statements" contained in this report.

Management's discussion and analysis is based, among other things, upon our audited consolidated financial statements and includes our accounts and the accounts of our wholly-owned subsidiaries, after elimination of all significant intercompany balances and transactions.

The following discussion and analysis should be read in conjunction with our consolidated financial statements and the notes thereto included in Item 8 of this report.

Review
2008 was a turbulent year throughout the U.S economy, with the domestic recessionary environment which became evident during the latter part of 2008. This turbulence impacted our results in 2008. Demand for our services has been, and we expect that demand will continue to be, subject to significant fluctuations due to a variety of factors beyond our control, including the current economic recession and conditions, inability of the federal government to adopt its budget or reductions in the budget for spending to remediate federal sites due to numerous reasons, including, without limitation, the substantial deficits that the federal government has and is continuing to incur. During economic downturns, such as the current economic recession, and large budget deficits that the federal government and many states are experiencing, the ability of private and government entities to spend on nuclear services may decline significantly. Although the recently adopted economic stimulus package provides for substantial funds to remediate federal nuclear sites, we cannot be certain that economic or political conditions will be generally favorable or that there will not be significant fluctuations adversely affecting our industry as a whole. In addition, our operations depend, in large part, upon governmental funding, particularly funding levels at the Department of Energy ("DOE"). Our governmental contracts and subcontracts relating to activities at governmental sites are subject to termination or renegotiation on 30 days notice at the government's option. Significant reductions in the level of governmental funding (for example, the annual budget of the DOE) or specifically mandated levels for different programs that are important to our business could have a material adverse impact on our business, financial position, results of operations and cash flows.

Within our Nuclear Segment, we generated revenue of $61,359,000, which included revenue of approximately $17,325,000 at our Perma-Fix Northwest Richland, Inc. ("PFNWR") facility acquired in June of 2007 and $7,095,000 of revenue generated from a subcontract awarded to us by the DOE's general contractor CH Plateau Remediation Compay ("CHPRC") to treat wastes at the Hanford Site. This CHPRC subcontract became effective October 1, 2008. In 2007, revenue from PFNWR accounted for $8,439,000 of our revenue within our Nuclear Segment. Excluding revenue of PFNWR and CHPRC, our Nuclear Segment's revenue decreased $6,326,000 or 14.6% due primarily to reduced receipts offset in part by higher priced wastes. Our Industrial Segment generated $10,951,000 in revenue in 2008 as compared to $10,442,000 in 2007 or 4.9% increase. This increase was primarily the result of oil sales which paralled the high price of oil globally in 2008. Revenue in our Industrial Segment includes revenue of Perma-Fix of Fort Lauderdale, Inc. ("PFFL"), Perma-Fix of South Georgia, Inc. ("PFSG"), and Perma-Fix of Orlando, Inc. ("PFO"). In May 2007, our Board of Directors authorized the divestiture of our Industrial Segment. In September 2008, our Board of Directors approved retaining the three facilities/operations at PFFL, PFSG, and PFO, which resulted in the reclassification of these three facilities/operations back into our continuing operations. The subsequent decision to retain these operations 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 the fourth quarter of 2008, we sold one of the two properties at our PFO facility for $900,000 in cash, which was used for our working capital. We do not expect any impact or reduction to PFO's operating capability from the sale of the property at PFO. Revenue in our Engineering Segment was up 33.2% in 2008 from 2007 due primarily to increase in billable hours. The backlog of stored waste within the Nuclear Segment was reduced to $10,244,000, at December 31, 2008, down from $14,646,000 in 2007, reflecting the reduced waste receipts in the year.

In 2008, we completed the sale of substantially all of the assets of three of our Industrial Segment facilities/operations which was reclassified into our discontinued operations in May 2007 as follows: on January 8, 2008, we completed the sale of substantially all of the assets of Perma-Fix Maryland, Inc. ("PFMD") for $3,825,000 in cash and the assumption by the buyer of certain liabilities of PFMD, with a final working capital adjustment of $170,000 received by Perma-Fix from the buyer in the fourth quarter of 2008; on March 14, 2008, we completed the sale of substantially all of the assets of Perma-Fix of Dayton, Inc. ("PFD") for approximately $2,143,000 in cash, plus assumption by the buyer of certain of PFD's liabilities and obligations. In June 2008, we paid the buyer $209,000 in final working capital adjustment; and on May 30, 2008, we completed the sale of substantially all of the assets of Perma-Fix Treatment Services, Inc. ("PFTS") for approximately $1,503,000, and assumption by the buyer of certain liabilities of PFTS. In July 2008, we paid the buyer $135,000 in final working capital adjustments. Proceeds received from the sale of these three facilities were used to pay off our term note and pay down our revolver. In August 2008, we reloaded our term note back to $7,000,000 with the revolving line of credit remaining at $18,000,000. The due date of the $25,000,000 credit facility was extended through July 31, 2012.

We have taken steps to improve our working capital in 2008. Our working capital position at December 31, 2008 is a negative $3,886,000, which includes working capital of our discontinued operations, as compared to a negative working capital of $17,154,000 as of December 31, 2007. The improvement in our working capital is the result of the reclassification of our indebtedness to certain of our lenders from current (less current maturities) to long term in the first quarter of 2008 due to the Company meeting its fixed charge coverage ratio, pursuant to our loan agreement, as amended, in the first quarter of 2008. In 2007, the Company failed to meet its fixed charge coverage ratio as of December 31, 2007 and as a result we were required under generally accepted accounting principles to reclassify approximately $11,403,000 in debt under our credit facility with PNC and debt payable to KeyBank National Association, due to a cross default provision from long term to current as of December 31, 2007. We met our fixed charge coverage ratio in each quarter in 2008 and we anticipate meeting this ratio in 2009. Our working capital in 2008 was also impacted by the annual cash payment to the finite risk sinking fund of $1,004,000, our payments of approximately $4,274,000 in financial assurance coverage for our PFNWR facility, capital spending of approximately $1,158,000, the reclassification of approximately $833,000 in principal balance on the shareholder note resulting from the acquisition of PFNWR in June from long term to current, payment of approximately $3,039,000 on the KeyBank debt from the PFNWR acquisition, and the payments against the long term portion of our term note of approximately $4,100,000 in proceeds received from sale of PFMD, PFD, and PFTS.

Outlook
We believe that government funding that will be available for DOE projects under the recently enacted government stimulus plan as it relates to our existing government contracts within our Nuclear Segment should positively impact our Nuclear Segment since the stimulus plan provides for a substantial amount for remediation of DOE sites. However, declining consumer confidence continues to impact the U.S. economy. Turmoil in the financial markets continues to strain 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 into 2009. A significant amount of our revenues within our Nuclear Segment stem from U.S. government contracts or subcontracts involving the U.S. government. Our government contracts and subcontracts relating to activities at governmental sites are subject to termination or renegotiation on 30 days notice at the government's option. With government deficits at an all time high, in light of the uncertainty in the current economy, 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. The Company continues to remain cautious of the future due to the heightened financial market turmoil and the large government deficit.

Results of Operations
The reporting of financial results and pertinent discussions are tailored to three reportable segments: Nuclear Waste Management Services ("Nuclear"), Industrial Waste Management Services ("Industrial"), and Consulting Engineering Services ("Engineering").

Below are the results of continuing operations for our years ended December 31, 2008, 2007, and 2006 (amounts in thousands):

(Consolidated)            2008            %           2007            %           2006            %
Net Revenues            $  75,504         100.0     $  64,544         100.0     $  68,205         100.0
Cost of goods sold         55,310          73.3        45,544          70.6        43,160          63.3
Gross Profit               20,194          26.7        19,000          29.4        25,045          36.7

Selling, general and
administrative             18,832          24.9        18,082          28.0        17,803          26.1
Asset impairment
(recovery) loss              (507 )         (.7 )       1,836           2.8             ¾             ¾
(Gain) loss on
disposal of property
   and equipment             (295 )         (.4 )         172            .3            27             ¾
Income (loss) from
operations                  2,164           2.9        (1,090 )        (1.7 )       7,215          10.6
Interest income               226            .3           312            .4           280            .4
Interest expense           (1,317 )        (1.7 )      (1,321 )        (2.0 )      (1,255 )        (1.8 )
Interest expense -
financing fees               (137 )         (.2 )        (196 )         (.3 )        (192 )         (.3 )
Other                          (6 )           ¾           (85 )         (.1 )        (119 )         (.2 )
Income (loss) from
continuing operations
before taxes                  930           1.3        (2,380 )        (3.7 )       5,929           8.7
Income tax expense             10             ¾             ¾             ¾           507            .8
Income (loss) from
continuing operations         920           1.3        (2,380 )        (3.7 )       5,422           7.9
Preferred Stock
dividends                       ¾             ¾             ¾             ¾             ¾             ¾

Summary - Years Ended December 31, 2008 and 2007

Net Revenue
Consolidated revenues from continuing operations increased $10,960,000 for the
year ended December 31, 2008, compared to the year ended December 31, 2007, as
follows:

                                     - 31 -
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  Table of Contents


(In thousands)               2008           % Revenue        2007           % Revenue       Change        % Change
Nuclear
Government waste           $  14,209              18.9     $  11,763              18.2     $   2,446           20.8
LATA/Parallax                  4,841               6.4         8,784              13.6        (3,943 )        (44.9 )
Fluor Hanford                  2,814 (1)           3.7         3,885 (2)           6.0        (1,071 )        (27.6 )
CHPRC                          7,095 (1)           9.4             ¾                 ¾         7,095          100.0
Hazardous/non-hazardous        3,973               5.3         5,068               7.9        (1,095 )        (21.6 )
Other nuclear waste           11,102              14.7        13,765              21.3        (2,663 )        (19.3 )
Acquisition 6/07 (PFNWR)      17,325 (1)          22.9         8,439 (2)          13.1         8,886          105.3
Total                         61,359              81.3        51,704              80.1         9,655           18.7

Industrial
Commercial waste               5,495               7.3         5,699               8.8          (204 )         (3.6 )
Government services              814               1.1         1,653               2.6          (839 )        (50.8 )
Oil sales                      4,642               6.1         3,090               4.8         1,552           50.2
Total                         10,951              14.5        10,442              16.2           509            4.9

Engineering                    3,194               4.2         2,398               3.7           796           33.2

Total                      $  75,504             100.0     $  64,544             100.0     $  10,960           17.0

(1) Revenue of $17,325,000 from PFNWR for 2008 includes approximately $14,505,000 relating to wastes generated by the federal government, either directly or indirectly as a subcontractor to the federal government. Of the $14,505,000 in revenue, approximately $5,160,000 was from Fluor Hanford, a contractor to the federal government and approximately $1,025,000 was from CHPRC, a contractor to the federal government. Revenue in 2008 from Fluor Hanford totaled approximately $7,974,000 or 10.6% of total consolidated revenue. Revenue in 2008 from CHPRC totaled approximately $8,120,000 or 10.8% of total consolidated revenue.

(2) Revenue of $8,439,000 from PFNWR for 2007 includes approximately $5,568,000 relating to wastes generated by the federal government, either directly or indirectly as a subcontractor to the federal government. Of the $5,568,000 in revenue, approximately $3,100,000 was from Fluor Hanford, a contractor to the federal government. Revenue in 2007 from Fluor Hanford totaled approximately $6,985,000 or 10.8 % of total consolidated revenue.

The Nuclear Segment experienced a $9,655,000 increase in revenue for the year ended December 31, 2008 over the same period in 2007. Total revenue within the Nuclear Segment included $17,325,000 of revenue at our PFNWR facility for the full year of 2008 as compared to $8,439,000 after the facility was acquired on June 13, 2007. In addition, our revenue for the Nuclear Segment included revenue of $7,095,000 for our new subcontract awarded to us from CHPRC. In the second quarter of 2008, we were awarded a subcontract by CHPRC to perform a portion of facility operations and waste management activities for the DOE Hanford, Washington Site. The general contract awarded by the DOE to CHPRC and our subcontract provide for a transition period from August 11, 2008 through September 30, 2008, a base period from October 1, 2008 through September 30, 2013 and an option period from October 1, 2013 through September 30, 2018. On October 1, 2008, operations of this subcontract commenced at the DOE Hanford Site. Excluding our revenue from PFNWR and CHPRC, revenue within our Nuclear Segment decreased approximately $6,326,000 or 14.6% as compared to the same period of 2007. Excluding revenue from PFNWR and CHPRC, revenue from government generators (which includes our subcontrtacts with LATA/Parallax and Fluor Hanford) decreased $2,568,000 or 10.5% due primarily to overall lower government receipts. For 2008, government agencies were operated under "Continuing Resolution" without finalized budgets due in part to the impending change in Administration, which had a negative impact on availability of funding for services offered by our Nuclear Segment. We saw a decrease of $3,943,000 or 44.9% under our subcontracts with LATA/Parallax due to significant progress made by LATA/Parallax in completing legacy waste removal actions as part of their clean-up project at Portsmouth for the DOE. We saw a decrease of approximately $1,071,000 or 27.6% in revenue from Fluor Hanford due to lower overall

receipts and transition of revenue from Fluor Hanford to CHPRC effective October 1, 2008 (see "known Trends and Uncertainties - significant customers" in this section). Revenue from remaining government wastes increased approximately $2,446,000 or 20.8% due to higher priced waste with reduced volume. Revenue from hazardous and non-hazardous waste was down $1,095,000 or 21.6% due to lower volume of waste received offset by higher average prices per drum which increase approximately 38.5%. The price change is primarily due to waste mix. We also had three large event projects in 2007, while none occurred in 2008. Other nuclear waste revenue decreased $2,663,000 or 19.3% as packaging and field service related revenue from LATA/Parallax Portsmouth contract from 2007 did not occur in 2008. Revenue in our Industrial Segment increased $509,000 or 4.9% due primarily to higher oil sale revenue. We saw an increase of approximately 52.6% in average price per gallon while volume only decreased 2.1%. The increase in average price per gallon was attributed to the high global oil costs throughout most of 2008. This increase in oil sale revenue was partially offset by lower government revenue resulting from termination of a government contract in July 2007. Revenue in our Engineering Segment increased approximately $796,000 or 33.2% due primarily to the increase of billable hours of 29.0% caused by increase in external business, with the billability rate remaining fairly constant, a slight decrease of .3% from 2007 to 2008.

Cost of Goods Sold
Cost of goods sold increased $9,766,000 for the year ended December 31, 2008, as
compared to the year ended December 31, 2007, as follows:

                                            %                          %
(In thousands)               2008        Revenue        2007        Revenue       Change
Nuclear                    $ 35,143          79.8     $ 30,261          69.9     $  4,882
Acquisition 6/07 (PFNWR)     10,606          61.2        4,938          58.5     $  5,668
Industrial                    7,439          67.9        8,707          83.4       (1,268 )
Engineering                   2,122          66.4        1,638          68.3          484
Total                      $ 55,310          73.3     $ 45,544          70.6     $  9,766

Excluding the cost of goods sold of approximately $10,606,000 for the PFNWR facility, the Nuclear Segment's cost of goods sold for the year ending December 31, 2008 were up approximately $4,882,000. The $35,143,000 in cost of good sold in the Nuclear Segment (excluding PFNWR) includes cost of good sold of approximately $5,584,000 related to the CHPRC subcontract. Excluding this $5,584,000 in cost of good sold, our remaining Nuclear Segment cost of goods sold decreased $702,000 or 2.3%. Although receipts were down 41.6% as compared to prior year, cost as a percentage of revenue (excluding the CHPRC subcontract and PFNWR) increased to 80.0% from 69.9%. This reflects the mix of wastes received which was costlier to dispose. In the Industrial Segment, cost of goods sold decreased $1,268,000 or 14.6% due primarily to reduced revenue from a government contract which terminated in July 2007. This decrease was offset by higher cost of good sold related to material and supply purchases, especially raw oil purchases, the result of the increase in the global cost of oil throughout 2008. Cost as a percentage of revenue decreased from 83.4% in 2007 to 67.9% due primarily to reduction in government receipts processed. Total cost of good sold for the Industrial Segment decreased despite depreciation expenses of approximately $244,000 incurred as result of the reclassification of PFFL, PFO, and PFSG facilities as continuing operations. The Engineering Segment costs increased $484,000 or 29.5% due primarily to increased revenue of 33.2%. Included within cost of goods sold is depreciation and amortization expense of $4,612,000 and $3,918,000 for the year ended December 31, 2008 and 2007, respectively.

Gross Profit
Gross profit for the year ended December 31, 2008, was $1,194,000 higher than
2007, as follows:

                                            %                          %
(In thousands)               2008        Revenue        2007        Revenue       Change
Nuclear                    $  8,891          20.2     $ 13,004          30.1     $ (4,113 )
Acquisition 6/07 (PFNWR)      6,719          38.8        3,501          41.5        3,218
Industrial                    3,512          32.1        1,735          16.6        1,777
Engineering                   1,072          33.6          760          31.7          312
Total                      $ 20,194          26.7     $ 19,000          29.4     $  1,194

The Nuclear Segment gross profit, excluding gross profit of our PFNWR facility, decreased $4,113,000 from 2007 to 2008. Gross profit of the Nuclear Segment (excluding PFNWR) includes the gross profit of our CHPRC subcontract of approximately $1,511,000. Excluding this gross profit, our Nuclear Segment gross profit decreased $5,624,000 or 43.2% from 2007 to 2008 due primarily to lower volume of waste received. Gross margin decreased from 30.1% to 20.0% which reflects the receipt of lower margin waste streams in 2008. The Industrial Segment gross profit increased $1,777,000 or 102.4% due primarily to the improved revenue mix resulting from higher margin oil revenue which displaced lower margin hazardous waste disposal revenue. Gross margin increased to 32.1% in 2008 from 16.6% in 2007 which reflects the favorable increase in oil price throughout much of 2008. The Engineering Segment gross profit increased $312,000 or 41.1% due to increased revenue resulting from a 29.0% increase in billable hours in 2008 as compared to 2007. Gross margin remained fairly constant, with an increase of 1.9% in 2008 as compared to 2007.

Selling, General and Administrative
Selling, general and administrative ("SG&A") expenses increased $750,000 for the
year ended December 31, 2008, as compared to the corresponding period for 2007,
as follows:

                                             %                          %
(In thousands)                2008        Revenue        2007        Revenue      Change
Administrative              $  5,679             ¾     $  5,457             ¾     $   222
Nuclear                        6,924          15.7        7,520          17.4        (596 )
Acquisition 06/07 (PFNWR)      2,878          16.6        1,678          19.9       1,200
Industrial                     2,686          24.5        2,910          27.9        (224 )
Engineering                      665          20.8          517          21.6         148
Total                       $ 18,832          24.9     $ 18,082          28.0     $   750

Excluding the SG&A of our PFNWR facility, our Nuclear SG&A expenses decreased $596,000 or 7.9% in 2008 as compared to 2007. The decrease within the Nuclear Segment (excluding PFNWR) was due to lower payroll, commission, travel related expenses, and general expenses due to headcount reduction resulting from decreased revenue. The increase in administrative SG&A was primarily the result of higher stock option expenses as we granted 1,083,000 options to certain company officers and employees. Such options were not granted in 2007. In addition, legal fees were higher in 2008 due to the Company's daily legal corporate matters and public corporate filings. These increases were offset by lower director fees in 2008 as we had a one time fee payment of $160,000 to a member of our Board of Directors in 2007 as compensation for his service in negotiating the agreement in principal to resolve a certain legal matter with the EPA against our former PFD facility. The decrease in SG&A in our Industrial Segment is due to lower payroll related expenses as we continue to streamline costs within the segment. This decrease was offset by incremental depreciation expense incurred in 2008 of approximately $128,000 as a result of the reclassification of PFO, PFFL, and PFSG into continuing operations and higher bonus/commission expenses at PFFL due to higher revenue in 2008 as compared to 2007. The Engineering Segment increase was the result of an increase in payroll related expenses but this increase was offset by a significant decrease in bad

debt expense. Included in SG&A expense is depreciation and amortization expense of $254,000 and $174,000 for the years ended December 31, 2008 and 2007, respectively.

Loss (Gain) on Disposal of Property and Equipment The gain on disposal of property and equipment in 2008 is primarily due to the sale of one of the properties at our PFO for $900,000 which resulted in gain of approximately $483,000. The proceeds were used for our working capital. This gain was offset by disposal of idle equipment at our DSSI and M&EC facilities. The loss on disposal of property and equipment for 2007 was attributed mainly to the disposal of idle equipment at our M&EC, DSSI, and PFFL facilities.

Asset Impairment Recovery
In May 2007, our PFSG, PFO, and PFFL facilities met the held for sale criteria under SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets as a result of our Board of Directors approving the divestiture of these facilities, which resulted in impairment losses of $1,329,000 and $507,000 for PFSG and PFO, respectively. In September 2008, these facilities were reclassified back into continuing operations as a result of our Board of Directors approving the retention of these facilities. In the third quarter of 2008, we reclassified one of the two properties at PFO as "net property and equipment held for sale" within our continuing operations in accordance with SFAS No. 144. We evaluated the fair value of PFO's assets and as a result, recorded the $507,000 previously impairment loss as an asset impairment recovery.

Interest Income
Interest income decreased $86,000 for the year ended December 31, 2008, as compared to 2007. The decrease is primarily due to interest earned from excess . . .