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

Forward-looking Statements
Certain statements contained within 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 performance of the Company to differ materially from such statements. The words "believe," "expect," "anticipate," "intend," "will," and similar expressions identify forward-looking statements. Forward-looking statements contained herein relate to, among other things,

· cash flow from operations and our available liquidity from our line of credit are sufficient to service our current obligations;
· government funding and economic stimulus package should positively impact our existing government contracts;
· demand for our service will continue to be subject to fluctuations;
· effect on us due to reductions in the level of government funding;
· 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 costs of operations;
· ability to remediate certain contaminated sites for projected amounts;
· no further impairment of intangible or tangible assets;
· despite our aggressive compliance and auditing procedures for disposal of wastes, we could, in the future, be notified that we are a Partially Responsible Party ("PRP") at a remedial action site, which could have a material adverse effect;
· ability to generate funds internally to remediate sites;
· ability to fund budgeted capital expenditures of $1,300,000 during 2009 through our operations or lease financing or a combination of both;
· growth of our Nuclear Segment;
· we believe full operations under the CHPRC subcontract will result in revenues for on-site and off-site work of approximately $200,000,000 to $250,000,000 over the five year base period;
· settlement of the Notice of Violation at PFTS is estimated to be during the second quarter of 2009, subject to finalization and execution of a settlement agreement;
· 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;
· 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 anticipate spending $267,000 in the remaining nine months of 2009 to remediate the PFMI site, with the remainder over the next five years;
· based on the current status of Corrective Action for PFMI, we believe that the remaining reserve is adequate to cover the liability;
· 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;
· we anticipate remediation of these control weaknesses by the third quarter of 2009;
· potential for fines and remediation of our waste management facilities;
· In the event of failure of AIG, this could significantly impact our operations and our permits;
· the Company expects SFAS No. 141R and FSP No. 141R-1 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 effect date;

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· the Company does not expect the adoption of SAB No. 110 and FSP 132(R)-1 to materially impact our operations or financial position; and
· placing the first $1,000,000 of the escrow amount we may be required to pay in connection with the acquisition of PFNWR and PFNW in an escrow account during the later part of 2009.

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;
· inability to collect in a timely manner a material amount of receivables;
· increased competitive pressures; the ability to maintain and obtain required permits and approvals to conduct
· operations; the 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;
· potential increases in equipment, maintenance, operating or labor costs;
· management retention and development;
· financial valuation of intangible assets is substantially more/less than expected;
· the requirement to use internally generated funds for purposes not presently anticipated;
· inability to continue to be profitable on an annualized basis;
· the inability 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;
· renegotiation of contracts involving the federal government;
· disposal expense accrual could prove to be inadequate in the event the waste requires re-treatment; and
· Risk Factors contained in Item 1A of our 2008 Form 10-K.

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

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Overview
We provide services through three reportable operating segments: Nuclear Waste Management Services Segment ("Nuclear Segment"), Industrial Waste Management Services Segment ("Industrial Segment"), and Consulting Engineering Services Segment ("Engineering 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 Industrial Segment provides on-and-off site treatment, storage, processing and disposal of hazardous and non-hazardous industrial waste and wastewater. 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.

The first quarter of 2009 reflected a revenue increase of $4,532,000 to $22,002,000 or 25.9% from revenue of $17,470,000 for the same period of 2008.
Within our Nuclear Segment, we generated revenue of $19,114,000 in the first quarter of 2009, an increase of $5,133,000 or 36.7% from the corresponding period of 2008. The increase in revenue within our Nuclear Segment was primarily due to revenue generated from the subcontract awarded to our M&EC subsidiary by CH Plateau Remediation Company ("CHPRC"), a general contractor to the Department of Energy ("DOE"), in the second quarter of 2008. This increase in revenue was offset by lower receipts from remaining generators. Our Industrial Segment generated $2,109,000 in revenue in the quarter ended March 31, 2009, as compared to $2,587,000 for the corresponding period of 2008, or 18.5 % decrease. This decrease was primarily the result of lower oil sales revenue resulting from both decreased volume and lower average price per gallon and less field service work in the first quarter of 2009 as compared to first quarter of 2008 resulting from the slow down in the economy. 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. Revenue for the first quarter of 2009 from the Engineering Segment decreased $123,000 or 13.6% to $779,000 from $902,000 for the same period of 2008.

The first quarter 2009 gross profit increased $642,000 or 14.4% from the corresponding period of 2008 due primarily to the CHPRC subcontract at M&EC.

SG&A for the first quarter of 2009 decreased 2.7% to $4,339,000 from $4,460,000 in the corresponding period of 2008.

Our working capital position at March 31, 2008 was a negative $2,301,000, which includes working capital of our discontinued operations, as compared to a negative working capital of $3,886,000 as of December 31, 2008. The improvement in our working capital was primarily the result of the reduction in our current unbilled receivable of approximately $1,264,000 as we continue our efforts to invoice our customers. In addition, we continue to reduce our account payables and other current debts by utilizing funds generated by our operations. Our working capital in the first quarter of 2009 was also impacted by the annual cash payment to the finite risk sinking fund of $1,004,000 and capital spending of approximately $304,000.

Outlook
We believe that the higher government funding made available to remediate DOE sites than past years under the 2009 government budget along with the economic stimulus package (American Recovery and Reinvestment Act), enacted by the Congress in February 2009, will provide substantial funds to remediate DOE sites and thus should positively impact our existing government contracts within our Nuclear Segment. However, we expect that demand for our services will continue to be subjected to fluctuations due to a variety of factors beyond our control, including the current economic recession and conditions, and the manner in which the federal government will be required to spend funding to remediate federal sites. Our operations depend, in large part, upon governmental funding, particularly funding levels at the DOE. In addition, 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 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.

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