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 will provide substantial funds for DOE to remediate its sites and 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;

· the Company does not have any immediate plans or current commitments to issue shares under the registration statement;

· ability to generate sufficient cash flow from operations to fund all costs of operations;

· ability to remediate certain contaminated sites for projected amounts;

· ability to borrow under our credit facility;

· we expect to meet to our financial covenants in the fourth quarter of 2009 and beyond;

· consideration of alternatives to our credit facility which could provide terms more favorable to us than under our existing credit facilities;

· 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 Potentially Responsible Party ("PRP") at a remedial action site, which could have a material adverse effect;

· we anticipate paying the remaining $9,000 of our estimated portion of the cost of the site assessment for the PRP at the Marine Shale Superfund in the fourth quarter of 2009;

· ability to generate funds internally to remediate sites;

· ability to fund budgeted capital expenditures of approximately $2,300,000 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;

· 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 $18,000 in the remaining three 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 expect to pay $184,000 in pension liability for PFMI over the next year;

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· 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;

· due to the downturn in the economy, changes within the environmental insurance market, and the financial difficulties of AIG, the provider of our financial assurance policies, we have no guarantees as to continued coverage by AIG, that we will be able to obtain similar insurance in future years, or that the cost of such insurance will not increase materially;

· implementation of certain controls at our certain of our Industrial Segment facilities and our PFNWR facility to remediate material control weaknesses by the fourth quarter of 2009;

· we will complete testing of the final control in the fourth quarter of 2009 for our CHPRC subcontract, at which time, we believe the material weakness for our CHPRC subcontract will be fully remediated;

· we plan to integrate a Purchase Order System to certain of our facilities by year end;

· potential for fines and remediation of our waste management facilities;

· we will continue to monitor the fair value of the Put on a quarterly basis;

· in the event of failure of AIG, this could significantly impact our operations and our permits;

· we will expense approximately $144,000 during the fourth quarter of 2009 as result of extension of approximately 270,000 Non-Qualified Stock Options to Larry McNamara;

· the Company expects ASC 805-20 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;

· the Company does not expect ASU 2009-12 to materially impact our financial condition, results of operations, and disclosures;

· the Company does not expect the guidance issued as SFAS No. 166 and No. 167 to have a material impact our financial condition, results of operations, and disclosures; and

· the remaining amount of the earn-out that we may be required to pay in connection with the acquisition of PFNWR and PFNW.

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;

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· 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.

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 third quarter of 2009 reflected a revenue increase of $10,545,000 to $26,534,000 or 66.0% from revenue of $15,989,000 for the same period of 2008.
Within our Nuclear Segment, we generated revenue of $23,518,000 in the third quarter of 2009, an increase of $10,999,000 or 87.9% from the corresponding period of 2008. The increase in revenue within our Nuclear Segment was primarily due to $9,083,000 in revenue generated from the subcontract awarded to our East Tennessee Materials and Energy Corporation ("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 subcontract officially commenced on October 1, 2008. The remaining increase in revenue in our Nuclear Segment was due to higher priced waste which offset the impact of lower volume of waste. Our Industrial Segment generated $2,128,000 in revenue in the third quarter of 2009, as compared to $2,624,000 for the corresponding period of 2008, or 18.9% decrease. This decrease was primarily the result of lower oil sales revenue resulting from both decreased volume and lower average price per gallon. Revenue for the third quarter of 2009 from the Engineering Segment increased $42,000 or 5.0% to $888,000 from $846,000 for the same period of 2008.

The third quarter 2009 gross profit increased $3,583,000 or 87.3% from the corresponding period of 2008 due primarily to increase in revenue from our CHPRC subcontract and increase in revenue from other generators in our Nuclear Segment.

SG&A for the third quarter of 2009 decreased 3.5% to $4,486,000 from $4,648,000 in the corresponding period of 2008.

Net income applicable to Common Stockholders for the quarter ended September 30, 2009 was $2,622,000 or $.05 per share as compared to net loss applicable to Common Stockholders of $341,000 or ($.01) per share for the corresponding period of 2008. Our net income applicable to Common Stockholders for the quarter ended September 30, 2009 included a reduction of approximately $787,000 in costs of goods sold in our Nuclear Segment resulting from a change in estimate related to accrued costs to dispose of legacy waste that were assumed as part of the acquisition of our PFNWR facility in June 2007 (see "Cost of Goods Sold" in this section for further information regarding this reduction). In addition, our loss from discontinued operations for the quarter ended September 30, 2009 included approximately $115,000 in abated interest that was previously expensed in the second quarter of 2009 in connection with an excise tax audit for fiscal years 1999 to 2006 (see "Discontinued Operations" in this section for further information on the abated interest).

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Our working capital position at September 30, 2009 was $2,694,000, 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 attributed by the reduction of our account payables using funds generated by our operations.

Outlook
We believe that the increase in government funding made available to remediate Department of Energy ("DOE") sites under the 2009 federal 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. We also believe we are beginning to see this impact with increased waste receipts toward the end of the third quarter of 2009. However, we expect that demand for our services will continue to fluctuate due to a variety of factors beyond our control, including the current economic conditions, the federal deficit, 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. 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.