Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

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,

? demand for our services subject to fluctuations;

? funding by the federal government;

? goals;

? ability to improve operations;

? receivables are normally considered collectible within twelve month;

? we anticipate meeting our financial covenants in remaining 2012;

? ability to close and remediate certain contaminated sites for projected amounts over the projected periods;

? ability to fund expenses to remediate sites from funds generated internally;

? collectability of our receivables;

? ability to fund budgeted capital expenditures during 2012 through our operations and lease financing;

? our cash flows from operations and our available liquidity from our line of credit are sufficient to service the Company's current obligations and current obligations resulting from the acquisition of SEC;

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? continue to take steps to improve our operations and liquidity and to invest working capital into our facilities to fund capital additions to our segments;

? due to the continued uncertainty in the economy and changes within the environmental insurance market, we have no guarantee that we will be able to obtain similar insurance in future years, or that the cost of such insurance will not increase materially;

? we could be subject to fines, penalties or other liabilities or could be adversely affected by existing or subsequently enacted laws or regulations;

? as our operations and activities expand, there could be an increase in potential litigation;

? 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;

? demand for our services will be subject to fluctuations due to a variety of factors beyond our control;

? investment of working capital;

? seasonality and the government's budget process;

? process backlog;

? funding of any repurchases of our common stock;

? contracts with the federal government;

? we do not believe that SEHC's subsidiary's prior deficiencies on this project will affect our ability to obtain additional contracts with the DOE;

? treatment processes we utilize offer a cost saving alternative to more traditional remediation and disposal methods offered by certain of our competitors;

? despite our aggressive compliance and auditing procedure for disposal of wastes, we could further be notified, in the future, that we are a PRP at a remedial action site, which could have a material adverse effect; and

? we could be deemed responsible for part for the cleanup of certain properties and be subject to fines and civil penalties in connection with violations of regulatory requirements.

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;

? the ability to maintain and obtain closure and operating insurance requirements;

? 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;

? delays at our third party disposal site can extend collection of our receivables greater than twelve months;

? 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;

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? 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

? factors set forth in "Special Note Regarding Forward-Looking Statements" contained in our 2011 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
As previously reported, as a result of the acquisition on October 31, 2011 of all of the issued and outstanding shares of capital stock of Safety and Ecology Holdings Corporation ("SEHC") and its subsidiaries, Safety & Ecology Corporation ("Safety & Ecology"), SEC Federal Services Corporation, Safety and Ecology Corporation Limited ("SECL" - a United Kingdom operation) and SEC Radcon Alliance, LLC ("SECRA", which we own 75%), (collectively, "SEC") pursuant to that certain Stock Purchase Agreement, dated July 15, 2011 ("Purchase Agreement"), between the Company, Homeland Capital Security Corporation ("Homeland") and SEHC, we made structure and reporting changes to our internal organization and changes to our operating segments to create better consistency, greater coordination and enhanced communication. This restructuring aligns the internal management and functional support assets based on company service offerings. Such restructuring also provides a functionally supported matrix management approach which better supports resource allocation by our chief operating decision maker and optimizes performance assessment. These changes resulted in our new reporting segments: Treatment Segment ("Treatment") and the Services Segment ("Services"). The Treatment Segment comprises of treatment, processing, and disposal services of nuclear, low-level radioactive, mixed (waste containing both hazardous and low-level radioactive constituents), hazardous and non-hazardous waste. The Services Segment comprises of on-site waste management, technical, and consulting services. As such, the reporting of financial results and pertinent discussions below are tailored to the two newly re-aligned reportable segments. All of the historical segment numbers presented in the Form 10-Q have been recast to conform to this change in reportable segments.

Revenue increased $14,458,000 or 61.2% to $38,073,000 for the three months ended March 31, 2012 from $23,615,000 for the corresponding period of 2011. The revenue increase included revenue of $18,602,000 from the acquisition of SEC on October 31, 2011. Excluding revenue from this acquisition, revenue decreased $4,144,000 or 17.5% from the three months ended March 31, 2011 to March 31, 2012. Treatment Segment revenue increased $507,000 or 4.1% primarily due to higher waste volume which was reduced by lower average priced waste. Services Segment revenue decreased $4,651,000 or 41.2% primarily due to reduced revenue from the CH Plateau Remediation Company ("CHPRC") subcontract ("CHPRC subcontract"), a cost plus award fee subcontract. We were awarded the CHPRC subcontract in the second quarter of 2008 by CHPRC, a general contractor to the U.S. Department of Energy ("DOE"). This subcontract entails performing a portion of facility operations and waste management activities for the DOE Hanford, Washington Site. The revenue reduction was the result of a reduction in workforce which occurred during September 30, 2011 under the CHPRC subcontract.

Gross profit increased $1,271,000 or 41.9%, which included gross profit of $286,000 from the SEC acquisition. Excluding gross profit from SEC, remaining gross profit increased approximately $985,000 or 32.5% primarily due to increased gross profit from our Treatment Segment. Selling, General, and Administrative (SG&A) expenses increased $1,666,000 which included SG&A expenses of $1,327,000 of SEC. Excluding SG&A expense of SEC, remaining SG&A increased $339,000 or 10.1%.

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Outlook
We believe demand for our services will be subject to fluctuations due to a variety of factors beyond our control, including the current economic conditions, and the manner in which the 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 generally subject to termination or renegotiation on 30 days notice at the government's option. Significant reductions in the level of governmental funding due to the completion of most stimulus funded projects and federal budgets driven by temporary continuing resolutions could have a material adverse impact on our business, financial position, results of operations and cash flows.