SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





Form
10-Q





x
            QUARTERLY REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934


For
the quarterly period
ended            March 31,
2010





Or





o
            TRANSITION REPORT PURSUANT TO
      SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
      1934


For
the transition period from  to





Commission
File No.        111596





PERMA-FIX
ENVIRONMENTAL SERVICES, INC.


(Exact
name of registrant as specified in its charter)





Delaware
              (State
      or other jurisdiction
              of
      incorporation or organization)
            58-1954497
              (IRS
      Employer Identification Number)8302
      Dunwoody Place, Suite 250, Atlanta, GA
              (Address
      of principal executive offices)
            30350
              (Zip
      Code)





(770)
587-9898


(Registrant's
telephone number)





N/A





(Former
name, former address and former fiscal year, if changed since last
report)





Indicate
by check mark whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.


Yes x    No
o





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
Registrant was required to submit and post such files).


Yes £    No
£





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See definition of "large accelerated filer,” “accelerated
filer" and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.  (Check one):


Large
accelerated filer £        Accelerated
Filer x        Non-accelerated
Filer £        Smaller
reporting company £





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).  Yes £    No
x





Indicate
the number of shares outstanding of each of the issuer's classes of Common
Stock, as of the close of the latest practical date.





Class
            
            Outstanding at May 3,
  2010Common
      Stock, $.001 Par Value
            
            54,993,907
              shares
      of registrant’s
              Common
      Stock










PERMA-FIX
ENVIRONMENTAL SERVICES, INC.





INDEX





Page No.PART
      I
                                                  FINANCIAL
      INFORMATIONItem
      1.
                                                  Condensed
      Financial StatementsConsolidated
      Balance Sheets -March
      31, 2010 (unaudited) and December 31, 2009
                                                  1Consolidated
      Statements of Operations -Three
      Months Ended March 31, 2010 and 2009 (unaudited)
                                                  3Consolidated
      Statements of Cash Flows -Three
      Months Ended March 31, 2010 and 2009 (unaudited)
                                                  4Consolidated
      Statement of Stockholders' Equity -Three
      Months Ended March 31, 2010 (unaudited)
                                                  5Notes
      to Consolidated Financial Statements
                                                  6Item
      2.
                                                  Management's
      Discussion and Analysis ofFinancial Condition and Results of
      Operations
                                                  21Item
      3.
                                                  Quantitative
      and Qualitative Disclosures About Market Risk
                                                  41Item
      4.
                                                  Controls
      and Procedures
                                                  41PART II
                                                  OTHER
      INFORMATIONItem
      1.
                                                  Legal
      Proceedings
                                                  41Item
      1A.
                                                  Risk
      Factors
                                                  41Item
      6.
                                                  Exhibits
                                                  42





PART
I - FINANCIAL INFORMATION


Item
1. – Financial Statements





PERMA-FIX
ENVIRONMENTAL SERVICES, INC.


Consolidated
Balance Sheets





March 31,2010
                
                
                December 31,(AmountinThousands,ExceptforShareAmounts)
                
                (Unaudited)
                
                
                2009ASSETSCurrent
      assets:Cash
                
                $
                97
                
                
                $
                141Restricted
      cash
                
                
                55
                
                
                
                55Accounts
      receivable, net of allowance for doubtful accounts of $306 and $296,
      respectively
                
                
                13,333
                
                
                
                13,141Unbilled
      receivables - current
                
                
                10,886
                
                
                
                9,858Inventories
                
                
                464
                
                
                
                351Prepaid
      and other assets
                
                
                3,192
                
                
                
                3,447Deferred
      tax assets - current
                
                
                1,576
                
                
                
                1,856Current
      assets related to discontinued operations
                
                
                168
                
                
                
                174Total
      current assets
                
                
                29,771
                
                
                
                29,023Property
      and equipment:Buildings
      and land
                
                
                27,098
                
                
                
                27,098Equipment
                
                
                31,937
                
                
                
                31,757Vehicles
                
                
                650
                
                
                
                650Leasehold
      improvements
                
                
                11,506
                
                
                
                11,455Office
      furniture and equipment
                
                
                1,892
                
                
                
                1,933Construction-in-progress
                
                
                1,059
                
                
                
                92574,142
                
                
                
                73,818Less
      accumulated depreciation and amortization
                
                
                (29,517
                )
                
                
                (28,441
                )Net
      property and equipment
                
                
                44,625
                
                
                
                45,377Property
      and equipment related to discontinued operations
                
                
                637
                
                
                
                651Intangibles
      and other long term assets:Permits
                
                
                18,079
                
                
                
                18,079Goodwill
                
                
                12,893
                
                
                
                12,352Unbilled
      receivables – non-current
                
                
                2,737
                
                
                
                2,502Finite
      Risk Sinking Fund
                
                
                17,379
                
                
                
                15,480Deferred
      tax asset, net of liabilities
                
                
                243
                
                
                
                272Other
      assets
                
                
                2,401
                
                
                
                2,339Total
      assets
                
                $
                128,765
                
                
                $
                126,075





The
accompanying notes are an integral part of these consolidated financial
statements.


1




PERMA-FIX
ENVIRONMENTAL SERVICES, INC.


Consolidated
Balance Sheets, Continued





March 31,2010
                
                
                December 31,(AmountinThousands,ExceptforShareAmounts)
                
                (Unaudited)
                
                
                2009LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilities:Accounts
      payable
                
                $
                4,252
                
                
                $
                4,927Current
      environmental accrual
                
                
                125
                
                
                
                25Accrued
      expenses
                
                
                7,184
                
                
                
                6,478Disposal/transportation
      accrual
                
                
                2,746
                
                
                
                2,761Unearned
      revenue
                
                
                7,630
                
                
                
                8,949Current
      liabilities related to discontinued operations
                
                
                916
                
                
                
                993Current
      portion of long-term debt
                
                
                3,037
                
                
                
                3,050Total
      current liabilities
                
                
                25,890
                
                
                
                27,183Environmental
      accruals
                
                
                664
                
                
                
                785Accrued
      closure costs
                
                
                12,073
                
                
                
                12,031Other
      long-term liabilities
                
                
                531
                
                
                
                508Long-term
      liabilities related to discontinued operations
                
                
                1,337
                
                
                
                1,433Long-term
      debt, less current portion
                
                
                12,192
                
                
                
                9,331Total
      long-term liabilities
                
                
                26,797
                
                
                
                24,088Total
      liabilities
                
                
                52,687
                
                
                
                51,271Commitments
      and ContingenciesPreferred
      Stock of subsidiary, $1.00 par value; 1,467,396 shares authorized,
      1,284,730 shares issued and outstanding, liquidation value $1.00 per
      share
                
                
                1,285
                
                
                
                1,285Stockholders'
      equity:Preferred
      Stock, $.001 par value; 2,000,000 shares authorized, no shares issued and
      outstanding
                
                
                —
                
                
                
                —Common
      Stock, $.001 par value; 75,000,000 shares authorized, 54,994,410 and
      54,628,904 shares issued, respectively; 54,956,200
      and  54,628,904 outstanding, respectively
                
                
                55
                
                
                
                55Additional
      paid-in capital
                
                
                100,365
                
                
                
                99,641Accumulated
      deficit
                
                
                (25,539
                )
                
                
                (26,177
                )74,881
                
                
                
                73,519Less
      Common Stock in treaury at cost: 38,210 and 0 shares,
      respectively
                
                
                (88
                )
                
                
                —Total
      stockholders' equity
                
                
                74,793
                
                
                
                73,519Total
      liabilities and stockholders' equity
                
                $
                128,765
                
                
                $
                126,075





The
accompanying notes are an integral part of these consolidated financial
statements.


2


PERMA-FIX
ENVIRONMENTAL SERVICES, INC.


Consolidated
Statements of Operations


(Unaudited)





Three
      Months Ended
                  March
      31,(Amounts
      in Thousands, Except for Per Share Amounts)
                
                2010
                
                
                2009Net
      revenues
                
                $
                25,859
                
                
                $
                22,002Cost
      of goods sold
                
                
                20,467
                
                
                
                17,389Gross
      profit
                
                
                5,392
                
                
                
                4,613Selling,
      general and administrative expenses
                
                
                3,878
                
                
                
                3,859Loss
      (gain) on disposal of property and equipment
                
                
                2
                
                
                
                (12
                )Income
      from operations
                
                
                1,512
                
                
                
                766Other
      income (expense):Interest
      income
                
                
                21
                
                
                
                51Interest
      expense
                
                
                (220
                )
                
                
                (547
                )Interest
      expense-financing fees
                
                
                (102
                )
                
                
                (13
                )Other
                
                
                5
                
                
                
                1Income
      from continuing operations before taxes
                
                
                1,216
                
                
                
                258Income
      tax expense
                
                
                436
                
                
                
                9Income
      from continuing operations, net of taxes
                
                
                780
                
                
                
                249(Loss)
      income from discontinued operations, net of taxes
                
                
                (142
                )
                
                
                299Net
      income applicable to Common Stockholders
                
                $
                638
                
                
                $
                548Net
      income (loss) per common share – basicContinuing
      operations
                
                $
                .01
                
                
                $
                ―Discontinued
      operations
                
                
                ―
                
                
                
                .01Net
      income per common share
                
                $
                .01
                
                
                $
                .01Net
      income (loss) per common share – dilutedContinuing
      operations
                
                $
                .01
                
                
                $
                ―Discontinued
      operations
                
                
                ―
                
                
                
                .01Net
      income per common share
                
                $
                .01
                
                
                $
                .01Number
      of common shares used in computing net income (loss) per
      share:Basic
                
                
                54,693
                
                
                
                53,982Diluted
                
                
                54,901
                
                
                
                54,005





The
accompanying notes are an integral part of these consolidated financial
statements


3


PERMA-FIX
ENVIRONMENTAL SERVICES, INC.


Consolidated
Statements of Cash Flows


(Unaudited)





Three
      Months EndedMarch
      31,(Amounts
      in Thousands)
                
                2010
                
                
                2009Cash
      flows from operating activities:Net
      income
                
                $
                638
                
                
                $
                548Less:
      (loss) income from discontinued operations
                
                
                (142
                )
                
                
                299Income
      from continuing operations
                
                
                780
                
                
                
                249Adjustments
      to reconcile net income to cash provided by operations:Depreciation
      and amortization
                
                
                1,136
                
                
                
                1,180Non-cash
      financing costs
                
                
                83
                
                
                
                ―Deferred
      taxes
                
                
                30
                
                
                
                ―Provision
      for bad debt and other reserves
                
                
                16
                
                
                
                59Loss
      (gain) on disposal of plant, property and equipment
                
                
                2
                
                
                
                (12
                )Issuance
      of common stock for services
                
                
                59
                
                
                
                64Stock-based
      compensation
                
                
                86
                
                
                
                136Changes
      in operating assets and liabilities of continuing operations, net of
      effect from business acquisitions:Accounts
      receivable
                
                
                (208
                )
                
                
                200Unbilled
      receivables
                
                
                (1,263
                )
                
                
                2,079Prepaid
      expenses, inventories and other assets
                
                
                (12
                )
                
                
                (176
                )Accounts
      payable, accrued expenses and unearned revenue
                
                
                (2,101
                )
                
                
                (3,816
                )Cash
      used in continuing operations
                
                
                (1,392
                )
                
                
                (37
                )Cash
      (used in) provided by discontinued operations
                
                
                (332
                )
                
                
                253Cash
      (used in) provided by operating activities
                
                
                (1,724
                )
                
                
                216Cash
      flows from investing activities:Purchases
      of property and equipment
                
                
                (367
                )
                
                
                (304
                )Proceeds
      from sale of plant, property and equipment
                
                
                ―
                
                
                
                12Payment
      to finite risk sinking fund
                
                
                (1,899
                )
                
                
                (2,697
                )Cash
      used in investing activities of continuing operations
                
                
                (2,266
                )
                
                
                (2,989
                )Cash
      provided by discontinued operations
                
                
                37
                
                
                
                11Net
      cash used in investing activities
                
                
                (2,229
                )
                
                
                (2,978
                )Cash
      flows from financing activities:Net
      borrowing of revolving credit
                
                
                3,329
                
                
                
                3,001Principal
      repayments of long term debt
                
                
                (564
                )
                
                
                (298
                )Proceeds
      from finite risk financing
                
                
                653
                
                
                
                ―Proceeds
      from issuance of stock
                
                
                491
                
                
                
                ―Cash
      provided by financing activities of continuing operations
                
                
                3,909
                
                
                
                2,703Decrease
      in cash
                
                
                (44
                )
                
                
                (59
                )Cash
      at beginning of period
                
                
                141
                
                
                
                129Cash
      at end of period
                
                $
                97
                
                
                $
                70Supplemental
      disclosure:Interest
      paid
                
                $
                186
                
                
                $
                739Income
      taxes paid
                
                
                231
                
                
                
                3Non-cash
      investing and financing activities:Long-term
      debt incurred for purchase of property and equipment
                
                
                ―
                
                
                
                ―





The
accompanying notes are an integral part of these consolidated financial
statements.


4




PERMA-FIX
ENVIRONMENTAL SERVICES, INC.


Consolidated
Statement of Stockholders’ Equity


(Unaudited,
for the three months ended March 31, 2010)





(Amounts in thousands,
                                
                                Common
      Stock
                                
                                
                                Additional
                                  Paid-In
                                
                                
                                Common
                                  Stock Held In
                                
                                
                                Accumulated
                                
                                
                                Total
                                  Stockholders'except for share amounts)
                                
                                Shares
                                
                                
                                Amount
                                
                                
                                Capital
                                
                                
                                Treasury
                                
                                
                                Deficit
                                
                                
                                EquityBalance
      at December 31, 2009
                                
                                
                                54,628,904
                                
                                
                                $
                                55
                                
                                
                                $
                                99,641
                                
                                
                                $
                                —
                                
                                
                                $
                                (26,177
                                )
                                
                                $
                                73,519Net
      income
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                638
                                
                                
                                
                                638Issuance
      of Common Stock upon exercise of Options
                                
                                
                                340,000
                                
                                
                                
                                —
                                
                                
                                
                                579
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                579Payment
      of Option exercise by Common Stock shares
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                (88
                                )
                                
                                
                                
                                
                                
                                
                                (88
                                )Issuance
      of Common Stock for services
                                
                                
                                25,506
                                
                                
                                
                                —
                                
                                
                                
                                59
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                59Stock-Based
      Compensation
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                86
                                
                                
                                
                                —
                                
                                
                                
                                —
                                
                                
                                
                                86Balance
      at March 31, 2010
                                
                                
                                54,994,410
                                
                                
                                $
                                55
                                
                                
                                $
                                100,365
                                
                                
                                $
                                (88
                                )
                                
                                $
                                (25,539
                                )
                                
                                $
                                74,793





The
accompanying notes are an integral part of these consolidated financial
statements.


5


PERMA-FIX
ENVIRONMENTAL SERVICES, INC.


Notes
to Consolidated Financial Statements





March
31, 2010


(Unaudited)





Reference
is made herein to the notes to consolidated financial statements included in our
Annual Report on Form 10-K for the year ended December 31, 2009.





1.      Basis of
Presentation





The
consolidated financial statements included herein have been prepared by the
Company (which may be referred to as we, us or our), without an audit, pursuant
to the rules and regulations of the Securities and Exchange Commission
(“SEC”).  Certain information and note disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles in the United States of America have been condensed or
omitted pursuant to such rules and regulations, although the Company believes
the disclosures which are made are adequate to make the information presented
not misleading.  Further, the consolidated financial statements
reflect, in the opinion of management, all adjustments (which include only
normal recurring adjustments) necessary to present fairly the financial position
and results of operations as of and for the periods indicated.  The
results of operations for the three months ended March 31, 2010, are not
necessarily indicative of results to be expected for the fiscal year ending
December 31, 2010.





It is
suggested that these consolidated financial statements be read in conjunction
with the consolidated financial statements and the notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31,
2009.





As
previously disclosed in our 2009 Form 10-K, Our Perma-Fix of Memphis, Inc.
(“PFM”) facility was reclassed back into discontinued operations from continuing
operations during the fourth quarter of 2009, in accordance with ASC360,
“Property, Plant, and Equipment”. Accordingly, the accompanying condensed
financial statements have been restated for all periods presented to reflect the
reclassification of PFM as discontinued operations.  (See “Note 8 –
Discontinued Operations” for additional information regarding PFM).




2.      Summary of Significant
Accounting Policies





Our
accounting policies are as set forth in the notes to consolidated financial
statements referred to above.





Recently
Adopted Accounting Pronouncements


On
February 24, 2010, the Financial Accounting Standards Board (“FASB”) issued
Accounting Standards Updates (“ASU”) No. 2010-09, “Subsequent Events (Topic
855): Amendments to Certain Recognition and Disclosure Requirements”, which
remove the requirement for a Securities and Exchange Commission (“SEC”) filer to
disclose a date through which subsequent events have been evaluated in both
issued and revised financial statements.  Revised financial statements
include financial statements revised as a result of either correction of an
error or retrospective application of U.S. GAAP.  The FASB also
clarified that if the financial statements have been revised, then an entity
that is not an SEC filer should disclose both the date that the financial
statements were issued or available to be issued and the date the revised
financial statements were issued or available to be issued.  The FASB
believes these amendments remove potential conflicts with the SEC’s
literature.  All of the amendments in the ASU were effective upon
issuance except for the use of the issued date for conduit debt obligors. That
amendment is effective for interim or annual periods ending after June 15,
2010.  ASU No. 2010-09 did not materially impact our operations,
financial position, and disclosure requirement.


6


Recently
Issued Accounting Standards


In
October 2009, the FASB issued ASU 2009-13, “Revenue Recognition (Topic
605):Multiple
Deliverable Revenue Arrangements – A Consensus of the FASB Emerging Issues Task
Force.”  This update provides application guidance on whether multiple
deliverables exist, how the deliverables should be separated and how the
consideration should be allocated to one or more units of accounting. This
update establishes a selling price hierarchy for determining the selling price
of a deliverable. The selling price used for each deliverable will be based on
vendor-specific objective evidence, if available, third-party evidence if
vendor-specific objective evidence is not available, or estimated selling price
if neither vendor-specific or third-party evidence is available. ASU 2009-13
should be applied on a prospective basis for revenue arrangements entered into
or materially modified in fiscal years beginning on or after June 15, 2010, with
early adoption permitted.  The Company is currently evaluating the
impact of ASU 2009-13 on its financial positions and results of
operations.




In
January 2010, the FASB issued ASU 2010-6, “Improving Disclosures About Fair
Value Measurements”, which requires reporting entities to make new disclosures
about recurring or nonrecurring fair-value measurements including significant
transfers into and out of Level 1 and Level 2 fair-value measurements and
information on purchases, sales, issuances, and settlements on a gross basis in
the reconciliation of Level 3 fair- value measurements. ASU 2010-6 is effective
for annual reporting periods beginning after December 15, 2009, except for Level
3 reconciliation disclosures which are effective for annual periods beginning
after December 15, 2010. We do not expect ASU 2010-6 to have a material impact
on our consolidated financial statements.





Reclassifications


Certain
prior period amounts have been reclassified to conform with the current period
presentation.





3.      Stock Based
Compensation





We follow
FASB ASC 718, “Compensation – Stock Compensation” (“ASC 718”) to account for
stock-based compensation.  ASC 718 requires all stock-based payments
to employees, including grants of employee stock options, to be recognized in
the income statement based on their fair values.





The
Company has certain stock option plans under which it awards incentive and
non-qualified stock options to employees, officers, and outside
directors.  Stock options granted to employees have either a ten year
contractual term with one fifth yearly vesting over a five year period or a six
year contractual term with one third yearly vesting over a three year
period.  Stock options granted to outside directors have a ten year
contractual term with vesting period of six months.





No stock
options were granted during the first quarter of 2010.  During the
corresponding period of 2009, an aggregate 145,000 Incentive Stock Options were
granted (“ISO”) to certain employees of the Company which allows for the
purchase of 145,000 Common Stock from the Company’s 2004 Stock Option
Plan.  The option grants were for a contractual term of six years with
vesting period over a three year period at one-third increments per
year.  The exercise price of the options granted was $1.42 per share
which was based on our closing stock price on the date of grant.





The
Company estimates fair value of stock options using the Black-Scholes valuation
model.  Assumptions used to estimate the fair value of stock options
granted include the exercise price of the award, the expected term, the expected
volatility of the Company’s stock over the option’s expected term, the risk-free
interest rate over the option’s expected term, and the expected annual dividend
yield.  The fair value of the options granted to during the first
quarter of 2009 and the related assumptions used in the Black-Scholes option
pricing model used to value the options granted were as
follows:


7





Employee Stock Options GrantedMarch
      31, 2009Weighted-average
      fair value per share
                  
                  $
                  1.42Risk -free interest
      rate (1)
                  
                  
                  2.07%
      - 2.40%Expected volatility
      of stock (2)
                  
                  
                  59.16%
      - 60.38%Dividend
      yield
                  
                  NoneExpected option life
      (3)
                  
                  4.6
      years - 5.8 years





(1)The
risk-free interest rate is based on the U.S. Treasury yield in effect at the
grant date over the expected term of the option.





(2)The
expected volatility is based on historical volatility from our traded Common
Stock over the expected term of the option.





(3)The
expected option life is based on historical exercises and post-vesting
data.





As of
March 31, 2010, we had 2,075,525 employee stock options outstanding, of which
1,410,192 are vested.  The weighted average exercise price of the
1,410,192 outstanding and fully vested employee stock option is $1.97 with a
remaining weighted contractual life of 2.64 years.  Additionally, we
had 694,000 outstanding and fully vested director stock options with a weighted
average exercise price and remaining contractual life of $2.29 and 5.74 years,
respectively.





The
following table summarizes stock-based compensation recognized for the three
months ended March 31, 2010 and 2009 for our employee and director stock
options.





Three Months EndedStock Options
                    
                    March 31,2010
                    
                    
                    2009Employee
      Stock Options
                    
                    $
                    59,000
                    
                    
                    $
                    106,000Director
      Stock Options
                    
                    
                    27,000
                    
                    
                    
                    30,000Total
                    
                    $
                    86,000
                    
                    
                    $
                    136,000





We
recognized stock-based compensation expense using a straight-line amortization
method over the requisite period, which is the vesting period of the stock
option grant.  ASC 718 requires that stock based compensation expense
be based on options that are ultimately expected to vest.  ASC 718
requires forfeitures to be estimated at the time of grant and revised, if
necessary, in subsequent periods if actual forfeitures differ from those
estimates.  We have generally estimated forfeiture rate based on
historical trends of actual forfeitures.  When actual forfeitures vary
from our estimates, we recognize the difference in compensation expense in the
period the actual forfeitures occur or when options vest.  Our
stock-based compensation expense in the first quarter of 2010 included a
reduction of approximately $29,000 in our employee stock-based compensation
expense resulting from the difference in the actual and estimated
forfeitures.  As of March 31, 2010, we have approximately $454,000 of
total unrecognized compensation cost related to unvested options, of which
$247,000 is expected to be recognized in remaining 2010, $197,000 in 2011, and
$10,000 in 2012.


8


4.      Capital Stock, Stock Plans,
and Treasury Stock




During
the three months ended March 31, 2010, we issued an aggregate of 340,000 shares
of our Common Stock upon exercise of 340,000 employee stock options, at exercise
prices ranging from $1.25 to $2.19.  An employee used 38,210 shares of
personally held Company Common Stock as payment for the exercise of 70,000
options to purchase 70,000 shares of the Company’s Common Stock at $1.25 per
share, as permitted under the 1993 Non-Qualified Stock Option
Plan.  The 38,210 shares are held as treasury stock.  The
cost of the 38,210 shares was determined to be approximately $88,000 in
accordance with the Plan.  We received $491,500 in total proceeds from
the remaining 270,000 stock option exercise.   During the first
quarter of 2010, we also issued 25,506 shares of our Common Stock under our 2003
Outside Directors Stock Plan to our outside directors as compensation for
serving on our Board of Directors.  We pay each of our outside
directors $2,167 monthly in fees for serving as a member of our Board of
Directors.  The Audit Committee Chairman receives an additional
monthly fee of $1,833 due to the position’s additional
responsibility.  In addition, each board member is paid $1,000 for
each board meeting attendance as well as $500 for each telephonic conference
call.  As a member of the Board of Directors, each director elects to
receive either 65% or 100% of the director’s fee in shares of our Common Stock
based on 75% of the fair market value of our Common Stock determined on the
business day immediately preceding the date that the quarterly fee is
due.  The balance of each director’s fee, if any, is payable in
cash.





The
summary of the Company’s total Plans as of March 31, 2010 as compared to March
31, 2009, and changes during the period then ended are presented as
follows:





Shares
                
                
                Weighted
                  Average
                  Exercise
                  Price
                
                
                Weighted
                  Average
                  Remaining
                  Contractual
                  Term
                
                
                Aggregate
                  Intrinsic
                  ValueOptions
      outstanding Janury 1, 2010
                
                
                3,109,525
                
                
                $
                2.05Granted
                
                –
                
                
                –Exercised
                
                
                (340,000
                )
                
                
                1.70
                
                
                
                
                
                $
                217,700Forfeited
                
                –
                
                
                –Options outstanding
      End of Period (1)
                
                
                2,769,525
                
                
                
                2.10
                
                
                
                3.9
                
                
                $
                574,909Options Exercisable
      at March 31, 2010 (1)
                
                
                2,104,192
                
                
                $
                2.08
                
                
                
                3.7
                
                
                $
                492,809Options
      Vested and expected to be vested at March 31, 2010
                
                
                2,731,742
                
                
                $
                2.09
                
                
                
                3.9
                
                
                $
                574,909





Shares
                  
                  
                  Weighted
                    Average
                    Exercise
                    Price
                  
                  
                  Weighted
                    Average
                    Remaining
                    Contractual
                    Term
                  
                  
                  Aggregate
                    Intrinsic
                    ValueOptions
      outstanding Janury 1, 2009
                  
                  
                  3,417,347
                  
                  
                  $
                  2.03Granted
                  
                  
                  145,000
                  
                  
                  
                  1.42Exercised
                  
                  –
                  
                  
                  –
                  
                  
                  
                  
                  
                  $
                  –Forfeited
                  
                  
                  (4,000
                  )
                  
                  
                  1.97Options outstanding
      End of Period (2)
                  
                  
                  3,558,347
                  
                  
                  
                  2.01
                  
                  
                  
                  4.2
                  
                  
                  $
                  413,175Options Exercisable
      at March 31, 2009 (2)
                  
                  
                  2,422,847
                  
                  
                  $
                  1.94
                  
                  
                  
                  3.6
                  
                  
                  $
                  336,325Options
      Vested and expected to be vested at March 31, 2009
                  
                  
                  3,516,989
                  
                  
                  $
                  1.94
                  
                  
                  
                  4.2
                  
                  
                  $
                  413,175





(1)Option
with exercise price ranging from $1.25 to $2.98


(2)Option
with exercise price ranging from $1.22 to $2.98


9


5.      Earnings (Loss) Per
Share




Basic
earning per share excludes any dilutive effects of stock options, warrants, and
convertible preferred stock.  In periods where they are anti-dilutive,
such amounts are excluded from the calculations of dilutive earnings per
share.





The
following is a reconciliation of basic net income (loss) per share to diluted
net income (loss) per share for the three months ended March 31, 2010 and
2009:




Three Months Ended
                              March 31,(Amounts
      in Thousands, Except for Per Share Amounts)
                            
                            2010
                            
                            
                            2009Income
      per share from continuing
      operationsIncome
      from continuing operations
                            
                            $
                            780
                            
                            
                            $
                            249Basic
      income per share
                            
                            $
                            .01
                            
                            
                            $
                            —Diluted
      income per share
                            
                            $
                            .01
                            
                            
                            $
                            —(Loss)
      income per share from discontinued
      operations(Loss)
      income from discontinued operations
                            
                            $
                            (142
                            )
                            
                            $
                            299Basic
      income per share
                            
                            $
                            —
                            
                            
                            $
                            .01Diluted
      income per share
                            
                            $
                            —
                            
                            
                            $
                            .01Weighted
      average common shares outstanding – basic
                            
                            
                            54,693
                            
                            
                            
                            53,982Potential
      shares exercisable under stock option plans
                            
                            
                            166
                            
                            
                            
                            23Potential
      shares upon exercise of Warrants
                            
                            
                            42
                            
                            
                            
                            —Weighted
      average shares outstanding – diluted
                            
                            
                            54,901
                            
                            
                            
                            54,005Potential
      shares excluded from above weighted average share calculations due to
      their anti-dilutive effect include:Upon
      exercise of options
                            
                            
                            1,660
                            
                            
                            
                            3,361Upon
      exercise of Warrants
                            
                            
                            —
                            
                            
                            
                            —


10





6.      Long Term
Debt





Long-term
debt consists of the following at March 31, 2010 and December 31,
2009:





(Amounts in Thousands)
                        
                        March 31,
                          2010
                        
                        
                        December 31,
                          2009Revolving
      Credit facility dated December 22, 2000, borrowings basedupon
      eligible accounts receivable, subject to monthly borrowing base
      calculation, variable interest paid monthly at option of prime rate (3.25%
      at March 31, 2010) plus 2.0% or minimum floor base London InterBank Offer
      Rate ("LIBOR") of 1.0% plus 3.0%, balance due in July 2012. Effective
      interest rate for the first quarter of 2010 was 4.32% (1) (2)
      (3)
                        
                        $
                        5,988
                        
                        
                        $
                        2,659Term
      Loan dated December 22, 2000, payable in equal monthly
      installmentsof
      principal of $83, balance due in July 2012, variable interest paid monthly
      at option of prime rate plus 2.5% or minimum floor base LIBOR of 1.0% plus
      3.5%. Effective interest rate for the first quarter of 2010 was 5.08%(1) (2)
      (3)
                        
                        
                        5,417
                        
                        
                        
                        5,667Installment
      Agreementin the Agreement and Plan of Merger withNuvotec
      and PEcoS, dated April 27, 2007, payable in three equal yearly installment
      of principal of $833 beginning June 2009.  Interest accrues at
      annual rate of 8.25% on outstanding principal balance starting June 2007
      and payable yearly starting June 2008
                        
                        
                        1,667
                        
                        
                        
                        1,667Promissory Notedated
      May 8, 2009, payable in monthly installments of principal of $87 starting
      June 8, 2009, balance due May 8, 2011, variable interest paid monthly at
      LIBOR plus 4.5%, with LIBOR at least 1.5%.(4)
                        
                        
                        1,759
                        
                        
                        
                        1,938Various
      capital lease and promissory note obligations, payable 2010 to2013,
      interest at rates ranging from 5.0% to
12.6%.
                        
                        
                        398
                        
                        
                        
                        45015,229
                        
                        
                        
                        12,381Less
      current portion of long-term debt
                        
                        
                        3,037
                        
                        
                        
                        3,050$
                        12,192
                        
                        
                        $
                        9,331




(1)Our Revolving Credit is collateralized by our account receivables and our
Term Loan is collateralized by our property, plant, and equipment.





(2)Prior
to March 5, 2009, variable interest was paid monthly at prime plus 1/2% for our
Revolving Credit and prime plus 1.0% for our Term Loan.





(3)From
March 5, 2009 to January 24, 2010, variable interest were determined based on
the options as noted; however, minimum floor base under the LIBOR option was
2.5% for both our Revolving Credit and Term Loan.





(4)Net
of debt discount of ($367,000) based on the estimated fair value of two Warrants
and 200,000 shares of the Company’s Common Stock issued on May 8, 2009 in
connection with a $3,000,000 promissory note entered into by the Company and Mr.
William Lampson and Mr. Diehl Rettig.  See “Promissory Note and
Installment Agreement” below for additional
information.


11


Revolving
Credit and Term Loan Agreement


On
December 22, 2000, we entered into a Revolving Credit, Term Loan and Security
Agreement ("Loan Agreement") with PNC Bank, National Association, a national
banking association ("PNC") acting as agent ("Agent") for lenders, and as
issuing bank, as amended.  The Agreement provided for a term loan
("Term Loan") in the amount of $7,000,000, which requires monthly installments
of $83,000.  The Agreement also provided for a revolving line of
credit ("Revolving Credit") with a maximum principal amount outstanding at any
one time of $18,000,000, as amended.  The Revolving Credit advances
are subject to limitations of an amount up to the sum of (a) up to 85% of
Commercial Receivables aged 90 days or less from invoice date, (b) up to 85% of
Commercial Broker Receivables aged up to 120 days from invoice date, (c) up to
85% of acceptable Government Agency Receivables aged up to 150 days from invoice
date, and (d) up to 50% of acceptable unbilled amounts aged up to 60 days, less
(e) reserves the Agent reasonably deems proper and necessary.  As of
March 31, 2010, the excess availability under our Revolving Credit was
$7,528,000 based on our eligible receivables.





Pursuant
to the Loan Agreement, as amended, we may terminate the Loan Agreement upon 90
days’ prior written notice upon payment in full of the obligation.  We
agreed to pay PNC 1% of the total financing in the event we pay off our
obligations on or prior to August 4, 2009 and 1/2 % of the total financing if we
pay off our obligations on or after August 5, 2009, but prior to August 4,
2010.  No early termination fee shall apply if we pay off our
obligations after August 5, 2010.





On
January 25, 2010, we entered into an Amendment to our PNC Loan
Agreement.  This Amendment amended the interest rate to be paid under
the LIBOR option.  Under the terms of the Loan Agreement, we are to
pay interest on the outstanding balance of the term loan and the revolving line
of credit, at our option, based on prime plus 2.5% and 2.0%, respectively, or
LIBOR plus 3.5% and 3.0%, respectively.  Under the Loan Agreement
prior to this Amendment, the LIBOR option included a 2.5% floor, which limited
the minimum interest rates on the term loan and revolving line of credit at 6.0%
and 5.5%, respectively.  Under this Amendment, we and PNC agreed to
lower the floor on the LIBOR interest rate option by 150 basis points to 1.0%,
allowing for minimum interest rate floor under the LIBOR option on the
outstanding balances of our term loan and revolving line of credit of 4.5% and
4.0%, respectively.  The prime rate option of prime plus 2.5% and 2.0%
in connection with our term loan and revolving line of credit, respectively, was
not changed under this Amendment.  All other terms of the Loan
Agreement, as amended prior to this Amendment, remain principally
unchanged.





Promissory
Note and Installment Agreement


In
conjunction with our acquisition of Perma-Fix Northwest Richland, Inc. (“PFNWR”)
and Perma-Fix Northwest, Inc. (“PFNW”), we agreed to pay shareholders of Nuvotec
(n/k/a PFNW) that qualified as accredited investors, pursuant to Rule 501 of
Regulation D promulgated under the Securities Act of 1933, including Robert
Ferguson, who resigned as a member of our Board of Director effective February
27, 2010, $2,500,000, with principal payable in equal installment of $833,333 on
June 30, 2009, June 30, 2010, and June 30, 2011.  Interest is accrued
on the outstanding principal balance at 8.25% starting in June 2007 and is
payable on June 30, 2008, June 30, 2009, June 30, 2010, and June 30,
2011.  In June 2009, we paid the first principal installment of
$833,333, along with accrued interest.  Interest paid as of March 31,
2010 totaled $422,000.  See Note 7 – “Commitments and Contingencies -
Earn-Out Amount - PFNW and PFNWR” and Note 11 – “Related Party Transaction” in
this section for information regarding Mr. Robert Ferguson.





On May 8,
2009, the Company entered into a promissory note with William N. Lampson and
Diehl Rettig (collectively, the “Lenders”) for $3,000,000.  The
Lenders were formerly shareholders of PFNW and PFNWR prior to our acquisition of
PFNW and PFNWR and are also stockholders of the Company having received shares
of our Common Stock in connection with our acquisition of PFNW and
PFNWR.  We used the proceeds of the loan primarily to pay off a
promissory note entered into by our M&EC subsidiary with PDC in June 2001,
with the remaining funds used for working capital purposes.  The
promissory note provides for monthly principal repayment of approximately
$87,000 plus accrued interest, starting June 8, 2009, and on the 8th day of each
month thereafter, with interest payable at LIBOR plus 4.5%, with LIBOR at least
1.5%.  Any unpaid principal balance along with accrued interest is due
May 8, 2011.  We paid approximately $22,000 in closing costs for the
promissory note which is being amortized over the terms of the
note.  The promissory note may be prepaid at anytime by the Company
without penalty.  As consideration of the Company receiving this loan,
we issued a Warrant to Mr. Lampson and a Warrant to Mr. Diehl to purchase up to
135,000 and 15,000 shares, respectively, of the Company’s Common Stock at an
exercise price of $1.50 per share.  The Warrants are exercisable six
months from May 8, 2009 and expire two years from May 8, 2009.  We
also issued an aggregate of 200,000 shares of the Company’s Common Stock with
Mr. Lampson receiving 180,000 shares and Mr. Rettig receiving 20,000 shares of
the Company’s Common Stock.  We estimated the fair value of the Common
Stock and Warrants to be approximately $476,000 and $190,000,
respectively.  The fair value of the Common Stock and Warrants was
recorded as a debt discount and is being amortized over the term of the loan as
interest expense – financing fees.  Debt discount amortized as of
March 31, 2010 totaled approximately $299,000.


12


The
promissory note also includes an embedded Put Option (“Put”) that can be
exercised upon default, whereby the lender has the option to receive a cash
payment equal to the amount of the unpaid principal balance plus all accrued and
unpaid interest, or the number of whole shares of our Common Stock equal to the
outstanding principal balance.  The maximum number of payoff shares is
restricted to less than 20% of the outstanding equity.  We concluded
that the Put should have been bifurcated at inception; however, the Put Option
had and continues to have nominal value as of March 31, 2010.  We will
continue to monitor the fair value of the Put on a regular basis.




7.      Commitments and
Contingencies




Hazardous
Waste


In
connection with our waste management services, we handle both hazardous and
non-hazardous waste, which we transport to our own, or other facilities for
destruction or disposal.  As a result of disposing of hazardous
substances, in the event any cleanup is required, we could be a potentially
responsible party for the costs of the cleanup notwithstanding any absence of
fault on our part.





Legal


In the
normal course of conducting our business, we are involved in various
litigation.





Perma-Fix
of Dayton (“PFD”), Perma-Fix of Florida (“PFF”), Perma-Fix of Orlando (“PFO”),
Perma-Fix of South Georgia (“PFSG”), and Perma-Fix of Memphis
(“PFM”)


In May
2007, the above facilities were named Potentially Responsible Parties (“PRPs”)
at the Marine Shale Superfund site in St. Mary Parish, Louisiana
(“Site”).  Information provided by the EPA indicates that, from 1985
through 1996, the Perma-Fix facilities above were responsible for shipping 2.8%
of the total waste volume received by Marine Shale.  Subject to
finalization of this estimate by the PRP group, PFF, PFO and PFD could be
considered de-minimus at .06%, .07% and .28% respectively.  PFSG and
PFM would be major at 1.12% and 1.27% respectively.  However, at this
time the contributions of all facilities are consolidated.





The
Louisiana Department of Environmental Quality (“LDEQ”) has collected
approximately $8,400,000 to date for the remediation of the site (Perma-Fix
subsidiaries have not been required to contribute any of the $8,400,000) and has
completed removal of above ground waste from the site, with approximately
$5,000,000 remaining in this fund held by the LDEQ.  The EPA’s
unofficial estimate to complete remediation of the site is between $9,000,000
and $12,000,000, including work performed by LDEQ to date; however, based on
preliminary outside consulting work hired by the PRP group, which we are a party
to, the remediation costs could be below EPA’s estimation.  During
2009, a site assessment was conducted and paid for by the PRP group, which was
exclusive of the $8,400,000.  No unexpected issues were identified
during the assessment.  Collections from small contributors have also
begun for remediation of this site.  Remediation activities going
forward will be funded by LDEQ, until those funds are exhausted, at which time,
any additional requirements, if needed, will be funded from the small
contributors.  Once funds from the small contributors are exhausted,
if additional funds are required, they will be provided by the members of the
PRP group.  As part of the PRP Group, we paid an initial assessment of
$10,000, which was allocated among the facilities. In addition, we accrued
approximately $27,000 in the third quarter of 2008 for our estimated portion of
the cost of the site assessment, which was allocated among the
facilities.  As of March 31, 2010, the $27,000 has been paid, of which
$9,000 was paid in the first quarter of 2010.    As of the
date of this report, we cannot accurately access our ultimate
liability.  The Company records its environmental liabilities when
they are probable of payment and can be estimated within a reasonable
range.  Since this contingency currently does not meet this criteria,
a liability has not been established.


13


Industrial
Segment Divested Facilities/Operations


As
previously disclosed, our subsidiary, Perma-Fix Treatment Services, Inc.
(“PFTS”), sold substantially all of its assets in May 2008, pursuant to an Asset
Purchase Agreement, as amended (“Agreement”).  Under the Agreement,
the buyer assumed certain debts and obligations of PFTS.  We have sued
the buyer of the PFTS assets regarding certain liabilities which we believe the
buyer assumed and agreed to pay under the Agreement but which the buyer has
refused to pay.  The buyer has filed a counterclaim against us and is
alleging that PFTS made certain misrepresentations and failed to disclose
certain liabilities.  The pending litigation is styled American Environmental
Landfill, Inc. v. Perma-Fix Environmental Services, Inc. v. A Clean Environment,
Inc., Case No. CJ-2008-659, pending in the District Court of Osage
County, State of Oklahoma.  This matter was ordered to arbitration,
which was heard in April 2010.  We are waiting on the decision of the
arbitrator.





Earn-Out
Amount – Perma-Fix Northwest, Inc. (“PFNWR”) and Perma-Fix Northwest Richland,
Inc. (“PFNWR”)


In
connection with the acquisition of PFNW and PFNWR in June 2007, we are required
to pay to those former shareholders of PFNW immediately prior to our
acquisition, which includes Robert L. Ferguson who resigned as a member of our
Board of Director effective February 27, 2010, an earn-out amount upon meeting
certain conditions for each fiscal year ending June 30, 2008, to June 30, 2011,
with the aggregate of the full earn-out amount not to exceed $4,552,000,
pursuant to the Merger Agreement, as amended (“Agreement”) (See Note 11 –
“Related Party Transaction” for information regarding Mr.
Ferguson).  Under the Agreement, the earn-out amount to be paid for
any particular fiscal year is to be an amount equal to 10% of the amount that
the revenues for our nuclear business (as defined) for such fiscal year exceeds
the budgeted amount of revenues for our nuclear business for that particular
period.  No earn-out was required to be paid for fiscal 2008 and we
paid $734,000 in earn out for the fiscal 2009 in the third quarter of
2009.  Pursuant to the Agreement, any indemnification obligations
payable to the Company by Nuvotec (n/k/a “PFNW”), PEcoS (n/k/a “PFNWR”), and the
former shareholders will be deducted (“Offset Amount”) from any earn-out amounts
payable by the Company for the fiscal year ending June 30, 2010, and June 30,
2011.  The Offset Amount for the twelve month period ending June 30,
2010 will include the sum of approximately $93,000, of which approximately
$60,000 represents excise tax assessment issued by the State of Washington for
the annual period 2005 to 2007, with the remaining representing a refund request
from a PEcoS customer in connection with service for waste treatment prior to
our acquisition of PFNWR and PFNW.  The Company may elect to pay any
future earn-out amounts in excess of $1,000,000 after the Offset Amount, for
each fiscal year ended June 30, 2010, and 2011 by means of a three year
unsecured promissory note bearing an annual rate of 6.0%, payable in 36 equal
monthly installments due on the 15th day of
each months.  As of March 31, 2010, we have determined that
approximately $541,000 has been earned for the earn-out amount for fiscal year
ending June 30, 2010; accordingly, we recorded this amount as an increase to
goodwill for PFNWR, with an increase to accrued expense payable of $448,000 and
a reduction to receivable of $93,000, which represents the Offset Amount
previously recorded.


14


Insurance


In June
2003, we entered into a 25-year finite risk insurance policy with Chartis, a
subsidiary of American International Group, Inc. (“AIG”), which provides
financial assurance to the applicable states for our permitted facilities in the
event of unforeseen closure.  Prior to obtaining or renewing operating
permits, we are required to provide financial assurance that guarantees to the
states that in the event of closure, our permitted facilities will be closed in
accordance with the regulations.  The policy provided an initial
maximum $35,000,000 of financial assurance coverage and has available capacity
to allow for annual inflation and other performance and surety bond
requirements.  Our initial finite risk insurance policy required an
upfront payment of $4,000,000, of which $2,766,000 represented the full premium
for the 25-year term of the policy, and the remaining $1,234,000, was deposited
in a sinking fund account representing a restricted cash account.  We
are required to make seven annual installments, as amended, of $1,004,000, of
which $991,000 is to be deposited in the sinking fund account, with the
remaining $13,000 represents a terrorism premium.  In addition, we are
required to make a final payment of $2,008,000, of which $1,982,000 is to be
deposited in the sinking fund account, with the remaining $26,000 represents a
terrorism premium.  In February 2010, we paid our seventh of the eight
required remaining payments.  In March 2009, we increased our maximum
allowable policy coverage from $35,000,000 to $39,000,000 in order for our
Diversified Scientific Services, Inc. (“DSSI”) facility to receive and process
Polychlorinated Biphenyls (“PCBs”) wastes. Payment for this policy increase
requires a total payment of approximately $5,219,000, consisting of an upfront
payment of $2,000,000 made on March 6, 2009, of which approximately $1,655,000
was deposited into a sinking fund account, with the remaining representing fee
payable to Chartis.  In addition, we are required to make three yearly
payments of approximately $1,073,000 payable starting December 31, 2009, of
which $888,000 is be deposited into a sinking fund account, with the remaining
to represent fee payable to Chartis.  In February 2010, we paid our
first of the three $1,073,000 required payments.





As of
March 31, 2010, our total financial coverage amount under this policy totaled
$36,345,000.  We have recorded $11,532,000 in our sinking fund related
to the policy noted above on the balance sheet, which includes interest earned
of $819,000 on the sinking fund as of March 31, 2010.  Interest income
for the three months ended March 31, 2010, was approximately
$14,000.  On the fourth and subsequent anniversaries of the contract
inception, we may elect to terminate this contract.  If we so elect,
the Insurer is obligated to pay us an amount equal to 100% of the sinking fund
account balance in return for complete releases of liability from both us and
any applicable regulatory agency using this policy as an instrument to comply
with financial assurance requirements.





In August
2007, we entered into a second finite risk insurance policy for our PFNWR
facility with Chartis.  The policy provides an initial $7,800,000 of
financial assurance coverage with annual growth rate of 1.5%, which at the end
of the four year term policy, will provide maximum coverage of
$8,200,000.  The policy will renew automatically on an annual basis at
the end of the four year term and will not be subject to any renewal
fees.  The policy requires total payment of $7,158,000, consisting of
an initial payment of $1,363,000, and two annual payments of $1,520,000, payable
by July 31, 2008 and July 31, 2009, and an additional $2,755,000 payment to be
made in five quarterly payments of $551,000 beginning September
2007.  In July 2007, we paid the initial payment of $1,363,000, of
which $1,106,000 represented premium on the policy and the remaining was
deposited into a sinking fund account.  We have made each of the
annual payments of $1,520,000, of which $1,344,000 was deposited into a sinking
fund account and the remaining represented premium.   We have
also made all of the five quarterly payments which were deposited into a sinking
fund.  As of March 31, 2010, we have recorded $5,847,000 in our
sinking fund related to this policy on the balance sheet, which includes
interest earned of $148,000 on the sinking fund as of March 31,
2010.  Interest income for the three months ended March 31, 2010
totaled $7,000.





8.      Discontinued
Operations




Our
discontinued operations encompass our Perma-Fix of Maryland, Inc. (“PFMD”),
Perma-Fix of Dayton, Inc. (“PFD”), and Perma-Fix Treatment Services, Inc.
(“PFTS”) facilities within our Industrial Segment, which we completed the sale
of substantially all of the assets on January 8, 2008, March 14, 2008, and May
30, 2008, respectively.  Our discontinued operations also includes
three previously shut down locations, Perma-Fix of Pittsburgh, Inc. (“PFP”),
Perma-Fix of Michigan, Inc. (“PFMI”), and Perma-Fix of Memphis, Inc. (“PFM”),
which were approved as discontinued operations by our Board of Directors
effective November 8, 2005, October 4, 2004, and March 12, 1998,
respectively.





Our
Perma-Fix of Memphis, Inc. facility was reclassed back into discontinued
operations from continuing operations in the fourth quarter of
2009.  As noted above, PFM was approved as a discontinued operation by
our Board on March 12, 1998.  This decision was the result of an
explosion at the facility in 1997, which significantly disrupted its operations
and the high costs required to rebuild its operations.  PFM had been
reported as a discontinued operation until 2001.  In 2001, the
facility was reclassified back into continuing operations as we had no other
facilities classified as discontinued operations and its impact on our financial
statements was de minimis.  As the result of the reclassification of
PFM back into discontinued operations in the fourth quarter of 2009, the
accompanying condensed financial statements have been restated for all periods
presented to reflect the reclassification of PFM as discontinued
operations.


15


The
following table summarizes the results of discontinued operations for the three
months ended March 31, 2010, and 2009.  The operating results of
discontinued operations are included in our Consolidated Statements of
Operations as part of our “(Loss) income from discontinued operations, net of
taxes”.





Three Months EndedMarch 31,(Amounts
      in Thousands)
                  
                  2010
                  
                  
                  2009Net
      revenues
                  
                  $
                  —
                  
                  
                  $
                  —Interest
      expense
                  
                  
                  (16
                  )
                  
                  
                  (20
                  )(Loss) income from
      discontinued operations (1)
                  
                  
                  (142
                  )
                  
                  
                  299





(1) Net
of taxes of $0 for each period noted.





Our “loss
from discontinued operations, net of taxes”, for the three months ended March
31, 2010, included a gain of approximately $23,000 from the sale of a piece of
idle equipment at PFP.  We received proceeds of $37,000 from this
sale.  Our “income from discontinued operations, net of taxes” for the
three months ended March 31, 2009, included a recovery of approximately $400,000
in closure cost for PFTS resulting from the release of our financial assurance
bond for PFTS by the appropriate regulatory authority after the buyer of PFTS
acquired its financial assurance.





Assets
and liabilities related to discontinued operations total $805,000 and $2,253,000
as of March 31, 2010, respectively and $825,000 and $2,426,000 as of December
31, 2009, respectively.





The
following table presents the Industrial Segment’s major class of asset of
discontinued operations that is classified as held for sale as of March 31, 2010
and December 31, 2009.  No liabilities of discontinued operations are
held for sale.  The held for sale asset balance as of December 31,
2009 may differ from the respective balance at closing:





March 31,
                    
                    
                    December 31,(Amounts
      in Thousands)
                    
                    2010
                    
                    
                    2009Property,
      plant and equipment, net (1)
                    
                    
                    637
                    
                    
                    
                    651Total
      assets held for sale
                    
                    $
                    637
                    
                    
                    $
                    651





(1)net
of accumulated depreciation of $10,000 and $13,000 as of March 31, 2010, and
December 31, 2009, respectively.





The
following table presents the Industrial Segment’s major classes of assets and
liabilities of discontinued operations that are not held for sale as of March
31, 2010 and December 31, 2009:


16





March
      31,
                  
                  
                  December 31,(Amounts
      in Thousands)
                  
                  2010
                  
                  
                  2009Other
      assets
                  
                  $
                  168
                  
                  
                  $
                  174Total
      assets of discontinued operations
                  
                  $
                  168
                  
                  
                  $
                  174Account
      payable
                  
                  $
                  21
                  
                  
                  $
                  1Accrued
      expenses and other liabilities
                  
                  
                  1,449
                  
                  
                  
                  1,508Deferred
      revenue
                  
                  
                  —
                  
                  
                  
                  —Environmental
      liabilities
                  
                  
                  783
                  
                  
                  
                  917Total
      liabilities of discontinued operations
                  
                  $
                  2,253
                  
                  
                  $
                  2,426





The
environmental liabilities for our discontinued operations consist of remediation
projects currently in progress at PFMI, PFM, and PFD.  These
remediation projects principally entail the removal/remediation of contaminated
soil, and in some cases, the remediation of surrounding ground
water.  All of the remedial clean-up projects were an issue for years
prior to our acquisition of the facility and were recognized pursuant to a
business combination and recorded as part of the purchase price allocation to
assets acquired and liabilities assumed.  The environmental liability
for PFD was retained by the Company upon the sale of PFD in March 2008 and
pertains to the remediation of a leased property which was separate and apart
from the property on which PFD’s facility was located.  The reduction
of approximately $134,000 in environmental liabilities from the December 31,
2009 balance of $917,000 was payments made on remediation projects.





“Accrued expenses and other
liabilities”for our discontinued
operationsincludeapension payable at PFMI of
$882,000 as of March 31, 2010.The pension plan withdrawal
liability is a result of the termination of the union employees of
PFMI.  The PFMI union employees participated in the Central States
Teamsters Pension Fund ("CST"), which provides that a partial or full
termination of union employees may result in a withdrawal liability, due from
PFMI to CST.  The recorded liability is based upon a demand letter
received from CST in August 2005 that provided for the payment of $22,000 per
month over an eight year period.  This obligation is recorded as a
long-term liability, with a current portion of $199,000 that we expect to pay
over the next year.





9.      Operating
Segments




Pursuant
to ASC 280, “Segment Reporting”, we define an operating segment as a business
activity:





·
            from
      which we may earn revenue and incur
expenses;




·
            whose
      operating results are regularly reviewed by the Chief Executive Officer to
      make decisions about resources to be allocated to the segment and assess
      its performance; and




·
            for
      which discrete financial information is
  available.




We
currently have three operating segments, which are defined as each business line
that we operate.  This however, excludes corporate headquarters, which
does not generate revenue, and our discontinued operations, which include
certain facilities within our Industrial Segment (See “Note 8 – Discontinued
Operations” to “Notes to Consolidated Financial Statements”).





Our
operating segments are defined as follows:





The
Nuclear Waste Management Services Segment (“Nuclear Segment”) provides
treatment, storage, processing and disposal of nuclear, low-level radioactive,
mixed (waste containing both hazardous and non-hazardous constituents),
hazardous and non-hazardous waste through our four
facilities:  Perma-Fix of Florida, Inc., Diversified Scientific
Services, Inc., East Tennessee Materials and Energy Corporation, and Perma-Fix
of Northwest Richland, Inc.


17





The
Consulting Engineering Services Segment (“Engineering Segment”) provides
environmental engineering and regulatory compliance services through Schreiber,
Yonley & Associates, Inc. which includes oversight management of
environmental restoration projects, air, soil, and water sampling, compliance
reporting, emission reduction strategies, compliance auditing, and various
compliance and training activities to industrial and government customers, as
well as, engineering and compliance support needed by our other
segments.





The
Industrial Waste Management Services Segment (“Industrial Segment”) provides
on-and-off site treatment, storage, processing and disposal of hazardous and
non-hazardous industrial waste, and wastewater through our three facilities:
Perma-Fix of Ft. Lauderdale, Inc., Perma-Fix of Orlando, Inc., and Perma-Fix of
South Georgia, Inc.





The table
below presents certain financial information of our operating segment as of and
for the three months ended March 31, 2010 and 2009 (in thousands).





Segment
Reporting for the Quarter Ended March 31, 2010





Nuclear
                
                
                Engineering
                
                
                Industrial
                
                
                Segments
                  Total
                
                
                Corporate (2)
                
                
                Consolidated
                  TotalRevenue
      from external customers
                
                $
                22,892
                (3)
                
                $
                675
                
                
                $
                2,292
                
                
                $
                25,859
                
                
                $
                —
                
                
                $
                25,859Intercompany
      revenues
                
                
                790
                
                
                
                216
                
                
                
                152
                
                
                
                1,158
                
                
                
                —
                
                
                
                1,158Gross
      profit
                
                
                4,637
                
                
                
                160
                
                
                
                595
                
                
                
                5,392
                
                
                
                —
                
                
                
                5,392Interest
      income
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                21
                
                
                
                21Interest
      expense
                
                
                42
                
                
                
                1
                
                
                
                1
                
                
                
                44
                
                
                
                176
                
                
                
                220Interest
      expense-financing fees
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                102
                
                
                
                102Depreciation
      and amortization
                
                
                1,052
                
                
                
                8
                
                
                
                71
                
                
                
                1,131
                
                
                
                5
                
                
                
                1,136Segment
      profit (loss)
                
                
                2,407
                
                
                
                38
                
                
                
                190
                
                
                
                2,635
                
                
                
                (1,855
                )
                
                
                780Segment assets (1)
                
                
                96,525
                
                
                
                2,008
                
                
                
                5,888
                
                
                
                104,421
                
                
                
                24,344
                (4)
                
                
                128,765Expenditures
      for segment assets
                
                
                139
                
                
                
                —
                
                
                
                210
                
                
                
                349
                
                
                
                18
                
                
                
                367Total
      long-term debt
                
                
                1,956
                
                
                
                21
                
                
                
                88
                
                
                
                2,065
                
                
                
                13,164
                (5)
                
                
                15,229





Segment
Reporting for the Quarter Ended March 31, 2009





Nuclear
                
                
                Engineering
                
                
                Industrial
                
                
                Segments
                  Total
                
                
                Corporate (2)
                
                
                Consolidated
                  TotalRevenue
      from external customers
                
                $
                19,114
                (3)
                
                $
                779
                
                
                $
                2,109
                
                
                $
                22,002
                
                
                $
                —
                
                
                $
                22,002Intercompany
      revenues
                
                
                751
                
                
                
                170
                
                
                
                188
                
                
                
                1,109
                
                
                
                —
                
                
                
                1,109Gross
      profit
                
                
                3,946
                
                
                
                211
                
                
                
                456
                
                
                
                4,613
                
                
                
                —
                
                
                
                4,613Interest
      income
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                51
                
                
                
                51Interest
      expense
                
                
                360
                
                
                
                1
                
                
                
                5
                
                
                
                366
                
                
                
                181
                
                
                
                547Interest
      expense-financing fees
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                13
                
                
                
                13Depreciation
      and amortization
                
                
                1,056
                
                
                
                10
                
                
                
                103
                
                
                
                1,169
                
                
                
                11
                
                
                
                1,180Segment
      profit (loss)
                
                
                1,754
                
                
                
                86
                
                
                
                54
                
                
                
                1,894
                
                
                
                (1,645
                )
                
                
                249Segment assets (1)
                
                
                98,377
                
                
                
                2,152
                
                
                
                5,431
                
                
                
                105,960
                
                
                
                19,481
                (4)
                
                
                125,441Expenditures
      for segment assets
                
                
                252
                
                
                
                —
                
                
                
                49
                
                
                
                301
                
                
                
                3
                
                
                
                304Total
      long-term debt
                
                
                2,802
                
                
                
                27
                
                
                
                144
                
                
                
                2,973
                
                
                
                15,934
                
                
                
                18,907





(1)
                Segment
      assets have been adjusted for intercompany accounts to reflect actual
      assets for each
segment.





(2)
            Amounts
      reflect the activity for corporate headquarters not included in the
      segment information.





(3)
            The
      consolidated revenues within the Nuclear Segment include the CH Plateau
      Remediation Company (“CHPRC”) revenue of $11,725,000 or 45.4% and
      $10,748,000 or 48.8% of our total consolidated revenue for the quarter
      ended March 31, 2010 and March 31, 2009, respectively.  Our
      M&EC facility was awarded a subcontract by CH Plateau Remediation
      Company (“CHPRC”), a general contractor to the Department of Energy
      (“DOE”), in the second quarter of 2008.  See “Known Trends and
      Uncertainties – Significant Customers” in “Management’s Discussion and
      Analysis of Financial Condition and Results of Operations” for a
      discussion of CHPRC.


18


(4)
            Amount
      includes assets from discontinued operations of $805,000 and $711,000 as
      of March 31, 2010 and 2009,
respectively.





(5)
            Net
      of debt discount recorded ($666,000) and amortized ($299,000) based on the
      estimated fair value of two Warrants and 200,000 shares of the Company’s
      Common Stock issued on May 8, 2009 in connection with a $3,000,000
      promissory note entered into by the Company and Mr. William Lampson and
      Mr. Diehl Rettig.  See “Note 6 – Long Term Debt – Promissory
      Note and Installment Agreement” for additional
  information.





10.  Income
Taxes




The
Company uses an estimated annual effective tax rate, which is based on expected
annual income, statutory tax rates and tax planning opportunities available in
the various jurisdictions in which the Company operates, to determine its
quarterly provision for income taxes.





The
Company’s effective tax rates were approximately 35.8% and 3.5% for the three
months ended March 31, 2010 and 2009, respectively.  The higher income
tax for the three months ended March 31, 2010, as compared to the corresponding
period of 2009, was primarily the result of income tax benefits previously
recognized by the Company in the fourth quarter of 2009 related to federal and
state net operating loss (NOL) carryforwards that the Company is expected to
realize in 2010 through utilization against projected 2010 federal and state
taxable income.  The higher effective tax rate was also due to higher
state taxes resulting from full utilization of state NOLs at one of our nuclear
facilities in 2009.





The
provision for income taxes is determined in accordance with ASC 740, “Income
Taxes”.  Deferred income tax assets and liabilities are recognized for
future tax consequences attributed to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax basis. Deferred income tax assets and liabilities are measured
using enacted income tax rates expected to apply to taxable income in the years
in which those temporary differences are expected to be recovered or settled.
Any effect on deferred income tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment
date.





The
Company regularly assesses the likelihood that the deferred tax asset will be
recovered from future taxable income.  The Company considers projected
future taxable income and ongoing tax planning strategies, then records a
valuation allowance to reduce the carrying value of the net deferred income
taxes to an amount that is more likely than not to be realized.





11.  Related Party
Transactions




Mr.
Robert L. Ferguson


Mr.
Robert Ferguson, was nominated to serve as a Director in connection with the
closing of the acquisition by the Company of Nuvotec (n/k/a Perma-Fix Northwest,
Inc. (“PFNW”)) and its wholly owned subsidiary, Pacific EcoSolutions, Inc.
(“PEcoS”) (n/k/a Perma-Fix Northwest Richland, Inc. (“PFNWR”)) in June 2007 and
subsequently elected as a Director at our Annual Meeting of Shareholders held in
August 2007 and each Annual Meeting of Shareholders since August
2007.  At the time of the acquisition, Mr. Ferguson was the Chairman,
Chief Executive Officer, and individually or through entities controlled by him,
the owner of approximately 21.29% of Nuvotec’s outstanding Common
Stock.  See Note 6 “Long Term Debt – Promissory Note and Installment
Agreement” and Note 7 “Commitments and Contingencies – Earn-Out Amount – PFNW
and PFNWR” for a discussion of Mr. Ferguson’s interest in the consideration paid
and to be paid by us in connection with our acquisition of PFNWR and
PFNWR.  Effective February 27, 2010, Mr. Ferguson resigned as a member
of our Board of Directors.


19




12.  Subsequent
Event




On April
28, 2010, our Compensation Committee and the Board of Directors approved the
2010 Stock Option Plan (“2010 Option Plan), which only will become effective
upon the approval of a majority of the Company’s shares present in person or
represented by proxy and entitled to vote at the Company’s Annual Meeting of
Stockholders, which is to be held in late July 2010.  The 2010 Option
Plan authorizes an aggregate grant of 1,000,000 non-qualified and incentive
stock options to officers and employees (including an employee who is a member
of the Board of Directors) of the Company for the purchase of up to 1,000,000
shares of the Company’s Common Stock.  The term of each stock option
granted will be fixed by the Compensation Committee, but no stock option will be
exercisable more than ten years after the grant date, or in the case of an
incentive stock option granted to a 10% stockholder, five years after the grant
date.  The exercise price of any incentive stock option granted under
the 2010 Option Plan to an individual who is not a 10% stockholder at the time
of the grant will not be less than the fair market value of the shares at the
time of the grant, and the exercise price of any incentive stock option granted
to a 10% stockholder shall not be less than 110% of the fair market value at the
time of grant.  The exercise price of any non-qualified stock options
granted under the 2010 Stock Plan will not be less than the fair market value of
the shares at the time of grant.





Currently,
the Company has only 150,999 options remaining available for issuance under the
Company’s 2004 Stock Plan.  The Board of Director believes that the
2010 Option Plan will serve 1) to enhance the Company’s ability to attract,
retain, and reward qualified employees, and 2) to provide incentive for such
employees to render outstanding service to the Company and its
stockholders.


20




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,





·
            cash
      flow from operations and our available liquidity from our line of credit
      are sufficient to service our current
  obligations;


·
            we
      expect to meet our financial covenants in
2010;


·
            we
      believe government funding made available for DOE project under the
      government economic stimulus plan in February 2009 should continue to
      positively impact our existing government contracts within our Nuclear
      Segment;


·
            higher
      government funding made available through the economic stimulus package
      (American Recovery and Reinvestment Act) enacted by Congress in 2009,
      could result in larger fluctuations in
2010;


·
            demand
      for our service will continue to 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;


·
            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
flow;


·
            with
      much of our Nuclear Segment customer base being government or prime
      contractors treating government waste, we do not believe economic upturns
      or downturns have a significant impact on the demand for our
      services;


·
            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;


·
            no
      immediate plans or current commitments to issue shares under the
      registration statement;


·
            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;


·
            we
      make every reasonable attempt to maintain complete compliance with these
      regulations; however, even with a diligent commitment, we, along with many
      of our competitors, may be required to pay fines for violations or
      investigate and potentially remediate our waste management
      facilities;


·
            ability
      to generate funds internally to remediate
sites;


·
            ability
      to fund budgeted capital expenditures of $2,000,000 during 2010 through
      our operations or lease financing or a combination of
  both;


·
            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;


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


·
            although
      we have seen smaller fluctuation in government receipts between quarters
      in recent years, nevertheless, 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;


·
            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;


21


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


·
            as
      there are limited disposal sites available to us, a change in the number
      of available sites or an increase or decrease in demand for the existing
      disposal areas could significantly affect the actual disposal costs either
      positively or negatively;


·
            pending
      legislative and regulatory proposals which address greenhouse gas
      emissions, if and when enacted, could increase costs associated with our
      operations;


·
            expect
      treatment/processing unit will be back on-line in mid-May;
    and


·
            We
      do not expect ASU 2010-6 to have a material impact on our 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;


·
            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;


·
            Risk
      Factors contained in Item 1A of our 2009 Form 10-K;
  and


·
            factors
      set forth in “Special Note Regarding Forward-Looking Statements” contained
      in our 2009 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.


22




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 of
mixed and low-level radioactive waste remediation.  Our Industrial
Segment provides on-and-off site treatment, storage, processing and disposal of
hazardous and non-hazardous industrial waste and wastewater, in addition to the
sales of used oil and other off-specification petroleum-based
products.  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 2010 reflected a revenue increase of $3,857,000 to $25,859,000 or
17.5% from revenue of $22,002,000 for the same period of 2009.  Within our
Nuclear Segment, we generated revenue of $22,892,000 in the first quarter of
2010, an increase of $3,778,000 or 19.8% from the corresponding period of
2009.  Of the $3,778,000 increase in revenue, approximately $2,508,000
was attributed to the increase in 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, to perform a portion of facility operations and waste management
activities for the DOE Hanford Site.  The remaining increase was
attributed to higher priced waste, which was partially offset by lower
volume.  This reduction in waste volume was impacted by the shut down
of a treatment/processing unit resulting from enhancements being made to the
unit.  We expect this unit will be back on-line in
mid-May.  Our Industrial Segment generated $2,292,000 in revenue in
the quarter ended March 31, 2010, as compared to $2,109,000 for the
corresponding period of 2009, or 8.7% increase.  The increase was
primarily the result of better pricing in field services, in addition to volume
increases in certain other waste streams.  This increase was offset by
lower oil sales revenue from reduction in both volume and average pricing per
gallon.  Revenue for the first quarter of 2010 from the Engineering
Segment decreased $104,000 or 13.4% to $675,000 from $779,000 for the same
period of 2009.





The first
quarter 2010 gross profit increased $779,000 or 16.9% from the corresponding
period of 2009 due primarily to the increase in revenue at our Nuclear and
Industrial Segments.





SG&A
for the first quarter of 2010 increased slightly by 0.5% to $3,878,000 from
$3,859,000 for the corresponding period of 2009.





Our
working capital position at March 31, 2010 increased to $3,881,000 from a
working capital of $1,840,000 as of December 31, 2009.





Outlook


We
believe that government funding made available for DOE projects under the
government stimulus plan in February 2009 should continue to positively impact
our existing government contracts within our Nuclear Segment since the stimulus
plan provides for a substantial amount for remediation of DOE
sites.  However, we expect that 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 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.





23




Results
of Operations


The
reporting of financial results and pertinent discussions are tailored to three
reportable segments: Nuclear, Industrial, and Engineering.





Three Months Ended
                  March 31,Consolidated
      (amounts in thousands)
                
                2010
                
                
                %
                
                
                2009
                
                
                %Net
      revenues
                
                $
                25,859
                
                
                
                100.0
                
                
                $
                22,002
                
                
                
                100.0Cost
      of good sold
                
                
                20,467
                
                
                
                79.1
                
                
                
                17,389
                
                
                
                79.0Gross
      profit
                
                
                5,392
                
                
                
                20.9
                
                
                
                4,613
                
                
                
                21.0Selling,
      general and administrative
                
                
                3,878
                
                
                
                15.0
                
                
                
                3,859
                
                
                
                17.5Loss
      (gain) on disposal of property and equipment
                
                
                2
                
                
                
                3⁄4
                
                
                
                (12
                )
                
                
                3⁄4Income
      from operations
                
                $
                1,512
                
                
                
                5.9
                
                
                $
                766
                
                
                
                3.5Interest
      income
                
                
                21
                
                
                
                3⁄4
                
                
                
                51
                
                
                
                .2Interest
      expense
                
                
                (220
                )
                
                
                (.8
                )
                
                
                (547
                )
                
                
                (2.5
                )Interest
      expense-financing fees
                
                
                (102
                )
                
                
                (.4
                )
                
                
                (13
                )
                
                
                3⁄4Other
                
                
                5
                
                
                
                3⁄4
                
                
                
                1
                
                
                
                3⁄4Income
      from continuing operations before taxes
                
                
                1,216
                
                
                
                4.7
                
                
                
                258
                
                
                
                1.2Income
      tax expense
                
                
                436
                
                
                
                1.7
                
                
                
                9
                
                
                
                3⁄4Income
      from continuing operations
                
                
                780
                
                
                
                3.0
                
                
                
                249
                
                
                
                1.2





Summary –
Three Months Ended March 31, 2010 and 2009




Consolidated
revenues increased $3,857,000 for the three months ended March 31, 2010,
compared to the three months ended March 31, 2009, as follows:




(In
      thousands)
                          
                          2010
                          
                          
                          %
                            Revenue
                          
                          
                          2009
                          
                          
                          %
                            Revenue
                          
                          
                          Change
                          
                          
                          %
                            ChangeNuclearGovernment
      waste
                          
                          $
                          7,733
                          
                          
                          
                          29.9
                          
                          
                          $
                          4,678
                          
                          
                          
                          21.3
                          
                          
                          $
                          3,055
                          
                          
                          
                          65.3Hazardous/Non-hazardous
                          
                          
                          891
                          
                          
                          
                          3.4
                          
                          
                          
                          958
                          
                          
                          
                          4.4
                          
                          
                          
                          (67
                          )
                          
                          
                          (7.0
                          )Other
      nuclear waste
                          
                          
                          2,543
                          
                          
                          
                          9.8
                          
                          
                          
                          2,730
                          
                          
                          
                          12.4
                          
                          
                          
                          (187
                          )
                          
                          
                          (6.8
                          )CHPRC
                          
                          
                          11,725
                          
                          
                          
                          45.4
                          
                          
                          
                          10,748
                          
                          
                          
                          48.8
                          
                          
                          
                          977
                          
                          
                          
                          9.1Total
                          
                          
                          22,892
                          
                          
                          
                          88.5
                          
                          
                          
                          19,114
                          
                          
                          
                          86.9
                          
                          
                          
                          3,778
                          
                          
                          
                          19.8IndustrialCommercial
                          
                          $
                          1,552
                          
                          
                          
                          6.0
                          
                          
                          $
                          1,228
                          
                          
                          
                          5.6
                          
                          
                          $
                          324
                          
                          
                          
                          26.4Government
      services
                          
                          
                          169
                          
                          
                          
                          0.7
                          
                          
                          
                          127
                          
                          
                          
                          0.6
                          
                          
                          
                          42
                          
                          
                          
                          33.1Oil
      Sales
                          
                          
                          571
                          
                          
                          
                          2.2
                          
                          
                          
                          754
                          
                          
                          
                          3.4
                          
                          
                          
                          (183
                          )
                          
                          
                          (24.3
                          )Total
                          
                          
                          2,292
                          
                          
                          
                          8.9
                          
                          
                          
                          2,109
                          
                          
                          
                          9.6
                          
                          
                          
                          183
                          
                          
                          
                          8.7Engineering
                          
                          
                          675
                          
                          
                          
                          2.6
                          
                          
                          
                          779
                          
                          
                          
                          3.5
                          
                          
                          
                          (104
                          )
                          
                          
                          (13.4
                          )Total
                          
                          $
                          25,859
                          
                          
                          
                          100.0
                          
                          
                          $
                          22,002
                          
                          
                          
                          100.0
                          
                          
                          $
                          3,857
                          
                          
                          
                          17.5




24




Net
Revenue


The
Nuclear Segment realized revenue growth of $3,778,000 or 19.8% for the three
months ended March 31, 2010 over the same period in 2009.  Revenue
from CH Plateau Remediation Company (“CHPRC”) totaled $11,725,000 or 45.4% and
$10,748,000 or 41.7% of our total revenue from continuing operations for the
three months ended March 31, 2010, and 2009, respectively.  Revenue
from CHPRC included approximately $10,046,000 and $7,538,000 generated for the
first quarter of 2010 and 2009, respectively, from the subcontract awarded by
CHPRC in the second quarter of 2008, to our M&EC subsidiary to perform a
portion of facility operations and waste management activities for the DOE
Hanford, Washington Site .  This subcontract (“CHPRC subcontract”) is
a cost plus award fee subcontract.  The increase of $2,508,000 or
33.3% from this subcontract was primarily due to increase in labor hours from
increased headcount working under this subcontract.  Remaining revenue
generated from CHPRC of approximately $1,679,000 and $3,210,000 for the first
quarter of 2010 and the corresponding period of 2009, respectively, was from
three existing waste processing contracts we have with CHPRC.  Revenue
from government generators (which includes revenue generated from the three
waste processing contracts from CHRPC noted above) increased by total of
$1,524,000 or 19.3% due primarily to higher priced waste, which was partially
offset by volume reduction.  Revenue from hazardous and non-hazardous
waste was down $67,000 or 7.0% primarily due to a reduction in volume of
approximately 24.7%, which was partially offset by higher average pricing
increase of 10.4%.  Other nuclear waste revenue decreased
approximately $187,000 or 6.8% primarily due to lower priced
waste.  Revenue from our Industrial Segment increased $183,000 or 8.7%
due primarily to higher waste volume and better pricing from field service
work.  Oil sales revenue continued to be lower resulting from both
decreased volume and average price per gallon of 11.7% and 14.1%,
respectively.  Revenue in our Engineering Segment decreased
approximately $104,000 or 13.4% due primarily to decreased billable hours of
10.4% with average billing rate remaining flat.





Cost
of Goods Sold


Cost of
goods sold increased $3,078,000 for the quarter ended March 31, 2010, compared
to the quarter ended March 31, 2009, as follows:





(In
      thousands)
                  
                  2010
                  
                  
                  %
                    Revenue
                  
                  
                  2009
                  
                  
                  %
                    Revenue
                  
                  
                  ChangeNuclear
                  
                  $
                  18,255
                  
                  
                  
                  79.7
                  
                  
                  $
                  15,168
                  
                  
                  
                  79.4
                  
                  
                  $
                  3,087Industrial
                  
                  
                  1,697
                  
                  
                  
                  74.0
                  
                  
                  
                  1,653
                  
                  
                  
                  78.4
                  
                  
                  
                  44Engineering
                  
                  
                  515
                  
                  
                  
                  76.3
                  
                  
                  
                  568
                  
                  
                  
                  72.9
                  
                  
                  
                  (53
                  )Total
                  
                  $
                  20,467
                  
                  
                  
                  79.1
                  
                  
                  $
                  17,389
                  
                  
                  
                  79.0
                  
                  
                  
                  3,078




The
Nuclear Segment’s costs of goods sold for the three months ended March 31, 2010
were up $3,087,000 or 20.4% from the corresponding period of
2009.  The cost of goods sold within our Nuclear Segment includes
approximately $8,142,000 and $6,026,000 in cost of goods sold for the first
quarter of 2010 and 2009, respectively, related to the CHPRC
subcontract.  This increase of $2,116,000 or 35.1% was consistent with
the increase in revenue for the CHPRC subcontract.  Excluding the cost
of goods sold of the CHPRC subcontract, the Nuclear Segment costs increased
approximately $971,000 or 10.6%, throughout various categories due primarily to
the increase in revenue.  In the Industrial Segment, cost of goods
sold increased $44,000 or 2.7% due primarily to increases in
disposal/transportation, regulatory, and outside service costs, which was offset
by lower material/supplies and general costs.  However, cost as a
percentage of revenue decreased by approximately 4.4% due to revenue mix and our
continued effort to reduce costs.  Engineering Segment costs decreased
approximately $53,000 or 9.3% due to primarily to reduction in
revenue.  Included within cost of goods sold is depreciation and
amortization expense of $1,086,000 and $1,123,000 for the three months ended
March 31, 2010, and 2009, respectively.





25




Gross
Profit


Gross
profit for the quarter ended March 31, 2010 increased $779,000 over 2009, as
follows:





(In
      thousands)
                  
                  2010
                  
                  
                  %
                    Revenue
                  
                  
                  2009
                  
                  
                  %
                    Revenue
                  
                  
                  ChangeNuclear
                  
                  $
                  4,637
                  
                  
                  
                  20.3
                  
                  
                  $
                  3,946
                  
                  
                  
                  20.6
                  
                  
                  $
                  691Industrial
                  
                  
                  595
                  
                  
                  
                  26.0
                  
                  
                  
                  456
                  
                  
                  
                  21.6
                  
                  
                  
                  139Engineering
                  
                  
                  160
                  
                  
                  
                  23.7
                  
                  
                  
                  211
                  
                  
                  
                  27.1
                  
                  
                  
                  (51
                  )Total
                  
                  $
                  5,392
                  
                  
                  
                  20.9
                  
                  
                  $
                  4,613
                  
                  
                  
                  21.0
                  
                  
                  
                  779




The
Nuclear Segment gross profit increased $691,000 or 17.5% in the first quarter of
2010 from the corresponding period of 2009.  The Nuclear gross profit
included $1,904,000 and $1,512,000 in gross profit for the first quarter of 2010
and 2009, respectively, for the CHPRC subcontract.  Gross margin on
the CHPRC subcontract was approximately 19.0% and 20.1% for first quarter of
2010 and 2009, respectively, which was in accordance with the contract fee
provisions.  Excluding the gross profit of the CHPRC subcontract,
Nuclear Segment gross profit increased approximately $299,000 or approximately
12.3% due to the increase in revenue.  However, gross margin increased
slightly by approximately 0.3% due to revenue mix and the impact of volume
reduction.  In the Industrial Segment, gross profit increased
approximately $139,000 or 30.5%.  Gross margin increased to 26.0% in
the first quarter of 2010 as compared to 21.6% in the corresponding period of
2009 due to revenue mix and our cost cutting efforts.   The
decrease in gross profit in the Engineering Segment was due primarily to lower
revenue resulting from decreased billable hours.





Selling,
General and Administrative


Selling,
general and administrative ("SG&A") expenses increased $19,000 for the three
months ended March 31, 2010, as compared to the corresponding period for 2009,
as follows:





(In
      thousands)
                  
                  2010
                  
                  
                  %
                    Revenue
                  
                  
                  2009
                  
                  
                  %
                    Revenue
                  
                  
                  ChangeAdministrative
                  
                  $
                  1,598
                  
                  
                  
                  3⁄4
                  
                  
                  $
                  1,503
                  
                  
                  
                  3⁄4
                  
                  
                  $
                  95Nuclear
                  
                  
                  1,787
                  
                  
                  
                  7.8
                  
                  
                  
                  1,827
                  
                  
                  
                  9.6
                  
                  
                  
                  (40
                  )Industrial
                  
                  
                  373
                  
                  
                  
                  16.3
                  
                  
                  
                  406
                  
                  
                  
                  19.3
                  
                  
                  
                  (33
                  )Engineering
                  
                  
                  120
                  
                  
                  
                  17.8
                  
                  
                  
                  123
                  
                  
                  
                  15.8
                  
                  
                  
                  (3
                  )Total
                  
                  $
                  3,878
                  
                  
                  
                  15.0
                  
                  
                  $
                  3,859
                  
                  
                  
                  17.5
                  
                  
                  $
                  19




Our
SG&A in the first quarter of 2010 increased slightly by $19,000 or 0.5% over
the corresponding period of 2009.  The increase in administrative
SG&A was the result of higher outside service expense relating to corporate
business matters, consulting initiatives, and information technology issues, in
addition to higher payroll related costs.  The higher expense was
partially offset by lower bonus, lower stock option expense from forfeiture, and
overall lower general expenses.  Nuclear Segment SG&A was down
approximately $40,000 or 2.2%. This decrease was attributed mainly to lower
payroll related expenses, lower bonus/commission expense, and lower bad debt
expense.  This decrease was partially offset by increase in outside
service expense related to business development/consulting.  The
decrease in SG&A in the Industrial Segment was primarily due to lower bad
debt expense, lower outside service expense, and lower general expense as we
continue our efforts to reduce costs within the segment.  This
reduction was partially offset by higher commission resulting from higher
revenue.  The Engineering Segment’s SG&A expense decreased
approximately $3,000 in the first quarter of 2010 as compared to the
corresponding period of 2009 due primarily to lower overall general expenses due
to cost cutting efforts, which was partially offset by higher bad debt
expense.  Included in SG&A expenses is depreciation and
amortization expense of $50,000 and $57,000 for the three months ended March 31,
2010, and 2009, respectively.





26




Interest
Expense


Interest
expense decreased approximately $327,000 for the quarter ended March 31, 2010,
as compared to the corresponding period of 2009





(In
      thousands)
                    
                    2010
                    
                    
                    2009
                    
                    
                    ChangePNC
      interest
                    
                    $
                    127
                    
                    
                    $
                    162
                    
                    
                    $
                    (35
                    )Other
                    
                    
                    93
                    
                    
                    
                    385
                    
                    
                    
                    (292
                    )Total
                    
                    $
                    220
                    
                    
                    $
                    547
                    
                    
                    $
                    (327
                    )





The
decrease in interest expense in the first quarter of 2010 as compared to the
corresponding period in 2009 was due primarily to lower interest on our revolver
and term note resulting from lower average balances and lower interest rate from
an amendment entered into with PNC on January 25, 2010 (see “Liquidity and
Capital Resources of the Company - Financing Activities” for information
regarding this Amendment).  In addition, we incurred lower interest
expense resulting from payoff of the PDC note in May 2009 at our M&EC
facility.  In addition, interest expense related to certain vendor
invoices in the first quarter of 2010 was lower as compared to the corresponding
period of 2009.





Interest
Expense - Financing Fees


Interest
expense-financing fees increased approximately $89,000 for the three months
ended March 31, 2010 as compared to the corresponding period of 2009 due
primarily to debt discount amortized as financing fees in connection with the
issuance of 200,000 shares of the Company’s Common Stock and two Warrants for
purchase up to 150,000 shares of the Company’s Common Stock as consideration for
the Company receiving a $3,000,000 loan from Mr. William Lampson and Mr. Diehl
Rettig in May 2009.





Interest
Income


Interest
income decreased approximately $30,000 for the three months ended March 31,
2010, as compared to the corresponding period of 2009.  This decrease
is primarily the result of lower interest earned on the finite risk sinking fund
due to lower interest rate.





Income
Tax Expense


Income
tax expense for continuing operations was $436,000 for the three months ended
March 31, 2010, as compared to $9,000 for the corresponding period of
2009.  The Company’s effective tax rates were approximately 35.8% and
3.5% for the three months ended March 31, 2010 and 2009,
respectively.  The higher income tax for the three months ended March
31, 2010, as compared to the corresponding period of 2009, was primarily the
result of income tax benefits previously recognized by the Company in the fourth
quarter of 2009 related to federal and state net operating loss (NOL)
carryforwards that the Company is expected to realize in 2010 through
utilization against projected 2010 federal and state taxable
income.  The higher effective tax rate was also due to higher state
taxes resulting from full utilization of state NOLs at one of our nuclear
facilities in 2009.





Discontinued
Operations and Divestitures


Our
discontinued operations encompass our Perma-Fix of Maryland, Inc. (“PFMD”),
Perma-Fix of Dayton, Inc. (“PFD”), and Perma-Fix Treatment Services, Inc.
(“PFTS”) facilities within our Industrial Segment, as well as three previously
shut down locations, Perma-Fix of Pittsburgh, Inc. (“PFP”), Perma-Fix of
Michigan, Inc. (“PFMI”), and Perma-Fix of Memphis, Inc. (“PFM”), three
facilities which were approved as discontinued operations by our Board of
Directors effective November 8, 2005, October 4, 2004, and March 12, 1998,
respectively.  As previously reported, we completed the sale of
substantially all of the assets of PFMD, PFD, and PFTS on January 8, 2008, March
14, 2008, and May 30, 2008, respectively.





We had
net loss of $142,000 and net income $299,000 for our discontinued operations for
the three months ended March 31, 2010 and 2009, respectively.  Our
“loss from discontinued operations, net of taxes”, for the three months ended
March 31, 2010, included a gain of approximately $23,000 from the sale of a
piece of idle equipment at PFP.  We received proceeds of $37,000 from
this sale.  Our “income from discontinued operations, net of taxes”
for the three months ended March 31, 2009, included a recovery of approximately
$400,000 in closure cost for PFTS resulting from the release of our financial
assurance bond for PFTS by the appropriate regulatory authority after the buyer
of PFTS acquired its financial assurance.





27




Assets
and liabilities related to discontinued operations total $805,000 and $2,253,000
as of March 31, 2010, respectively and $825,000 and $2,426,000 as of December
31, 2009, respectively.





Liabilitieswithin ourdiscontinued operationsincludeapension payable at PFMI of
$882,000 as of March 31, 2010.The pension plan withdrawal
liability is a result of the termination of the union employees of
PFMI.  The PFMI union employees participated in the Central States
Teamsters Pension Fund ("CST"), which provides that a partial or full
termination of union employees may result in a withdrawal liability, due from
PFMI to CST.  The recorded liability is based upon a demand letter
received from CST in August 2005 that provided for the payment of $22,000 per
month over an eight year period.  This obligation is recorded as a
long-term liability, with a current portion of $199,000 that we expect to pay
over the next year.





Liquidity
and Capital Resources of the Company


Our
capital requirements consist of general working capital needs, scheduled
principal payments on our debt obligations and capital leases, remediation
projects, and planned capital expenditures.  Our capital resources
consist primarily of cash generated from operations, funds available under our
revolving credit facility and proceeds from issuance of our Common
Stock.  Our capital resources are impacted by changes in accounts
receivable as a result of revenue fluctuation, economic trends, collection
activities, and the profitability of the segments.





At March
31, 2010, we had cash of $97,000.  The following table reflects the
cash flow activities during the first quarter of 2010.





(In
      thousands)
                  
                  2010Cash
      used in continuing operations
                  
                  $
                  (1,392
                  )Cash
      used in discontinued operations
                  
                  
                  (332
                  )Cash
      used in investing activities of continuing operations
                  
                  
                  (2,266
                  )Cash
      provided by investing activities of discontinued
operations
                  
                  
                  37Cash
      provided by financing activities of continuing operations
                  
                  
                  3,909Decrease
      in cash
                  
                  $
                  (44
                  )





We are in
a net borrowing position and therefore attempt to move all excess cash balances
immediately to the revolving credit facility, so as to reduce debt and interest
expense.  We utilize a centralized cash management system, which
include a remittance lock box and is structured to accelerate collection
activities and reduce cash balances, as idle cash is moved without delay to the
revolving credit facility or the Money Market account, if
applicable.  The cash balance at March 31, 2010, primarily represents
minor petty cash and local account balances used for miscellaneous services and
supplies.





Operating
Activities


Accounts
Receivable, net of allowances for doubtful accounts, totaled $13,333,000, an
increase of $192,000 over the December 31, 2009, balance of
$13,141,000.  The Nuclear Segment experienced an increase of
approximately $200,000 due primarily to increase invoicing resulting from
increase in revenue.  This increase was offset by our improved
collection efforts.  The Industrial Segment also experienced an
increase of approximately $144,000 due primarily to increase in
revenue.  The Engineering Segment experienced a decrease of
approximately $152,000 due mainly to reduction in revenue.





28




Unbilled
receivables are generated by differences between invoicing timing and our
performance based methodology used for revenue recognition
purposes.  As major processing phases are completed and the costs
incurred, we recognize a corresponding percentage of revenue.  We
experience delays in processing invoices due to the complexity of the
documentation that is required for invoicing, as well as the difference between
completion of revenue recognition milestones and agreed upon invoicing terms,
which results in unbilled receivables.  The timing differences occur
for several reasons:  partially from delays in the final processing of
all wastes associated with certain work orders and partially from delays for
analytical testing that is required after we have processed waste but prior to
our release of waste for disposal.  These delays usually take several
months to complete.  As of March 31, 2010, unbilled receivables
totaled $13,623,000, an increase of $1,263,000 from the December 31, 2009,
balance of $12,360,000.   The delays in processing invoices, as
mentioned above, usually take several months to complete but are normally
considered collectible within twelve months.  However, as we now have
historical data to review the timing of these delays, we realize that certain
issues, including, but not limited to, delays at our third party disposal site,
can exacerbate collection of some of these receivables greater than twelve
months.  Therefore, we have segregated the unbilled receivables
between current and long term.  The current portion of the unbilled
receivables as of March 31, 2010 is $10,886,000, an increase of $1,028,000 from
the balance of $9,858,000 as of December 31, 2009.  The long term
portion as of March 31, 2010 is $2,737,000, an increase of $235,000 from the
balance of $2,502,000 as of December 31, 2009.





As of
March 31, 2010, total consolidated accounts payable was $4,252,000, a decrease
of $675,000 from the December 31, 2009, balance of $4,927,000.  The
decrease was due primarily to payments of our vendor invoices using cash
generated from our operations.  We continue to negotiate and manage
payment terms with our vendors to maximize our cash position throughout all
segments.





Accrued
Expenses as of March 31, 2010, totaled $7,184,000, an increase of $706,000 over
the December 31, 2009, balance of $6,478,000.  Accrued expenses are
made up of accrued compensation, interest payable, insurance payable, certain
tax accruals, and other miscellaneous accruals.  The increase was
primarily due to approximately $448,000 in estimated earn-out payable as of
March 31, 2010 for fiscal year ending June 20, 2010 in connection with the
acquisition of our PFNWR facility in June 2007 (see “Liquidity and Capital
Resources of the Company – Financing Activities” for further information
regarding this estimated earn-out).





Our
working capital position at March 31, 2010 was $3,881,000, which includes
working capital of our discontinued operations, as compared to a working capital
of $1,840,000 as of December 31, 2009.  The improvement in our working
capital was primarily due to the increase of our receivables, reduction of our
unearned revenue, and pay down of our accounts payable.





Investing
Activities


Our
purchases of capital equipment for the three months period ended March 31, 2010,
totaled approximately $367,000.  These expenditures were for
improvements to operations primarily within the Nuclear and Industrial
Segments.  These capital expenditures were funded by the cash provided
by operations. We have budgeted capital expenditures of approximately $2,000,000
for fiscal year 2010 for our segments to expand our operations into new markets,
reduce the cost of waste processing and handling, expand the range of wastes
that can be accepted for treatment and processing, and to maintain permit
compliance requirements.  Certain of these budgeted projects are
discretionary and may either be delayed until later in the year or deferred
altogether.  We have traditionally incurred actual capital spending
totals for a given year less than the initial budget amount.  The
initiation and timing of projects are also determined by financing alternatives
or funds available for such capital projects.   We anticipate
funding these capital expenditures by a combination of lease financing and
internally generated funds.





29




In June
2003, we entered into a 25-year finite risk insurance policy with Chartis, a
subsidiary of American International Group, Inc. (“AIG”), which provides
financial assurance to the applicable states for our permitted facilities in the
event of unforeseen closure.  Prior to obtaining or renewing operating
permits, we are required to provide financial assurance that guarantees to the
states that in the event of closure, our permitted facilities will be closed in
accordance with the regulations.  The policy provided an initial
maximum $35,000,000 of financial assurance coverage and has available capacity
to allow for annual inflation and other performance and surety bond
requirements.  Our initial finite risk insurance policy required an
upfront payment of $4,000,000, of which $2,766,000 represented the full premium
for the 25-year term of the policy, and the remaining $1,234,000, was deposited
in a sinking fund account representing a restricted cash account.  We
are required to make seven annual installments, as amended, of $1,004,000, of
which $991,000 is to be deposited in the sinking fund account, with the
remaining $13,000 represents a terrorism premium.  In addition, we are
required to make a final payment of $2,008,000, of which $1,982,000 is to be
deposited in the sinking fund account, with the remaining $26,000 represents a
terrorism premium.  In February 2010, we paid our seventh of the eight
required remaining payments.  In March 2009, we increased our maximum
allowable policy coverage from $35,000,000 to $39,000,000 in order for our
Diversified Scientific Services, Inc. (“DSSI”) facility to receive and process
Polychlorinated Biphenyls (“PCBs”) wastes. Payment for this policy increase
requires a total payment of approximately $5,219,000, consisting of an upfront
payment of $2,000,000 made on March 6, 2009, of which approximately $1,655,000
was deposited into a sinking fund account, with the remaining representing fee
payable to Chartis.  In addition, we are required to make three yearly
payments of approximately $1,073,000 payable starting December 31, 2009, of
which $888,000 is be deposited into a sinking fund account, with the remaining
to represent fee payable to Chartis.  In February 2010, we paid our
first of the three $1,073,000 required payments.





As of
March 31, 2010, our total financial coverage amount under this policy totaled
$36,345,000.  We have recorded $11,532,000 in our sinking fund related
to the policy noted above on the balance sheet, which includes interest earned
of $819,000 on the sinking fund as of March 31, 2010.  Interest income
for the three months ended March 31, 2010, was approximately
$14,000.  On the fourth and subsequent anniversaries of the contract
inception, we may elect to terminate this contract.  If we so elect,
the Insurer is obligated to pay us an amount equal to 100% of the sinking fund
account balance in return for complete releases of liability from both us and
any applicable regulatory agency using this policy as an instrument to comply
with financial assurance requirements.





In August
2007, we entered into a second finite risk insurance policy for our PFNWR
facility with Chartis.  The policy provides an initial $7,800,000 of
financial assurance coverage with annual growth rate of 1.5%, which at the end
of the four year term policy, will provide maximum coverage of
$8,200,000.  The policy will renew automatically on an annual basis at
the end of the four year term and will not be subject to any renewal
fees.  The policy requires total payment of $7,158,000, consisting of
an initial payment of $1,363,000, and two annual payments of $1,520,000, payable
by July 31, 2008 and July 31, 2009, and an additional $2,755,000 payment to be
made in five quarterly payments of $551,000 beginning September
2007.  In July 2007, we paid the initial payment of $1,363,000, of
which $1,106,000 represented premium on the policy and the remaining was
deposited into a sinking fund account.  We have made each of the
annual payments of $1,520,000, of which $1,344,000 was deposited into a sinking
fund account and the remaining represented premium.   We have
also made all of the five quarterly payments which were deposited into a sinking
fund.  As of March 31, 2010, we have recorded $5,847,000 in our
sinking fund related to this policy on the balance sheet, which includes
interest earned of $148,000 on the sinking fund as of March 31,
2010.  Interest income for the three months ended March 31, 2010
totaled $7,000.





It has
been previously reported that AIG, parent company of Chartis, has experienced
financial difficulties and is continuing to experience financial
difficulties.  In the event of failure of AIG, this could
significantly impact our operations and our permits.





Financing
Activities


On
December 22, 2000, we entered into a Revolving Credit, Term Loan and Security
Agreement ("Loan Agreement") with PNC Bank, National Association, a national
banking association ("PNC") acting as agent ("Agent") for lenders, and as
issuing bank, as amended.  The Agreement provided for a term loan
("Term Loan") in the amount of $7,000,000, which requires monthly installments
of $83,000.  The Agreement also provided for a revolving line of
credit ("Revolving Credit") with a maximum principal amount outstanding at any
one time of $18,000,000, as amended.  The Revolving Credit advances
are subject to limitations of an amount up to the sum of (a) up to 85% of
Commercial Receivables aged 90 days or less from invoice date, (b) up to 85% of
Commercial Broker Receivables aged up to 120 days from invoice date, (c) up to
85% of acceptable Government Agency Receivables aged up to 150 days from invoice
date, and (d) up to 50% of acceptable unbilled amounts aged up to 60 days, less
(e) reserves the Agent reasonably deems proper and necessary.  As of
March 31, 2010, the excess availability under our Revolving Credit was
$7,528,000 based on our eligible receivables.





30




Pursuant
to the Loan Agreement, as amended, we may terminate the Loan Agreement upon 90
days’ prior written notice upon payment in full of the obligation.  We
agreed to pay PNC 1% of the total financing in the event we pay off our
obligations on or prior to August 4, 2009 and 1/2 % of the total financing if we
pay off our obligations on or after August 5, 2009, but prior to August 4,
2010.  No early termination fee shall apply if we pay off our
obligations after August 5, 2010.





On
January 25, 2010, we entered into an Amendment to our PNC Loan
Agreement.  This Amendment amended the interest rate to be paid under
the LIBOR option.  Under the terms of the Loan Agreement, we are to
pay interest on the outstanding balance of the term loan and the revolving line
of credit, at our option, based on prime plus 2.5% and 2.0%, respectively, or
LIBOR plus 3.5% and 3.0%, respectively.  Under the Loan Agreement
prior to this Amendment, the LIBOR option included a 2.5% floor, which limited
the minimum interest rates on the term loan and revolving line of credit at 6.0%
and 5.5%, respectively.  Under this Amendment, we and PNC agreed to
lower the floor on the LIBOR interest rate option by 150 basis points to 1.0%,
allowing for minimum interest rate floor under the LIBOR option on the
outstanding balances of our term loan and revolving line of credit of 4.5% and
4.0%, respectively.  The prime rate option of prime plus 2.5% and 2.0%
in connection with our term loan and revolving line of credit, respectively, was
not changed under this Amendment.  All other terms of the Loan
Agreement, as amended prior to this Amendment, remain principally
unchanged.  As result of this Amendment, the effective rate for our
revolving line of credit and Term note was approximately 4.32% and 5.08%,
respectively, for the first quarter of 2010, resulting from the combination of
the prime rate and LIBOR options.




Our
credit facility with PNC Bank contains certain financial covenants, along with
customary representations and warranties.  A breach of any of these
financial covenants, unless waived by PNC, could result in a default under our
credit facility triggering our lender to immediately require the repayment of
all outstanding debt under our credit facility and terminate all commitments to
extend further credit.  We met our financial covenants in each of the
quarters in 2009, and we expect to meet our financial covenants in
2010.  The following table illustrates the most significant financial
covenants under our credit facility and reflects the quarterly compliance
required by the terms of our senior credit facility as of March 31,
2010:




Quarterly
                            
                            
                            1st
      Quarter(Dollars
      in thousands)
                            
                            Requirement
                            
                            
                            Actual(dollares
      in thousands)
                            
                            
                            (dollares
      in thousands)Senior
      Credit FacilityFixed
      charge coverage ratio
                            
                            1:25:1
                            
                            
                            2:72:1Minimum
      tangible adjusted net worth
                            
                            $30,000
                            
                            
                            $61,900





In
conjunction with our acquisition of Perma-Fix Northwest Richland, Inc. (“PFNWR”)
and Perma-Fix Northwest, Inc. (“PFNW”), we agreed to pay shareholders of Nuvotec
(n/k/a PFNW) that qualified as accredited investors, pursuant to Rule 501 of
Regulation D promulgated under the Securities Act of 1933, including Robert
Ferguson, who resigned as a member of our Board of Director effective February
27, 2010, $2,500,000, with principal payable in equal installment of $833,333 on
June 30, 2009, June 30, 2010, and June 30, 2011.  Interest is accrued
on the outstanding principal balance at 8.25% starting in June 2007 and is
payable on June 30, 2008, June 30, 2009, June 30, 2010, and June 30,
2011.  In June 2009, we paid the first principal installment of
$833,333, along with accrued interest.  Interest paid as of March 31,
2010 totaled $422,000.  See “Related Party Transaction” in this
section for information regarding Mr. Robert Ferguson.





31




In
connection with the acquisition of PFNW and PFNWR in June 2007, we are also
required to pay to those former shareholders of PFNW immediately prior to our
acquisition, which includes Robert L. Ferguson who resigned as a member of our
Board of Director effective February 27, 2010, an earn-out amount upon meeting
certain conditions for each fiscal year ending June 30, 2008, to June 30, 2011,
with the aggregate of the full earn-out amount not to exceed $4,552,000,
pursuant to the Merger Agreement, as amended (“Agreement”) (See “Related Party
Transaction” in this section for information regarding Mr.
Ferguson).  Under the Agreement, the earn-out amount to be paid for
any particular fiscal year is to be an amount equal to 10% of the amount that
the revenues for our nuclear business (as defined) for such fiscal year exceeds
the budgeted amount of revenues for our nuclear business for that particular
period.  No earn-out was required to be paid for fiscal 2008 and we
paid $734,000 in earn out for the fiscal 2009 in the third quarter of
2009.  Pursuant to the Agreement, any indemnification obligations
payable to the Company by Nuvotec (n/k/a “PFNW”), PEcoS (n/k/a “PFNWR”), and the
former shareholders will be deducted (“Offset Amount”) from any earn-out amounts
payable by the Company for the fiscal year ending June 30, 2010, and June 30,
2011.  The Offset Amount for the twelve month period ending June 30,
2010 will include the sum of approximately $93,000, of which approximately
$60,000 represents excise tax assessment issued by the State of Washington for
the annual period 2005 to 2007, with the remaining representing a refund request
from a PEcoS customer in connection with service for waste treatment prior to
our acquisition of PFNWR and PFNW.  The Company may elect to pay any
future earn-out amounts in excess of $1,000,000 after the Offset Amount, for
each fiscal year ended June 30, 2010, and 2011 by means of a three year
unsecured promissory note bearing an annual rate of 6.0%, payable in 36 equal
monthly installments due on the 15th day of
each months.  As of March 31, 2010, we have determined that
approximately $541,000 has been earned for the earn-out amount for fiscal year
ending June 30, 2010; accordingly, we recorded this amount as an increase to
goodwill for PFNWR, with an increase to accrued expense of $448,000 and a
reduction to receivable of $93,000, which represents the Offset Amount
previously recorded.





On May 8,
2009, the Company entered into a promissory note with William N. Lampson and
Diehl Rettig (collectively, the “Lenders”) for $3,000,000.  The
Lenders were formerly shareholders of PFNW and PFNWR prior to our acquisition of
PFNW and PFNWR and are also stockholders of the Company having received shares
of our Common Stock in connection with our acquisition of PFNW and
PFNWR.  We used the proceeds of the loan primarily to pay off a
promissory note entered into by our M&EC subsidiary with PDC in June 2001,
with the remaining funds used for working capital purposes.  The
promissory note provides for monthly principal repayment of approximately
$87,000 plus accrued interest, starting June 8, 2009, and on the 8th day of each
month thereafter, with interest payable at LIBOR plus 4.5%, with LIBOR at least
1.5%.  Any unpaid principal balance along with accrued interest is due
May 8, 2011.  We paid approximately $22,000 in closing costs for the
promissory note which is being amortized over the terms of the
note.  The promissory note may be prepaid at anytime by the Company
without penalty.  As consideration of the Company receiving this loan,
we issued a Warrant to Mr. Lampson and a Warrant to Mr. Diehl to purchase up to
135,000 and 15,000 shares, respectively, of the Company’s Common Stock at an
exercise price of $1.50 per share.  The Warrants are exercisable six
months from May 8, 2009 and expire two years from May 8, 2009.  We
also issued an aggregate of 200,000 shares of the Company’s Common Stock with
Mr. Lampson receiving 180,000 shares and Mr. Rettig receiving 20,000 shares of
the Company’s Common Stock.  We estimated the fair value of the Common
Stock and Warrants to be approximately $476,000 and $190,000,
respectively.  The fair value of the Common Stock and Warrants was
recorded as a debt discount and is being amortized over the term of the loan as
interest expense – financing fees.  Debt discount amortized as of
March 31, 2010 totaled approximately $299,000.





During
the three months ended March 31, 2010, we issued an aggregate of 340,000 shares
of our Common Stock upon exercise of employee stock options, at exercise prices
ranging from $1.25 to $2.19.  An employee used 38,210 shares of
personally held Company Common Stock as payment for the exercise of 70,000
options to purchase 70,000 shares of the Company’s Common Stock at $1.25 per
share, as permitted under the 1993 Non-Qualified Stock Option
Plan.  The 38,210 shares are held as treasury stock.  The
cost of the 38,210 shares was determined to be approximately $88,000 in
accordance with the Plan.  We received $491,500 in total proceeds from
the remaining non-qualified stock option exercise.





32




On July
28, 2006, our Board of Directors authorized a common stock repurchase program to
purchase up to $2,000,000 of our Common Stock, through open market and privately
negotiated transactions, with the timing, the amount of repurchase transactions
and the prices paid under the program as deemed appropriate by management and
dependent on market conditions and corporate and regulatory
considerations.   We plan to fund any repurchases under this
program through our internal cash flow and/or borrowing under our line of
credit.  As of the date of this report, we have not repurchased any of
our Common Stock under the program as we continue to evaluate this repurchase
program within our internal cash flow and/or borrowings under our line of
credit.





On April
8, 2009, the Company filed a shelf registration statement on Form S-3 with the
U.S. Securities and Exchange Commission (“SEC”), which was declared effective by
the SEC on June 26, 2009.  The shelf registration statement gives the
Company the ability to sell up to 5,000,000 shares of its Common Stock from time
to time and through one or more methods of distribution, subject to market
conditions and the Company’s capital needs at that time.  The terms of
any offering under the registration statement will be established at the time of
the offering.  The Company does not have any immediate plans or
current commitments to issue shares under the registration
statement.




In
summary, we continue to take steps to improve our operations and liquidity and
to invest working capital into our facilities to fund capital additions our
Segments.  Although there are no assurances, 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.





Contractual
Obligations


The
following table summarizes our contractual obligations at March 31, 2010, and
the effect such obligations are expected to have on our liquidity and cash flow
in future periods, (in thousands):





Payments
      due by periodContractual
      Obligations
                  
                  Total
                  
                  
                  2010
                  
                  
                  
                  2011-
                    2013
                  
                  
                  
                  2014
      -
                    2015
                  
                  
                  After
                    2015Long-term debt (1)
                  
                  $
                  15,596
                  
                  
                  $
                  2,486
                  
                  
                  $
                  13,091
                  
                  
                  $
                  19
                  
                  
                  $
                  —Interest on fixed
      rate long-term debt (2)
                  
                  
                  206
                  
                  
                  
                  137
                  
                  
                  
                  69
                  
                  
                  
                  —
                  
                  
                  
                  —Interest on variable
      rate debt (3)
                  
                  
                  780
                  
                  
                  
                  319
                  
                  
                  
                  461
                  
                  
                  
                  —
                  
                  
                  
                  —Operating
      leases
                  
                  
                  2,542
                  
                  
                  
                  648
                  
                  
                  
                  1,251
                  
                  
                  
                  335
                  
                  
                  
                  308Finite risk policy
      (4)
                  
                  
                  4,154
                  
                  
                  
                  1,073
                  
                  
                  
                  3,081
                  
                  
                  
                  —
                  
                  
                  
                  —Pension withdrawal
      liability (5)
                  
                  
                  882
                  
                  
                  
                  134
                  
                  
                  
                  698
                  
                  
                  
                  50
                  
                  
                  
                  —Environmental
      contingencies (6)
                  
                  
                  1,572
                  
                  
                  
                  504
                  
                  
                  
                  672
                  
                  
                  
                  243
                  
                  
                  
                  153Earn Out Amount -
      PFNWR (7)
                  
                  
                  448
                  
                  
                  
                  448
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —Purchase obligations
      (8)
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —Total
      contractual obligations
                  
                  $
                  26,180
                  
                  
                  $
                  5,749
                  
                  
                  $
                  19,323
                  
                  
                  $
                  647
                  
                  
                  $
                  461





(1)
            Amount
      excludes debt discount recorded and amortized of approximately $105,000
      for the two Warrants and $262,000 for the 200,000 shares of the Company
      Stock issued in connection with the $3,000,000 loan between the Company
      and Mr. William Lampson and Mr. Diehl Rettig.  See “Liquidity
      and Capital Resources of the Company – Financing Activities” earlier in
      this Management’s Discussion and Analysis for further discussion on the
      debt discount.





(2)
            In
      conjunction with our acquisition of PFNWR and PFNW, which was completed on
      June 13, 2007, we agreed to pay shareholders of Nuvotec that qualified as
      accredited investors pursuant to Rule 501 of Regulation D promulgated
      under the Securities Act of 1933, $2,500,000, with principal payable in
      equal installment of $833,333 on June 30, 2009, June 30, 2010, and June
      30, 2011.  Interest is accrued on outstanding principal balance
      at 8.25% starting in June 2007 and is payable on June 30, 2008, June 30,
      2009, June 30, 2010, and June 30,
2011.




33




(3)
            We
      have variable interest rates on our Term Loan and Revolving Credit of 2.5%
      and 2.0% over the prime rate of interest, respectively, or variable
      interest rates on our Term Loan and Revolving Credit of 3.5% and 3.0%,
      respectively, over the minimum floor base LIBOR of 1.0%, as
      amended.  Our calculation of interests on our Term Loan and
      Revolving Credit was estimated using the more favorable LIBOR option in
      years 2010 through July 2012.  In addition, we have a $3,000,000
      promissory note with Mr. William Lampson and Mr. Diehl Rettig which pays
      interest at LIBOR plus 4.5%, with LIBOR of at least
  1.5%.





(4)
            Our
      finite risk insurance policy provides financial assurance guarantees to
      the states in the event of unforeseen closure of our permitted
      facilities.  See Liquidity and Capital Resources – Investing
      activities earlier in this Management’s Discussion and Analysis for
      further discussion on our finite risk
policy.





(5)
            The
      pension withdrawal liability is the estimated liability to us upon
      termination of our union employees at our discontinued operation,
      PFMI.  See Discontinued Operations earlier in this section for
      discussion on our discontinued
operation.





(6)
            The
      environmental contingencies and related assumptions are discussed further
      in the Environmental Contingencies section of this Management’s Discussion
      and Analysis, and are based on estimated cash flow spending for these
      liabilities.  The environmental contingencies noted are for
      PFMI, PFM, PFSG, and PFD, which are the financial obligations of the
      Company.  The environmental liability, as it relates to the
      remediation of the EPS site assumed by the Company as a result of the
      original acquisition of the PFD facility, was retained by the Company upon
      the sale of PFD in March 2008.





(7)
            In
      connection with the acquisition of PFNW and PFNWR in June 2007, we are
      required to pay to those former shareholders of PFNW immediately prior to
      our acquisition, if certain revenue targets are met, an earn-out amount
      for each fiscal year ending June 30, 2008, to June 30, 2011, with the
      aggregate of the full earn-out amount not to exceed $4,552,000, pursuant
      to the Merger Agreement, as amended.  No earn-out was required
      to be paid for fiscal 2008 and we paid $734,000 in earn out for the fiscal
      2009 in the third quarter of 2009.  As of March 31, 2010, we
      have determined that approximately $541,000 in earn-out amount has been
      earned for the fiscal year ended June 30, 2010.  The amount
      payable as of March 31, 2010, was approximately $448,000, which was net of
      a $93,000 Offset Amount, representing indemnification obligations payable
      to the Company by Nuvotec, PEcoS, and the former
      shareholders.  See “Liquidity and Capital Resources of the
      Company - Financing Activities” in this “Management and Discussion and
      Analysis of Financial Condition and Results of Operations” for further
      information on the earn-out amount.





(8)
            We
      are not a party to any significant long-term service or supply contracts
      with respect to our processes.  We refrain from entering into
      any long-term purchase commitments in the ordinary course of
      business.





Critical
Accounting Estimates


In
preparing the consolidated financial statements in conformity with generally
accepted accounting principles in the United States of America, management makes
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements, as well as, the reported amounts of revenues and
expenses during the reporting period.  We believe the following
critical accounting policies affect the more significant estimates used in
preparation of the consolidated financial statements:





34




Revenue Recognition
Estimates.We utilize a performance based methodology for
purposes of revenue recognition in our Nuclear Segment.  As we accept
more complex waste streams in this segment, the treatment of those waste streams
becomes more complicated and time consuming.  We have continued to
enhance our waste tracking capabilities and systems, which has enabled us to
better match the revenue earned to the processing phases
achieved.  The major processing phases are receipt,
treatment/processing and shipment/final disposition.  Upon receiving
mixed waste we recognize a certain percentage (ranging from 20% to 33%) of
revenue as we incur costs for transportation, analytical and labor associated
with the receipt of mixed wastes.  As the waste is processed, shipped
and disposed of we recognize the remaining revenue and the associated costs of
transportation and burial.  The waste streams in our Industrial
Segment are much less complicated, and services are rendered shortly after
receipt, as such we do not use a performance based methodology in our Industrial
segment.  We review and evaluate our revenue recognition estimates and
policies on a quarterly basis.  Under our subcontract awarded by CHPRC
in 2008, we are reimbursed for costs incurred plus a certain percentage markup
for indirect costs, in accordance with contract provision.  Costs
incurred on excess of contract funding may be renegotiated for
reimbursement.  We also earn a fee based on the approved costs to
complete the contract.  We recognize this fee using the proportion of
costs incurred to total estimated contract costs.





Allowance for Doubtful
Accounts.  The carrying amount of accounts receivable is
reduced by an allowance for doubtful accounts, which is a valuation allowance
that reflects management's best estimate of the amounts that are
uncollectible.  We regularly review all accounts receivable balances
that exceed 60 days from the invoice date and based on an assessment of current
credit worthiness, estimate the portion, if any, of the balances that are
uncollectible.  Specific accounts that are deemed to be uncollectible
are reserved at 100% of their outstanding balance.  The remaining
balances aged over 60 days have a percentage applied by aging category (5% for
balances 61-90 days, 20% for balances 91-120 days and 40% for balances over 120
days aged), based on a historical valuation, that allows us to calculate the
total reserve required. This allowance was approximately 0.3% of revenue for
2009, and 2.2% of accounts receivable, as of December 31, 2009.  This
allowance was approximately 1.2% of revenue for the first quarter of 2010, and
2.2% of accounts receivable as of March 31, 2010.





Intangible
Assets.  Intangible assets relating to acquired businesses
consist primarily of the cost of purchased businesses in excess of the estimated
fair value of net identifiable assets acquired or goodwill and the recognized
value of the permits required to operate the business.  We continually
reevaluate the propriety of the carrying amount of permits and goodwill to
determine whether current events and circumstances warrant adjustments to the
carrying value.  We test each Segment’s (or Reporting Unit’s) goodwill
and permits, separately, for impairment, annually as of October
1.  Our annual impairment test as of October 1, 2009 and 2008 resulted
in no impairment of goodwill and permits.  The methodology utilized in
performing this test estimates the fair value of our operating segments using a
discounted cash flow valuation approach.  Those cash flow estimates
incorporate assumptions that marketplace participants would use in their
estimates of fair value.  The most significant assumptions used in the
discounted cash flow valuation regarding each of the Segment’s fair value in
connection with goodwill valuations are:  (1) detailed five year cash
flow projections, (2) the risk adjusted discount rate, and (3) the expected
long-term growth rate.  Intangible assets that have definite useful
lives are amortized using the straight-line method over the estimated useful
lives and are excluded from our annual intangible asset valuation review
conducted as of October 1.





Property
and Equipment


Property
and equipment expenditures are capitalized and depreciated using the
straight-line method over the estimated useful lives of the assets for financial
statement purposes, while accelerated depreciation methods are principally used
for income tax purposes.  Generally, annual depreciation rates range
from ten to forty years for buildings (including improvements and asset
retirement costs) and three to seven years for office furniture and equipment,
vehicles, and decontamination and processing equipment.  Leasehold
improvements are capitalized and amortized over the lesser of the term of the
lease or the life of the asset.  Maintenance and repairs are charged
directly to expense as incurred.  The cost and accumulated
depreciation of assets sold or retired are removed from the respective accounts,
and any gain or loss from sale or retirement is recognized in the accompanying
consolidated statements of operations. Renewals and improvement, which extend
the useful lives of the assets, are capitalized.  We include within
buildings, asset retirement obligations, which represents our best estimates of
the cost to close, at some undetermined future date, our permitted and/or
licensed facilities.





35




Accrued Closure Costs.
Accrued closure costs represent a contingent environmental liability to clean up
a facility in the event we cease operations in an existing
facility.  The accrued closure costs are estimates based on guidelines
developed by federal and/or state regulatory authorities under Resource
Conservation and Recovery Act (“RCRA”).  Such costs are evaluated
annually and adjusted for inflationary factors (for 2010, the average
inflationary factor was approximately 1.02%) and for approved changes or
expansions to the facilities. Increases or decreases in accrued closure costs
resulting from changes or expansions at the facilities are determined based on
specific RCRA guidelines applied to the requested change.  This
calculation includes certain estimates, such as disposal pricing, external
labor, analytical costs and processing costs, which are based on current market
conditions.





Accrued Environmental
Liabilities. We have four remediation projects currently in
progress.  The current and long-term accrual amounts for the projects
are our best estimates based on proposed or approved processes for
clean-up.  The circumstances that could affect the outcome range from
new technologies that are being developed every day to reduce our overall costs,
to increased contamination levels that could arise as we complete remediation
which could increase our costs, neither of which we anticipate at this
time.  In addition, significant changes in regulations could adversely
or favorably affect our costs to remediate existing sites or potential future
sites, which cannot be reasonably quantified.  In connection with the
sale of our PFD facility in March 2008, the Company retained the environmental
liability for the remediation of an independent site known as Environmental
Processing Services (“EPS”).  This liability was assumed by the
Company as a result of the original acquisition of the PFD
facility.  The environmental liabilities of PFM, PFMI, PFSG, and PFD
remain the financial obligations of the Company.





Disposal/Transportation
Costs. We accrue for waste disposal based upon a physical count of the
total waste at each facility at the end of each accounting
period.  Current market prices for transportation and disposal costs
are applied to the end of period waste inventories to calculate the disposal
accrual.  Costs are calculated using current costs for disposal, but
economic trends could materially affect our actual costs for
disposal.  As there are limited disposal sites available to us, a
change in the number of available sites or an increase or decrease in demand for
the existing disposal areas could significantly affect the actual disposal costs
either positively or negatively.





Stock-Based Compensation.We
account for stock-based compensation in accordance with ASC 718, “Compensation –
Stock Compensation”.  ASC 718 requires all stock-based payments to
employees, including grants of employee stock options, to be recognized in the
income statement based on their fair values.  The Company uses the
Black-Scholes option-pricing model to determine the fair-value of stock-based
awards which requires subjective assumptions.  Assumptions used to
estimate the fair value of stock options granted include the exercise price of
the award, the expected term, the expected volatility of the Company’s stock
over the option’s expected term, the risk-free interest rate over the option’s
expected term, and the expected annual dividend yield.  The Company’s
expected term represents the period that stock-based awards are expected to be
outstanding and is determined based on historical experience of similar awards,
giving consideration to the contractual terms of the stock-based awards, vesting
schedules, and post-vesting data.  Our computation of expected
volatility is based on the Company’s historical volatility from our traded
Common Stock over the expected term of the option grants.  The
interest rate for periods within the expected term of the award is based on the
U.S. Treasury yield curve in effect at the time of grant.





We
recognize stock-based compensation expense using a straight-line amortization
method over the requisite period, which is the vesting period of the stock
option grant.  ASC 718 requires that stock-based compensation expense
be based on options that are ultimately expected to vest.  ASC 718
requires forfeitures to be estimated at the time of grant and revised, if
necessary, in subsequent periods if actual forfeitures differ from those
estimates.  We have generally estimated forfeiture rate based on
historical trends of actual forfeiture. When actual forfeitures vary from our
estimates, we recognize the difference in compensation expense in the period the
actual forfeitures occur or when options vest. Forfeiture rates are evaluated,
and revised as necessary.





36




Income Taxes.The
provision for income tax is determined in accordance with ASC 740, “Income
Taxes”, and ASC 270, “Interim Reporting”.  As part of the process of
preparing our consolidated financial statements, we are required to estimate our
income taxes in each of the jurisdictions in which we operate. We record this
amount as a provision or benefit for income taxes.  This process
involves estimating our actual current income tax exposure, including assessing
the risks associated with income tax audits, and assessing temporary differences
resulting from different treatment of items for tax and accounting purposes.
These differences result in deferred income tax assets and liabilities. We
periodically assess the likelihood that our deferred income tax assets will be
recovered from future taxable income and, provide valuation allowance to the
extent that we believe recovery is not likely.





Known
Trends and Uncertainties


Seasonality.  Historically,
we have experienced reduced activities and related billable hours throughout the
November and December holiday periods within our Engineering
Segment.  Our Industrial Segment operations experience reduced
activities during the holiday periods; however, one key product line is the
servicing of cruise line business where operations are typically higher during
the winter months, thus offsetting the impact of the holiday
season.  The DOE and DOD represent major customers for the Nuclear
Segment.  In conjunction with the federal government’s September 30
fiscal year-end, the Nuclear Segment historically experienced seasonably large
shipments during the third quarter, leading up to this government fiscal
year-end, as a result of incentives and other quota
requirements.  Correspondingly for a period of approximately three
months following September 30, the Nuclear Segment generally slows down, as the
government budgets are still being finalized, planning for the new year is
occurring, and we enter the holiday season.    This trend
generally continues into the first quarter of the new year as government
entities evaluate their spending priorities.  Over the past years, due
to our efforts to work with the various government customers to smooth these
shipments more evenly throughout the year, we have seen smaller fluctuations in
the quarters.  Although we have seen smaller fluctuation in the
quarters in recent years, nevertheless, 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.  In addition, higher government (specifically DOE) funding
made available through the economic stimulus package (American Recovery and
Reinvestment Act) enacted by Congress in February 2009, could result in larger
fluctuations in 2010.





Economic Conditions.With
much of our Nuclear Segment customer base being government or prime contractors
treating government waste, we do not believe that economic upturns or downturns
have a significant impact on the demand for our services.  With our
Industrial Segment, economic downturns or recessionary conditions can adversely
affect the demand for our industrial services.  Although we continue
to experience economic slowdown due to the current uncertain economic
environment, we continue to review contracts and revenue streams within our
Industrial Segment in efforts to replace those that are not profitable with more
profitable ones.  Our Engineering Segment relies more on commercial
customers though this segment makes up a very small percentage of our
revenue.





We
believe that the higher government funding made available to remediate DOE sites
under the economic stimulus package (American Recovery and Reinvestment Act),
enacted by the Congress in February 2009, should continue to positively impact
our existing government contracts within our Nuclear
Segment.  However, we expect that 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 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.





37




Certain
Legal Matters:


Perma-Fix
of Dayton (“PFD”), Perma-Fix of Florida (“PFF”), Perma-Fix of Orlando (“PFO”),
Perma-Fix of South Georgia (“PFSG”), and Perma-Fix of Memphis
(“PFM”)


In May
2007, the above facilities were named Potentially Responsible Parties (“PRPs”)
at the Marine Shale Superfund site in St. Mary Parish, Louisiana
(“Site”).  Information provided by the EPA indicates that, from 1985
through 1996, the Perma-Fix facilities above were responsible for shipping 2.8%
of the total waste volume received by Marine Shale.  Subject to
finalization of this estimate by the PRP group, PFF, PFO and PFD could be
considered de-minimus at .06%, .07% and .28% respectively.  PFSG and
PFM would be major at 1.12% and 1.27% respectively.  However, at this
time the contributions of all facilities are consolidated.





The
Louisiana Department of Environmental Quality (“LDEQ”) has collected
approximately $8,400,000 to date for the remediation of the site (Perma-Fix
subsidiaries have not been required to contribute any of the $8,400,000) and has
completed removal of above ground waste from the site, with approximately
$5,000,000 remaining in this fund held by the LDEQ.  The EPA’s
unofficial estimate to complete remediation of the site is between $9,000,000
and $12,000,000, including work performed by LDEQ to date; however, based on
preliminary outside consulting work hired by the PRP group, which we are a party
to, the remediation costs could be below EPA’s estimation.  During
2009, a site assessment was conducted and paid for by the PRP group, which was
exclusive of the $8,400,000.  No unexpected issues were identified
during the assessment.  Collections from small contributors have also
begun for remediation of this site.  Remediation activities going
forward will be funded by LDEQ, until those funds are exhausted, at which time,
any additional requirements, if needed, will be funded from the small
contributors.  Once funds from the small contributors are exhausted,
if additional funds are required, they will be provided by the members of the
PRP group.  As part of the PRP Group, we paid an initial assessment of
$10,000, which was allocated among the facilities. In addition, we accrued
approximately $27,000 in the third quarter of 2008 for our estimated portion of
the cost of the site assessment, which was allocated among the
facilities.  As of March 31, 2010, the $27,000 has been paid, of which
$9,000 was paid in the first quarter of 2010.  As of the date of this
report, we cannot accurately access our ultimate liability.  The
Company records its environmental liabilities when they are probable of payment
and can be estimated within a reasonable range.  Since this
contingency currently does not meet this criteria, a liability has not been
established.





Industrial
Segment Divested Facilities/Operations


As
previously disclosed, our subsidiary, Perma-Fix Treatment Services, Inc.
(“PFTS”), sold substantially all of its assets in May 2008, pursuant to an Asset
Purchase Agreement, as amended (“Agreement”).  Under the Agreement,
the buyer assumed certain debts and obligations of PFTS.  We have sued
the buyer of the PFTS assets regarding certain liabilities which we believe the
buyer assumed and agreed to pay under the Agreement but which the buyer has
refused to pay.  The buyer has filed a counterclaim against us and is
alleging that PFTS made certain misrepresentations and failed to disclose
certain liabilities.  The pending litigation is styled American Environmental
Landfill, Inc. v. Perma-Fix Environmental Services, Inc. v. A Clean Environment,
Inc., Case No. CJ-2008-659, pending in the District Court of Osage
County, State of Oklahoma.  This matter was ordered to arbitration and
heard in April 2010.  We are waiting on the decision of the
arbitrator.





Significant Customers. Our
revenues are principally derived from numerous and varied customers. However,
our Nuclear Segment has a significant relationship with the federal government
and has continued to enter into contracts with (directly or indirectly as a
subcontractor) the federal government.  The contracts that we are a
party to with the federal government or with others as a subcontractor to the
federal government generally provide that the government may terminate on 30
days notice or renegotiate the contracts, at the government's
election.  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.





38




We
performed services relating to waste generated by the federal government, either
directly or indirectly as a subcontractor (including CHPRC as discussed below)
to the federal government, representing approximately $19,458,000 or 75.2%
(within our Nuclear Segment) of our total revenue from continuing operations
during the three months ended March 31, 2010, as compared to $15,426,000 or
70.1% of our total revenue from continuing operations during the corresponding
period of 2009.





During
the second quarter of 2008, our M&EC facility was awarded a subcontract by
CHPRC, a general contractor to the DOE, to participate in the cleanup of the
central portion of the Hanford Site.  On October 1, 2008, operations
of this subcontract commenced at the DOE Hanford Site.  We believe
full operations under this 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.  As provided above, M&EC’s subcontract is terminable
or subject to renegotiation, at the option of the government, on 30 days
notice.  Effective October 1, 2008, CHPRC also assumed responsibility
for three existing Nuclear Segment waste processing contracts that were
previously managed by DOE’s general contractor prior to CHPRC.  These
three contracts were renegotiated and extended through September 30,
2013.  Revenues from CHPRC totaled $11,725,000 or 45.5% and
$10,748,000 or 48.8% of our total revenue from continuing operations for three
months ended March 31, 2010 and 2009, respectively.





Insurance. We maintain
insurance coverage similar to, or greater than, the coverage maintained by other
companies of the same size and industry, which complies with the requirements
under applicable environmental laws. We evaluate our insurance policies annually
to determine adequacy, cost effectiveness and desired deductible levels. Due to
the continued uncertainty in the economy, changes within the environmental
insurance market, and the financial difficulties of AIG, whose subsidiary
Chartis, is the provider of our financial assurance policies, we have no
guarantees as to continued coverage by Chartis, that we will be able to obtain
similar insurance in future years, or that the cost of such insurance will not
increase materially.





Climate Change. Climate
change is receiving ever increasing attention worldwide. Many scientists,
legislators and others attribute global warming to increased levels of
greenhouse gases, including carbon dioxide, which has led to significant
legislative and regulatory efforts to limit greenhouse gas
emissions.




There is
a number of pending legislative and regulatory proposals to address greenhouse
gas emissions. For example, in June 2009 the U.S. House of Representatives
passed the American Clean Energy and Security Act that would phase-in
significant reductions in greenhouse gas emissions if enacted into law. The U.S.
Senate is considering a different bill, and it is uncertain whether, when and in
what form a federal mandatory carbon dioxide emissions reduction program may be
adopted. These actions could increase costs associated with our
operations.  Because it is uncertain what laws will be enacted, we
cannot predict the potential impact of such laws on our future consolidated
financial condition, results of operations or cash flows.





Profit
Sharing Plan


We
adopted the Perma-Fix Environmental Services, Inc. 401(k) Plan (the “401(k)
Plan”) in 1992, which is intended to comply under Section 401 of the Internal
Revenue Code and the provisions of the Employee Retirement Income Security Act
of 1974.  All full-time employees who have attained the age of 18 are
eligible to participate in the 401(k) Plan.  Participating employees
may make annual pretax contributions to their accounts up to 100% of their
compensation, up to a maximum amount as limited by law.  We, at our
discretion, may make matching contributions based on the employee's elective
contributions.  Company contributions vest over a period of five
years.  We matched up to 25% of our employees'
contributions.  We contributed $85,000 in matching funds during
2009.  The Company suspended its matching contribution effective March
1, 2009, in an effort to reduce costs in light of the downturn in the economic
environment.  Effective January 1, 2010, the Company reinstated this
matching contribution.





Environmental
Contingencies


We are
engaged in the waste management services segment of the pollution control
industry.  As a participant in the on-site treatment, storage and
disposal market and the off-site treatment and services market, we are subject
to rigorous federal, state and local regulations.  These regulations
mandate strict compliance and therefore are a cost and concern to
us.  Because of their integral role in providing quality environmental
services, we make every reasonable attempt to maintain complete compliance with
these regulations; however, even with a diligent commitment, we, along with many
of our competitors, may be required to pay fines for violations or investigate
and potentially remediate our waste management facilities.





39




We
routinely use third party disposal companies, who ultimately destroy or secure
landfill residual materials generated at our facilities or at a client's
site.  We, compared to certain of our competitors, dispose of
significantly less hazardous or industrial by-products from our operations due
to rendering material non-hazardous, discharging treated wastewaters to
publicly-owned treatment works and/or processing wastes into saleable
products.  In the past, numerous third party disposal sites have
improperly managed waste and consequently require remedial action; consequently,
any party utilizing these sites may be liable for some or all of the remedial
costs.  Despite our aggressive compliance and auditing procedures 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.





We have
budgeted for 2010, $526,000 in environmental remediation expenditures to comply
with federal, state and local regulations in connection with remediation of
certain contaminates at our facilities.  Our facilities where the
remediation expenditures will be made are the Leased Property in Dayton, Ohio
(EPS), a former RCRA storage facility as operated by the former owners of PFD,
PFM's facility in Memphis, Tennessee, PFSG's facility in Valdosta, Georgia, and
PFMI's facility in Detroit, Michigan.  The environmental liability of
PFD (as it relates to the remediation of the EPS site assumed by the Company as
a result of the original acquisition of the PFD facility) was retained by the
Company upon the sale of PFD in March 2008.  All of the reserves are
within our discontinued operations with the exception of PFSG.  While
no assurances can be made that we will be able to do so, we expect to fund the
expenses to remediate these sites from funds generated internally.





At March
31, 2010, we had total accrued environmental remediation liabilities of
$1,572,000 of which $523,000 is recorded as a current liability, which reflects
a decrease of $155,000 from the December 31, 2009, balance of
$1,727,000.  The decrease represents payment on remediation
projects.  The March 31, 2010, current and long-term accrued
environmental balance is recorded as follows (in thousands):


Current
                    
                    
                    Long-termAccrual
                    
                    
                    Accrual
                    
                    
                    TotalPFD
                    
                    $
                    107
                    
                    
                    $
                    182
                    
                    
                    $
                    289PFM
                    
                    
                    218
                    
                    
                    
                    180
                    
                    
                    
                    398PFSG
                    
                    
                    125
                    
                    
                    
                    664
                    
                    
                    
                    789PFMI
                    
                    
                    73
                    
                    
                    
                    23
                    
                    
                    
                    96Total
      Liability
                    
                    $
                    523
                    
                    
                    $
                    1,049
                    
                    
                    $
                    1,572





Related
Party Transactions


Mr.
Robert Ferguson, was nominated to serve as a Director in connection with the
closing of the acquisition by the Company of Nuvotec (n/k/a Perma-Fix Northwest,
Inc. (“PFNW”)) and its wholly owned subsidiary, Pacific EcoSolutions, Inc.
(“PEcoS”) (n/k/a Perma-Fix Northwest Richland, Inc. (“PFNWR”)) in June 2007 and
subsequently elected as a Director at our Annual Meeting of Shareholders held in
August 2007 and each Annual Meeting of Shareholders since August
2007.  At the time of the acquisition, Mr. Ferguson was the Chairman,
Chief Executive Officer, and individually or through entities controlled by him,
the owner of approximately 21.29% of Nuvotec’s outstanding Common
Stock.  See discussion under “Liquidity and Capital Resources of the
Company – Financing Activities” of this “Management Discussion and Analysis of
Financial Condition and Results of Operations” as to payments that have been
made or are required to be made as a result of the acquisition to the former
shareholders of PFNWR and PFNW.  Effective February 27, 2010, Mr.
Ferguson resigned as a member of our Board of Directors.




40




Item
      3.
              Quantitative
      and Qualitative Disclosures about Market
Risks





The
Company is exposed to certain market risks arising from adverse changes in
interest rates, primarily due to the potential effect of such changes on our
variable rate loan arrangements with PNC and with Mr. William Lampson and Mr.
Diehl Rettig.  The interest rates payable to PNC are based on a spread
over prime rate or a spread over a minimum floor base LIBOR of 1.0% and the
interest rates payable on the promissory note to Mr. Lampson and Mr. Rettig is
based on a spread over a minimum floor base LIBOR of 1.5%.  As of
March 31, 2010, the Company had approximately $13,531,000 in variable rate
borrowing.  Assuming a 1% change in the average interest rate as of
March 31, 2010, our interest cost would change by approximately
$135,310.  As of March 31, 2010, we had no interest swap agreement
outstanding.





Item
      4.
              Controls
      and Procedures
 (a)
                Evaluation of disclosure
      controls, and
procedures.
  We
maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our periodic reports filed with the
Securities and Exchange Commission (the "SEC") is recorded, processed,
summarized and reported within the time periods specified in the rules and forms
of the SEC and that such information is accumulated and communicated to our
management.  Based on their most recent assessment, which was
completed as of the end of the period covered by this Quarterly Report on Form
10-Q, we have assessed, with the participation of our Chief Executive Officer
and Chief Financial Officer, the effectiveness of our disclosure controls and
procedures (as defined in Rules 13a-15 and 15d-15 of the Securities Exchange Act
of 1934, as amended) and believe that such are effective, as of March 31,
2010.
 
 (b)
              Changes in internal control
      over financial reporting.
  There was
no change in our internal control over financial reporting (as defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act) in the quarter ended
March 31, 2010 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial
reporting.





PART
II – OTHER INFORMATION





Item
      1.
                Legal
      Proceedings




There are
no additional material legal proceedings pending against us and/or our
subsidiaries not previously reported by us in Item 3 of our Form 10-K for the
year ended December 31, 2009, which is incorporated herein by
reference.  In addition, there has been no material developments with
regards to the proceedings as previously disclosed in our Form 10-K for the year
ended December 31, 2009.




Item
      1A.
              Risk
      Factors


There has
been no other material change from the risk factors previously disclosed in our
Form 10-K for the year ended December 31, 2009.




41




Item
      6.
              Exhibits
 (a)
                  Exhibits
 4.1
              Amendment
      No. 14 to Revolving Credit, Term Loan, and Security Agreement, dated as of
      January 25, 2010, between the Company and PNC Bank, as incorporated by
      reference from Exhibit 99.1 to the Company’s 8-K filed on January 28,
      2010.
 31.1
              Certification
      by Dr. Louis F. Centofanti, Chief Executive Officer of the Company
      pursuant to Rule 13a-14(a) or
15d-14(a).
 31.2
              Certification
      by Ben Naccarato, Chief Financial Officer of the Company pursuant to Rule
      13a-14(a) or 15d-14(a).
 32.1
              Certification
      by Dr. Louis F. Centofanti, Chief Executive Officer of the Company
      furnished pursuant to 18 U.S.C. Section
1350.
 32.2
              Certification
      by Ben Naccarato, Chief Financial Officer of the Company furnished
      pursuant to 18 U.S.C. Section
1350.


42


SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, hereunto
duly authorized.





PERMA-FIX
      ENVIRONMENTAL SERVICESDate:  May
      7, 2010
              By:
              /s/ Dr. Louis F.
  CentofantiDr.
      Louis F. Centofanti
                Chairman
      of the Board
                Chief
      Executive OfficerDate:  May
      7, 2010
              By:
              /s/ Ben NaccaratoBen
      NaccaratoChief
      Financial Officer


43