<SUBMISSION>
<ACCESSION-NUMBER>0000948600-02-000067
<TYPE>ARS
<PUBLIC-DOCUMENT-COUNT>1
<PERIOD>20011231
<FILING-DATE>20021009
<EFFECTIVENESS-DATE>20021009
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>PERMA FIX ENVIRONMENTAL SERVICES INC
<CIK>0000891532
<ASSIGNED-SIC>4955
<IRS-NUMBER>581954497
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>ARS
<ACT>34
<FILE-NUMBER>001-11596
<FILM-NUMBER>02785035
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>1940 NORTHWEST 67TH PLACE
<STREET2>SUITE A
<CITY>GAINESVILLE
<STATE>FL
<ZIP>32653
<PHONE>3523734200
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>1940 NW 67TH PL
<STREET2>SUITE A
<CITY>GAINESVILLE
<STATE>FL
<ZIP>32653
</MAIL-ADDRESS>
</FILER>
<DOCUMENT>
<TYPE>ARS
<SEQUENCE>1
<FILENAME>annual-rep.htm
<DESCRIPTION>ANNUAL REPORT (2001)
<TEXT>
<HTML><HEAD><TITLE>Annual Report (2001)</TITLE>
</HEAD>
<p align="right"><font face="Imprint MT Shadow" size="6">Perma<b>Fix</b></font><FONT face="CG Times Regular">
<br>
environmental services</p>
<table BORDER="0" WIDTH="100%">
  <tr VALIGN="TOP">
    <td COLSPAN="2"><font color="#83CDE4" size="4">Annual Report 2001</font>
      <hr align="left" width="40%" noshade size="4" color="#83CDE4">
    </td>
  </tr>
  <tr VALIGN="TOP">
    <td>&nbsp;</td>
    <td><font color="#83CDE4">Moving<br>
      towards a<br>
      cleaner<br>
      environment.</font></td>
  </tr>
</table>
&nbsp;
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p align="center">Cover -- center photograph<br>
(nuclear lab employee utilizing test equipment to analyze production sample)</p>
<p align="center">&nbsp;</p>
<p align="center">&nbsp;</p>
<p align="right">Cover -- lower right photograph<br>
(M&amp;EC employee operating Perma-Fix II<br>
&nbsp;processing equipment)
<p align="right">&nbsp;</p>
<p>Cover -- lower left photograph<br>
(scenic view of mountains and lake)</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
</FONT>
<p align="center"><font face="Imprint MT Shadow" size="5">Perma</font><b><font face="Imprint MT Shadow" size="5">Fix</font></b><FONT face="CG Times Regular">
<br>
environmental services</p>
<p>&nbsp;</p>
</FONT>
<table BORDER="0" WIDTH="661">
  <tr VALIGN="TOP">
    <td COLSPAN="3" width="630"><i><font face="Imprint MT Shadow" size="4" color="#0000FF">
      OUR MISSION</font></i>
      <p>&nbsp;</p>
    </td>
    <FONT face="CG Times Regular">
    <td width="5">&nbsp;</td>
  </tr>
  <tr VALIGN="TOP">
    <td width="123">&nbsp;</td>
    <td COLSPAN="2" width="509"><i><font SIZE="-1" color="#0000FF">The Perma-Fix mission is to enhance
      profitability and increase shareholder value by:</font></i>
      <p>&nbsp;</p>
    </td>
    <td width="5">&nbsp;</td>
  </tr>
  <tr VALIGN="TOP">
    <td width="123">&nbsp;</td>
    <td width="8"><FONT face="CG Times Regular">
<font size="-1" color="#0000FF"><i>*</i></font></FONT>
    </td>
    <td width="489"><i><font SIZE="-1" color="#0000FF">consistently improving and expanding the range and
      quality of waste treatment technologies and services that we can offer our
      customers;</font></i>
      <p>&nbsp;</p>
    </td>
    <td width="5">&nbsp;</td>
  </tr>
  <tr VALIGN="TOP">
    <td width="123">&nbsp;</td>
    <td width="8"><FONT face="CG Times Regular">
<font size="-1" color="#0000FF"><i>*</i></font></FONT>
    </td>
    <td width="489"><i><font SIZE="-1" color="#0000FF">expanding our customer base both through acquisitions
      and the building of customer loyalty through the consistent demonstration
      of our commitment to providing safe, effective, low-cost solutions to our
      customers' complex nuclear mixed waste and industrial waste and wastewater
      disposal needs; and</font></i>
      <p>&nbsp;</p>
    </td>
    <td width="5">&nbsp;</td>
  </tr>
  <tr VALIGN="TOP">
    <td width="123">&nbsp;</td>
    <td width="10"><FONT face="CG Times Regular">
<font size="-1" color="#0000FF"><i>*</i></font></FONT>
    </td>
    <td width="489"><i><font SIZE="-1" color="#0000FF">by the wise management of our financial, technological
      and human resources.</font></i>
      <p>&nbsp;</p>
    </td>
    <td width="5">&nbsp;</td>
  </tr>
  </FONT>
  <tr VALIGN="TOP">
    <td COLSPAN="3" width="630"><font size="4" face="Imprint MT Shadow" color="#0000FF">CORPORATE PROFILE</font></td>
    <FONT face="CG Times Regular">
    <td width="5">&nbsp;</td>
  </tr>
  <tr VALIGN="TOP">
    <td width="123">&nbsp;</td>
    <td COLSPAN="3" width="520"><font SIZE="-1">Perma-Fix Environmental Services, Inc. is a
      national environmental technology company, providing unique mixed waste
      and industrial waste management services. The Company has increased its
      focus on the nuclear services segment, which provides radioactive and
      mixed waste treatment services to hospitals, research laboratories and
      institutions, numerous federal agencies including the Departments of
      Energy and Defense and nuclear utilities. The industrial services segment
      provides hazardous and non-hazardous waste treatment services for a
      diverse group of customers including Fortune 500 companies, numerous
      federal, state and local agencies and thousands of smaller clients. The
      Company operates nine major waste treatment facilities across the country,
      supported by numerous satellite offices, a government services group and a
      large technical staff.</font></td>
  </tr>
</table>
<p>&nbsp;</p>
&nbsp;
  <table border="1" cellpadding="0" cellspacing="1" width="63%">
    <tr>
      <td width="69%">
        <p align="center">&nbsp;</td>
      <td width="31%" bordercolorlight="#0000FF" bordercolordark="#0000FF"><FONT face="CG Times Regular">
<p><br>
<center><font SIZE="+2">2001<br>
</font></center><font SIZE="-1" color="#0000FF" face="CG Times Regular"><center>annual report<br>
</center></font></p>
        </FONT>
      </td>
    </tr>
  </table>
  &nbsp;</FONT>
<table BORDER="0" WIDTH="100%">
  <tr VALIGN="TOP">
    <td><font face="Imprint MT Shadow" color="#0000FF" size="4">FINANCIAL HIGHLIGHTS</font>
      <p>&nbsp;</p>
      <p>&nbsp;</p>
    </td>
  </tr>
</table>
<FONT face="CG Times Regular">
<table BORDER="1" WIDTH="100%">
  <tr VALIGN="TOP">
    <td><font SIZE="-1">(Amounts in Thousands, Except for Share Amounts)</font></td>
    <td ALIGN="CENTER" rowspan="8" bordercolor="#0000FF" bordercolorlight="#0000FF" bordercolordark="#0000FF"><font SIZE="-1">2001<br>
      </font><FONT face="CG Times Regular">
<hr noshade size="4" color="#000000">
<font SIZE="-1">$ 74,492</font>
<p><font SIZE="-1">24,773</font></p>
<font SIZE="-1">10,035</font>
<p><font SIZE="-1">5,419</font></p>
<font SIZE="-1">99,137</font>
<p><font SIZE="-1">41,841</font></FONT>
    </td>
    <td ALIGN="CENTER"><font SIZE="-1">2000</font></td>
    <td ALIGN="CENTER"><font SIZE="-1">1999</font></td>
    <td ALIGN="CENTER"><font SIZE="-1">1998</font></td>
    <td ALIGN="CENTER"><font SIZE="-1">1997</font></td>
  </tr>
  <tr VALIGN="TOP">
    <td>
      <hr noshade size="4" color="#000000">
    </td>
    <td ALIGN="CENTER" colspan="4"><FONT face="CG Times Regular">
<hr noshade size="4" color="#000000">
      </FONT>
    </td>
  </tr>
  <tr VALIGN="TOP">
    <td><font SIZE="-1">Net Revenues</font></td>
    <td ALIGN="RIGHT"><font SIZE="-1">$ 59,139</font></td>
    <td ALIGN="RIGHT"><font SIZE="-1">$ 46,464</font></td>
    <td ALIGN="RIGHT"><font SIZE="-1">$ 30,551</font></td>
    <td ALIGN="RIGHT"><font SIZE="-1">$ 28,413</font></td>
  </tr>
  <tr VALIGN="TOP">
    <td><font SIZE="-1">Gross Profit</font></td>
    <td ALIGN="RIGHT"><font SIZE="-1">18,229</font></td>
    <td ALIGN="RIGHT"><font SIZE="-1">15,193</font></td>
    <td ALIGN="RIGHT"><font SIZE="-1">9,487</font></td>
    <td ALIGN="RIGHT"><font SIZE="-1">8,586</font></td>
  </tr>
  <tr VALIGN="TOP">
    <td><font SIZE="-1">EBITDA</font></td>
    <td ALIGN="RIGHT"><font SIZE="-1">5,464</font></td>
    <td ALIGN="RIGHT"><font SIZE="-1">4,894</font></td>
    <td ALIGN="RIGHT"><font SIZE="-1">2,640</font></td>
    <td ALIGN="RIGHT"><font SIZE="-1">2,904</font></td>
  </tr>
  <tr VALIGN="TOP">
    <td><font SIZE="-1">Operating Income</font></td>
    <td ALIGN="RIGHT"><font SIZE="-1">1,813</font></td>
    <td ALIGN="RIGHT"><font SIZE="-1">2,116</font></td>
    <td ALIGN="RIGHT"><font SIZE="-1">531</font></td>
    <td ALIGN="RIGHT"><font SIZE="-1">924</font></td>
  </tr>
  <tr VALIGN="TOP">
    <td><font SIZE="-1">Total Assets</font></td>
    <td ALIGN="RIGHT"><font SIZE="-1">72,771</font></td>
    <td ALIGN="RIGHT"><font SIZE="-1">54,644</font></td>
    <td ALIGN="RIGHT"><font SIZE="-1">28,748</font></td>
    <td ALIGN="RIGHT"><font SIZE="-1">28,570</font></td>
  </tr>
  <tr VALIGN="TOP">
    <td><font size="-1">Stockholders' Equity</font></td>
    <td ALIGN="RIGHT"><FONT face="CG Times Regular">
<font SIZE="-1">22,020</font></FONT>
    </td>
    <td ALIGN="RIGHT"><FONT face="CG Times Regular">
<font SIZE="-1">19,819</font></FONT>
    </td>
    <td ALIGN="RIGHT"><FONT face="CG Times Regular">
<font SIZE="-1">15,953</font></FONT>
    </td>
    <td ALIGN="RIGHT"><FONT face="CG Times Regular">
<font SIZE="-1">12,194</font></FONT>
    </td>
  </tr>
</table>
<br WP="BR2">
<table BORDER="0" WIDTH="651">
  <tr VALIGN="TOP">
    <td COLSPAN="2" width="475"><em><font size="4" color="#0000FF">Consolidated revenues
      increased 26% or $15.4 million to a<br>
      <br>
      record&nbsp;$74.5 million for the year
      ended December 31, 2001</font></em></td>
    <td width="160"><font FACE="Times New Roman" SIZE="-1"><center></font><font FACE="Diotima-Roman" SIZE="+4" COLOR="#83cde4">26%</font><font FACE="Times New Roman" SIZE="-1"></center></font></td>
  </tr>
  <tr VALIGN="TOP">
    <td ALIGN="CENTER" width="248"><em><font FACE="Times New Roman" SIZE="-1">Net Revenues<br>
      </font></em><font FACE="Times New Roman" SIZE="-1"><em>(in millions)</em></font></td>
    <td ALIGN="CENTER" width="221"><font FACE="Times New Roman" SIZE="-1"><em>EBITDA<br>
      (in millions)</em></font>
    </td>
    <td ALIGN="CENTER" width="160"><font FACE="Times New Roman" SIZE="-1"><em>Operating
      Income<br>
      (in millions)</em></font>
    </td>
  </tr>
  <tr VALIGN="TOP">
    <td ALIGN="CENTER" width="248"><br>
      1999 -- $46.5<br>
      <br>
      2000 -- $59.1<br>
      <br>
      2001 -- $74.5</td>
    <td ALIGN="CENTER" width="221">
      <p><br>
      1999 -- $4.9<br>
      <br>
      2000 -- $5.5<br>
      <br>
      2001 -- $10.0</p>
    </td>
    <td ALIGN="CENTER" width="160"><br>
      1999 -- $2.1<br>
      <br>
      2000 -- $1.8<br>
      <br>
      2001 -- $5.4</td>
  </tr>
</table>
<br WP="BR1">
<p>&nbsp;</p>
<p align="right"><font color="#0000FF"><font size="2">2001 annual report&nbsp; </font></font><font size="3" color="#000000">1</font></p>
<p align="right">&nbsp;</p>
<table border="1" cellpadding="0" cellspacing="1" width="66%">
  <tr>
    <td width="69%">
      <p align="center">&nbsp;</td>
    <td width="31%" bordercolorlight="#0000FF" bordercolordark="#0000FF"><FONT face="CG Times Regular">
<p><br>
</FONT>
      </FONT>
      <center><font face="Times New Roman" size="5">Perma-Fix<br>
      </font><FONT face="CG Times Regular">
<font FACE="Times New Roman" SIZE="-1">environmental services</font></center></p>
</font>
    </td>
  </tr>
</table>
<p align="right">&nbsp;</p>
<table BORDER="0" WIDTH="675">
  <tr VALIGN="TOP">
    <td COLSPAN="3" width="641"><font face="Imprint MT Shadow" size="4" color="#0000FF">LETTER TO OUR
      SHAREHOLDERS</font></td>
  </tr>
  <FONT face="CG Times Regular">
  <tr VALIGN="TOP">
    <td width="88">&nbsp;</td>
</FONT>
    <td COLSPAN="2" width="571"><em><font face="Times New Roman" size="3" color="#0000FF">2001 was a year
      of major accomplishments for Perma-Fix, as we successfully executed on our
      business plan. We have positioned our Company to be a leader in the Mixed
      Waste Market and focused on niche industrial opportunities through new
      technologies, such as the Bio-Fix water treatment technology.</font></em>
      <p>&nbsp;</p>
      <p>&nbsp;</p>
      <p>&nbsp;</p>
</td>
  </tr>
  <tr VALIGN="BOTTOM">
    <td COLSPAN="3" width="641"><font face="Imprint MT Shadow" color="#0000FF" size="4">DEAR FELLOW
      SHAREHOLDER:</font></td>
  </tr>
  <FONT face="CG Times Regular">
  <tr VALIGN="TOP">
    <td width="88">&nbsp;</td>
    <td width="27"><br WP="BR1">
      <br WP="BR2">
      <br WP="BR1">
      <br WP="BR2">
    </td>
    <td width="538"><font FACE="Times New Roman" SIZE="-1">We are pleased with our
      accomplishments achieved during 2001, which are illustrated by a strategic
      mixed waste acquisition, the significant investment in new capital assets,
      within both the nuclear and industrial segments and continued mixed waste
      market penetration. As evidenced by the revenue growth, our investments
      are already beginning to pay off.</font>
      <p><font FACE="Times New Roman" SIZE="-1">Total consolidated revenues
      increased 26% or $15.4 million to a record $74.5 million for the year
      ended December 31, 2001, as we are positioning our Company as one of the
      leaders in both the nuclear and industrial segments. During the year, the
      most significant growth was achieved within the nuclear segment, which
      increased by $17.2 million, over the 2000 revenue of $11.7 million,
      reflecting an increase of 146%. In conjunction with this growth, the
      Company's EBITDA for the year grew to $10.0 million, an increase of 83%
      over 2000.</font></p>
      <p><font FACE="Times New Roman" SIZE="-1">We have continued to develop new
      technologies and invest in research and development. It is our objective
      to be at the forefront of technology and to lead the industry in the
      development of proprietary and safe methods to treat waste. In addition,
      we continue to make substantial investments in our future by expanding our
      existing facilities, completing key acquisitions and positioning our
      Company for continued growth. With the completion of our acquisition of
      DSSI in 2000, the upgrades to our</font></p>
      <p><font FACE="Times New Roman" SIZE="-1">North Florida facility and the
      acquisition of M&amp;EC in 2001, we have become one of the major players
      in the nuclear mixed waste market.</font></p>
      <p><font FACE="Times New Roman" SIZE="-1">Central to our performance has
      been our zealous adherence to this strategic focus, coupled with
      exceptional customer service, integration of efforts and a proven
      management team. Our success in implementing our objectives is as
      highlighted:</font></td>
  </tr>
</table>
&nbsp;
  <p>&nbsp;</p>
  <p align="left"><font size="3" color="#000000">2&nbsp;&nbsp;</font><font size="2" color="#0000FF">2001
  annual report</font></p>
  <p>&nbsp;</p>
  <p align="right">&nbsp;</p>
  <div align="right">
<table BORDER="1" WIDTH="40%">
  <tr VALIGN="TOP">
    <td align="right">
      <p align="center"><font FACE="Times New Roman" SIZE="-1"><br>
      <br>
      Phot</font></FONT><font face="Times New Roman" size="-1">ograph
      of Dr. Louis F. Centofanti,<br>
      the Company's Chairman, President,<br>
      and Chief Executive Officer<br>
      <br>
      </font></td>
  </tr>
</table>
</div>
<FONT face="CG Times Regular">
<p>&nbsp;</p>
<p>&nbsp;</p>
<table BORDER="0" WIDTH="651">
  <tr VALIGN="TOP">
    <td ALIGN="RIGHT" width="28">&nbsp;</td>
    <td COLSPAN="4" ALIGN="RIGHT" width="485">
      <p align="left"><font FACE="Times New Roman" SIZE="-1"><em>Nuclear
      Revenues<br>
      </em></font>
      <font FACE="Times New Roman" SIZE="-2"><em>(in millions)</em></font></FONT>
      <p align="left"><em><font face="Times New Roman" color="#0000FF">Nuclear revenues increased 17.2
      million or</font></em></p>
      <p align="left"><em><font face="Times New Roman" color="#0000FF">146% to $28.9 million</font></em></td>
  </tr>
<FONT face="CG Times Regular">
  <tr VALIGN="TOP">
    <td ALIGN="RIGHT" width="28">&nbsp;</td>
</FONT>
    <td COLSPAN="3" ALIGN="RIGHT" width="456">
      <p align="center"><font face="Times New Roman" size="-1"><em>BAR GRAPH</em></font><FONT face="CG Times Regular"></p>
    </td>
    <td ROWSPAN="3" VALIGN="BOTTOM" width="23">&nbsp;</td>
    <td ROWSPAN="3" VALIGN="BOTTOM" width="400">&nbsp;</td>
  </tr>
  <tr VALIGN="BOTTOM">
    <td ALIGN="CENTER" width="28">&nbsp;</td>
    <td ALIGN="CENTER" width="74"><font FACE="Times New Roman" SIZE="-1">$7.0</font></td>
    <td ALIGN="CENTER" width="119"><font FACE="Times New Roman" SIZE="-1">$11.7</font></td>
    <td ALIGN="CENTER" width="251"><font FACE="Times New Roman" SIZE="-1">$28.9</font></td>
  </tr>
  <tr VALIGN="BOTTOM">
    <td ALIGN="CENTER" width="28">&nbsp;</td>
    <td ALIGN="CENTER" width="74"><font face="Times New Roman" SIZE="-1" color="#0000FF">'99</font></td>
    <td ALIGN="CENTER" width="119"><font face="Times New Roman" SIZE="-1" color="#0000FF">'00</font></td>
    <td ALIGN="CENTER" width="251"><font face="Times New Roman" SIZE="+1" color="#0000FF">'01</font></td>
  </tr>
<FONT face="CG Times Regular">
  <tr VALIGN="TOP">
    <td ALIGN="RIGHT" width="28">&nbsp;</td>
    <td COLSPAN="4" ALIGN="RIGHT" width="485">&nbsp;</td>
  </tr>
</FONT>
  <tr VALIGN="TOP">
    <td ALIGN="RIGHT" width="28">
      <p align="center">*</td>
    <FONT face="CG Times Regular">
    <td COLSPAN="3" ALIGN="left" width="456">
      <p align="left"><font FACE="Times New Roman" SIZE="-1">In
      June 2001, we completed the acquisition of M&amp;EC, a permitted mixed
      waste facility in Oak Ridge, Tennessee, which holds three major DOE
      subcontracts. The newly constructed M&amp;EC facility became operational
      in September 2001.<br>
      <br>
      </font></td>
    <td width="423" colspan="2"><FONT face="CG Times Regular">
<font FACE="Times New Roman" SIZE="-1">Three common themes will remain
      constant as we attempt to position the Company for continued growth:<br>
</font></FONT>
</td>
  </tr>
</FONT>
  <tr VALIGN="TOP">
    <td ALIGN="RIGHT" width="28">
      <p align="center"><font face="Times New Roman" size="-1">*</font></td>
    <FONT face="CG Times Regular">
    <td COLSPAN="3" ALIGN="left" width="456"><font FACE="Times New Roman" SIZE="-1">During the year, we made
      great strides toward restructuring our balance sheet. In July 2001, the
      Company finalized a private placement offering for $7.7 million, secured
      longterm sub-debt financing for $5.6 million and completed an exchange of
      $3.1 million in debt for equity.<br>
      <br>
      </font></td>
    </FONT>
    <td width="23"><font face="Times New Roman" size="-1">*</font></td>
    <FONT face="CG Times Regular">
    <td width="400"><font FACE="Times New Roman" SIZE="-1">&nbsp;To focus on opportunities in
      growing and profitable markets that require the development and deployment
      of proprietary technologies, developed or licensed by the Company, that
      are safe and nondestructive to the environment.<br>
      </font></td>
  </tr>
  <tr VALIGN="TOP">
    <td ALIGN="RIGHT" width="28">
      <p align="center">*</td>
    <td COLSPAN="3" ALIGN="left" width="456"><font FACE="Times New Roman" SIZE="-1">During 2001, the industrial
      segment developed and constructed a new biological wastewater treatment
      facility at its Ohio location, installed our new &quot;Bio-Fix&quot; water
      treatment technology and subsequently achieved successful full scale
      operations in June of 2002.</font></td>
    </FONT>
    <td width="23"><font face="Times New Roman" size="2">*</font>
      <p><font size="2"><br>
      *</font></td>
    <FONT face="CG Times Regular">
    <td width="400"><font FACE="Times New Roman" size="2">To continue our expansion
      into the nuclear mixed waste market.</font>
      <p><font FACE="Times New Roman" size="2">To strive toward continued
      growth of the Company with the constant goal of improving shareholder
      value.<br>
      <br>
      </font></td>
  </tr>
  <tr VALIGN="TOP">
    <td colspan="4" ALIGN="RIGHT" width="484"><FONT face="CG Times Regular">
<p align="left"><font FACE="Times New Roman" SIZE="-1">The corporate initiatives we had
      previously implemented&nbsp;<br>
 and our many accomplishments during 2001 have set
      the&nbsp;<br>
 stage for our anticipated growth and expansion during&nbsp;<br>
 2002. Within the
      nuclear segment, our backlog is at an&nbsp;<br>
 all-time high, and we continue to
      treat increased levels&nbsp;<br>
 of mixed waste. Within the industrial segment, we
      see&nbsp;<br>
 new opportunities as we roll out our new 'Bio-Fix' process,<br>
which
      continues to expand our penetration into the&nbsp;<br>
 water treatment market.</font></FONT>
    </td>
    <td width="423" colspan="2"><FONT face="CG Times Regular">
      <p><font FACE="Times New Roman" SIZE="-1">Finally, I would like to thank
      all of our employees for their hard work, our customers for their
      confidence and our shareholders for their loyalty during this
      unprecedented period of growth and transformation into a leading hazardous
      nuclear waste company. With a strong foundation in place, we foresee many
      new opportunities for our Company in the years ahead.</font></p>
<p><font face="Times New Roman" size="-1">D<FONT face="CG Times Regular">r. Louis F. Centofanti<br>
</FONT><em>Chairman, President and
      Chief Executive Officer</em></font></p>
      </FONT>
    </td>
  </tr>
</table>
<p align="right"><font size="2"><font color="#0000FF">2001 annual report&nbsp;</font>
</font><font size="3" color="#000000">3</font></p>
<p align="right">&nbsp;</p>
<p align="right">&nbsp;</p>
<table border="1" cellpadding="0" cellspacing="1" width="66%">
  <tr>
    <td width="69%">
      <p align="center">&nbsp;</td>
    <td width="31%" bordercolorlight="#0000FF" bordercolordark="#0000FF"><FONT face="CG Times Regular">
<p><br>
</FONT>
      <center><font face="Times New Roman" size="5">Perma-Fix<br>
      </font><FONT face="CG Times Regular">
<font FACE="Times New Roman" SIZE="-1">environmental services</font></center></p>
    </font>
    </td>
  </tr>
</table>
<p align="right">&nbsp;</p>
</FONT>
<table BORDER="0" WIDTH="651">
  <tr>
    <td COLSPAN="2" width="641"><font face="Imprint MT Shadow" size="5" color="#0000FF">PERMA-FIX
      ENVIRONMENTAL SERVICES Q &amp; A</font>
      <p>&nbsp;</p>
    </td>
  </tr>
  <FONT face="CG Times Regular">
  <tr VALIGN="TOP">
    <td width="116">&nbsp;</td>
  </FONT>
    <td width="519"><em><font face="Times New Roman" size="3" color="#0000FF"><i>One of the most exciting
      market opportunities for our industrial segment are those hard to treat,
      highly organic, contaminated wastewaters. We have developed and
      constructed a new biological wastewater treatment facility and installed
      our new 'Bio-Fix' water treatment technology, which has already proven
      successful in treating such heavily contaminated wastewater streams.</i></font></em></td>
  </tr>
  <FONT face="CG Times Regular">
  <tr VALIGN="TOP">
    <td COLSPAN="2" width="641">&nbsp;</td>
  </tr>
</table>
</FONT>
<table BORDER="0" WIDTH="651">
  <tr VALIGN="TOP">
    <td width="11"><em><font face="Times New Roman" size="3" color="#0000FF">Q</font></em></td>
    <td COLSPAN="2" width="624"><em><font face="Times New Roman" size="3" color="#0000FF">What
      is the size of the nuclear waste market and what is your role in it?</font></em></td>
  </tr>
  <FONT face="CG Times Regular">
  <tr VALIGN="TOP">
    <td COLSPAN="2" width="34">&nbsp;</td>
  </FONT>
  <td width="601"><font face="Times New Roman" color="#0000FF"><font SIZE="-1">A.</font><font size="-1">&nbsp;&nbsp;</font></font>&nbsp;&nbsp;&nbsp;<FONT face="CG Times Regular"><font FACE="Times New Roman" SIZE="-1">The
    mixed waste market (waste containing both hazardous waste and low level
    radioactive waste) is national in scope. The U.S. Department of Energy
    (&quot;DOE&quot;) is the largest generator of mixed waste. Due to the high
    cost to treat mixed waste, transportation expense is not a limiting factor.</font>
    <p><font FACE="Times New Roman" SIZE="-1">The largest component of the mixed
    waste market was generated by the DOE in conjunction with nuclear weapons
    production. The DOE has estimated the cost to treat its mixed waste at a
    minimum of $7 billion. Estimates to treat new mixed waste generated annually
    by the DOE and commercial organizations currently stand at more than $150
    million per year.</font></p>
    <p><font FACE="Times New Roman" SIZE="-1">In June 1998, six &quot;Broad
    Spectrum Contracts&quot; were issued to serve as the first and currently,
    the only, procurement mechanism to treat mixed waste generated by federal
    government agencies including the DOE, three of which were awarded to
    M&amp;EC. As an example of the magnitude of the market, DOE has estimated
    that $1.2 billion of low-level mixed waste will be generated at the DOE's
    Oak Ridge, Tennessee facility. To accelerate cleanup efforts at this
    facility, the State of Tennessee has recently obtained consent decrees
    requiring the DOE to treat and dispose of targeted levels of mixed waste.</font></td>
  </tr>
  </table>
  <p align="left">&nbsp;</p>
  <p align="left">&nbsp;</p>
  <p align="left"><font size="3" color="#000000">4&nbsp;&nbsp;</font><font size="2" color="#0000FF">2001
  annual report</font></p>
<p>&nbsp;</p>
<table BORDER="0" WIDTH="651">
  <tr VALIGN="TOP">
    <td width="13"><font color="#0000FF"><i>Q</i></font></td>
    <td COLSPAN="2" width="622"><em><font face="Times New Roman" size="3" color="#0000FF"><i>What
      is unique about the Perma-Fix<sup>(R)</sup> Process?</i></font></em></td>
  </tr>
  <tr VALIGN="TOP">
    <td COLSPAN="2" width="9">&nbsp;</td>
    <td width="626"><font FACE="Times New Roman" SIZE="-1">A. Our process
      differs from those of our competitors in that it is not only a proven
      technology, but it is far simpler, and as a result, less expensive and
      safer to use. There are no dangerously high temperatures and no emissions.
      It is a very forgiving process -- if we make a mistake, we just go back
      and mix in more chemicals. The Perma-Fix Process is a batch process, so we
      have total control at all times. Because it employs a relatively safe
      technology, with little need for complicated safety features, it is far
      less expensive. The technology is proven and has been utilized for many
      years.</font>
      <p>&nbsp;</p>
    </td>
  </tr>
  <tr VALIGN="TOP">
    <td width="13"><em><font face="Times New Roman" size="3" color="#0000FF">Q</font></em></td>
    <td COLSPAN="2" width="622"><em><font face="Times New Roman" size="3" color="#0000FF">What
      is your strategy for capitalizing on the nuclear waste treatment market?</font></em></td>
  </tr>
  <tr VALIGN="TOP">
    <td COLSPAN="2" width="9">&nbsp;</td>
    <td width="626"><font FACE="Times New Roman" SIZE="-1">The Company has a
      minimum three-year head start on any potential entrants to the industry
      due to its proprietary technology, lengthy and restrictive government
      licensing requirements, the Company's extensive experience and impeccable
      safety record. As a result, the barriers to entry are significant.</font>
      <p>&nbsp;</p>
    </td>
  </tr>
  <tr VALIGN="TOP">
    <td width="13"><em><font face="Times New Roman" size="3" color="#0000FF">Q</font></em></td>
    <td COLSPAN="2" width="622"><em><font face="Times New Roman" size="3" color="#0000FF">What
      is the market like for the industrial services you provide?</font></em></td>
  </tr>
  <tr VALIGN="TOP">
    <td COLSPAN="2" width="9">&nbsp;</td>
    <td width="626"><font FACE="Times New Roman" SIZE="-1">A. Based on the
      Farkas Berkowitz Marketing Study, the industrial waste management market
      (hazardous and non-hazardous waste) is estimated at $40 billion with
      approximately $13 billion allocated to treatment services. The market is
      regional in nature as commercial waste generators do not want to incur the
      cost of transporting waste in excess of 200 to 300 miles.</font><br WP="BR1">
      <br WP="BR2">
      <p><font FACE="Times New Roman" SIZE="-1">The industrial waste market is
      highly regulated with few, if any, new or significantly modified hazardous
      waste permits and licenses granted by state or federal governments. In the
      unusual event that a new hazardous waste permit is awarded, the process
      typically encompasses 3-5 years. In general, industrial waste is
      considered to be a mature but fragmented market.</font></p>
      <p>&nbsp;</p>
    </td>
  </tr>
</table>
<table BORDER="0" WIDTH="100%">
  <tr VALIGN="TOP">
    <td><em><font face="Times New Roman" size="3" color="#0000FF"><i>Q</i></font></em></td>
    <td COLSPAN="2"><em><font face="Times New Roman" size="3" color="#0000FF"><i>What
      is your marketing strategy for the industrial segment?</i></font></em>
      <p>&nbsp;</p>
    </td>
  </tr>
  <tr VALIGN="TOP">
    <td COLSPAN="2">&nbsp;</td>
    <td><font FACE="Times New Roman" SIZE="-1">A. We maintain a staff of local
      salespeople at each facility, who call on potential customers. Our
      strategy is to dominate the geographic area surrounding each of our
      facilities. We presently dominate the lower southeast U.S. and will
      continue to grow via upgrades to existing facilities and tuck-in
      acquisition in the Southeast and Midwest.</font>
      <p>&nbsp;</p>
    </td>
  </tr>
  <tr VALIGN="TOP">
    <td><em><i><font color="#0000FF" face="Times New Roman" size="3">Q</font></i></em></td>
    <td COLSPAN="2"><em><i><font color="#0000FF" face="Times New Roman" size="3">Other
      than targeting the growing nuclear waste treatment market, what is the
      Company's overall strategy for future growth?</font></i></em>
      <p>&nbsp;</p>
    </td>
  </tr>
  <tr VALIGN="TOP">
    <td COLSPAN="2">&nbsp;</td>
    <td><font FACE="Times New Roman" SIZE="-1">A. The Company's strategy is to
      treat industrial and mixed waste streams generated by commercial
      institutions and the federal government. The Company plans to enhance its
      position as one of the leading providers of industrial and mixed waste
      treatment services. Key elements of the Company's strategy include:
      Acquiring existing treatment facilities; investing in plant expansion,
      especially with proprietary technology; maximizing use of facility
      capacity; building strong relationships with federal government agencies,
      commercial institutions and industrial customers; and maintaining our
      expertise in waste treatment.</font></td>
  </tr>
</table>
<p>&nbsp;</p>
    <FONT face="CG Times Regular">
    <p align="right"><font size="2"><font color="#0000FF">2001 annual report&nbsp;</font>
    </font><font size="3" color="#000000">5</font></p>
</FONT>
<p>&nbsp;</p>
<table BORDER="1" WIDTH="651">
  <tr VALIGN="TOP">
    <td width="312">
      <p align="center"><font size="2">
      <br WP="BR1">
      <br>
      <br>
      <br>
      <br>
      <br>
      <br>
      Photograph of two employees sampling&nbsp;<br>
      nuclear waste upon receipt.
      <br WP="BR2">
      <br WP="BR1">
      <br WP="BR2">
      <br WP="BR1">
      <br WP="BR2">
      <br WP="BR1">
      <br WP="BR2">
      </font></p>
    </td>
    <td width="323">
      <p align="center"><font size="2"><br>
      <br>
      <br>
      <br>
      <br>
      <br>
      <font face="Times New Roman"><br>
      Photograph of Perma-Fix II&nbsp;<br>
      processing unit at the M&amp;EC facility</font></font></p>
    </td>
  </tr>
</table>
<table BORDER="0" WIDTH="100%">
  <tr VALIGN="TOP">
    <td>&nbsp;</td>
    <td><font face="Imprint MT Shadow" color="#0000FF" size="4">NUCLEAR WASTE<br>
      MANAGEMENT</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr VALIGN="TOP">
    <td COLSPAN="2">&nbsp;
      <p><font FACE="Times New Roman" SIZE="-1">Perma-Fix currently
      operates three of the country's most unique facilities, which provide
      treatment and disposal of a variety of hazardous and radioactive mixed
      wastes. The Florida facility treats and stores radioactive material,
      hazardous and radioactive mixed wastes, PCB contaminated wastes and
      industrial hazardous and non-hazardous liquids, sludges and solids. The
      Diversified Scientific Services, Inc. facility is the only commercial
      facility of its kind in the U.S. and employs a unique energy recovery
      process that utilizes mixed waste as an energy source for the destruction
      of liquid organic mixed waste. During June of 2001, Perma-Fix completed
      the acquisition of East Tennessee Materials and Energy Corporation
      (&quot;M&amp;EC&quot;), a very unique mixed waste treatment facility,
      situated on the Department of Energy complex. During the third quarter of
      2001, M&amp;EC completed construction of its new 150,000 sq. ft.
      state-of-the-art processing facility. In addition to our various mixed
      waste contracts with large industrial companies, nuclear utilities,
      research labs and</font></p>
    </td>
    <td VALIGN="BOTTOM"><font FACE="Times New Roman" SIZE="-1">various
      government agencies, M&amp;EC also operates under three broad spectrum
      subcontracts issued by Bechtel-Jacobs Company, DOE's environmental program
      manager.</font>
      <p><font FACE="Times New Roman" SIZE="-1">State-of-the-art,
      environmentally friendly technologies, and the Company's ability to obtain
      the necessary combination of permits and licenses, has made Perma-Fix
      extremely successful in this specialized field. A skilled technical staff,
      combined with sophisticated equipment and systems, ensures that all waste
      is destroyed in full compliance with all applicable regulations. Perma-Fix's
      turnkey service, from sampling through disposal, leaves the customers
      secure in the knowledge that their nuclear waste has been managed as
      safely and effectively as possible.</font></td>
  </tr>
</table>
<p><font size="3" color="#000000">6&nbsp;&nbsp;</font><font size="2" color="#0000FF">2001
  annual report</font></p>
<table BORDER="0" WIDTH="100%">
  <tr VALIGN="TOP">
    <td>&nbsp;</td>
    <td COLSPAN="2" VALIGN="BOTTOM">&nbsp;
      <p><font face="Imprint MT Shadow" size="4" color="#0000FF">INDUSTRIAL
      WASTE MANAGEMENT</font></p>
    </td>
    <td>
      <p align="center"><font size="2"><br>
      <br>
      <font face="Times New Roman">Photograph of employee<br>
      monitoring wastewater tank<br>
      and analyzing results<br>
      <br>
      </font></font></p>
    </td>
  </tr>
  <tr VALIGN="TOP">
    <td>&nbsp;</td>
    <td>&nbsp;
      <p>&nbsp;</p>
      <p><font FACE="Times New Roman" SIZE="-1">With six facilities strategically
      located throughout the United States, Perma-Fix has positioned itself as a
      leader in the treatment, disposal, and recycling of a broad range of
      hazardous and non-hazardous materials. From common waste streams to the
      most complex, Perma-Fix is uniquely suited to provide turnkey disposal
      services. From lab packs to bulk, Perma-Fix can manage every RCRA waste
      code in any quantity. Via extensive in-house transportation services,
      coupled with the complete integration of our facilities, Perma-Fix is
      committed to offering the most comprehensive</font> <font FACE="Times New Roman" SIZE="-1">waste management experience in
      the industry.</font></td>
    <td COLSPAN="2"><font size="2"><br>
      <br>
      <br>
      <br>
      <br>
      <br>
      <br>
      <br>
      <br>
      <br>
      During 2001, Perma-Fix identified a new wastewater market and began
      construction of a biological wastewater system at our Ohio facility. The
      enhanced treatment technology was completed in early 2002, and full-scale
      operations were successfully achieved during the second quarter.</font>
      <p><font FACE="Times New Roman" SIZE="-1">While leading the way today,
      Perma-Fix is laying the groundwork for the future. Already utilizing a
      proprietary treatment technology, which provides an environmentally safe
      alternative to incineration, Perma-Fix continues to pioneer technologies
      to benefit industry and the environment.</font></td>
  </tr>
</table>
<table BORDER="0" WIDTH="651">
  <tr VALIGN="BOTTOM">
    <td width="473"><font face="Diotima-Roman" size="+4" color="#83cde4">84%</font><br WP="BR1">
    </td>
    <td ROWSPAN="2" VALIGN="TOP" width="162">
      <p align="center"><font size="2"><br>
      <br>
      <br>
      <font face="Times New Roman">Photograph of biological<br>
      wastewater system at<br>
      Ohio facility<br>
      <br>
      </font></font></p>
    </td>
  </tr>
  <tr VALIGN="TOP">
    <td ALIGN="CENTER" width="473">
      <p align="left"><em><font face="Times New Roman" size="3" color="#0000FF">Earnings
      Before Interest, Taxes, Depreciation and Amortization&nbsp;</font></em>
      <p align="left"><em><font face="Times New Roman" size="3" color="#0000FF">(EBITDA) increased
      85% or $4.5 million to a record</font></em></p>
      <p align="left"><em><font face="Times New Roman" size="3" color="#0000FF">$10.0 million.</font></em></td>
  </tr>
</table>
<p align="right"><FONT face="CG Times Regular"><font size="2"><font color="#0000FF">2001 annual report&nbsp;</font>
    </font><font size="3" color="#000000">7</font>
</FONT>
</p>
<table BORDER="0" WIDTH="100%">
  <tr VALIGN="TOP">
    <td COLSPAN="3"><font face="Imprint MT Shadow" size="4" color="#0000FF">CONSULTING
      ENGINEERING</font><font FACE="Times New Roman" SIZE="-1"><em><center></em></center></font></td>
  </tr>
  <tr VALIGN="TOP">
    <td>&nbsp;</td>
    <td><font FACE="Times New Roman" SIZE="-1">Perma-Fix's engineering firm,
      Schreiber, Yonley &amp; Associates, provides high quality environmental
      engineering services to industry, addressing the broad spectrum of
      environmental regulations and technologies. The firm has a solid
      reputation for delivering professional, practical and innovative
      engineering solutions to meet the client's environmental challenges
      Typical projects include regulatory permitting and compliance for existing
      and new facilities; auditing; agency and public</font></td>
    <td><font size="2"><br>
      <br>
      <br>
      <br>
      <br>
      communications; environmental project design; oversight and operation;
      remediation services and pollutant testing and research. With a dedicated
      staff of environmental professionals and a long working relationship in
      the industry, the firm not only supports and enhances the Company's
      facilities, but is a consistent and profitable business segment.</font></td>
  </tr>
</table>
<p>&nbsp;</p>
<table BORDER="1" WIDTH="100%">
  <tr VALIGN="TOP">
    <td><i><font size="2"><br WP="BR1">
      <br WP="BR2">
      <br WP="BR1">
      <br WP="BR2">
      <br WP="BR2">
      </font></i>
      <p><center><i><font FACE="Times New Roman" size="2">Photograph of M&amp;EC facility
      located at DOE's K-25 Nuclear Weapons Plant<br>
      <br>
      <br>
      <br>
      <br>
      <br>
      <br>
      </font></i></center></td>
  </tr>
</table>
<p><font face="Imprint MT Shadow" color="#0000FF" size="4">TABLE OF CONTENTS</font></p>
<table BORDER="0" WIDTH="651">
  <tr VALIGN="TOP">
    <td width="45"><strong><font SIZE="-2" color="#0000FF" face="Times New Roman">Page
      1</font></strong></td>
    <td width="316"><font FACE="Times New Roman" SIZE="-2">Business</font></td>
    <td width="50"><strong><font SIZE="-2" color="#0000FF" face="Times New Roman">Page
      35</font></strong></td>
    <td width="212"><font FACE="Times New Roman" SIZE="-2">Consolidated Balance
      Sheets</font></td>
  </tr>
  <tr VALIGN="TOP">
    <td width="45"></td>
    <td width="316"></td>
    <td width="50"></td>
    <td width="212"></td>
  </tr>
  <tr VALIGN="TOP">
    <td width="45"><strong><font SIZE="-2" color="#0000FF" face="Times New Roman">Page
      14</font></strong></td>
    <td width="316"><font FACE="Times New Roman" SIZE="-2">Market for
      Registrant's Common Equity and Related&nbsp;<br>
      Stockholders' Matters</font></td>
    <td width="50"><strong><font SIZE="-2" color="#0000FF" face="Times New Roman">Page
      37</font></strong></td>
    <td width="212"><font FACE="Times New Roman" SIZE="-2">Consolidated
      Statements of Operations</font></td>
  </tr>
  <tr VALIGN="TOP">
    <td width="45"></td>
    <td width="316"></td>
    <td width="50"><strong><font SIZE="-2" color="#0000FF" face="Times New Roman">Page
      38</font></strong></td>
    <td width="212"><font FACE="Times New Roman" SIZE="-2">Consolidated
      Statements of Cash Flows</font></td>
  </tr>
  <tr VALIGN="TOP">
    <td width="45"><strong><font SIZE="-2" color="#0000FF" face="Times New Roman">Page
      15</font></strong></td>
    <td width="316"><font FACE="Times New Roman" SIZE="-2">Selected Financial
      Data</font></td>
    <td width="50"></td>
    <td width="212"></td>
  </tr>
  <tr VALIGN="TOP">
    <td width="45"></td>
    <td width="316"></td>
    <td width="50"><strong><font SIZE="-2" color="#0000FF" face="Times New Roman">Page
      39</font></strong></td>
    <td width="212"><font FACE="Times New Roman" SIZE="-2">Consolidated
      Statements of Stockholders' Equity</font></td>
  </tr>
  <tr VALIGN="TOP">
    <td width="45"><strong><font SIZE="-2" color="#0000FF" face="Times New Roman">Page
      16</font></strong></td>
    <td width="316"><font FACE="Times New Roman" SIZE="-2">Management's
      Discussion and Analysis of Financial Condition<br>
      and Results of Operations</font></td>
    <td width="50"><strong><font SIZE="-2" color="#0000FF" face="Times New Roman"><br>
      Page 40</font></strong></td>
    <td width="212"><font FACE="Times New Roman" SIZE="-2"><br>
      Notes to Consolidated Financial Statements</font></td>
  </tr>
  <tr VALIGN="TOP">
    <td width="45"></td>
    <td width="316"></td>
    <td width="50"></td>
    <td width="212"></td>
  </tr>
  <tr VALIGN="TOP">
    <td width="45"><strong><font SIZE="-2" color="#0000FF" face="Times New Roman">Page
      34</font></strong></td>
    <td width="316"><font FACE="Times New Roman" SIZE="-2">Report of Independent
      Certified Public Accountants</font></td>
    <td width="50"></td>
    <td width="212"></td>
  </tr>
</table>
<p><font size="3" color="#000000">8&nbsp;&nbsp;</font><font size="2" color="#0000FF">2001
  annual report</font></p>
<p>&nbsp;</p>
<HR align=left color=#000080 noShade SIZE=4 width="100%">

<P>&nbsp;</P>
<P align=center><FONT face="CG Times Regular"><STRONG>UNITED
STATES<BR>SECURITIES AND EXCHANGE COMMISSION<BR>WASHINGTON, D.C. 20549<BR>Form
10-K</STRONG></FONT>
<P><STRONG><FONT face="CG Times Regular">[X]&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;EXCHANGE
ACT OF
1934<BR></FONT></STRONG>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<STRONG><FONT
face="CG Times Regular">For the fiscal year ended
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;December 31,
2001&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<BR></U></FONT></STRONG><STRONG><FONT
face="CG Times Regular">
<CENTER>or<BR></CENTER>[&nbsp; ]&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECURITIES
EXCHANGE ACT OF
1934<BR></FONT></STRONG>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<STRONG><FONT
face="CG Times Regular">For the transition period from ____________________ to
____________________<BR><BR></FONT></STRONG><FONT
face="CG Times Regular"><STRONG>
<CENTER>Commission File No.
<U>&nbsp;&nbsp;&nbsp;1-11596&nbsp;&nbsp;&nbsp;&nbsp;</U></STRONG></CENTER></FONT>
<P></P>
<P><FONT face="CG Times Regular">
<CENTER><STRONG>PERMA-FIX ENVIRONMENTAL SERVICES,
INC.<BR></STRONG></CENTER></FONT>
<CENTER><FONT face="CG Times Regular" size=-1><EM>(Exact name of registrant as
specified in its charter)</EM></FONT><FONT
face="CG Times Regular"></CENTER></FONT>
<P></P>
<P><FONT
face="CG Times Regular"><STRONG>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Delaware&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;58-1954497</STRONG><BR><STRONG>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</STRONG></FONT><EM><FONT
face="CG Times Regular" size=-1>(State or other
jurisdiction&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(IRS
Employer Identification
Number)<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
incorporation or organization)</FONT></EM><FONT face="CG Times Regular"><EM>
</EM></FONT></P>
<P align=left><FONT face="CG Times Regular"><STRONG>&nbsp;&nbsp;&nbsp;1940 N.W.
67th Place, Gainesville,
FL&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;32653<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</STRONG></FONT><EM><FONT
face="CG Times Regular" size=-1>(Address of principal executive
offices)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Zip
Code)</FONT></EM></P>
<P><FONT face="CG Times Regular">&nbsp;
<CENTER><STRONG>(352) 373-4200<BR></STRONG></CENTER></FONT>
<CENTER><FONT face="CG Times Regular" size=-1><EM>(Registrant's telephone
number)</EM></FONT><FONT face="CG Times Regular"></CENTER></FONT>
<P></P>
<P><FONT face="CG Times Regular">Securities registered pursuant to Section 12(b)
of the
Act:<BR><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Title
of each
class&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Name
of each exchange on which registered<BR></U>Common Stock, $.001 Par
Value&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Boston
Stock Exchange<BR><BR>Securities registered pursuant to Section 12(g) of the
Act: None</FONT></P>
<P><FONT face="CG Times Regular">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<U> X
</U>&nbsp;&nbsp;&nbsp;No__ </FONT></P>
<P><FONT face="CG Times Regular">Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained to the best of the Registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. [&nbsp; ]</FONT></P>
<P><FONT face="CG Times Regular">The aggregate market value of the voting stock
held by nonaffiliates of the Registrant as of March 28, 2002, based on the
closing sale price of such stock as reported by NASDAQ on such day, was
$99,911,945. For the purposes of this calculation, we have excluded shares held
by officers and directors of the Company, and have included 9,530,745 shares
held of record by Capital Bank Grawe-Gruppe. As discussed in Part VII under Item
12 - "Security Ownership of Certain Beneficial Owners," the Company does not
consider Capital Bank to be an affiliate of the Company. The Company's Common
Stock is listed on the NASDAQ SmallCap Market and the Boston Stock
Exchange.</FONT></P>
<P><FONT face="CG Times Regular">As of March 28, 2002, there were 34,087,125
shares of the registrant's Common Stock, $.001 par value, outstanding, excluding
988,000 shares held as treasury stock.</FONT></P>
<P><FONT face="CG Times Regular">Documents incorporated by reference:
none</FONT></P><FONT face="CG Times Regular"><U>
<HR align=left color=#000080 noShade SIZE=4 width="100%">

<P align=center></U></FONT><FONT face="CG Times Regular"><STRONG>PERMA-FIX
ENVIRONMENTAL SERVICES, INC.</STRONG></FONT></P>
<P><FONT face="CG Times Regular"><STRONG>
<CENTER>INDEX</STRONG></CENTER></FONT>
<P></P>
<TABLE width=530>
    <TR vAlign=top>
    <TD width=304><FONT face="CG Times Regular"><STRONG>PART I
    </STRONG></FONT></TD>
    <TD align=right width=212><FONT face="CG Times Regular"><U>Page
      No.</U></FONT></TD></TR></TABLE>
<TABLE width=529>
    <TR vAlign=top>
    <TD width=61><BR WP="BR1"><BR WP="BR2"><FONT
      face="CG Times Regular"></FONT>Item 1.</TD>
    <TD width=454><FONT face="CG Times Regular"></FONT><BR WP="BR1"><BR
      WP="BR2">Business . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . . . 1</TD></TR>
  <TR vAlign=top>
    <TD width=61><FONT face="CG Times Regular">Item 2.</FONT></TD>
    <TD width=454><FONT face="CG Times Regular">Properties&nbsp; . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
      .11</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=61><FONT face="CG Times Regular">Item 3.</FONT></TD>
    <TD width=454><FONT face="CG Times Regular">Legal Proceedings . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .&nbsp;
      12</FONT></TD></TR></TABLE>
<TABLE width=529>
    <TR vAlign=top>
    <TD width=61><FONT face="CG Times Regular">Item 4A.</FONT></TD>
    <TD width=454><FONT face="CG Times Regular">Executive Officers of the
      Company . . . . . . . . . . . . . . . . . . . . . . . .&nbsp;
  13</FONT></TD></TR></TABLE>
<TABLE width=528>
    <TR vAlign=top>
    <TD width=304><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular"><STRONG>PART II </STRONG></FONT></TD>
    <TD width=210><FONT face="CG Times Regular"></FONT></TD></TR></TABLE>
<TABLE width=527>
    <TR vAlign=top>
    <TD width=59></FONT><FONT face="CG Times Regular">Item 5.</FONT></TD>
    <TD width=454><FONT face="CG Times Regular">Market for Registrant's Common
      Equity and Related<BR>Stockholder Matters&nbsp; . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . .&nbsp; 14</FONT>
  </TD></TR></TABLE>
<TABLE width=527>
    <TR vAlign=top>
    <TD width=59><FONT face="CG Times Regular">Item 6.</FONT></TD>
    <TD width=454><FONT face="CG Times Regular">Selected Financial Data. . . .
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .&nbsp;
    15</FONT></TD></TR></TABLE>
<TABLE width=529>
    <TR vAlign=top>
    <TD width=57><FONT face="CG Times Regular">Item 7.</FONT></TD>
    <TD width=458><FONT face="CG Times Regular">Management's Discussion and
      Analysis of Financial Condition<BR>and Results of Operations&nbsp; . . . .
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  16</FONT></TD></TR></TABLE>
<TABLE width=530>
    <TR vAlign=top>
    <TD width=58><FONT face="CG Times Regular">Item 7A.</FONT></TD>
    <TD width=458><FONT face="CG Times Regular">Quantitative and Qualitative
      Disclosures About Market Risk . . . . .&nbsp; 31</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=58><FONT face="CG Times Regular"></FONT></TD>
    <TD width=458><FONT face="CG Times Regular">Special Note Regarding
      Forward-Looking Statements&nbsp; . . . . . . . . .&nbsp; .32</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=58><FONT face="CG Times Regular">Item 8.</FONT></TD>
    <TD width=458><FONT face="CG Times Regular">Financial Statements and
      Supplementary Data . . . . . . . . . . . . . . . . .33</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=58><FONT face="CG Times Regular">Item 9.</FONT></TD>
    <TD width=458><FONT face="CG Times Regular">Changes in and Disagreements
      with Accountants on<BR>Accounting and Financial Disclosure . . . . . . . .
      . . . . . . . . . . . . . . . . 74 </FONT></TD></TR></TABLE>
<TABLE width=529>
    <TR vAlign=top>
    <TD width=300><FONT face="CG Times Regular"><STRONG>PART
      III</STRONG></FONT></TD>
    <TD width=215><FONT face="CG Times Regular"></FONT></TD></TR></TABLE>
<TABLE width=531>
    <TR vAlign=top>
    <TD width=58></FONT><FONT face="CG Times Regular">Item 10.</FONT></TD>
    <TD width=459><FONT face="CG Times Regular">Directors and Executive
      Officers of the Registrant . . . . . . . . . . . . .&nbsp; 75</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=58><FONT face="CG Times Regular">Item 11.</FONT></TD>
    <TD width=459><FONT face="CG Times Regular">Executive Compensation&nbsp; .
      . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
    77</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=58><FONT face="CG Times Regular">Item 12.</FONT></TD>
    <TD width=459><FONT face="CG Times Regular">Security Ownership of Certain
      Beneficial Owners and&nbsp;<BR>Management . . . . . . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . .&nbsp; . 81</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=58><FONT face="CG Times Regular">Item 13.</FONT></TD>
    <TD width=459><FONT face="CG Times Regular">Certain Relationships and
      Related Transactions . . . . . . . . . . . . . . .
85</FONT></TD></TR></TABLE>
<TABLE width=528>
    <TR vAlign=top>
    <TD width=302><FONT face="CG Times Regular"><STRONG>PART
    IV</STRONG></FONT></TD>
    <TD width=212><FONT face="CG Times Regular"></FONT></TD></TR></TABLE>
<TABLE width=528>
    <TR vAlign=top>
    <TD width=58></FONT><FONT face="CG Times Regular">Item 14.</FONT></TD>
    <TD width=456><FONT face="CG Times Regular">Exhibits, Financial Statement
      Schedules and Report on&nbsp;<BR>Form 8-K . .&nbsp;. . . . . . . . . . . .
      . . . . . . . . . . . . . . . . . . . . . . . . . . . .&nbsp;
  87</FONT></TD></TR></TABLE>&nbsp;
<P>&nbsp;</P>
<P>&nbsp;</P>
<P align=center><FONT face="CG Times Regular"></FONT><FONT
face="CG Times Regular"><STRONG>PART I</STRONG></FONT></P>&nbsp;
<TABLE width=623>
    <TR vAlign=top>
    <TD width=69><FONT face="CG Times Regular"><STRONG>ITEM
    1.</STRONG></FONT></TD>
    <TD width=540><FONT
      face="CG Times Regular"><STRONG>BUSINESS</STRONG></FONT></TD></TR></TABLE>
<P><FONT face="CG Times Regular"></FONT><FONT
face="CG Times Regular"><STRONG>Company Overview and Principal Products and
Services<BR></STRONG>Perma-Fix Environmental Services, Inc. (the Company, which
may be referred to as we, us, or our) is a Delaware corporation, engaged through
its subsidiaries, in:</FONT></P>
<TABLE width=621>
    <TR vAlign=top>
    <TD colSpan=3 width=607><FONT face="CG Times Regular">*&nbsp; Industrial
      Waste Management Services, which includes:</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle width=12></TD>
    <TD align=middle width=25><FONT face="CG Times Regular">*</FONT></TD>
    <TD width=564><FONT face="CG Times Regular">treatment, storage,
      processing, and disposal of hazardous and nonhazardous waste; and
    </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=right width=12></TD>
    <TD align=right width=25>
      <P align=center><FONT face="CG Times Regular">*</FONT></P></TD>
    <TD width=564><FONT face="CG Times Regular">industrial waste and
      wastewater management services, including the collection, treatment,
      processing and disposal of hazardous and non-hazardous
  waste.</FONT></TD></TR></TABLE>
<TABLE width=621>
    <TR vAlign=top>
    <TD colSpan=3 width=1226><FONT face="CG Times Regular">*&nbsp; Nuclear
      Waste Management Services, which includes:</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=19></TD>
    <TD width=52>
      <P align=center><FONT face="CG Times Regular">*</FONT></P></TD>
    <TD width=1123><FONT face="CG Times Regular">treatment, storage,
      processing and disposal of mixed waste (which is both low-level
      radioactive and hazardous waste); and</FONT></TD></TR></TABLE>
<TABLE width=621>
    <TR vAlign=top>
    <TD width=11></TD>
    <TD width=30>
      <P align=center><FONT face="CG Times Regular">*</FONT></P></TD>
    <TD width=609><FONT face="CG Times Regular">nuclear and low-level
      radioactive waste treatment, processing and disposal, which includes
      research, development, on and off-site waste remediation and
      processing.</FONT></TD></TR></TABLE>
<TABLE width=621>
    <TR vAlign=top>
    <TD width=613><FONT face="CG Times Regular">*&nbsp; Consulting Engineering
      Services, which includes:</FONT></TD></TR></TABLE>
<TABLE width=621>
    <TR vAlign=top>
    <TD width=14></TD>
    <TD width=26>
      <P align=center><FONT face="CG Times Regular">*</FONT></P></TD>
    <TD width=607><FONT face="CG Times Regular">consulting services regarding
      broad-scope environmental issues, including environmental management
      programs, regulatory permitting, compliance and auditing, landfill design,
      field testing and characterization.</FONT></TD></TR></TABLE>
<P><FONT face="CG Times Regular">We have grown through both acquisitions and
internal development. Our present objective is to focus on the operations,
maximize the profitability and to continue the research and development of
innovative technologies for the treatment of nuclear, mixed waste and industrial
waste. </FONT></P>
<P><FONT face="CG Times Regular">We service research institutions, commercial
companies, public utilities and governmental agencies nationwide. The
distribution channels for our services are through direct sales to customers or
via intermediaries. </FONT></P>
<P><FONT face="CG Times Regular">We were incorporated in December of 1990. Our
executive offices are located at 1940 N.W. 67th Place, Gainesville, Florida
32653.</FONT></P>
<P><FONT face="CG Times Regular">Our home page on the Internet is at
www.perma-fix.com. You can learn more about us by visiting that site.
</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Segment Information and Foreign and
Domestic Operations and Export Sales<BR></STRONG>During 2001, we were engaged in
eleven operating segments. Pursuant to FAS 131, we define an operating segment
as:</FONT></P>
<TABLE width=680>
    <TR vAlign=top>
    <TD align=right width=29></TD>
    <TD align=right width=42><FONT face="CG Times Regular"></FONT>
      <P align=center>*<BR>*<BR><BR>*&nbsp;<FONT face="CG Times Regular"></FONT>
      </P></TD>
    <TD width=589><FONT face="CG Times Regular"><FONT
      face="CG Times Regular">A business activity from which we may earn revenue
      and incur expenses;<BR>Whose operating results are regularly reviewed by
      the President of the segment to make decisions about resources to be
      allocated within the segment and assess its performance; and<BR>For which
      discrete financial information is available.</FONT>
</FONT></TD></TR></TABLE>
<P><FONT face="CG Times Regular">We therefore define our operating segments as
each separate facility or location that we operate. These segments, however,
exclude the Corporate headquarters which does not generate revenue and Perma-Fix
of Memphis, Inc. ("PFM") a discontinued operation which is reported with
Corporate headquarters. See Note 3 to Notes to Consolidated Financial Statements
regarding discontinued operations.</FONT></P>
<P><FONT face="CG Times Regular">Pursuant to FAS 131 we have aggregated our
operating segments into three reportable segments to ease in the presentation
and understanding of our business. Each reportable segment has a President who
manages and makes decisions for the reportable segment as a whole. The results
of the reportable segments are then</FONT></P>
<P>&nbsp;</P>
<P align=center>-1-</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">reviewed by the Company's chief operating
decision maker. We used the following criteria to aggregate our
segments:</FONT></P>
<TABLE width=663>
    <TR vAlign=top>
    <TD align=middle width=43></TD>
    <TD align=middle width=39>*<BR>*<BR>*<BR>*<BR>*<FONT
      face="CG Times Regular"></FONT><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular"></FONT><FONT face="CG Times Regular"></FONT> </TD>
    <TD width=561><FONT face="CG Times Regular"><FONT
      face="CG Times Regular">The nature of our products and services;<BR>The
      nature of the production processes;<BR>The type or class of customer for
      our products and services;<BR>The methods used to distribute our products
      or provide our services; and<BR>The nature of the regulatory
      environment.</FONT> </FONT></TD></TR></TABLE>
<P><FONT face="CG Times Regular">During 2000, in conjunction with the expansion
of the nuclear, mixed waste facilities, the acquisition of Diversified
Scientific Services, Inc. and expanded Oak Ridge, Tennessee, mixed waste
activities, the Company established a Nuclear Waste Management Services segment,
in addition to the two previously reported segments.</FONT></P>
<P><FONT face="CG Times Regular">Most of our activities are conducted
nationwide, however, our Industrial Waste Management Services segment maintains
a significant role in the Southeast and Midwest portions of the United States.
We had no foreign operations or export sales during 2001.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Operating Segments<BR></STRONG>We have
eleven operating segments which represent each separate facility or location
that we operate. Seven of these segments provide Industrial Waste Management
Services, three of these segments provide Nuclear Waste Management Services and
one segment provides Consulting Engineering Services as described
below:</FONT></P>
<P><FONT face="CG Times Regular">INDUSTRIAL WASTE MANAGEMENT SERVICES, which
includes, off-site waste storage, treatment, processing and disposal services of
hazardous and non-hazardous waste (solids and liquids) through six of our
treatment facilities and numerous related operations provided by our other
location, as discussed below.</FONT></P>
<P><FONT face="CG Times Regular">Perma-Fix Treatment Services, Inc. ("PFTS") is
a Resource Conservation and Recovery Act of 1976 ("RCRA") permitted treatment,
storage and disposal ("TSD") facility located in Tulsa, Oklahoma. PFTS stores
and treats hazardous and non-hazardous waste liquids, provides waste
transportation and disposal of non-hazardous liquid waste via its on-site Class
I Injection Well located at the facility. The injection well is permitted for
the disposal of non-hazardous liquids and characteristic hazardous wastes that
have been treated to remove the hazardous characteristic. PFTS operates a
non-hazardous wastewater treatment system for oil and solids' removal, a
corrosive treatment system for neutralization and metals precipitation, and a
container stabilization system. The injection well is controlled by a
state-of-the-art computer system to assist in achieving compliance with all
applicable state and federal regulations.</FONT></P>
<P><FONT face="CG Times Regular">Perma-Fix of Dayton, Inc. ("PFD") is a RCRA
permitted TSD facility located in Dayton, Ohio. PFD has four main disposal
production areas. The four production areas are a RCRA permitted TSD, a
centralized wastewater treatment area, a used oil recycling area, and a
non-hazardous solids solidification area. Hazardous waste accepted under the
RCRA permit is typically drum waste for fuel bulking, incineration or
stabilization. Wastewaters accepted at the facility include hazardous and
non-hazardous wastewaters, which are treated by ultra filtration, metals
precipitation and bio-degradation to meet the requirements of PFD's Clean Water
Act pretreatment permit. Waste industrial oils and used motor oils are processed
through high-speed centrifuges to produce a high quality fuel that is burned by
industrial burners.</FONT></P>
<P><FONT face="CG Times Regular">Perma-Fix of Ft. Lauderdale, Inc. ("PFFL") is a
permitted facility located in Ft. Lauderdale, Florida. PFFL collects and treats
wastewaters, oily wastewaters, used oil and other off-specification
petroleum-based products, some of which may potentially be recycled into usable
products. Key activities at PFFL include process cleaning and material recovery,
production and sales of on-specification fuel oil, custom tailored waste
management programs and hazardous material disposal and recycling materials from
generators such as the cruise line and marine industries.</FONT></P>
<P>&nbsp;</P>
<P align=center>-2-</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">Perma-Fix of Orlando, Inc. ("PFO"), F/K/A
Chemical Conservation Corporation ("CCC"), is a RCRA permitted TSD facility
located in Orlando, Florida, which was acquired effective June 1, 1999. PFO
collects, stores and treats hazardous and non-hazardous wastes out of two
processing buildings, under one of our most inclusive permits. PFO is also a
transporter of hazardous waste and operates a transfer facility at the
site.</FONT></P>
<P><FONT face="CG Times Regular">Perma-Fix of South Georgia, Inc. ("PFSG"),
F/K/A Chemical Conservation of Georgia, Inc. ("CCG"), is a RCRA permitted TSD
facility located in Valdosta, Georgia, which was acquired effective June 1,
1999. PFSG provides storage, treatment and disposal services to hazardous and
non-hazardous waste generators throughout the United States, in conjunction with
the utilization of the PFO facility and transportation services. PFSG operates a
hazardous waste storage facility that primarily blends and processes hazardous
and non-hazardous waste liquids, solids and sludges into substitute fuel or as a
raw material substitute in cement kilns that have been specially permitted for
the processing of hazardous and non-hazardous waste.</FONT></P>
<P><FONT face="CG Times Regular">Perma-Fix of Michigan, Inc. ("PFMI"), F/K/A
Chem-Met Services, Inc. ("CM"), is a permitted TSD facility located in Detroit,
Michigan, which was acquired effective June 1, 1999. PFMI is a waste treatment
and storage facility, situated on 60 acres, that treats hazardous, non-hazardous
and inorganic wastes with solidification/chemical fixation and bulks, repackages
and remanifests wastes that are determined to be unsuitable for treating. This
large bulk processing facility utilizes a chemical fixation and stabilization
process to produce a solid non-hazardous matrix that can safely be disposed of
in a solid waste landfill.</FONT></P>
<P><FONT face="CG Times Regular">Perma-Fix Government Services ("PFGS") F/K/A
Chem-Met Government Services ("CMGS") specializes in the on-site (at the
government's site) environmental and hazardous waste management, with emphasis
on the management of large long-term federal and industrial on-site field
service contracts. PFGS operates out of five (5) field service offices, located
throughout the United States. PFGS currently manages six (6) hazardous waste
management service contracts with the Defense Reutilization &amp; Marketing
Service ("DRMS"), working closely with the above noted permitted facilities for
certain transportation and waste management services.</FONT></P>
<P><FONT face="CG Times Regular">For 2001, the Company's Industrial Waste
Management Services segment accounted for approximately $42,355,000 (or 56.9%)
of the Company's total revenue, as compared to approximately $44,191,000 (or
74.7%) for 2000. See "Financial Statements and Supplementary Data" for further
details.</FONT></P>
<P><FONT face="CG Times Regular">NUCLEAR WASTE MANAGEMENT SERVICES, which
includes nuclear, mixed and low-level radioactive waste treatment, processing
and disposal services through three of our TSD facilities. The presence of
nuclear and low-level radioactive constituents within the waste streams
processed by this segment create different and unique operational, processing
and permitting/licensing requirements, from those contained within the
Industrial Waste Management Services segment, as discussed below.</FONT></P>
<P><FONT face="CG Times Regular">Perma-Fix of Florida, Inc. ("PFF"), located in
Gainesville, Florida, is a uniquely permitted and licensed TSD. PFF specializes
in the processing and treatment of certain types of wastes containing both
low-level radioactive and hazardous wastes, which are known in the industry as
mixed waste. PFF is one of only a few facilities nationally to operate under
both a hazardous waste permit and a nuclear materials license, from which it has
built its reputation based on its ability to treat difficult waste streams using
its unique processing technologies and its ability to provide related research
and development services. With the amended permits and licenses received during
2000 and the expansion of its mixed waste processing equipment and capabilities,
PFF has transitioned into a full mixed waste and low level radioactive
processing facility. Its mixed waste services have included the treatment and
processing of waste Liquid Scintillation Vials (LSVs) since the mid 1980's. The
LSVs are generated primarily by institutional research agencies and biotechnical
companies. These wastes contain mixed (low-level) radioactive materials and
hazardous waste (flammable) constituents. Management believes that PFF currently
processes approximately 80% of the available LSV waste in the country. The
business has expanded into receiving and handling other types of mixed waste,
primarily from the nuclear utilities, commercial generators, prominent
pharmaceutical companies, the Department of Energy ("DOE") and other government
facilities as well as select mixed waste field remediation projects.</FONT></P>
<P>&nbsp;</P>
<P align=center>-3-</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">Diversified Scientific Services, Inc. ("DSSI"),
located in Kingston, Tennessee, is also a uniquely permitted and licensed TSD,
which was acquired effective August 31, 2000. DSSI specializes in the processing
and destruction of certain types of wastes containing both low-level radioactive
and hazardous waste (mixed waste). DSSI, like PFF, is one of only a few
facilities nationally to operate under both a hazardous waste permit and a
nuclear materials license. Additionally, DSSI is the only commercial facility of
its kind in the U.S. that is currently operating and licensed to destroy liquid
organic mixed waste, through its treatment unit. DSSI provides mixed waste
disposal services for nuclear utilities, commercial generators, prominent
pharmaceutical companies, and agencies and contractors of the U.S. government,
including the DOE and the Department of Defense ("DOD"). </FONT></P>
<P><FONT face="CG Times Regular">East Tennessee Materials &amp; Energy
Corporation ("M&amp;EC"), located in Oak Ridge, Tennessee, is the Company's
third mixed waste facility, which was acquired effective June 25, 2001. As with
PFF and DSSI, M&amp;EC also operates under both a hazardous waste permit and
nuclear materials license. M&amp;EC represents the largest of the Company's
three mixed waste facilities, covering 150,000 sq.ft., and is located within the
DOE K-25 complex. M&amp;EC operates in a newly constructed facility, whose
initial construction phase was completed during the third quarter of 2001 and
became operational in September 2001. In addition to providing mixed waste
treatment services to commercial generators, nuclear utilities and various
agencies and contractors of the U.S. Government, including the DOD, M&amp;EC was
awarded three contracts to treat DOE mixed waste by Bechtel-Jacobs Company, LLC,
DOE's Environmental Program Manager, which covers the treatment of mixed waste
throughout all DOE facilities ( see "Oak Ridge Contract Award").</FONT></P>
<P><FONT face="CG Times Regular">For 2001, the Company's nuclear waste
management services business accounted for $28,932,000 (or 38.8%) of total
revenue for 2001, as compared to $11,737,000 (or 19.9%) of total revenue for
2000. See "Financial Statements and Supplementary Data" for further
details.</FONT></P>
<P><FONT face="CG Times Regular">CONSULTING ENGINEERING SERVICES, which provides
environmental engineering and regulatory compliance consulting services through
one subsidiary, as discussed below.</FONT></P>
<P><FONT face="CG Times Regular">Schreiber, Yonley &amp; Associates ("SYA") is
located in St. Louis, Missouri. SYA specializes in environmental management
programs, permitting, compliance and auditing, in addition to landfill design,
field investigation, testing and monitoring. SYA clients are primarily
industrial, including many within the cement manufacturing industry. SYA also
provides the necessary support, compliance and training as required by our
operating facilities. </FONT></P>
<P><FONT face="CG Times Regular">During 2001, environmental engineering and
regulatory compliance consulting services accounted for approximately $3,205,000
or 4.3% of our total revenue, as compared to approximately $3,211,000 or 5.4% in
2000. See "Financial Statements and Supplementary Data" for further
details.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Importance of Patents and Trademarks,
or Concessions Held<BR></STRONG>We do not believe we are dependent on any
particular trademark in order to operate our business or any significant segment
thereof. We have received registration through the year 2006 for the service
mark "Perma-Fix" by the U.S. Patent and Trademark office.</FONT></P>
<P><FONT face="CG Times Regular">The Company is active in the research and
development of technologies that allow it to address certain of its customers'
environmental needs. To date, the Company's R&amp;D efforts have resulted in the
granting of three patents and the filing of an additional ten pending patent
applications. The Company's flagship technology, the <EM>Perma-Fix Process</EM>,
is a proprietary, cost effective, treatment technology that converts hazardous
waste into non-hazardous material. Subsequently, the Company developed a new
<EM>Perma-Fix II </EM>process ("New Process")<EM>,</EM> a multi-step treatment
process that converts hazardous organic components into non-hazardous material.
The New Process is particularly important to the Company's mixed waste strategy.
Management believes that at least one third of DOE mixed wastes contain organic
components.</FONT></P>
<P><FONT face="CG Times Regular">The New Process is designed to remove certain
types of organic hazardous constituents from soils or other solids and sludges
("Solids") through a water-based system. We have filed a patent application with
the U.S.</FONT></P>
<P>&nbsp;</P>
<P align=center><FONT face="CG Times Regular">-4-</FONT></P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">Patent and Trademark Office covering the New
Process. As of the date of this report, we have not received a patent for the
New Process, and there are no assurances that such a patent will be issued.
Until development of this New Process, we were not aware of a relatively simple
and inexpensive process that would remove the organic hazardous constituents
from Solids without elaborate and expensive equipment or expensive treating
agents. Due to the organic hazardous constituents involved, the disposal options
for such materials are limited, resulting in high disposal cost when there is a
disposal option available. By reducing the organic hazardous waste constituents
from the Solids to a level where the Solids may be returned to the ground, the
generator's disposal options for such waste are substantially increased,
allowing the generator to dispose of such waste at substantially less cost. We
began commercial use of the New Process in 2000. Patent applications have also
been filed for processes to treat radon, selenium and other speciality materials
utilizing variations of this new process. However, changes to current
environmental laws and regulations could limit the use of the New Process or the
disposal options available to the generator. See "BUSINESS--Permits and
Licenses" and "BUSINESS--Research and Development."</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Permits and Licenses<BR></STRONG>Waste
management companies are subject to extensive, evolving and increasingly
stringent federal, state and local environmental laws and regulations. Such
federal, state and local environmental laws and regulations govern our
activities regarding the treatment, storage, processing, disposal and
transportation of hazardous, non-hazardous and radioactive wastes, and require
us to obtain and maintain permits, licenses and/or approvals in order to conduct
certain of our waste activities. Failure to obtain and maintain our permits or
approvals would have a material adverse effect on us, our operations and
financial condition. The permits and licenses have a term ranging from five (5)
to ten (10) years and, provided that the Company maintains a reasonable level of
compliance, renew with minimal effort and cost. Historically, there have been no
compelling challenges to the permit and license renewals. Moreover, as we expand
our operations we may be required to obtain additional approvals, licenses or
permits, and there can be no assurance that we will be able to do so. Such
permits and licenses, however, represent a potential barrier to entry for
possible competitors.</FONT></P>
<P><FONT face="CG Times Regular">PFTS is a permitted solid and hazardous waste
treatment, storage, and disposal facility. The RCRA Part B Permit to treat and
store certain types of hazardous waste was issued by the Waste Management
Section of the Oklahoma Department of Environmental Quality ("ODEQ").
Additionally PFTS maintains an Injection Facility Operations Permit issued by
the ODEQ Underground Injection Control Section for our two waste disposal
injection wells, and a pre-treatment permit in order to discharge industrial
wastewaters to the local Publically Owned Treatment Works. PFTS is also
registered with the ODEQ and the Department of Transportation as a hazardous
waste transporter.</FONT></P>
<P><FONT face="CG Times Regular">PFFL operates under a general permit and used
oil processors license issued by the Florida Department of Environmental
Protection ("FDEP"), a transporter license issued by the FDEP and a transfer
facility license issued by Broward County, Florida. Broward County also issued
PFFL a discharge Pre-Treatment permit that allows discharge of treated water to
the Broward County Publically Owned Treatment Works.</FONT></P>
<P><FONT face="CG Times Regular">PFD operates a hazardous and non-hazardous
waste treatment and storage facility under various permits, including a RCRA
Part B permit. PFD provides wastewater pretreatment under a discharge permit
with the local Publically Owned Treatment Works and is a specification and
off-specification used oil processor under the guidelines of the Ohio
EPA.</FONT></P>
<P><FONT face="CG Times Regular">PFMI operates under an operating license issued
in 1982 as an existing facility for the treatment and storage of certain
hazardous wastes. The operating license continues in effect in conjunction with
the terms of a consent judgement as agreed to in 1991.</FONT></P>
<P><FONT face="CG Times Regular">PFO operates a hazardous and non-hazardous
treatment and storage facility under various permits, including a RCRA Part B
permit, issued by the State of Florida.</FONT></P>
<P>&nbsp;</P>
<P align=center>-5-</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">PFSG operates a hazardous treatment and storage
facility under a RCRA Part B permit, issued by the State of Georgia.</FONT></P>
<P><FONT face="CG Times Regular">PFF operates its hazardous and low-level
radioactive waste activities under a RCRA Part B permit and a radioactive
materials license issued by the State of Florida. </FONT></P>
<P><FONT face="CG Times Regular">DSSI operates hazardous and low-level
radioactive waste activities under a RCRA Part B permit and a radioactive
materials license issued by the State of Tennessee.</FONT></P>
<P><FONT face="CG Times Regular">M&amp;EC operates hazardous and low-level
radioactive waste activities under a RCRA Part B permit and a radioactive
materials license issued by the State of Tennessee.</FONT></P>
<P><FONT face="CG Times Regular">The combination of a RCRA Part B hazardous
waste permit and a radioactive materials license, as held by PFF, DSSI and
M&amp;EC, are very difficult to obtain for a single facility and make these
facilities very unique.</FONT></P>
<P><FONT face="CG Times Regular">We believe that our TSD facilities presently
have obtained all approvals, licenses and permits necessary to enable them to
conduct their business as they are presently conducted. The failure of our TSD
facilities to renew any of their present approvals, licenses and permits, or the
termination of any such approvals, licenses or permits, could have a material
adverse effect on us, our operations and financial condition.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG></STRONG></FONT><FONT
face="CG Times Regular"><STRONG>Seasonality<BR></STRONG>We experience a seasonal
slowdown in operations and revenues during the winter months extending from late
November through early March. The seasonality factor is a combination of poor
weather conditions in the central plains and Midwestern geographical markets we
serve for on-site and off-site waste management services, and the impact of
reduced activities during holiday periods along with the inability to generate
consistent billable hours in the consulting engineering segment, resulting in a
decrease in revenues and earnings during such period.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Dependence Upon a Single or Few
Customers<BR></STRONG>The majority of our revenues for fiscal 2001 have been
derived from hazardous, non-hazardous and mixed waste management services
provided to a variety of industrial, commercial customers, and government
agencies and contractors. Our customers are principally engaged in research,
biotechnical development, transportation, chemicals, metal processing,
electronic, automotive, petrochemical, refining and other similar industries, in
addition to government agencies that include the DOE, DOD, and other federal,
state and local agencies. We are not dependent upon a single customer, or a few
customers, the loss of anyone or more would not have a material adverse effect
on us. However, PFGS currently manages six (6) hazardous waste management
service contracts with the DRMS. The DRMS is a subagency of the Defense
Logistics Agency and the DOD, which is considered to be a single customer. The
consolidated revenues for the DRMS contracts for 2001 total $5,996,000 (or 8.0%)
of total revenue, as compared to $7,606,000 (or 12.9%) for</FONT> <FONT
face="CG Times Regular">the year ended December 31, 2000, which results in a
decrease of $1,610,000 for 2001. Delays in the government's payment of amounts
owing to the Company have resulted, from time to time, in a decrease in the
Company's liquidity. Also, M&amp;EC was awarded three contracts to treat certain
waste at DOE facilities. See Oak Ridge Contract Award below for further
discussion on the Oak Ridge Contracts.</FONT></P>
<P><FONT face="CG Times Regular">We have and continue 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.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Oak Ridge Contract
Award<BR></STRONG>The Company and M&amp;EC entered into an agreement pursuant to
which the Company and M&amp;EC agreed to act as a team in the performance of
certain contracts that either the Company or M&amp;EC may obtain from
</FONT></P>
<P>&nbsp;</P>
<P align=center>-6-</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">customers of the DOE regarding treatment and
disposal of certain types of radioactive, hazardous or mixed waste (waste
containing both hazardous and low level radioactive waste) at DOE facilities. In
connection with proposals relating to the treatment and disposal of mixed waste
at DOE's Oak Ridge, Tennessee system ("Oak Ridge"), M&amp;EC and the Company
made a joint proposal to DOE, with M&amp;EC to act as the team leader. In June
1998 M&amp;EC, as the team leader, was awarded three contracts ("Oak Ridge
Contracts") by Bechtel Jacobs Company, LLC, the government-appointed manager of
the environmental program for Oak Ridge, to perform certain treatment and
disposal services relating to Oak Ridge. The Oak Ridge Contracts were issued by
Bechtel Jacobs Company, as a contract to the DOE, based on proposals by M&amp;EC
and the Company. </FONT></P>
<P><FONT face="CG Times Regular">The Oak Ridge Contracts are similar in nature
to a blanket purchase order whereby the DOE specifies the approved waste
treatment process and team to be used for certain disposal, but the DOE does not
specify a schedule as to dates for disposal or quantities of disposal material
to be processed. The initial term of the contract represented a demonstration
period for the team's successful treatment of the waste and the resulting
ability of such processed waste to meet acceptance criteria for its ultimate
disposal location. All three of the Company's mixed waste facilities (PFF, DSSI
and M&amp;EC) have successfully performed under the demonstration period and are
currently receiving and processing waste under the Oak Ridge
Contracts.</FONT></P>
<P><FONT face="CG Times Regular">As with most such blanket processing
agreements, the Oak Ridge Contracts contain no minimum or maximum processing
guarantees, and may be terminated pursuant to federal contracting terms and
conditions. Each specific waste stream processed under the Oak Ridge Contracts
will require a separate work order from DOE and will be priced separately with
an intent of recognizing an acceptable profit margin.</FONT></P>
<P><FONT face="CG Times Regular">Effective June 25, 2001, the Company acquired
M&amp;EC and the facility became operational in the third quarter of 2001.
Consolidated revenues under the Oak Ridge contracts for 2001 total $6,300,000 or
8.5% of total revenues for the year ended December 31, 2001. See "Management's
Discussion and Analysis of Financial Conditions and Results of Operations --
Liquidity and Capital Resources of the Company," and "Note 4 to Notes to
Consolidated Financial Statements."</FONT></P>
<P><FONT face="CG Times Regular"><STRONG></STRONG></FONT><FONT
face="CG Times Regular"><STRONG>Competitive Conditions<BR></STRONG>Competition
is intense within certain product lines within the Industrial Waste Management
Services segment of our business. We compete with numerous companies both large
and small, that are able to provide one or more of the environmental services
offered by us and many of which may have greater financial, human and other
resources than we have. However, we believe that the range of waste management
and environmental consulting, treatment, processing and remediation services we
provide affords us a competitive advantage with respect to certain of our more
specialized competitors. We believe that the treatment processes we</FONT> <FONT
face="CG Times Regular">utilize offer a cost savings alternative to more
traditional remediation and disposal methods offered by our competitors. The
intense competition for performing the services provided by us within the
Industrial Waste Management Services segment has resulted in reduced gross
margin levels for certain of those services.</FONT></P>
<P><FONT face="CG Times Regular">The Nuclear Waste Management Services segment,
however has only a few competitors and does not currently experience such
competitive pressures. In addition, at present we believe there is only one
other facility in the United States that provides low-level radioactive and
hazardous waste processing of scintillation vials, which also requires both a
radioactive materials license and a hazardous waste permit.</FONT></P>
<P><FONT face="CG Times Regular">Competition in the waste management industry is
likely to increase as the industry continues to mature, and as consolidations
continue to occur. We believe that there are no formidable barriers to entry
into certain of the on-site treatment businesses. However, the permitting and
licensing requirements, and the cost to obtain such permits, are barriers to the
entry of hazardous waste TSD facilities and radioactive and mixed waste
activities as presently operated by our subsidiaries. Certain of the
non-hazardous waste operations, however, do not require such permits and, as a
result, entry into these non-hazardous waste businesses would be easier. If the
permit requirements for both hazardous waste storage, treatment and disposal
activities and/or the licensing requirements for the handling of low level
radioactive matters are eliminated or if such licenses or permits were made
easier to obtain, such would allow more companies to enter into these markets
and provide greater competition.</FONT></P>
<P>&nbsp;</P>
<P align=center>-7-</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">Within our Industrial Waste Management Services
segment we participate nationwide. However, we believe that we are a significant
participant in the delivery of off-site waste treatment services in the
Southeast, Midwest and Southwest portions of the United States. We compete with
TSD facilities operated by national, regional and independent environmental
services firms located within a several hundred-mile radius of our facilities.
Our subsidiaries, PFF, DSSI and M&amp;EC, with permitted radiological activities
solicit business on a nationwide basis, including the U.S. Territories and
Antarctica.</FONT></P>
<P><FONT face="CG Times Regular">Environmental engineering and consulting
services provided by us through SYA involve competition with larger engineering
and consulting firms. We believe that we are able to compete with these firms
based on our established reputation in these market areas and our expertise in
several specific elements of environmental engineering and consulting such as
environmental applications in the cement industry.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Capital Spending, Certain Environmental
Expenditures and Potential Environmental Liabilities<BR></STRONG>During 2001, we
spent approximately $4,598,000 in capital expenditures, which was principally
for the expansion and improvements to our continuing operations. Included in
this total is approximately $1,699,000 to complete the initial phase of the
construction of the M&amp;EC facility, incurred after the date of acquisition
and a new waste water treatment system within the Dayton, Ohio, industrial
facility, totaling approximately $972,000. This 2001 capital spending total
includes $517,000 of which was financed. For 2002, we have budgeted
approximately $11,000,000 for capital expenditures to improve and 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, and approximately $1,202,000 to
comply with federal, state and local regulations in connection with remediation
activities at four locations. See Note 9 to Notes to Consolidated Financial
Statements. However, there is no assurance that we will have the funds available
for such budgeted expenditures. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital Resources
of the Company." We do not anticipate the ongoing environmental expenditures to
be significant, with the exception of remedial activities at the four locations
discussed below.</FONT></P>
<P><FONT face="CG Times Regular">In June 1994, we acquired from Quadrex
Corporation and/or a subsidiary of Quadrex Corporation (collectively, "Quadrex")
three TSD companies, including PFD. The former owners of PFD had merged
Environmental Processing Services, Inc. ("EPS") with PFD, which was subsequently
sold to Quadrex. Through our acquisition of PFD in 1994 from Quadrex, we were
indemnified by Quadrex for costs</FONT> <FONT face="CG Times Regular">associated
with remediating certain property leased by EPS from an affiliate of EPS on
which EPS operated a RCRA storage and processing facility ("Leased Property").
Such remediation involves soil and/or groundwater restoration. The Leased
Property used by EPS to operate its facility is separate and apart from the
property on which PFD's facility is located. During 1995, in conjunction with
the bankruptcy filing by Quadrex, we recognized an environmental liability of
approximately $1,200,000 for remedial activities at the leased property. We have
accrued approximately $541,000 for the estimated, remaining costs of remediating
the Leased Property used by EPS, which will extend for a period of two (2) to
three (3) years.</FONT></P>
<P><FONT face="CG Times Regular">Due to the acquisition of PFM, we assumed and
recorded certain liabilities to remediate gasoline contaminated groundwater and
investigate, under the hazardous and solid waste amendments, potential areas of
soil contamination on PFM's property. Prior to our ownership of PFM, the owners
installed monitoring and treatment equipment to restore the groundwater to
acceptable standards in accordance with federal, state and local authorities. We
have accrued approximately $973,000 for the estimated, remaining cost of
remediating the groundwater contamination.</FONT></P>
<P><FONT face="CG Times Regular">The PFM facility is situated in the vicinity of
the Memphis Military Defense Depot (the "Defense Facility"), which Defense
Facility is listed as a Superfund Site. The Defense Facility is located in the
general up gradient direction of ground water flow of the Allen Well Field
utilized by Memphis Light, Gas &amp; Water, a public water supply utilized in
Memphis, Tennessee. Chlorinated compounds have previously been detected in the
groundwater beneath the Defense Facility, as well as in very limited amounts in
certain production wells in the adjacent Allen Well Field. Very low
concentrations of certain chlorinated compounds have also been detected in the
groundwater beneath the PFM facility. The PFM facility is located in the down
gradient</FONT></P>
<P>&nbsp;</P>
<P align=center>-8-</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">direction of ground water flow from the Allen
Well Field. Based upon a study performed by our environmental engineering group,
we do not believe the PFM facility is the source of the chlorinated compounds in
the noted production wells in the Allen Well Field and, as a result, do not
believe that the presence of the low concentrations of chlorinated compounds at
the PFM facility will have a material adverse effect upon the
Company.</FONT></P>
<P><FONT face="CG Times Regular">Pursuant to the acquisition of PFSG during
1999, we recognized an environmental accrual of $2,199,000 for estimated
long-term costs to remove contaminated soil and to undergo ground water
remediation activities at the acquired facility in Valdosta, Georgia. Initial
valuation has recently been completed, and the remedial process selected. The
planning and approval process will continue throughout 2002, with remedial
activities beginning in 2003. For the year ended December 31, 2001, we have a
remaining accrual of $1,400,000, of which we anticipate spending $108,000 during
2002, with the remaining $1,292,000 to be spent over the next five to seven
years.</FONT></P>
<P><FONT face="CG Times Regular">In conjunction with the acquisition of PFMI
during 1999, we recognized a long-term environmental accrual of $2,120,000. This
amount represented the Company's estimate of the long-term costs to remove
contaminated soil at the PFMI acquired facility in Detroit, Michigan. The
facility has pursued remedial activities over the past three years, and
anticipates completion of such activities during 2003. The accrued balance at
December 31, 2001, for the PFMI remediation is $620,000, of which we anticipate
spending $507,000 during 2002, with the remaining $113,000 in 2003. </FONT></P>
<P><FONT face="CG Times Regular">No insurance or third party recovery was taken
into account in determining our cost estimates or reserves, nor do our cost
estimates or reserves reflect any discount for present value purposes. See Note
4 to Notes to Consolidated Financial Statements for discussion on the
acquisition and Note 9 to Notes to Consolidated Financial Statements for
discussion on environmental liabilities.</FONT></P>
<P><FONT face="CG Times Regular">The nature of our business exposes us to
significant risk of liability for damages. Such potential liability could
involve, for example, claims for cleanup costs, personal injury or damage to the
environment in cases where we are held responsible for the release of hazardous
materials; claims of employees, customers or third</FONT> <FONT
face="CG Times Regular">parties for personal injury or property damage occurring
in the course of our operations; and claims alleging negligence or professional
errors or omissions in the planning or performance of our services or in the
providing of our products. In addition, we could be deemed a responsible party
for the costs of required cleanup of any property which may be contaminated by
hazardous substances generated or transported by us to a site we selected,
including properties owned or leased by us. We could also be subject to fines
and civil penalties in connection with violations of regulatory
requirements.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG></STRONG></FONT><FONT
face="CG Times Regular"><STRONG>Research and Development<BR></STRONG>Innovation
by our operations is very important to the success of our business. Our goal is
to discover, develop and bring to market innovative ways to process waste that
address unmet environmental needs. We are planning for future growth of our
research operations. We conduct research internally, and also through
collaborations with universities. We feel that our investments in research have
been rewarded by the discovery of the <EM>Perma-Fix Process</EM> and the New
Process. Our competitors also devote resources to research and development and
many such competitors have greater resources at their disposal than we do. We
have estimated that during 1999, 2000 and 2001, we spent approximately $467,000,
$359,000, and $428,000, respectively in Company-sponsored research and
development activities.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Number of Employees<BR></STRONG>In our
service-driven business, our employees are vital to our success. We believe we
have good relationships with our employees. As of December 31, 2001, we employed
approximately 498 persons, of which approximately 13 were assigned to our
corporate office, approximately 28 were assigned to our Consulting Engineering
Services segment, approximately 278 to the Industrial Waste Management Services
segment of which 19 employees at one facility are represented by a collective
bargaining unit, under a contract expiring on March 31,2006, and approximately
179 to the Nuclear Waste Management Services segment, including approximately 58
employees at the M&amp;EC facility acquired in June 2001.</FONT></P>
<P>&nbsp;</P>
<P align=center>-9-</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular"><STRONG>Governmental
Regulation<BR></STRONG>Environmental companies and their customers are subject
to extensive and evolving environmental laws and regulations by a number of
national, state and local environmental, safety and health agencies, the
principal of which being the EPA. These laws and regulations largely contribute
to the demand for our services. Although our customers remain responsible by law
for their environmental problems, we must also comply with the requirements of
those laws applicable to our services. Because the field of environmental
protection is both relatively new and rapidly developing, we cannot predict the
extent to which our operations may be affected by future enforcement policies as
applied to existing laws or by the enactment of new environmental laws and
regulations. Moreover, any predictions regarding possible liability are further
complicated by the fact that under current environmental laws we could be
jointly and severally liable for certain activities of third parties over whom
we have little or no control. Although we believe that we are currently in
substantial compliance with applicable laws and regulations, we could be subject
to fines, penalties or other liabilities or could be adversely affected by
existing or subsequently enacted laws or regulations. The principal
environmental laws affecting us and our customers are briefly discussed below.
</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>The Resource Conservation and Recovery
Act of 1976, as amended</STRONG> <STRONG>("RCRA")<BR></STRONG>RCRA and its
associated regulations establish a strict and comprehensive regulatory program
applicable to hazardous waste. The EPA has promulgated regulations under RCRA
for new and existing treatment, storage and disposal facilities including
incinerators, storage and treatment tanks, storage containers, storage and
treatment surface impoundments, waste piles and landfills. Every facility that
treats, stores or disposes of hazardous waste must obtain a RCRA permit or must
obtain interim status from the EPA, or a state agency which has been authorized
by the EPA to administer its program, and must comply with certain operating,
financial responsibility and closure requirements. RCRA provides for the
granting of interim status to facilities that allows a facility to continue to
operate by complying with certain minimum standards pending issuance or denial
of a final RCRA permit.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Boiler and Industrial Furnace
Regulations under RCRA ("BIF Regulations")<BR></STRONG>BIF Regulations require
boilers and industrial furnaces, such as cement kilns, to obtain permits or to
qualify for interim status under RCRA before they may use hazardous waste as
fuel. If a boiler or industrial furnace does not qualify for interim status
under RCRA, it may not burn hazardous waste as fuel or use such as raw materials
without first having obtained a final RCRA permit. In addition, the BIF
Regulations require 99.99% destruction of the hazardous organic compounds used
as fuels in a boiler or industrial furnace and impose stringent restrictions on
particulate, carbon monoxide, hydrocarbons, toxic metals and hydrogen chloride
emissions.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>The Safe Drinking Water
Act</STRONG>,<STRONG> as amended (the "SDW Act")<BR></STRONG>SDW Act regulates,
among other items, the underground injection of liquid wastes in order to
protect usable groundwater from contamination. The SDW Act established the
Underground Injection Control Program ("UIC Program") that provides for the
classification of injection wells into five classes. Class I wells are those
which inject industrial, municipal, nuclear and hazardous wastes below all
underground sources of drinking water in an area. Class I wells are divided into
nonhazardous and hazardous categories with more stringent regulations imposed on
Class I wells which inject hazardous wastes. PFTS' permit to operate its
underground injection disposal wells is limited to nonhazardous
wastewaters.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG></STRONG></FONT><FONT
face="CG Times Regular"><STRONG>The Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA," also referred to as the
"Superfund Act")<BR></STRONG>CERCLA governs the cleanup of sites at which
hazardous substances are located or at which hazardous substances have been
released or are threatened to be released into the environment. CERCLA
authorizes the EPA to compel responsible parties to clean up sites and provides
for punitive damages for noncompliance. CERCLA imposes joint and several
liability for the costs of clean up and damages to natural resources.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Health and Safety
Regulations<BR></STRONG>The operation of the Company's environmental activities
is subject to the requirements of the Occupational Safety and Health Act
("OSHA") and comparable state laws. Regulations promulgated under OSHA by
the</FONT></P>
<P>&nbsp;</P>
<P align=center><FONT face="CG Times Regular">-10-</FONT></P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">Department of Labor require employers of
persons in the transportation and environmental industries, including
independent contractors, to implement hazard communications, work practices and
personnel protection programs in order to protect employees from equipment
safety hazards and exposure to hazardous chemicals.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Atomic Energy Act<BR></STRONG>The
Atomic Energy Act of 1954 governs the safe handling and use of Source, Special
Nuclear and Byproduct materials in the U.S. and its territories. This act
authorized the Atomic Energy Commission (now the Nuclear Regulatory Commission)
to enter into "Agreements with States to carry out those regulatory functions in
those respective states except for Nuclear Power Plants and federal facilities
like the VA hospitals and the DOE operations." The State of Florida (with the
USNRC oversight), Office of Radiation Control, regulates the radiological
program of the PFF facility, and the State of Tennessee (with the USNRC
oversight), Tennessee Department of Radiological Health, regulates the
radiological program of the DSSI and M&amp;EC facilities.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Other Laws<BR></STRONG>Our activities
are subject to other federal environmental protection and similar laws,
including, without limitation, the Clean Water Act, the Clean Air Act, the
Hazardous Materials Transportation Act and the Toxic Substances Control Act.
Many states have also adopted laws for the protection of the environment which
may affect us, including laws governing the generation, handling, transportation
and disposition of hazardous substances and laws governing the investigation and
cleanup of, and liability for, contaminated sites. Some of these state
provisions are broader and more stringent than existing federal law and
regulations. Our failure to conform our services to the requirements of any of
these other applicable federal or state laws</FONT> <FONT
face="CG Times Regular">could subject us to substantial liabilities which could
have a material adverse affect on us, our operations and financial condition. In
addition to various federal, state and local environmental regulations, our
hazardous waste transportation activities are regulated by the U.S. Department
of Transportation, the Interstate Commerce Commission and transportation
regulatory bodies in the states in which we operate. We cannot predict the
extent to which we may be affected by any law or rule that may be enacted or
enforced in the future, or any new or different interpretations of existing laws
or rules.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Insurance<BR></STRONG>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. There can be no assurances, however, that liabilities which may be
incurred by us will be covered by our insurance or that the dollar amount of
such liabilities which are covered will not exceed our policy limits. Under our
insurance contracts, we usually accept self-insured retentions which we believe
appropriate for our specific business risks. We are required by EPA regulations
to carry environmental impairment liability insurance providing coverage for
damages on a claims-made basis in amounts of at least $1 million per occurrence
and $2 million per year in the aggregate. To meet the requirements of customers,
we have exceeded these coverage amounts.</FONT></P>
<TABLE width=653>
    <TR vAlign=top>
    <TD width=68><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular"><STRONG>ITEM 2.</STRONG></FONT></TD>
    <TD width=571><FONT
      face="CG Times Regular"><STRONG>PROPERTIES</STRONG></FONT></TD></TR></TABLE>
<P><FONT face="CG Times Regular"></FONT><FONT face="CG Times Regular">Our
principal executive offices are in Gainesville, Florida. Our Industrial Waste
Management Services segment maintains facilities in Orlando and Ft. Lauderdale,
Florida; Dayton, Ohio; Tulsa, Oklahoma; Valdosta, Georgia; and Detroit,
Michigan. Our Nuclear Waste Management Services segment maintains facilities in
Gainesville, Florida; Kingston, Tennessee; and Oak Ridge, Tennessee. Our
Consulting Engineering Services are located in St. Louis, Missouri. We also
maintain Government Services offices in Jacksonville, Florida; Anniston,
Alabama; San Diego, California; Oklahoma City, Oklahoma; and Honolulu,
Hawaii.</FONT></P>
<P><FONT face="CG Times Regular">We own nine facilities, all of which are in the
United States. Five of our facilities are subject to mortgages as placed by the
Company's senior lender. In addition, we lease ten properties for office space,
all of which are located in the United States as described above. Included in
our leased properties is M&amp;EC's 150,000 square-foot facility, located on the
grounds of the Oak Ridge K-25 weapons facility of the DOE.</FONT></P>
<P>&nbsp;</P>
<P align=center>-11-</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">We believe that the above facilities currently
provide adequate capacity for our operations and that additional facilities are
readily available in the regions in which we operate.</FONT></P>
<TABLE width=653>
    <TR vAlign=top>
    <TD width=67><FONT face="CG Times Regular"><STRONG></STRONG></FONT><FONT
      face="CG Times Regular"><STRONG>ITEM 3.</STRONG></FONT></TD>
    <TD width=572><FONT face="CG Times Regular"><STRONG>LEGAL
      PROCEEDINGS</STRONG></FONT></TD></TR></TABLE>
<P><FONT face="CG Times Regular">PFMI, which was purchased by the Company
effective June 1, 1999, has been advised that it is considered a potentially
responsible party ("PRP") in three Superfund sites, two of which had no
relationship with PFMI according to PFMI records. The relationship of PFMI to
the third site, if any, is currently being investigated by the Company. PFO,
which was also purchased by the Company effective June 1, 1999, has been advised
that it is a PRP in two Superfund sites. The Company is currently investigating
the relationship of PFO to the two sites.</FONT></P>
<P><FONT face="CG Times Regular">PFFL has been advised by the EPA that a release
or threatened release of hazardous substances has been documented by the EPA at
the former facility of Florida Petroleum Reprocessors (the "Site"), which is
located approximately 3,000 feet northwest of the PFFL facility in Davie,
Florida. However, studies conducted by, or under the direction of, the EPA,
together with data previously provided to PFFL by the EPA, do not indicate that
the PFFL facility in Davie, Florida has contributed to the deep groundwater
contamination associated with the Site. As a result, we are unable to determine
with any degree of certainty what exposure, if any, PFFL may have as a result of
the documented release from the Site.</FONT></P>
<P><FONT face="CG Times Regular">PFD is required to remediate a parcel of leased
property ("Leased Property"), which was formerly used as a Resource Conservation
and Recovery Act of 1976 storage facility that was operated as a storage and
solvent recycling facility by a company that was merged with PFD prior to the
Company's acquisition of PFD. The Leased Property contains certain contaminated
waste in the soils and groundwater. The Company was indemnified by the seller of
PFD for costs associated with remediating the Leased Property, which entails
remediation of soil and/or groundwater restoration. However, during 1995, the
seller filed for bankruptcy. Prior to the acquisition of PFD by the Company, the
seller had established a trust fund ("Remediation Trust Fund"), which it funded
with the seller's stock to support the remedial activity on the Leased Property
pursuant to the agreement with the Ohio Environmental Protection Agency ("Ohio
EPA"). After the Company purchased PFD, it was required to advance $250,000 into
the Remediation Trust Fund due to the reduction in the value of the seller's
stock that comprised the Remediation Trust Fund, which stock had been sold by
the trustee prior to the seller's filing bankruptcy and has subsequently put an
additional $192,000 into the Remediation Trust Fund. PFD has brought action
against the owners and former operators of the Leased Property to remediate the
Leased Property and/or to recover any cost incurred by PFD in connection
therewith.</FONT></P>
<P><FONT face="CG Times">PFMI was previously named as a PRP under the Indiana
state equivalent to the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980 at the Four County Landfill site near
DeLong, Indiana. In March 1999, PFMI the Indiana Department of Environmental
Management ("IDEM"), and the members of the Four County Landfill Group and the
Four County Landfill Operable Unit One RD/RA Group (collectively the "Groups")
entered into an Agreed Order (the "Agreed Order") in an administrative
proceeding before IDEM pursuant to which PFMI received a full and complete
release from the Groups, a covenant from IDEM not to sue or take any
administrative action against PFMI with respect to present or future liability
relating to the site (with the exception of liability, if any, associated with
loss of natural resources), and protection from contribution actions of third
parties relating to the site. On July 13, 2001, the United States of America
(the "Government") filed an action against PFMI and others, including members of
the Groups, seeking to recover response costs allegedly incurred by the United
States Environmental Protection Agency ("EPA") in connection with the Four
County Landfill site. The suit is pending in the United States District Court
for the Northern District of Indiana, South Bend Division, R#D5:01CVO513R.
According to the demand, the Government is seeking to recover approximately
$576,000. The complaint alleges that the defendants are jointly and severally
liable. The action is currently stayed while the parties pursue settlement
negotiations. At this point we are unable to determine what exposure PFMI may
have to the Government in this matter. </FONT></P>
<P>&nbsp;</P>
<P align=center><FONT face="CG Times Regular">-12-</FONT></P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular"></FONT><FONT face="CG Times Regular">In
addition to the above matters and in the normal course of conducting our
business, we are involved in various other litigation. We are not a party to any
litigation or governmental proceeding which our management believes could result
in any judgments or fines against us that would have a material adverse affect
on our financial position, liquidity or results of future operations.</FONT></P>
<TABLE width=653>
    <TR vAlign=top>
    <TD width=74><FONT face="CG Times Regular"><STRONG>ITEM
    4A.</STRONG></FONT></TD>
    <TD width=565><FONT face="CG Times Regular"><STRONG>EXECUTIVE OFFICERS OF
      THE COMPANY</STRONG></FONT></TD></TR></TABLE>
<P><FONT face="CG Times Regular">The following table sets forth, as of the date
hereof, information concerning the Executive Officers of the Company:
<TABLE width=653></FONT>
    <TR vAlign=top>
    <TD align=middle width=14></TD>
    <TD align=middle width=150><FONT
    face="CG Times Regular"><U>NAME</U></FONT></TD>
    <TD align=middle width=54><FONT
    face="CG Times Regular"><U>AGE</U></FONT></TD>
    <TD align=middle width=409><FONT
      face="CG Times Regular"><U>POSITION</U></FONT></TD></TR>
  <TR vAlign=top>
    <TD width=14></TD>
    <TD width=150><FONT face="CG Times Regular">Dr. Louis F. Centofanti<BR>Mr.
      Richard T. Kelecy<BR>Mr. Roger Randall<BR>Mr. Larry McNamara</FONT></TD>
    <TD width=54><FONT face="CG Times Regular">
      <P align=center>58<BR>46<BR>58<BR>52</FONT></P></TD>
    <TD width=409><FONT face="CG Times Regular">Chairman of the Board,
      President and Chief Executive Officer<BR>Chief Financial Officer, Vice
      President and Secretary<BR>President, Industrial Services<BR>President,
      Nuclear Services</FONT></TD></TR></TABLE>
<P><FONT face="CG Times Regular"><STRONG>DR. LOUIS F. CENTOFANTI<BR></STRONG>Dr.
Centofanti has served as Chairman of the Board since he joined the Company in
February 1991. Dr. Centofanti also served as President and Chief Executive
Officer of the Company from February 1991 until September 1995 and again in
March 1996 was elected to serve as President and Chief Executive Officer of the
Company. From 1985 until joining the Company, Dr. Centofanti served as Senior
Vice President of USPCI, Inc., a large hazardous waste management company, where
he was responsible for managing the treatment, reclamation and technical groups
within USPCI. In 1981 he founded PPM, Inc., a hazardous waste management company
specializing in the treatment of PCB contaminated oils which was subsequently
sold to USPCI. From 1978 to 1981, Dr. Centofanti served as Regional
Administrator of the U.S. Department of Energy for the southeastern region of
the United States. Dr. Centofanti has a Ph.D. and a M.S. in Chemistry from the
University of Michigan, and a B.S. in Chemistry from Youngstown State
University.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>MR. RICHARD T. KELECY<BR></STRONG>Mr.
Kelecy was elected Vice-President and Chief Financial Officer in September 1995.
He previously served as Chief Accounting Officer and Treasurer of the Company
since July 1994. From 1992 until June 1994, Mr. Kelecy was Corporate Controller
and Treasurer for Quadrex Corporation. From 1990 to 1992 Mr. Kelecy was Chief
Financial Officer for Superior Rent-a-Car, and from 1983 to 1990 held various
positions at Anchor Glass Container Corporation including Assistant Treasurer.
Mr. Kelecy holds a B.A. in Accounting and Business Administration from
Westminster College.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG></STRONG></FONT><FONT
face="CG Times Regular"><STRONG>MR. ROGER RANDALL<BR></STRONG>Mr. Randall was
elected President of the Industrial Waste Management Services Segment in October
2000. He previously served as Vice President of Industrial Services from
December 1997 to October 2000 and as Vice President/General Manager of PFD since
its acquisition by the Company in June 1994. From June 1992 to June 1994, Mr.
Randall served as General Manager of PFD under the ownership of Quadrex
Corporation. From 1982 to June 1992, Mr. Randall served a variety of management
roles at the Dayton facility, ranging from Operations Manager to Chairman of the
Board and Chief Executive Officer under the ownership of Clark Processing, Inc.
Previous to his involvement with the waste management industry, Mr. Randall
spent 17 years in public education serving a variety of administrative roles. He
has a B.S. from Wittenberg University and an M.A. from Wright State
University.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>MR. LARRY MCNAMARA<BR></STRONG>Mr.
McNamara has served as President of the Nuclear Waste Management Services
Segment since October 2000. From December 1998 to October 2000, he served as
Vice President of the Nuclear Waste Management Services Segment for the
Company's nuclear activities. Between 1997 and 1998, he served as Mixed Waste
Program Manager for Waste Control Specialists (WCS) developing plans for the WCS
mixed waste processing facilities, identifying markets and directing proposal
activities. Between 1996 and 1995, Mr. McNamara was the single point of contact
for the DOD to all state and federal regulators for issues related to disposal
of Low Level Radioactive Waste and served on various National Committees and
advisory groups. Mr. McNamara served, from 1992 to 1995, as Chief of the
Department of Defense Low Level Radioactive Waste office. Between 1986 and 1992
he served as the Chief of Planning for the Department of Army overseeing project
management and program policy for the Army program. Mr. McNamara has a B.S. from
the University of Iowa.</FONT></P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P align=center>-13-</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P align=center><FONT face="CG Times Regular"><STRONG>PART
II</STRONG></FONT></P>
<TABLE width=653>
    <TR vAlign=top>
    <TD width=77><FONT face="CG Times Regular"><STRONG></STRONG></FONT><FONT
      face="CG Times Regular"><STRONG>ITEM 5.</STRONG></FONT> </TD>
    <TD width=562><FONT face="CG Times Regular"><STRONG>MARKET FOR
      REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
    MATTERS</STRONG></FONT></TD></TR></TABLE>
<P><FONT face="CG Times Regular">Our Common Stock, with a par value of $.001 per
share, is traded on the NASDAQ SmallCap Market ("NASDAQ") and the Boston Stock
Exchange ("BSE") under the symbol "PESI" on both NASDAQ and BSE. Effective
December 1996, our Common Stock also began trading on the Berlin Stock Exchange
under the symbol "PES.BE." The following table sets forth the high and low
market trade prices quoted for the Common Stock during the periods shown. The
source of such quotations and information is the NASDAQ online trading history
reports.</FONT></P>
<TABLE width=655>
    <TR vAlign=top>
    <TD width=286></TD>
    <TD width=168>
      <P align=center><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular"><U></U>2001 </FONT></P></TD>
    <TD width=7><FONT face="CG Times Regular"></FONT></TD>
    <TD width=168>
      <P align=center></FONT><FONT face="CG Times Regular">2000</FONT></P></TD></TR>
  <TR vAlign=top>
    <TD width=286></TD>
    <TD width=168>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD width=7></TD>
    <TD width=168>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR></TABLE>
<TABLE width="100%">
    <TR vAlign=top>
    <TD></TD>
    <TD></TD>
    <TD align=middle><FONT face="CG Times Regular">Low</FONT></TD>
    <TD align=middle></TD>
    <TD align=middle><FONT face="CG Times Regular">High</FONT></TD>
    <TD align=middle></TD>
    <TD align=middle><FONT face="CG Times Regular">Low</FONT></TD>
    <TD align=middle></TD>
    <TD align=middle><FONT face="CG Times Regular">High</FONT></TD></TR>
  <TR vAlign=top>
    <TD></TD>
    <TD></TD>
    <TD align=middle>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle></TD>
    <TD align=middle>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle></TD>
    <TD align=middle>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle></TD>
    <TD align=middle>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD><FONT face="CG Times Regular">Common Stock:</FONT>
      <P></P><BR WP="BR1"><BR WP="BR2"></TD>
    <TD><FONT face="CG Times Regular">1st Quarter<BR>2nd Quarter<BR>3rd
      Quarter<BR>4th Quarter </FONT></TD>
    <TD align=right><FONT
      face="CG Times Regular">$1.250<BR>1.620<BR>2.160<BR>2.400</FONT></TD>
    <TD align=right><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right><FONT
      face="CG Times Regular">$2.094<BR>2.810<BR>3.650<BR>3.890</FONT></TD>
    <TD align=right><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right><FONT
      face="CG Times Regular">$1.125<BR>1.250<BR>1.375<BR>1.313</FONT></TD>
    <TD align=right><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right><FONT
      face="CG Times Regular">$1.938<BR>1.750<BR>1.719<BR>2.438</FONT></TD></TR></TABLE>
<P><FONT face="CG Times Regular">Such over-the-counter market quotations reflect
inter-dealer prices, without retail markups or commissions and may not represent
actual transactions.</FONT></P>
<P><FONT face="CG Times Regular">As of March 20, 2002, there were approximately
300 shareholders of record of our Common Stock, including brokerage firms and/or
clearing houses holding shares of our Common Stock for their clientele (with
each brokerage house and/or clearing house being considered as one holder).
However, the total number of beneficial shareholders as of March 20, 2002, was
approximately 3,944.</FONT></P>
<P><FONT face="CG Times Regular">Since our inception, we have not paid any cash
dividends on our Common Stock and have no dividend policy. Our loan agreement
prohibits paying any cash dividends on our Common Stock without prior
approval.</FONT></P>
<P><FONT face="CG Times Regular">In addition to the securities sold by us during
2001, as reported in our Forms 10-Q for the quarters ended March 31, 2001, June
30, 2001 and September 30, 2001, which were not registered under the Securities
Act of 1933, as amended, we sold or issued during the fourth quarter of 2001 the
following securities which were also not registered under the Act:</FONT></P>
<P><FONT face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;On
or about December 31, 2001, pursuant to the terms of a certain Consulting
Agreement<BR>&nbsp;&nbsp;&nbsp;&nbsp; ("Consulting Agreement") entered into
effective as of January 1, 1998, the Company issued
4,057&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of Common Stock in payment
of accrued fees of $9,000 to Alfred C. Warrington IV,
an&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;outside, independent consultant to the
Company, as consideration for certain consulting
services&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;rendered to the Company by
Warrington from October 2000 through September 2001
reduced&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;by an overpayment of fees during
1999. The issuance of Common Stock pursuant to the
Consulting<BR>&nbsp;&nbsp;&nbsp;&nbsp; Agreement was a private placement under
Section 4(2) of the Act. The Consulting
Agreement&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;provides that Warrington will
be paid $1,000 per month of service to the Company, payable,
at&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;the option of Warrington (i) all in
cash, (ii) sixty-five percent in shares of Common Stock and
thirty-<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;five percent in cash, or (iii) all in
Common Stock. If Warrington elects to receive part or all of
his<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;compensation in Common Stock, such will be
valued at seventy-five percent of its "Fair
Market&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Value" (as defined in the
Consulting Agreement). Warrington elected to receive all of his
accrued<BR>&nbsp;&nbsp;&nbsp;&nbsp; compensation from October 2000 through the
end of September 2001 in Common
Stock.&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Warrington represented and
warranted in the Consulting Agreement, inter alia, as
follows:&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the Common Stock is being
acquired for Warrington's own account, and not on behalf of
any&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;other persons; (ii) Warrington is
acquiring the Common Stock to hold for investment, and
not&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;with a view to the resale or
distribution of all or any part of the Common Stock; (iii)
Warrington&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;will not sell or otherwise
transfer the Common Stock in the absence of an effective
registration&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;statement under the Act, or
an opinion of counsel satisfactory to the Company, that the
transfer&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;can be made without violating
the registration provisions of the Act and the rules and regulations</FONT></P>
<P>&nbsp;</P>
<P align=center><FONT face="CG Times Regular">-14-</FONT></P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp; promulgated
thereunder; (iv) Warrington is an "accredited investor" as defined in Rule 501
of&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Regulation D as promulgated under the
Act; (v) Warrington has such knowledge,
sophistication&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and experience in
financial and business matters that he is capable of evaluating the merits and
risks&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of the acquisition of the Common
Stock; (vi) Warrington fully understands the nature, scope
and&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;duration of the limitations on
transfer of the Common Stock as contained in the
Consulting&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Agreement; and (vii)
Warrington understands that a restrictive legend as to transferability will
be&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;placed upon the certificates for any
of the shares of Common Stock received by
Warrington&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;under the Consulting Agreement
and that stop transfer instructions will be given to the
Company's&nbsp;</FONT></P>
<P><FONT face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;transfer agent
regarding such certificates. Mr. Warrington was subsequently elected as a
director&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of the Company in March 2002 to
fill a newly created directorship. Upon his election to
the&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;board the Consulting Agreement was
terminated.</FONT></P>
<TABLE width=653>
    <TR vAlign=top>
    <TD width=63><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular"><STRONG>ITEM 6.</STRONG></FONT></TD>
    <TD width=576><FONT face="CG Times Regular"><STRONG>SELECTED FINANCIAL
      DATA</STRONG></FONT></TD></TR></TABLE>
<P><FONT face="CG Times Regular">The financial data included in this table has
been derived from our audited consolidated financial statements, which have been
audited by BDO Seidman, LLP.</FONT></P>
<TABLE width=653>
    <TR vAlign=top>
    <TD colSpan=2 width=639><FONT face="CG Times Regular"><STRONG>Statement of
      Operations Data:</STRONG> </FONT></TD></TR>
  <TR vAlign=top>
    <TD width=207><FONT face="CG Times Regular">(Amounts in Thousands, Except
      for Share Amounts)</FONT></TD>
    <TD align=middle width=432><FONT face="CG Times Regular"></FONT><BR
      WP="BR1">December 31,</TD></TR>
  <TR vAlign=top>
    <TD width=207></TD>
    <TD align=middle width=432>
      <HR align=right color=#000080 noShade SIZE=3 width="95%">
    </TD></TR></TABLE>
<TABLE width="100%">
    <TR vAlign=top>
    <TD align=right></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle vAlign=bottom><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular"></FONT><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular">2001<SUP>(4)</SUP></FONT></TD>
    <TD align=middle vAlign=bottom><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle vAlign=bottom></FONT><FONT
      face="CG Times Regular"></FONT><FONT
      face="CG Times Regular">2000<SUP>(3)</SUP> </FONT></TD>
    <TD align=middle vAlign=bottom><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle vAlign=bottom></FONT><FONT
      face="CG Times Regular"></FONT><FONT
      face="CG Times Regular">1999<SUP>(1)</SUP> </FONT></TD>
    <TD align=middle vAlign=bottom><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle vAlign=bottom></FONT><FONT
      face="CG Times Regular"></FONT><FONT face="CG Times Regular">1998
    </FONT></TD>
    <TD align=middle vAlign=bottom><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle vAlign=bottom></FONT><FONT
      face="CG Times Regular"></FONT><FONT face="CG Times Regular">1997
    </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=right></TD>
    <TD align=middle colSpan=2 vAlign=bottom>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle colSpan=2 vAlign=bottom>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle colSpan=2 vAlign=bottom>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle colSpan=2 vAlign=bottom>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=middle colSpan=2 vAlign=bottom>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=bottom>
    <TD align=left><FONT
    face="CG Times Regular">Revenues<SUP>(2)</SUP></FONT></TD>
    <TD align=right><FONT face="CG Times Regular">$</FONT></TD>
    <TD align=right><FONT face="CG Times Regular">74,492 </FONT></TD>
    <TD align=right><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right></FONT><FONT face="CG Times Regular">$</FONT></TD>
    <TD align=right><FONT face="CG Times Regular">59,139 </FONT></TD>
    <TD align=right><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right></FONT><FONT face="CG Times Regular">$</FONT></TD>
    <TD align=right><FONT face="CG Times Regular">46,464 </FONT></TD>
    <TD align=right><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right></FONT><FONT face="CG Times Regular">$</FONT></TD>
    <TD align=right><FONT face="CG Times Regular">30,551 </FONT></TD>
    <TD align=right><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right></FONT><FONT face="CG Times Regular">$</FONT></TD>
    <TD align=right><FONT face="CG Times Regular">28,413 </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left><FONT face="CG Times Regular">Net income (loss)
      from<BR>&nbsp;&nbsp;&nbsp;continuing operations</FONT> </TD>
    <TD align=right><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right><FONT face="CG Times Regular">(602)</FONT></TD>
    <TD align=right><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular">(556)</FONT></TD>
    <TD align=right><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right></TD>
    <TD align=right><BR WP="BR1">1,570 </TD>
    <TD align=right><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right></TD>
    <TD align=right><BR WP="BR1">462 </TD>
    <TD align=right><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right></TD>
    <TD align=right><BR WP="BR1">192 </TD></TR>
  <TR vAlign=bottom>
    <TD align=left><FONT face="CG Times Regular">Net loss from
      discontinued<BR></FONT>&nbsp;&nbsp;&nbsp;<FONT
      face="CG Times Regular">operations</FONT> </TD>
    <TD align=right><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right><FONT face="CG Times Regular">--&nbsp; </FONT></TD>
    <TD align=right><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular">--&nbsp; </FONT></TD>
    <TD align=right><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right></TD>
    <TD align=right><BR WP="BR1">--&nbsp; </TD>
    <TD align=right><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right></TD>
    <TD align=right><BR WP="BR1">--&nbsp; </TD>
    <TD align=right><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right></TD>
    <TD align=right><BR WP="BR1">(4,101)</TD></TR>
  <TR vAlign=bottom>
    <TD align=left><FONT face="CG Times Regular">Preferred Stock
      dividends</FONT></TD>
    <TD align=right><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right></FONT><FONT face="CG Times Regular">(145)</FONT></TD>
    <TD align=right><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right></TD>
    <TD align=right></FONT><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular">(206)</FONT></TD>
    <TD align=right><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right></TD>
    <TD align=right></FONT><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular">(308)</FONT></TD>
    <TD align=right><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right></TD>
    <TD align=right></FONT><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular">(1,160)</FONT></TD>
    <TD align=right><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right></TD>
    <TD align=right></FONT><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular">(1,260)</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD align=left><FONT face="CG Times Regular">Gain on Preferred
      Stock<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;redemption</FONT></TD>
    <TD align=right><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right><FONT face="CG Times Regular">--&nbsp; </FONT></TD>
    <TD align=right><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular">--&nbsp; </FONT></TD>
    <TD align=right><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right></TD>
    <TD align=right><BR WP="BR1">188&nbsp; </TD>
    <TD align=right><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right></TD>
    <TD align=right><BR WP="BR1">--&nbsp; </TD>
    <TD align=right><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right></TD>
    <TD align=right><BR WP="BR1">--&nbsp; </TD></TR>
  <TR vAlign=bottom>
    <TD align=left><FONT face="CG Times Regular">Net income (loss)
      applicable<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;to Common Stock
      from<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;continuing operations</FONT> </TD>
    <TD align=right><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right><FONT face="CG Times Regular">(747)</FONT></TD>
    <TD align=right><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular">(762)</FONT></TD>
    <TD align=right><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right></TD>
    <TD align=right><BR WP="BR1"><BR WP="BR2">1,450 </TD>
    <TD align=right><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right></TD>
    <TD align=right><BR WP="BR1"><BR WP="BR2">(698)</TD>
    <TD align=right><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right></TD>
    <TD align=right><BR WP="BR1"><BR WP="BR2">(1,068)</TD></TR>
  <TR vAlign=bottom>
    <TD align=left><FONT face="CG Times Regular">Basic net income (loss)
      per<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common share
      from<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;continuing operations</FONT> </TD>
    <TD align=right></TD>
    <TD align=right>(.03)</TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right>(.04)</TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right>.08 </TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right>(.06)</TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right>(.10)</TD></TR>
  <TR vAlign=bottom>
    <TD align=left><FONT face="CG Times Regular">Diluted net income (loss)
      per<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common share
      from<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;continuing operations</FONT> </TD>
    <TD align=right>$</TD>
    <TD align=right>(.03)</TD>
    <TD align=right></TD>
    <TD align=right>$</TD>
    <TD align=right>(.04)</TD>
    <TD align=right></TD>
    <TD align=right>$</TD>
    <TD align=right>.07 </TD>
    <TD align=right></TD>
    <TD align=right>$</TD>
    <TD align=right>(.06)</TD>
    <TD align=right></TD>
    <TD align=right>$</TD>
    <TD align=right>(.10)</TD></TR>
  <TR vAlign=bottom>
    <TD align=left><FONT face="CG Times Regular">Basic number of
      shares<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;used in computing
      net<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;income (loss) per share</FONT> </TD>
    <TD align=right></TD>
    <TD align=right>27,235</TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right>21,558</TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right>17,488 </TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right>12,028</TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right>10,650</TD></TR>
  <TR vAlign=bottom>
    <TD align=left><FONT face="CG Times Regular">Diluted number of shares
      and<BR>potential common shares<BR>used in computing net<BR>income (loss)
      per share</FONT></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular">27,235</FONT></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right>21,558</TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right>21,224 </TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right>12,028</TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right>10,650</TD></TR></TABLE><FONT
face="CG Times Regular"><STRONG>
<HR align=left color=#000080 noShade SIZE=4>
</STRONG></FONT><B>Balance Sheet Data:</B>
<TABLE width=653>
    <TR vAlign=top>
    <TD width=211></TD>
    <TD align=middle width=428><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular">December 31,</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=211></TD>
    <TD align=middle width=428>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR></TABLE>
<TABLE width="100%">
    <TR vAlign=top>
    <TD align=left></TD>
    <TD align=middle colSpan=2 vAlign=center><FONT
      face="CG Times Regular">2001 </FONT></TD>
    <TD align=middle vAlign=center><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle colSpan=2 vAlign=center><FONT
      face="CG Times Regular">2000 </FONT></TD>
    <TD align=middle vAlign=center><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle colSpan=2 vAlign=center><FONT
      face="CG Times Regular">1999 </FONT></TD>
    <TD align=middle vAlign=center><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle colSpan=2 vAlign=center><FONT
      face="CG Times Regular">1998 </FONT></TD>
    <TD align=middle vAlign=center><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle colSpan=2 vAlign=center><FONT
      face="CG Times Regular">1997 </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left></TD>
    <TD align=middle colSpan=2 vAlign=center>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle vAlign=center></TD>
    <TD align=middle colSpan=2 vAlign=center>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle vAlign=center></TD>
    <TD align=middle colSpan=2 vAlign=center>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle vAlign=center></TD>
    <TD align=middle colSpan=2 vAlign=center>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle vAlign=center></TD>
    <TD align=middle colSpan=2 vAlign=center>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT face="CG Times Regular">Working capital
      (deficit)</FONT></TD>
    <TD align=right vAlign=bottom><FONT face="CG Times Regular">$</FONT></TD>
    <TD align=right><FONT face="CG Times Regular">831 </FONT></TD>
    <TD align=right vAlign=bottom><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right vAlign=bottom></FONT><FONT
    face="CG Times Regular">$</FONT></TD>
    <TD align=right><FONT face="CG Times Regular">(2,829)</FONT></TD>
    <TD align=right vAlign=bottom><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right vAlign=bottom></FONT><FONT
    face="CG Times Regular">$</FONT></TD>
    <TD align=right><FONT face="CG Times Regular">(1,400)</FONT></TD>
    <TD align=right vAlign=bottom><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right vAlign=bottom></FONT><FONT
    face="CG Times Regular">$</FONT></TD>
    <TD align=right><FONT face="CG Times Regular">372 </FONT></TD>
    <TD align=right vAlign=bottom><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right vAlign=bottom></FONT><FONT
    face="CG Times Regular">$</FONT></TD>
    <TD align=right><FONT face="CG Times Regular">754 </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT face="CG Times Regular">Total assets</FONT></TD>
    <TD align=middle vAlign=bottom><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right></FONT><FONT face="CG Times Regular">99,137 </FONT></TD>
    <TD align=middle vAlign=bottom><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=right></FONT><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular">72,771 </FONT></TD>
    <TD align=middle vAlign=bottom><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=right></FONT><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular">54,644 </FONT></TD>
    <TD align=middle vAlign=bottom><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=right></FONT><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular">28,748 </FONT></TD>
    <TD align=middle vAlign=bottom><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=right></FONT><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular">28,570 </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT face="CG Times Regular">Long-term debt </FONT></TD>
    <TD align=middle vAlign=bottom><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right></FONT><FONT face="CG Times Regular">31,146 </FONT></TD>
    <TD align=middle vAlign=bottom><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=right></FONT><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular">25,490 </FONT></TD>
    <TD align=middle vAlign=bottom><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=right></FONT><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular">15,306 </FONT></TD>
    <TD align=middle vAlign=bottom><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=right></FONT><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular">3,042 </FONT></TD>
    <TD align=middle vAlign=bottom><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=right></FONT><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular">4,981 </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT face="CG Times Regular">Total liabilities</FONT></TD>
    <TD align=middle vAlign=bottom><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right></FONT><FONT face="CG Times Regular">56,011 </FONT></TD>
    <TD align=middle vAlign=bottom><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=right></FONT><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular">50,751 </FONT></TD>
    <TD align=middle vAlign=bottom><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=right></FONT><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular">34,825 </FONT></TD>
    <TD align=middle vAlign=bottom><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=right></FONT><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular">12,795 </FONT></TD>
    <TD align=middle vAlign=bottom><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=right></FONT><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular">16,376 </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT face="CG Times Regular">Preferred Stock of
      subsidiary</FONT></TD>
    <TD align=middle vAlign=bottom><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right></FONT><FONT face="CG Times Regular">1,285 </FONT></TD>
    <TD align=middle vAlign=bottom><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=right></FONT><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular">-- </FONT></TD>
    <TD align=middle vAlign=bottom><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=right></FONT><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular">-- </FONT></TD>
    <TD align=middle vAlign=bottom><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=right></FONT><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular">-- </FONT></TD>
    <TD align=middle vAlign=bottom><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=right></FONT><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular">-- </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left><FONT face="CG Times Regular">Stockholders'
equity</FONT></TD>
    <TD align=middle vAlign=bottom><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right></FONT><FONT face="CG Times Regular">41,841 </FONT></TD>
    <TD align=middle vAlign=bottom><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=right></FONT><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular">22,020 </FONT></TD>
    <TD align=middle vAlign=bottom><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=right></FONT><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular">19,819 </FONT></TD>
    <TD align=middle vAlign=bottom><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=right></FONT><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular">15,953 </FONT></TD>
    <TD align=middle vAlign=bottom><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle vAlign=bottom></TD>
    <TD align=right></FONT><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular">12,194 </FONT></TD></TR></TABLE>
<P>&nbsp;</P>
<P align=center>-15-</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular"><SUP>(1)</SUP> Includes financial data of PFO,
PFSG and PFMI as acquired during 1999 and accounted for using the purchase
method of accounting from the date of acquisition, June 1, 1999.</FONT></P>
<P><FONT face="CG Times Regular"><SUP>(2)</SUP> Excludes revenues of PFM, shown
elsewhere as a discontinued operation.</FONT></P>
<P><FONT face="CG Times Regular"><SUP>(3)</SUP> Includes financial data of DSSI
as acquired during 2000 and accounted for using the purchase method of
accounting from the date of acquisition, August 31, 2000.</FONT></P>
<P><FONT face="CG Times Regular"><SUP>(4)</SUP> Includes financial data of
M&amp;EC as acquired during 2001 and accounted for using the purchase method of
accounting from the date of acquisition, June 25, 2001.</FONT></P>
<TABLE width=653>
    <TR vAlign=top>
    <TD width=75><FONT face="CG Times Regular"><STRONG></STRONG></FONT><FONT
      face="CG Times Regular"><STRONG>ITEM 7.</STRONG></FONT></TD>
    <TD width=564><FONT face="CG Times Regular"><STRONG>MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS</STRONG></FONT></TD></TR></TABLE>
<P><FONT face="CG Times Regular">Certain statements contained within this
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" may be deemed "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended (collectively, the "Private
Securities Litigation Reform Act of 1995"). See "Special Note regarding
Forward-Looking Statements" contained in this report.</FONT></P>
<P><FONT face="CG Times Regular">Management's discussion and analysis is based,
among other things, upon our audited consolidated financial statements and
includes the accounts of the Company and our wholly-owned subsidiaries, after
elimination of all significant intercompany balances and
transactions.</FONT></P>
<P><FONT face="CG Times Regular">The following discussion and analysis should be
read in conjunction with our consolidated financial statements and the notes
thereto included in Item 8 of this report.</FONT></P>
<P><FONT face="CG Times Regular"></FONT><FONT
face="CG Times Regular"><STRONG>Critical Accounting Policies and
Estimates<BR></STRONG>In preparing the consolidated financial statements in
conformity with generally accepted accounting principles, 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. The Company believes the following
critical accounting policies affect the more significant estimates used in
preparation of the consolidated financial statements:</FONT></P>
<P><FONT face="CG Times Regular"><EM>Intangible Assets</EM>. Intangible assets
relating to acquired businesses consist primarily of the cost of purchased
businesses in excess of the estimated fair value of net assets acquired
("goodwill") and the recognized permit value of the business. The Company
continually reevaluates the propriety of the carrying amount of permits and
goodwill as well as the amortization period to determine whether current events
and circumstances warrant adjustments to the carrying value and estimates of
useful lives. Effective January 1, 2002, the Company will adopt SFAS 142 and
will obtain a financial valuation of our intangible assets. At this time, the
Company does not believe there will be an impairment to intangible assets, does
not expect a write-down of our intangible assets, and effective January 1, 2002,
will discontinue amortizing indefinite life intangible assets as required by
SFAS 142. </FONT></P>
<P><FONT face="CG Times Regular"><EM>Accrued Closure Costs.</EM> The accrued
closure costs are estimates based on guidelines developed by federal and/or
state regulatory authorities under RCRA. Such costs are evaluated annually and
adjusted for inflationary factors and for approved changes or expansions to the
facilities. Increases due to inflationary factors for the years ended December
31, 2001, 2000 and 1999 have been approximately 2.1%, 1.5% and 1.1%,
respectively, and based on the historical information, the Company does not
expect future inflationary changes to differ materially from the last three
years. 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, which are based on current market conditions. Accrued
closure costs represent a contingent environmental liability </FONT></P>
<P>&nbsp;</P>
<P align=center><FONT face="CG Times Regular">-16-</FONT></P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">to clean up a facility in the event the Company
ceases operations in an existing facility. However, the Company has no
intention, at this time, to close any of our facilities. </FONT></P>
<P><FONT face="CG Times Regular"><EM>Accrued Environmental Liabilities</EM>. The
Company has four remediation projects currently in progress. The current and
long-term accrual amounts for the projects are our best estimates determined
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 that reduce the Company's overall costs, to increased contamination
levels that could arise as the Company completes remediation which could
increase the Company's costs, neither of which the Company anticipates 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. </FONT></P>
<P><FONT face="CG Times Regular"><EM>Disposal Costs.</EM> The Company accrues
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. </FONT></P>
<P><FONT face="CG Times Regular"><EM>Self Insurance. </EM>We have a
self-insurance program for certain health benefits. The cost of such benefits is
recognized as expense in the period in which the claim occurred and includes an
estimate of claims incurred but not reported ("IBNR"), with such estimates based
upon historical trends. Actual health insurance claims may differ materially
from the estimates, as a result of the nature and extent of the actual IBNR
claims paid. The Company maintains separate insurance to cover the excess
liability over an established specific single claim amount and also an aggregate
annual claim total.</FONT></P>
<P><FONT face="CG Times Regular"></FONT><FONT
face="CG Times Regular"><STRONG>Results of Operations<BR></STRONG>The reporting
of financial results and pertinent discussions are tailored to three reportable
segments: Industrial Waste Management Services, Nuclear Waste Management
Services and Consulting Engineering Services.</FONT></P>
<P><FONT face="CG Times Regular">Below are the results of operations for our
years ended December 31, 2001, 2000 and 1999 (amounts in thousands, except for
share amounts):</FONT></P>
<TABLE width=651>
    <TR vAlign=top>
    <TD width=227><FONT face="CG Times Regular">(Consolidated)</FONT></TD>
    <TD align=middle width=67><FONT face="CG Times Regular">2001</FONT></TD>
    <TD align=middle width=4><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle width=45></FONT><FONT face="CG Times Regular">%</FONT></TD>
    <TD align=middle width=3><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle width=63></FONT><FONT
    face="CG Times Regular">2000</FONT></TD>
    <TD align=middle width=5><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle width=45></FONT><FONT face="CG Times Regular">%</FONT></TD>
    <TD align=middle width=6><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle width=63></FONT><FONT
    face="CG Times Regular">1999</FONT></TD>
    <TD align=middle width=3><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle width=46></FONT><FONT
  face="CG Times Regular">%</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=227>
      <HR align=left color=#000080 noShade SIZE=3 width="45%">
    </TD>
    <TD align=middle width=67>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=4></TD>
    <TD align=middle width=45>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=3></TD>
    <TD align=middle width=63>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=5></TD>
    <TD align=middle width=45>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=6></TD>
    <TD align=middle width=63>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=3></TD>
    <TD align=middle width=46>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD width=227><FONT face="CG Times Regular">Net Revenues</FONT> </TD>
    <TD align=right width=67><FONT face="CG Times Regular">$
      74,492&nbsp;</FONT></TD>
    <TD align=right width=4><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=45><FONT
    face="CG Times Regular">100.0&nbsp;</FONT></TD>
    <TD align=right width=3><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=63><FONT face="CG Times Regular">$ 59,139&nbsp;
      </FONT></TD>
    <TD align=right width=5><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=45><FONT face="CG Times Regular">100.0 </FONT></TD>
    <TD align=right width=6><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=63><FONT face="CG Times Regular">$ 46,464 </FONT></TD>
    <TD align=right width=3><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=46><FONT face="CG Times Regular">100.0 </FONT></TD></TR>
  <TR vAlign=top>
    <TD width=227><FONT face="CG Times Regular">Cost of goods sold</FONT> </TD>
    <TD align=right width=67>49,719&nbsp;</TD>
    <TD align=right width=4></TD>
    <TD align=right width=45>66.7&nbsp;</TD>
    <TD align=right width=3></TD>
    <TD align=right width=63>40,910&nbsp;</TD>
    <TD align=right width=5></TD>
    <TD align=right width=45>69.2</TD>
    <TD align=right width=6></TD>
    <TD align=right width=63>31,271</TD>
    <TD align=right width=3></TD>
    <TD align=right width=46><FONT face="CG Times Regular">67.3</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=227></TD>
    <TD align=right width=67>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=4></TD>
    <TD align=right width=45>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=3></TD>
    <TD align=right width=63>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=5></TD>
    <TD align=right width=45>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=6></TD>
    <TD align=right width=63>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=3></TD>
    <TD align=right width=46>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD width=227><FONT
      face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross
      profit</FONT> </TD>
    <TD align=right width=67>24,773&nbsp;</TD>
    <TD align=right width=4></TD>
    <TD align=right width=45>33.3&nbsp;</TD>
    <TD align=right width=3></TD>
    <TD align=right width=63>18,229&nbsp;</TD>
    <TD align=right width=5></TD>
    <TD align=right width=45>30.8&nbsp;</TD>
    <TD align=right width=6></TD>
    <TD align=right width=63>15,193&nbsp;</TD>
    <TD align=right width=3></TD>
    <TD align=right width=46><FONT
  face="CG Times Regular">32.7&nbsp;</FONT></TD></TR></TABLE>
<TABLE width=653>
    <TR vAlign=top>
    <TD width=228><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular">Selling, general and administrative</FONT></TD>
    <TD align=right width=66><FONT
    face="CG Times Regular">14,738&nbsp;</FONT></TD>
    <TD align=right width=5><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=44><FONT
face="CG Times Regular">19.8&nbsp;</FONT></TD>
    <TD align=right width=8><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=56><FONT
    face="CG Times Regular">12,765&nbsp;</FONT></TD>
    <TD align=right width=4><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=49><FONT
face="CG Times Regular">21.6&nbsp;</FONT></TD>
    <TD align=right width=5><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=62><FONT
    face="CG Times Regular">10,299&nbsp;</FONT></TD>
    <TD align=right width=3><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=49><FONT
  face="CG Times Regular">22.2&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=228><FONT face="CG Times Regular">Depreciation and
      amortization&nbsp;</FONT></TD>
    <TD align=right width=66>4,616&nbsp;</TD>
    <TD align=right width=5></TD>
    <TD align=right width=44>6.2&nbsp;</TD>
    <TD align=right width=8></TD>
    <TD align=right width=56>3,651&nbsp;</TD>
    <TD align=right width=4></TD>
    <TD align=right width=49>6.2&nbsp;</TD>
    <TD align=right width=5></TD>
    <TD align=right width=62>2,778&nbsp;</TD>
    <TD align=right width=3></TD>
    <TD align=right width=49><FONT
  face="CG Times Regular">6.0&nbsp;</FONT></TD></TR></TABLE>
<TABLE width=666>
    <TR vAlign=top>
    <TD width=227><FONT face="CG Times Regular">Other income
    (expense)</FONT></TD>
    <TD align=right width=68></TD>
    <TD align=right width=4></TD>
    <TD align=right width=58></TD>
    <TD align=right width=6></TD>
    <TD align=right width=56></TD>
    <TD align=right width=5></TD>
    <TD align=right width=49></TD>
    <TD align=right width=5></TD>
    <TD align=right width=63></TD>
    <TD align=right width=2></TD>
    <TD align=right width=49></TD></TR>
  <TR vAlign=top>
    <TD width=227><FONT
      face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest
      income</FONT></TD>
    <TD align=right width=68>29&nbsp;</TD>
    <TD align=right width=4></TD>
    <TD align=right width=58>--&nbsp;</TD>
    <TD align=right width=6></TD>
    <TD align=right width=56>41&nbsp;</TD>
    <TD align=right width=5></TD>
    <TD align=right width=49>.1&nbsp;</TD>
    <TD align=right width=5></TD>
    <TD align=right width=63>50&nbsp;</TD>
    <TD align=right width=2></TD>
    <TD align=right width=49><FONT
  face="CG Times Regular">.1&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=227><FONT
      face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest
      expense</FONT></TD>
    <TD align=right width=68>(3,038)</TD>
    <TD align=right width=4></TD>
    <TD align=right width=58>(4.1)</TD>
    <TD align=right width=6></TD>
    <TD align=right width=56>(2,132)</TD>
    <TD align=right width=5></TD>
    <TD align=right width=49>(3.6)</TD>
    <TD align=right width=5></TD>
    <TD align=right width=63>(650)</TD>
    <TD align=right width=2></TD>
    <TD align=right width=49><FONT face="CG Times Regular">(1.4)</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=227><FONT
      face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest
      expense-Warrants</FONT></TD>
    <TD align=right width=68>(234)</TD>
    <TD align=right width=4></TD>
    <TD align=right width=58>(.3)</TD>
    <TD align=right width=6></TD>
    <TD align=right width=56>(344)</TD>
    <TD align=right width=5></TD>
    <TD align=right width=49>(.6)</TD>
    <TD align=right width=5></TD>
    <TD align=right width=63>--&nbsp;</TD>
    <TD align=right width=2></TD>
    <TD align=right width=49><FONT
      face="CG Times Regular">--&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=227><FONT
      face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest
      expense-financing fees</FONT></TD>
    <TD align=right width=68>(2,732)</TD>
    <TD align=right width=4></TD>
    <TD align=right width=58>(3.6)</TD>
    <TD align=right width=6></TD>
    <TD align=right width=56>(181)</TD>
    <TD align=right width=5></TD>
    <TD align=right width=49>(.3)</TD>
    <TD align=right width=5></TD>
    <TD align=right width=63>(67)</TD>
    <TD align=right width=2></TD>
    <TD align=right width=49><FONT face="CG Times Regular">(.1)</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=227><FONT
      face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other</FONT></TD>
    <TD align=right width=68>(46)</TD>
    <TD align=right width=4></TD>
    <TD align=right width=58>(.1)</TD>
    <TD align=right width=6></TD>
    <TD align=right width=56>247&nbsp;</TD>
    <TD align=right width=5></TD>
    <TD align=right width=49>.4&nbsp;</TD>
    <TD align=right width=5></TD>
    <TD align=right width=63>121&nbsp;</TD>
    <TD align=right width=2></TD>
    <TD align=right width=49><FONT
  face="CG Times Regular">.3&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=227></TD>
    <TD align=right width=68>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=4></TD>
    <TD align=right width=58>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=6></TD>
    <TD align=right width=56>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=5></TD>
    <TD align=right width=49>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=5></TD>
    <TD align=right width=63>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=2></TD>
    <TD align=right width=49>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD width=227><FONT face="CG Times Regular">Net income (loss)</FONT></TD>
    <TD align=right width=68>(602)</TD>
    <TD align=right width=4></TD>
    <TD align=right width=58>(.8)</TD>
    <TD align=right width=6></TD>
    <TD align=right width=56>(556)</TD>
    <TD align=right width=5></TD>
    <TD align=right width=49>(1.0)</TD>
    <TD align=right width=5></TD>
    <TD align=right width=63>1,570&nbsp;</TD>
    <TD align=right width=2></TD>
    <TD align=right width=49><FONT
  face="CG Times Regular">3.4&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=227><FONT face="CG Times Regular">Preferred Stock
      dividends</FONT></TD>
    <TD align=right width=68>(145)</TD>
    <TD align=right width=4></TD>
    <TD align=right width=58>(.2)</TD>
    <TD align=right width=6></TD>
    <TD align=right width=56>(206)</TD>
    <TD align=right width=5></TD>
    <TD align=right width=49>(.3)</TD>
    <TD align=right width=5></TD>
    <TD align=right width=63>(308)</TD>
    <TD align=right width=2></TD>
    <TD align=right width=49><FONT face="CG Times Regular">(.7)</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=227><FONT face="CG Times Regular">Gain on Preferred
      Stock<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;redemption</FONT></TD>
    <TD align=right width=68><BR>--&nbsp;</TD>
    <TD align=right width=4></TD>
    <TD align=right width=58><BR>--&nbsp;&nbsp;</TD>
    <TD align=right width=6></TD>
    <TD align=right width=56><BR>--&nbsp;</TD>
    <TD align=right width=5></TD>
    <TD align=right width=49><BR>--&nbsp;</TD>
    <TD align=right width=5></TD>
    <TD align=right width=63><BR>188&nbsp;</TD>
    <TD align=right width=2></TD>
    <TD align=right width=49><BR>.4&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width=227></TD>
    <TD align=right width=68>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=4></TD>
    <TD align=right width=58>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=6></TD>
    <TD align=right width=56>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=5></TD>
    <TD align=right width=49>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=5></TD>
    <TD align=right width=63>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=2></TD>
    <TD align=right width=49>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD width=227><FONT face="CG Times Regular">Net income (loss) applicable
      to<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common Stock</FONT></TD>
    <TD align=right width=68><BR>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(747)</TD>
    <TD align=right width=4></TD>
    <TD align=right width=58><BR>(1.0)</TD>
    <TD align=right width=6></TD>
    <TD align=right width=56><BR>$&nbsp;&nbsp;&nbsp;(762)</TD>
    <TD align=right width=5></TD>
    <TD align=right width=49><BR>(1.3)</TD>
    <TD align=right width=5></TD>
    <TD align=right width=63><BR>$&nbsp;&nbsp;&nbsp;1,450&nbsp;</TD>
    <TD align=right width=2></TD>
    <TD align=right width=49><BR>3.1&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width=227></TD>
    <TD align=right width=68>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right width=4></TD>
    <TD align=right width=58>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right width=6></TD>
    <TD align=right width=56>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right width=5></TD>
    <TD align=right width=49>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right width=5></TD>
    <TD align=right width=63>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right width=2></TD>
    <TD align=right width=49>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD></TR>
  <TR vAlign=top>
    <TD width=227><FONT face="CG Times Regular">Basic net income (loss)
      per<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common share</FONT></TD>
    <TD align=right width=68><BR>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (.03)</TD>
    <TD align=right width=4></TD>
    <TD align=right width=58></TD>
    <TD align=right width=6></TD>
    <TD align=right width=56><BR>$&nbsp;&nbsp;&nbsp;&nbsp;(.04)</TD>
    <TD align=right width=5></TD>
    <TD align=right width=49></TD>
    <TD align=right width=5></TD>
    <TD align=right
      width=63><BR>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.08&nbsp;</TD>
    <TD align=right width=2></TD>
    <TD align=right width=49></TD></TR>
  <TR vAlign=top>
    <TD width=227></TD>
    <TD align=right width=68>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right width=4></TD>
    <TD align=right width=58></TD>
    <TD align=right width=6></TD>
    <TD align=right width=56>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right width=5></TD>
    <TD align=right width=49></TD>
    <TD align=right width=5></TD>
    <TD align=right width=63>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right width=2></TD>
    <TD align=right width=49></TD></TR>
  <TR vAlign=top>
    <TD width=227><FONT face="CG Times Regular">Diluted net income (loss)
      per<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common share</FONT> </TD>
    <TD align=right width=68><BR>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(.03)</TD>
    <TD align=right width=4></TD>
    <TD align=right width=58></TD>
    <TD align=right width=6></TD>
    <TD align=right width=56><BR>$ &nbsp;&nbsp;&nbsp;(.04)</TD>
    <TD align=right width=5></TD>
    <TD align=right width=49></TD>
    <TD align=right width=5></TD>
    <TD align=right
      width=63><BR>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.07&nbsp;</TD>
    <TD align=right width=2></TD>
    <TD align=right width=49></TD></TR>
  <TR vAlign=top>
    <TD width=227></TD>
    <TD align=right width=68>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right width=4></TD>
    <TD align=right width=58></TD>
    <TD align=right width=6></TD>
    <TD align=right width=56>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right width=5></TD>
    <TD align=right width=49></TD>
    <TD align=right width=5></TD>
    <TD align=right width=63>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right width=2></TD>
    <TD align=right width=49></TD></TR></TABLE>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P align=center><FONT face="CG Times Regular">-17-</FONT></P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular"><STRONG><U>Summary - Years Ended December 31,
2001 and 2000<BR></U></STRONG>Consolidated revenues increased $15,353,000 or
26.0% for the year ended December 31, 2001, compared to the year ended December
31, 2000. This increase is principally attributable to a full year of additional
revenues resulting from the acquisition of DSSI, effective August 31, 2000,
which contributed approximately $5,095,000 of the increase and the additional
revenues resulting from the acquisition of M&amp;EC, effective June 25, 2001,
which contributed approximately $6,702,000 of the increase. Additionally,
revenues increased in the Nuclear Waste Management Services segment due to the
mixed waste subcontract work preformed for M&amp;EC prior to the acquisition and
from growth in mixed waste revenues driven by the expansion of the mixed waste
treatment facility in North Florida. These factors combined increased revenues
by approximately $17,195,000 in the Nuclear Waste Management Services segment.
Offsetting this increase, were decreases in the Industrial Waste Management
Services segment totaling approximately $1,836,000 and in the Consulting
Engineering Services segment totaling approximately $6,000. The decreases were
primarily due to the harsher weather conditions in the winter months, the impact
of the downturn in the economy and the reduced revenue in September 2001 within
all segments resulting from the tragic events of September 11, 2001. The
strategy to target higher margin business and the expiration of certain
government contracts also contributed to the decrease within the Industrial
Waste Management Services segment.</FONT></P>
<P><FONT face="CG Times Regular">Cost of goods sold increased $8,809,000, or
21.5% for the year ended December 31, 2001, compared to the year ended December
31, 2000. This increase in cost of goods sold reflects principally the increased
operating, disposal and transportation costs corresponding to the increased
revenues from the August 31, 2000, acquisition of DSSI, and the June 25, 2001,
acquisition of M&amp;EC. The acquired facilities contributed additional cost of
goods sold totaling approximately $3,978,000 and $3,887,000, respectively.
Additionally, cost of goods sold increases were experienced in the Nuclear Waste
Management Services segment in conjunction with increased revenues from the
mixed waste subcontract work performed for M&amp;EC prior to the acquisition and
from growth in mixed waste revenues driven by the expansion of the mixed waste
facility in North Florida. Combined, these factors increased cost of goods sold
by $11,628,000 in the Nuclear Waste Management Services segment. Offsetting
these increases, were decreases in cost of goods sold in the Industrial Waste
Management Services segment totaling approximately $2,560,000 and in the
Consulting Engineering Services segment totaling approximately $259,000. These
decreases were in conjunction with the decrease in revenues in these segments
mentioned above and cost reduction programs. </FONT></P>
<P><FONT face="CG Times Regular">Gross profit for the year ended December 31,
2001, increased to $24,773,000, which as a percentage of revenue is 33.3%,
reflecting an increase over the 2000 percent of revenue of 30.8%. This increase
in the gross profit percentage principally reflects the impact of increased
wastewater activity, including certain new processes, the benefit of cost
reduction programs and the impact of targeting higher margin business in the
Industrial Waste Management Services segment. Additionally, the Consulting
Engineering Services segment showed an increase in gross profit percentage
reflecting the benefits from the restructuring and consolidation of our
engineering businesses. Offsetting these increases was a decrease in gross
profit percentage in the Nuclear Waste Management Services segment associated
with the subcontract work performed for M&amp;EC prior to the acquisition at
agreed upon reduced margins and the increased start-up costs incurred as this
segment ramps up to normal activities.</FONT></P>
<P><FONT face="CG Times Regular"></FONT><FONT face="CG Times Regular">Selling,
general and administrative expenses increased $1,973,000 or 15.5% for the year
ended December&nbsp;31, 2001, as compared to the corresponding period for 2000.
The increase in selling, general and administrative expense is principally due
to the acquisition of DSSI, which reflects additional expense of $702,000 for
this facility, as compared to the year ended December 31, 2000. Additionally,
selling, general and administrative expense increased due to the impact of the
acquisition of M&amp;EC, effective June 25, 2001, which resulted in additional
expense of $679,000 and the remaining increase of $592,000 is associated with
additional sales and marketing efforts as we continue to refocus the business
segments into new environmental markets, such as nuclear and mixed waste.
However, as a percentage of revenue, selling,</FONT> <FONT
face="CG Times Regular">general and administrative expenses decreased to 19.8%
for the year ended December 31, 2001, compared to 21.6% for the same period of
2000.</FONT></P>
<P>&nbsp;</P>
<P align=center>-18-</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">Depreciation and amortization expense,
including amortization of intangibles, for the year ended December&nbsp;31,
2001, reflects an increase of approximately $965,000 or 26.4%, as compared to
the year ended December 31, 2000. This increase is principally a result of
additional depreciation and amortization of $304,000 from the August 2000
acquisition of DSSI, and of $722,000 from the acquisition of M&amp;EC in June
2001. These increases were offset by a decrease in depreciation and amortization
expense of approximately $61,000 related to assets becoming fully depreciated.
Depreciation expense for the year ended December 31, 2001, was $3,041,000 which
included $420,000 and $177,000 for the above noted acquisitions in 2000 and
2001, respectively. Amortization expense for the year ended December 31, 2001,
was $1,575,000 which included $129,000 and $545,000 for the above noted
acquisitions in 2000 and 2001, respectively. </FONT></P>
<P><FONT face="CG Times Regular">Interest expense increased approximately
$906,000 for the year ended December 31, 2001, as compared to the corresponding
period of 2000. This increase reflects the impact of DSSI, which was acquired
during August 2000. Two promissory notes were executed in conjunction with the
DSSI acquisition, comprising $6,000,000 of the purchase price, resulting in
approximately $126,000 of additional interest expense for the year 2001. This
increase also reflects the impact of M&amp;EC, which was acquired during June
2001. As a condition of the closing, M&amp;EC entered into two installment
agreements, comprising of the original principal balance of $4,637,000, which
resulted in approximately $218,000 of additional interest expense. The remaining
increase is a direct result of the interest expense on the BHC Interim Funding,
L.P. ("BHC") loan agreement, which totaled $390,000, and the interest expense on
the Associated Mezzanine Investors-PESI, L.P. ("AMI") and Bridge East Capital,
L.P. ("BEC") loan agreement, which totaled $319,000, both related to the
expansion of our mixed waste facilities. This increase is offset by the impact
of lower interest rates due to a drop in the prime lending rate, reduced
borrowing levels on the revolving and term loan with PNC Bank, National
Association ("PNC") and the debt to equity conversion on amounts due to Capital
Bank. Combined, these factors resulted in a decrease in interest expense of
$147,000.</FONT></P>
<P><FONT face="CG Times Regular">Interest expense-Warrants for the year ended
December 31, 2001, was $234,000. This expense reflects the Black-Scholes pricing
valuation for certain Warrants issued to Capital Bank pursuant to the $3,000,000
Unsecured Promissory Note and the $750,000 Unsecured Promissory Note. The notes
required that certain Warrants be issued upon the initial execution of the note
and at monthly intervals until the debt obligations to Capital Bank were repaid
in full. During 2001, the Company issued 315,000 Warrants to Capital Bank
resulting in the above noted expense. See Note 6 to Notes to Consolidated
Financial Statements regarding the repayment of this debt.</FONT></P>
<P><FONT face="CG Times Regular">Interest expense-financing fees increased
approximately $2,551,000 for the year ended December 31, 2001, as compared to
the corresponding period of 2000. This increase is partially due to the
amortization and write-off of unamortized financing fees from the BHC debt of
approximately $2,041,000. The increase is also due to the amortization of PNC
financing fees of $438,000 offset by the financing fees of the previous primary
lender recorded in 2000 of $171,000 and AMI and BEC financing fees of $243,000.
See Liquidity and Capital Resources in this section and Note 6 to Notes to
Consolidated Financial Statements regarding the debt. </FONT></P>
<P><FONT face="CG Times Regular">See Note 10 to Notes to Consolidated Financial
Statements for a reconciliation between the expected tax benefit and the
provision for income taxes as reported. For the years ended December 31, 2001
and 2000, we had no federal income tax liability.</FONT></P>
<P><FONT face="CG Times Regular">Preferred Stock dividends decreased
approximately $61,000, for the year ended December 31, 2001, as compared to the
year ended December 31, 2000. This decrease is principally due to the conversion
of</FONT> <FONT face="CG Times Regular">$1,735,000 (1,735 preferred shares) of
the Preferred Stock into Common Stock in January and April of 2001. See Note 5
to Notes to Consolidated Financial Statements regarding the issuance of
Preferred Stock.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG><U>Summary - Years Ended December 31,
2000 and 1999<BR></U></STRONG>Consolidated revenues increased $12,675,000 or
27.3% for the year ended December 31, 2000, compared to the year ended December
31, 1999. This increase is principally attributable to a full year of additional
revenues resulting from the acquisition of PFO, PFSG and PFMI, effective June 1,
1999, which in</FONT></P>
<P>&nbsp;</P>
<P align=center>-19-</P>
<P align=left>&nbsp;</P>
<P><FONT face="CG Times Regular">the aggregate contributed approximately
$9,641,000 of the increase and the additional revenues resulting from the
acquisition of DSSI, effective August 31, 2000, which contributed approximately
$3,046,000 of the increase. Additionally, revenues increased in the Nuclear
Waste Management Services segment due to the mixed waste subcontract work
performed for M&amp;EC prior to the acquisition offset by a decrease in revenues
in the Consulting Engineering Services segment due to the reduction and
consolidation of the engineering businesses. Furthermore, a decrease was
experienced in the Industrial Waste Management Services segment due to the
closing of an unprofitable service center.</FONT></P>
<P><FONT face="CG Times Regular">Cost of goods sold increased $9,639,000, or
30.8% for the year ended December 31, 2000, compared to the year ended December
31, 1999. This increase in cost of goods sold reflects principally the increased
operating disposal and transportation costs corresponding to the increased
revenues from the June 1, 1999, acquisition of PFO, PFSG and PFMI, and the
August 31, 2000, acquisition of DSSI. The acquired facilities contributed
additional cost of goods sold totaling approximately $7,590,000 and $1,224,000,
respectively. The remaining increases in cost of goods sold reflect internal
growth within the waste management segments, included therein is an increase of
$1,889,000 for the Nuclear Waste Management Services segment in relation to the
increased revenues due to work performed for M&amp;EC. These increases are
partially offset by decreases in cost of goods sold for the Consulting
Engineering Services segment due to the engineering consolidation and for the
Industrial Waste Management Services segment due to the closing of an
unprofitable service center.</FONT></P>
<P><FONT face="CG Times Regular">Gross profit for the year ended December 31,
2000, increased to $18,229,000, which as a percentage of revenue is 30.8%,
reflecting a slight decrease over the 1999 percent of revenue of 32.7%. This
decrease in the gross profit percentage principally reflects increased
transportation and disposal costs at certain facilities, and the negative impact
from increased costs within the Nuclear Waste Management Services segment
resulting from this transitional year impacted by the new permit, license,
construction and expanded operations.</FONT></P>
<P><FONT face="CG Times Regular">Selling, general and administrative expenses
increased $2,466,000 or 23.9% for the year ended December&nbsp;31, 2000, as
compared to the corresponding period for 1999. The increase in selling, general
and administrative expense is principally due to the acquisition of PFO, PFSG
and PFMI, which reflects additional expense of $2,381,000 for these facilities,
as compared to the year ended December 31, 1999. The remaining increases to
selling, general and administrative expenses were related to the acquisition of
DSSI and increases from existing operations which were principally offset by
decreases in selling, general and administrative expenses in our Consulting
Engineering Services segment due to consolidation and the Industrial Waste
Management Services segment due to the closing of an unprofitable service
center. However, as a percentage of revenue, selling, general and administrative
expenses decreased to 21.6% for the year ended December 31, 2000, compared to
22.2% for the same period of 1999. </FONT></P>
<P><FONT face="CG Times Regular">Depreciation and amortization expense,
including amortization of intangibles, for the year ended December&nbsp;31,
2000, reflects an increase of approximately $873,000 or 31.4%, as compared to
the year ended December 31, 1999. This increase is principally a result of
additional depreciation and amortization of $556,000 from the 1999 acquisition
of PFO, PFSG and PFMI, and of $245,000 from the acquisition of DSSI in August
2000. The remaining increase is in direct relation to additional capital
expenditures from existing operations. Depreciation expense for the year ended
December 31, 2000, was $2,702,000 which included $826,000 and $155,000 for the
acquisitions in 1999 and 2000, respectively. Amortization expense</FONT> <FONT
face="CG Times Regular">for the year ended December 31, 2000, was $948,000 which
included $396,000 and $90,000 for the acquisitions in 1999 and 2000,
respectively.</FONT></P>
<P><FONT face="CG Times Regular">Interest expense increased approximately
$1,482,000 for the year ended December 31, 2000, as compared to the
corresponding period of 1999. This increase is principally due to additional
borrowing levels maintained pursuant to facility expansions and acquisition
efforts which totaled $1,055,000. Interim financing obtained pursuant to
acquisition efforts contributed $59,000 to the increase. Additional interest
expense in conjunction with the DSSI acquisition financing for the period from
August 31, 2000 through December 31, 2000, totaled $270,000. Additionally, a
portion of the increase reflects the twelve-month impact on 2000,</FONT></P>
<P>&nbsp;</P>
<P align=center>-20-</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">compared to the seven-month impact on 1999, of
the PFO, PFSG and PFMI debt assumption and acquisition financing, which totals
approximately $98,000.</FONT></P>
<P><FONT face="CG Times Regular">Interest expense-Warrants for the year ended
December 31, 2000, was $344,000. This expense reflects the Black-Scholes pricing
valuation for certain Warrants issued to Capital Bank pursuant to the $3,000,000
Unsecured Promissory Note and the $750,000 Unsecured Promissory Note. The notes
require that certain Warrants be issued upon the initial execution of the note
and at monthly intervals if the debt obligations to Capital have not been repaid
in full. As of December 31, 2000, the Company has issued 705,000 Warrants to
Capital resulting in the above noted expense. See Note 6 to Notes to
Consolidated Financial Statements regarding the debt.</FONT></P>
<P><FONT face="CG Times Regular">Interest expense-financing fees increased
approximately $114,000 for the year ended December 31, 2000, as compared to the
corresponding period of 1999. This increase is principally due to the write-off
of unamortized financing fees from the previous primary lender of approximately
$83,000, and an early termination fee of $40,000 paid to the previous primary
lender for the early termination of the previous primary lender, partially
offset by $9,000 reduction in other financing fees. See Note 6 to Notes to
Consolidated Financial Statements regarding the debt. </FONT></P>
<P><FONT face="CG Times Regular">See Note 10 to Notes to Consolidated Financial
Statements for a reconciliation between the expected tax benefit and the
provision for income taxes as reported.</FONT></P>
<P><FONT face="CG Times Regular">Preferred Stock dividends decreased
approximately $102,000, for the year ended December 31, 2000, as compared to the
year ended December 31, 1999. This decrease is principally due to the conversion
of $350,000 (350 preferred shares) of the Preferred Stock into Common Stock in
February and March of 2000. See Note 5 to Notes to Consolidated Financial
Statements regarding the issuance of Preferred Stock.</FONT></P>
<P><FONT face="CG Times Regular"></FONT><FONT
face="CG Times Regular"><STRONG>Liquidity and Capital Resources of the
Company<BR></STRONG>At December 31, 2001, we had cash of $860,000. This cash
total reflects an increase of $362,000 from December 31, 2000, as a result of
net cash used by continuing operations of $16,000, cash used by discontinued
operations of $188,000, cash used in investing activities of $14,015,000
(principally purchases of equipment, net totaling $4,081,000, cash used for
acquisition consideration and settlements totaling $10,083,000 partially offset
by the proceeds from the sale of property and equipment of $167,000) and cash
provided by financing activities of $14,581,000 (consisting of proceeds from
issuance of stock of $10,635,000, and net debt borrowings of
$3,946,000).</FONT></P>
<P><FONT face="CG Times Regular">Accounts Receivable, net of allowances for
doubtful accounts, totaled $17,191,000, an increase of $956,000 over the
December 31, 2000, balance of $16,235,000. This increase reflects the impact of
the acquisition of M&amp;EC effective June 25, 2001, which had a year end
accounts receivable balance of $4,706,000. This increase was partially offset by
the elimination of receivables in the Nuclear Waste Management Services segment
of $2,657,000 and the Industrial Waste Management Services segment of $364,000
in conjunction with the acquisition of M&amp;EC as these amounts were due from
M&amp;EC prior to the acquisition. The remaining decrease in the accounts
receivable balance totaling $729,000, resulted from increased collection efforts
across all segments, write off of some uncollectible accounts and reduced
revenues within the Industrial Waste Management Services segment.</FONT></P>
<P><FONT face="CG Times Regular">As of December 31, 2001, total consolidated
accounts payable was $7,167,000, a decrease of $642,000 from the December 31,
2000, balance of $7,809,000. The Nuclear Waste Management Services segment had
increases in accounts payable of $526,000, which were attributed to the
acquisition of M&amp;EC and expansion projects at the other mixed waste
facilities. This increase was more than offset by the decreases in accounts
payable in the Industrial Waste Management services segment and the Consulting
Engineering services segment, totaling $1,168,000, that is reflective of the
private placement equity raised during the year, a portion of which was used to
reduce certain payables.</FONT></P>
<P>&nbsp;</P>
<P align=center>-21-</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">Our purchases of new capital equipment for the
twelve-month period ended December 31, 2001, totaled approximately $4,598,000.
These expenditures were for expansion and improvements to the operations
principally within the waste management segments. These capital expenditures
were principally funded by the cash provided by continuing operations, $517,000
through various other lease financing sources and through a portion of the
private placement equity funds and Warrant proceeds raised during the year. We
have budgeted capital expenditures of approximately $11,000,000 for 2002, which
includes completion of certain current projects, as well as other identified
capital and permit compliance purchases. We anticipate funding these capital
expenditures by a combination of lease financing with lenders other than the
equipment financing arrangement discussed above, internally generated funds,
and/or the proceeds received from Warrant exercises.</FONT></P>
<P><FONT face="CG Times Regular">On December 22, 2000, the Company entered into
a Revolving Credit, Term Loan and Security Agreement ("Agreement") with PNC
acting as agent ("Agent") for lenders, and as issuing bank. The Agreement
provides for a term loan in the amount of $7,000,000, which requires principal
repayments based upon a seven-year amortization, payable over five years, with
monthly installments of $83,000 and the remaining unpaid principal balance due
on December 22, 2005. Payments commenced on February 1, 2001. The Agreement also
provided for a revolving line of credit ("Revolving Credit") with a maximum
principal amount outstanding at any one time of $15,000,000. 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 Agent reasonably deems proper and necessary. The
Revolving Credit advances shall be due and payable in full on December 22, 2005.
As of December 31, 2001, our availability under our revolving credit facility
was $4,080,000 based on our eligible receivables.</FONT></P>
<P><FONT face="CG Times Regular">Pursuant to the Agreement the Term Loan bears
interest at a floating rate equal to the prime rate plus 1&nbsp;1/2%, and the
Revolving Credit at a floating rate equal to the prime rate plus 1%. The Company
incurred approximately $2,190,000 in financing fees relative to the solicitation
and closing of this Agreement which are being amortized over the term of the
Agreement. Included in such financing fees are (i) PNC commitment fee of
$220,000, (ii) investment banking fees of $559,000, (iii) investment banking
Warrants valued at $867,000 (non-cash), (iv) legal fees of approximately
$275,000 and (v) appraisals, valuations and other closing related expenses of
approximately $269,000. The Agreement also contains certain management and
credit limit fees payable throughout the term. The loans are subject to a
prepayment fee of 1 1/2% in the first year, 1% in the second and third years and
3/4% after the third anniversary until termination date. </FONT></P>
<P><FONT face="CG Times Regular">As security for prompt payment and performance
of the Agreement, the Company granted a security interest in all receivables,
equipment, general intangibles, inventory, investment property, real property,
subsidiary stock and other assets of the Company and subsidiaries. The Agreement
contains affirmative covenants including, but not limited to, maintenance of
indebtedness and collateral, management reports and disclosures and fair
presentation of financial statements and disclosures. The Agreement also
contains a tangible adjusted net worth covenant and a fixed charge coverage
ratio covenant, both of which began effective March 31, 2001, and which the
Company was in compliance at December 31, 2001.</FONT></P>
<P><FONT face="CG Times Regular">The proceeds of the Agreement were utilized to
repay in full on December 22, 2000, the outstanding balance of the Congress
revolver and term loan, and to repay in full the guaranteed promissory note to
Waste Management Holding, dated August 31, 2000 in the principal amount of
$2,500,000 as incurred pursuant to the DSSI acquisition. The balance of the
Congress revolving loan on December 22, 2000, as repaid pursuant to the PNC
Agreement was $5,491,000. Subsequent to closing, additional funds in the amount
of $1,253,000 were deposited in the Congress revolver and subsequently forwarded
to PNC in January 2001. The balance of the Congress term loan on December 22,
2000 as report pursuant to the PNC Agreement was $2,266,000.</FONT></P>
<P><FONT face="CG Times Regular">In December 2000, the Company entered into an
interest rate swap agreement related to its term loan. This hedge, has
effectively fixed the interest rate on the notional amount of $3,500,000 of the
floating rate</FONT></P>&nbsp;
<P align=center>-22-</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">$7,000,000 PNC term loan debt. The Company will
pay the counterparty interest at a fixed rate equal to the base rate of 6.25%,
for a period from December 22, 2000, through December 22, 2005, in exchange for
the counterparty paying the Company one month LIBOR rate for the same term
(2.14% at December 31, 2001). The value of the interest rate swap at January 1,
2001, was deminimus. At December 31, 2001, the market value of the interest rate
swap was in an unfavorable value position of $158,000 and was recorded as a
liability and the loss was recorded as other comprehensive loss on the Statement
of Stockholders' Equity.</FONT></P>
<P><FONT face="CG Times Regular">Pursuant to the terms of the Stock Purchase
Agreements in connection with the acquisition of Perma-Fix of Orlando, Inc.
("PFO"), Perma-Fix of South Georgia, Inc. ("PFSG") and Perma-Fix of Michigan,
Inc. ("PFMI"), a portion of the consideration was paid in the form of Promissory
Notes, in the aggregate amount of $4,700,000, payable to the former owners of
PFO, PFSG and PFMI. The Promissory Notes are paid in equal monthly installments
of principal and interest of approximately $90,000 over five years with the
first installment due on July 1, 1999, and having an interest rate of 5.5% for
the first three years and 7% for the remaining two years. The aggregate
outstanding balance of the Promissory Notes total $2,495,000 at December 31,
2001, of which $957,000 is in the current portion. Payments of such Promissory
Notes are guaranteed by PFMI under a non-recourse guaranty, which non-recourse
guaranty is secured by certain real estate owned by PFMI. These Promissory Notes
are subject to subordination agreements with the Company's senior and
subordinated lenders.</FONT></P>
<P><FONT face="CG Times Regular">On July 14, 2000, the Company entered into a
letter agreement ("$750,000 Capital Loan Agreement") with Capital Bank-Grawe
Gruppe AG (f/k/a RBB Bank Aktiengesellschaft) organized under the laws of
Austria ("Capital Bank"), pursuant to which Capital Bank, acting as agent for
certain investors who provided the funds, loaned (the "$750,000 Capital Loan")
the Company the aggregate principal amount of $750,000, as evidenced by the
$750,000 Capital Promissory Note in the face amount of $750,000, bearing an
annual interest rate of 10.0% per annum. The purpose of the $750,000 Capital
Loan is to provide interim financing to facilitate the acquisition of DSSI and
M&amp;EC and to fund certain capital expansions at the Company's existing
facilities. The principal amount of this Note and accrued interest thereon was
initially payable in full upon the earlier of (i) December 31, 2000, or (ii) ten
business days after the Company raises $3,000,000 or more through a private
placement of capital securities. On December 19, 2000, this agreement was
amended pursuant to the terms of the PNC Revolving Credit and Term Loan
Agreement, which extended the due date of the principal and interest to July 1,
2001. On September 11, 2001, the Company paid the principal balance of $750,000
and accrued interest of $87,000 with proceeds from the exercise of
Warrants.</FONT></P>
<P><FONT face="CG Times Regular">On August 29, 2000, the Company entered into a
short term bridge loan agreement with Capital Bank in connection with the
Company's acquisition of DSSI. This loan agreement (the "$3,000,000 Capital Loan
Agreement") was between the Company and Capital Bank, pursuant to which Capital
Bank, acting as agent for certain investors who provided the funds, loaned (the
"$3,000,000 Capital Loan") the Company the aggregate principal amount of
$3,000,000, as evidenced by a Promissory Note (the "$3,000,000 Capital</FONT>
<FONT face="CG Times Regular">Promissory Note") in the face amount of
$3,000,000, having an initial maturity date of November 29, 2000 and bearing an
annual interest rate of 12%. On December 19, 2000, this agreement was also
amended pursuant to the terms of the PNC Revolving Credit and Term Loan
Agreement, which extended the due date of the principal and interest to July 1,
2001.</FONT></P>
<P><FONT face="CG Times Regular">The Company entered into an agreement (the
"Exchange Agreement") with Capital Bank, to issue to Capital Bank, as agent for
certain of its accredited investors, 1,893,505 shares of the Company's Common
Stock and a Warrant to purchase up to 1,839,405 shares of Common Stock at an
exercise price of $1.75 per share (the "Capital Bank Warrant"), in satisfaction
of all amounts due or to become due under the $3,000,000 Capital Loan Agreement,
and the related $3,000,000 Capital Promissory Note, including the Company's
obligations to issue to Capital Bank shares of Common Stock if the $3,000,000
Capital Promissory Note was not paid by certain due dates. The $3,000,000
Capital Promissory Note became due on July 1, 2001. The Exchange Agreement was
completed, effective as of July 9, 2001.</FONT></P>
<P><FONT face="CG Times Regular">Upon the closing of the Exchange Agreement, the
Company (a) paid to Capital Bank a closing fee of $325,000, payable $75,000 cash
and by the issuance by the Company of 105,932 shares of the Company's</FONT></P>
<P>&nbsp;</P>
<P align=center><FONT face="CG Times Regular">-23-</FONT></P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">Common Stock, such number of shares being equal
to the quotient of $250,000 divided by the last closing bid price of the Common
Stock as quoted on the NASDAQ on June 26, 2001, and (b) issued certain five year
Warrants for the purchase of up to 625,000 shares of Common Stock at a purchase
price of $1.75 per share.</FONT></P>
<P><FONT face="CG Times Regular">On August 31, 2000, as part of the
consideration for the purchase of DSSI, the Company issued to Waste Management
Holdings a long term unsecured promissory note (the "Unsecured Promissory Note")
in the aggregate principal amount of $3,500,000, bearing interest at a rate of
7% per annum and having a five-year term with interest to be paid annually and
principal due at the end of the term of the Unsecured Promissory
Note.</FONT></P>
<P><FONT face="CG Times Regular">On January 31, 2001, the Company entered into a
definitive loan agreement (the "Loan Agreement"), with BHC. Pursuant to the
terms of the Loan Agreement, BHC agreed to loan to the Company the principal
amount of $6 million (the "BHC Loan"), with $3.5 million of the BHC Loan funded
at the closing of the BHC Loan on February 2, 2001, and an additional $2.5
million funded in March 2001. The outstanding principal amount of the BHC Loan
was payable on March 30, 2002, with interest payable monthly on the outstanding
principal balance of the BHC Loan at the annual rate of $13.75%. The proceeds
from the BHC Loan were used for the Company's working capital purposes and for
construction of M&amp;EC's facility. On July 31, 2001, the Company paid off the
BHC Loan, including interest and early termination fees, with new long term debt
as discussed below in the amount of $5,625,000 and with proceeds from the
Private Placement Offering. Of the original prepaid financing fees of
$2,041,000, the unamortized balance of $1,440,000 was written-off in the quarter
ended September 30, 2001.</FONT></P>
<P><FONT face="CG Times Regular">On July 31, 2001, the Company issued
approximately $5.6 million of its 13.50% Senior Subordinated Notes due July 31,
2006 (the "Notes"). The Notes were issued pursuant to the terms of a Note and
Warrant Purchase Agreement, dated July 31, 2001 (the "Purchase Agreement"),
between the Company, AMI, and BEC. The Notes are unsecured and are
unconditionally guaranteed by the subsidiaries of the Company. The Company's
payment obligations under the Notes are subordinate to the Company's payment
obligations to its primary lender and to certain other debts of the Company up
to an aggregate amount of $25 million. The net proceeds from the sale of the
Notes were used to repay the BHC short-term loan agreement. </FONT></P>
<P><FONT face="CG Times Regular">Under the terms of the Purchase Agreement, the
Company also issued to AMI and BEC Warrants to purchase up to 1,281,731 shares
of the Company's Common Stock ("Warrant Shares") at an initial exercise price of
$1.50 per share (the "Warrants"), subject to adjustment under certain
conditions. The Warrants were valued at $1,622,000 using the Black-Sholes
Pricing Model and such valuation was recorded as a</FONT> <FONT
face="CG Times Regular">discount to the Notes to be amortized over the term of
the Notes. The Warrants may be exercised at any time during a seven-year term
and provide for cashless exercise. The number of shares issuable upon exercise
of the Warrants is subject to adjustment pursuant to certain anti-dilution
provisions.</FONT></P>
<P><FONT face="CG Times Regular">The Notes may be prepaid at any time, subject
to a 13.50% premium prior to July 31, 2003, a 6.75% premium prior to July 31,
2004, a 3.375% premium prior to July 31, 2005, and no premium thereafter. Upon a
Change of Control of the Company (as defined in the Purchase Agreement) or if
Dr. Louis F. Centofanti ceases for any reason to be the President and Chief
Executive Officer of the Company, the holders of the Notes have the option to
require the Company to prepay all amounts owing under the Notes plus, if the
prepayment is a result of a Change of Control, the applicable prepayment
premium.</FONT></P>
<P><FONT face="CG Times Regular">The holders of at least 25% of the Warrants or
the Warrant Shares may, at any time and from time to time during the term of the
Warrants, request on two occasions registration with the Securities and Exchange
Commission ("SEC") of the Warrant Shares. In addition, the holders of the
Warrants are entitled, subject to certain conditions, to include the Warrant
Shares in a registration statement covering other securities which the Company
proposes to register. On October 1, 2001, the Company filed an S-3 Registration
Statement with the SEC covering the Warrants. Subject to certain approvals by
shareholders, the Company will be filing with the SEC an amendment to the S-3
Registration Statement in the near future. This Registration Statement has not
been declared effective as of the date of this Form 10-K. </FONT></P>
<P>&nbsp;</P>
<P align=center>-24-</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">The Company incurred prepaid financing fees of
approximately $1,296,000 for the closing of the AMI and BEC Notes, which will be
amortized over the term of the notes. Included in such financing fees are (a)
closing fees of $200,000 to AMI and $75,000 to Bridge East Management, LLC; (b)
investment banking fees of $291,000; (c) investment banking Warrants of $389,000
(non-cash); (d) legal fees of $269,000; and (e) other closing related costs of
approximately $72,000.</FONT></P>
<P><FONT face="CG Times Regular">In connection with the sale of the Notes, the
Company, AMI, and BEC entered into an Option Agreement, dated July 31, 2001 (the
"Option Agreement"). Pursuant to the Option Agreement, the Company granted each
Purchaser an irrevocable option requiring the Company to purchase any or all of
the Warrants or the shares of Common Stock issuable under the Warrants (the
"Warrant Shares") then held by the Purchaser (the "Put Option"). The Put Option
may be exercised at any time commencing July 31, 2004, and ending
July</FONT>&nbsp;<FONT face="CG Times Regular">31, 2008. In addition, each
Purchaser granted to the Company an irrevocable option to purchase all the
Warrants or the Warrant Shares then held by the Purchaser (the "Call Option").
The Call Option may be exercised at any time commencing July 31, 2005, and
ending July 31, 2008. The purchase price under the Put Option and the Call
Option is based on the quotient obtained by dividing (a) the sum of six times
the Company's consolidated EBITDA for the period of the 12 most recent
consecutive months minus Net Debt plus the Warrant Proceeds by (b) the Company's
Diluted Shares (as the terms EBITDA, Net Debt, Warrant Proceeds, and Diluted
Shares are defined in the Option Agreement). Pursuant to the guidance under EITF
00-19 on accounting for and financial presentation of securities that could
potentially be settled in a Company's own stock. The put warrants would be
classified outside of equity based on the ability of the holder to require cash
settlement. Also, EITF Topic D-98 discusses the accounting for a security that
will become redeemable at a future determinable date and its redemption is
variable. This is the case with the Warrants as the date is fixed, but the put
or call price varies. The EITF gives two possible methodologies for valuing the
securities. The Company has selected to account for the changes in redemption
value immediately as they occur and the Company will adjust the carrying value
of the security to equal the redemption value at the end of each reporting
period. On December 31, 2001, the purchase price under the Put Option was in a
negative position, and as such no liability was recorded for the redemption of
the Put Option.</FONT></P>
<P><FONT face="CG Times Regular">In connection with the sale of the Notes, Ann
L. Sullivan Living Trust, dated September 6, 1978, and the Thomas P. Sullivan
Living Trust, dated September 8, 1978 (collectively the "Sullivan Trusts") each
have entered into a certain Subordination Agreement, dated July 30, 2001. Thomas
P. Sullivan, a trustee of the Thomas P. Sullivan Living Trust, is a director of
the Company. Under the terms of the Subordination</FONT> <FONT
face="CG Times Regular">Agreement, the Sullivan Trusts have subordinated all
amounts owing by the Company to the Sullivan Trusts in favor of the Company's
obligations under the Notes. Notwithstanding the subordination, the Company may
(a) as long as no event of default under the Purchase Agreement has occurred and
is continuing and if such payments would not create an event of default,
continue to make regularly scheduled payments of principal and interest owing
under certain promissory notes, dated May 28, 1999, in the original aggregate
principal amount of $4.7 million, which were issued to the Sullivan Trusts in
connection with the Company's acquisition of Perma-Fix of Michigan, Inc.,
Perma-Fix of South Georgia, Inc., and Perma-Fix of Orlando, Inc.; and (b) make
such payments as may be required pursuant to a certain Mortgage, dated May 28,
1999, by Perma-Fix of Michigan, Inc. in favor of the Sullivan Trusts. The
outstanding principal amount due to the Sullivan Trusts is approximately $2.5
million.</FONT></P>
<P><FONT face="CG Times Regular">In conjunction with the Company's acquisition
of M&amp;EC, M&amp;EC entered into an installment agreement with the Internal
Revenue Service ("IRS") for a principal amount of $913,000 dated June 7, 2001,
for certain withholding taxes owed by M&amp;EC. The installment agreement is
payable over eight years on a semiannual basis on June 30 and December 31.
Interest is accrued at the applicable law rate ("Applicable Rate") pursuant to
the provisions of section 6621 of the Internal Revenue Code of 1986 as amended.
Such rate is adjusted on a quarterly basis and payable in lump sum at the end of
the installment period. On December 31, 2001, the rate was 8% (see Note 6). On
December 31, 2001, the outstanding balance is $941,000 including accrued
interest of approximately $38,000.</FONT></P>
<P><FONT face="CG Times Regular">M&amp;EC also issued a promissory note for a
principal amount of $3.7 million to PDC, dated June 7, 2001, for monies advanced
to M&amp;EC for certain services performed by PDC. The promissory note is
payable over</FONT></P>
<P>&nbsp;</P>
<P align=center>-25-</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">eight years on a semiannual basis on June 30
and December 31. Interest is accrued at the applicable rate (8.00% on December
31, 2001) and payable in lump sum at the end of the loan period. On December 31,
2001, the outstanding balance is $3,809,000 including accrued interest of
approximately $175,000. PDC has directed M&amp;EC to make all payments under the
promissory note directly to the IRS to be applied to PDC's obligations under its
installment agreement with the IRS (see Note 4).</FONT></P>
<P><FONT face="CG Times Regular">The following table summarizes the Company's
contractual obligations at December 31, 2001, and the effect such obligations
are expected to have on its liquidity and cash flow in future periods, (in
thousands):</FONT></P>
<TABLE width=630>
    <TR vAlign=bottom>
    <TD width=18></TD>
    <TD colSpan=2 width=171></TD>
    <TD align=middle vAlign=top width=65><FONT
    face="CG Times Regular"></FONT></TD>
    <TD align=middle vAlign=top width=18></TD>
    <TD align=middle colSpan=7 vAlign=top width=326></FONT><FONT
      face="CG Times Regular"></FONT><FONT face="CG Times Regular">Payments due
      by period</FONT></TD></TR>
  <TR vAlign=bottom>
    <TD width=18></TD>
    <TD colSpan=2 width=171></TD>
    <TD align=middle vAlign=top width=65></TD>
    <TD align=middle vAlign=top width=18></TD>
    <TD align=middle colSpan=7 vAlign=top width=326>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD width=18></TD>
    <TD colSpan=2 width=171><FONT face="CG Times Regular"><BR>Contractual
      Obligations</FONT></TD>
    <TD align=middle vAlign=bottom width=65><FONT
      face="CG Times Regular">Total</FONT></TD>
    <TD align=middle vAlign=bottom width=18><FONT
      face="CG Times Regular"></FONT></TD>
    <TD align=middle vAlign=bottom width=65><FONT face="CG Times Regular">Less
      than<BR>1 year</FONT> </TD>
    <TD align=middle vAlign=bottom width=14><FONT
      face="CG Times Regular"></FONT></TD>
    <TD align=middle vAlign=bottom width=62></FONT><FONT
      face="CG Times Regular">1-3 years</FONT></TD>
    <TD align=middle vAlign=bottom width=10><FONT
      face="CG Times Regular"></FONT></TD>
    <TD align=middle vAlign=bottom width=59></FONT><FONT
      face="CG Times Regular">4-5 years</FONT></TD>
    <TD align=middle vAlign=bottom width=13><FONT
      face="CG Times Regular"></FONT></TD>
    <TD align=middle vAlign=bottom width=67><FONT
      face="CG Times Regular">After 5<BR>&nbsp;years</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=18></TD>
    <TD colSpan=2 width=171>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle vAlign=bottom width=65>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle vAlign=bottom width=18></TD>
    <TD align=middle vAlign=bottom width=65>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle vAlign=bottom width=14></TD>
    <TD align=middle vAlign=bottom width=62>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle vAlign=bottom width=10></TD>
    <TD align=middle vAlign=bottom width=59>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle vAlign=bottom width=13></TD>
    <TD align=middle vAlign=bottom width=67>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD width=18></TD>
    <TD colSpan=2 width=171></TD>
    <TD align=middle vAlign=bottom width=65></TD>
    <TD align=middle vAlign=bottom width=18></TD>
    <TD align=middle vAlign=bottom width=65></TD>
    <TD align=middle vAlign=bottom width=14></TD>
    <TD align=middle vAlign=bottom width=62></TD>
    <TD align=middle vAlign=bottom width=10></TD>
    <TD align=middle vAlign=bottom width=59></TD>
    <TD align=middle vAlign=bottom width=13></TD>
    <TD align=middle vAlign=bottom width=67></TD></TR>
  <TR vAlign=bottom>
    <TD width=18></TD>
    <TD colSpan=2 width=171><FONT face="CG Times Regular">Long-term
    debt</FONT></TD>
    <TD align=right vAlign=top width=65><FONT face="CG Times Regular">$31,146
      </FONT></TD>
    <TD align=right vAlign=top width=18><FONT
    face="CG Times Regular"></FONT></TD>
    <TD align=right vAlign=top width=65></FONT><FONT
      face="CG Times Regular">$2,989 </FONT></TD>
    <TD align=right vAlign=top width=14><FONT
    face="CG Times Regular"></FONT></TD>
    <TD align=right vAlign=top width=62></FONT><FONT
      face="CG Times Regular">$21,082 </FONT></TD>
    <TD align=right vAlign=top width=10><FONT
    face="CG Times Regular"></FONT></TD>
    <TD align=right vAlign=top width=59></FONT><FONT
      face="CG Times Regular">$6,135 </FONT></TD>
    <TD align=right vAlign=top width=13><FONT
    face="CG Times Regular"></FONT></TD>
    <TD align=right vAlign=top width=67></FONT><FONT
      face="CG Times Regular">$940 </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD width=18></TD>
    <TD colSpan=2 width=171><FONT face="CG Times Regular">Operating
      leases</FONT></TD>
    <TD align=right width=65><FONT face="CG Times Regular">6,198 </FONT></TD>
    <TD align=right width=18><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=65></FONT><FONT face="CG Times Regular">1,859
    </FONT></TD>
    <TD align=right width=14><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=62></FONT><FONT face="CG Times Regular">3,667
    </FONT></TD>
    <TD align=right width=10><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=59></FONT><FONT face="CG Times Regular">672
    </FONT></TD>
    <TD align=right width=13><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=67></FONT><FONT face="CG Times Regular">--
  </FONT></TD></TR>
  <TR vAlign=bottom>
    <TD width=18></TD>
    <TD colSpan=2 width=171></TD>
    <TD align=right width=65>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=18></TD>
    <TD align=right width=65>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=14></TD>
    <TD align=right width=62>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=10></TD>
    <TD align=right width=59>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=13></TD>
    <TD align=right width=67>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=bottom>
    <TD width=18></TD>
    <TD width=2><FONT face="CG Times Regular"></FONT></TD>
    <TD width=163><FONT
      face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total
      contractual<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;obligations</FONT></TD>
    <TD align=right vAlign=top width=65><FONT
      face="CG Times Regular"><BR>$37,344 </FONT></TD>
    <TD align=right vAlign=top width=18><FONT
    face="CG Times Regular"></FONT></TD>
    <TD align=right vAlign=top width=65><FONT
      face="CG Times Regular"><BR>$4,848 </FONT></TD>
    <TD align=right vAlign=top width=14><FONT
    face="CG Times Regular"></FONT></TD>
    <TD align=right vAlign=top width=62><FONT
      face="CG Times Regular"><BR>$24,749 </FONT></TD>
    <TD align=right vAlign=top width=10><FONT
    face="CG Times Regular"></FONT></TD>
    <TD align=right vAlign=top width=59><FONT
      face="CG Times Regular"><BR>$6,807 </FONT></TD>
    <TD align=right vAlign=top width=13><FONT
    face="CG Times Regular"></FONT></TD>
    <TD align=right vAlign=top width=67><FONT face="CG Times Regular"><BR>$940
      </FONT><FONT face=Arial></FONT></TD></TR>
  <TR vAlign=bottom>
    <TD width=18></TD>
    <TD width=2></TD>
    <TD width=163></TD>
    <TD align=right vAlign=top width=65>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right vAlign=top width=18></TD>
    <TD align=right vAlign=top width=65>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right vAlign=top width=14></TD>
    <TD align=right vAlign=top width=62>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right vAlign=top width=10></TD>
    <TD align=right vAlign=top width=59>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right vAlign=top width=13></TD>
    <TD align=right vAlign=top width=67>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD></TR></TABLE>
<P><FONT face="CG Times Regular"></FONT><FONT face="CG Times Regular">The
Company has outstanding 2,500 shares of Preferred Stock, with each share having
a liquidation preference of $1,000 ("Liquidation Value"). Annual dividends on
the Preferred Stock are 5% of the Liquidation Value. Dividends on the Preferred
Stock are cumulative, and are payable, if and when declared by the Company's
Board of Directors, on a semiannual basis. Dividends on the outstanding
Preferred Stock may be paid at the option of the Company, if declared by the
Board of Directors, in cash or in the shares of the Company's Common Stock as
described under Note 5 to Notes to Consolidated Financial Statements. Under the
terms of the Company's loan agreement, the Company may not pay these dividends
in cash without the lender's prior consent.</FONT></P>
<P><FONT face="CG Times Regular">The working capital position at December 31,
2001, was $831,000, as compared to a working capital deficit of $2,829,000 at
December 31, 2000. The increase in this position of $3,660,000 is principally a
result of the exchange of short term debt for equity. In July 2001 pursuant to
the Exchange Agreement with</FONT> <FONT face="CG Times Regular">Capital Bank,
the Company exchanged $3,000,000 in short-term debt for the Company's Common
Stock. During 2001 the Company also paid off $750,000 in short-term debt owed
Capital Bank with proceeds from Warrant exercises.</FONT></P>
<P><FONT face="CG Times Regular">On June 25, 2001, the Company completed the
acquisition of M&amp;EC, pursuant to the terms of the Stock Purchase Agreement,
dated January 18, 2001, (the "Purchase Agreement"), between the Company,
M&amp;EC, all of the shareholders of M&amp;EC and Bill Hillis. Pursuant to the
terms of the Purchase Agreement, all of the outstanding voting stock of M&amp;EC
was acquired by the Company and M&amp;EC with (a) M&amp;EC acquiring 20% of the
outstanding shares of voting stock of M&amp;EC (held as treasury stock), and (b)
the Company acquiring all of the remaining outstanding shares of M&amp;EC voting
stock (collectively, the "M&amp;EC Acquisition"). As a result, the Company now
owns all of the issued and outstanding voting capital stock of
M&amp;EC.</FONT></P>
<P><FONT face="CG Times Regular">The purchase price paid by the Company for the
M&amp;EC voting stock was approximately $2,396,000, which was paid by the
Company issuing 1,597,576 shares of the Company's Common Stock to the
shareholders of M&amp;EC, with each share of Common Stock having an agreed value
of $1.50, the closing price of the Common Stock as represented on the NASDAQ on
the date of the initial letter of intent relating to this acquisition. In
addition, as partial consideration of the M&amp;EC Acquisition, M&amp;EC issued
shares of its newly created Series B Preferred Stock to shareholders of M&amp;EC
having a stated value of approximately $1,285,000.<STRONG> </STRONG>The Series B
Preferred Stock is non-voting and non-convertible, has a $1.00 liquidation
preference per share and may be redeemed at the option of M&amp;EC at any time
after one year from the date of issuance for the per share price of $1.00.
Following the first 12 months after the original issuance of the Series B
Preferred Stock, the holders of the Series B Preferred Stock will be entitled to
receive, when, as, and if declared by the Board of Directors of M&amp;EC out of
legally available funds, dividends at the rate of 5% per year per share applied
to the amount of $1.00 per share, which shall be fully cumulative. As a
condition to the closing of the acquisition, the Company also issued 346,666
shares of the Company's Common Stock to certain creditors of M&amp;EC in
satisfaction of $520,000 of M&amp;EC's liabilities.</FONT></P>
<P>&nbsp;</P>
<P align=center>-26-</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">Prior to the date of acquisition, the Company
was operating under a subcontract agreement for the design and construction of
M&amp;EC's facility. Pursuant to the subcontract agreement, the Company, as of
the date of acquisition, had loaned and advanced M&amp;EC approximately $2.3
million for working capital purposes and had billed approximately $9.8 million
related to the construction of the new facility. At the date of closing, the
Company advanced funds to M&amp;EC to pay certain liabilities to the IRS, 401(k)
plans and several debt holders, in the aggregate amount of $2,048,000. During
2001, the net cash used for acquisition, including the above noted construction
and advanced funds, totaled approximately $10,083,000.</FONT></P>
<P><FONT face="CG Times Regular">As a condition to the closing of the M&amp;EC
Acquisition, M&amp;EC entered into an installment agreement with the Internal
Revenue Service (the "IRS") relating to various withholding taxes owing by
M&amp;EC in the amount of approximately $923,000 ("M&amp;EC Installment
Agreement"). The M&amp;EC Installment Agreement provides for the payment of such
withholding taxes over a term of approximately eight years. In addition, as a
condition to such closing, one of M&amp;EC's shareholders, Performance
Development Corporation, a Tennessee corporation ("PDC") and two corporations
affiliated with PDC, PDC Services Corporation ("PDC Services") and Management
Technologies, Inc. ("MTI") each entered into an installment agreement with the
IRS relating to withholding taxes owing by each of PDC, PDC Services and MTI
("PDC Installment Agreement"). The PDC Installment Agreement provides for the
payment of semiannual installments over a term of eight years in the aggregate
amount of approximately $3,714,000. The M&amp;EC Installment Agreement and the
PDC Installment Agreement provides that (a) the Company does not have any
liability for any taxes, interest or penalty with respect to M&amp;EC, PDC, PDC
Services or MTI; (b) M&amp;EC will be solely liable for paying the obligations
of M&amp;EC under the M&amp;EC Installment Agreement; (c) the IRS will not
assert any liability against the Company, M&amp;EC or any current or future
related affiliate of the Company</FONT> <FONT face="CG Times Regular">for any
tax, interest or penalty of PDC, PDC Services or MTI; and (d) as long as the
payments of M&amp;EC under its installment agreement are made timely, pursuant
to the terms of the installment agreement, the IRS will not file a notice of a
federal tax lien, change or cancel the installment agreement, or take any other
type of action against M&amp;EC with respect to the withholding taxes and
interest set forth in the installment agreement. The Company did not acquire any
interest in PDC, PDC Services or MTI.</FONT></P>
<P><FONT face="CG Times Regular">Prior to the closing of the M&amp;EC
Acquisition, PDC had advanced monies to, and performed certain services for
M&amp;EC totaling an aggregate of $3.7 million. In payment of such advances and
services and as a condition to closing, M&amp;EC issued a Promissory Note, dated
June 7, 2001, to PDC in the principal amount of approximately $3.7 million. The
promissory note is payable over eight years to correspond to payments due to the
IRS under the PDC Installment Agreement. PDC has directed M&amp;EC to make all
payments under the promissory note directly to the IRS to be applied to PDC's
obligations under its installment agreement with the IRS. </FONT></P>
<P><FONT face="CG Times Regular">In connection with the closing of the M&amp;EC
Acquisition, the Company also made certain corrective contributions to
M&amp;EC's 401(k) Plan and to the 401(k) Plan of PDC. The total amount of
corrective contributions made to the M&amp;EC 401(k) Plan and the PDC 401(k)
Plan was $1.8 million. The Company utilized a portion of the proceeds of its
private placement offering described in Note 11 and a portion of its working
capital line of credit to fund the corrective contributions to the 401(k) Plans
described above.</FONT></P>
<P><FONT face="CG Times Regular">On August 31, 2000, the Company purchased all
of the outstanding capital stock of DSSI and paid $8,500,000, as follows: (i)
$2,500,000 in cash at closing, (ii) a guaranteed promissory note (the
"Guaranteed Note"), guaranteed by DSSI, with the DSSI guarantee secured by
certain assets of DSSI (except for accounts receivable, general intangibles,
contract rights, cash, real property and proceeds thereof), executed by the
Company in favor of Waste Management Holdings in the aggregate principal amount
of $2,500,000 and bearing interest at a rate equal to the prime rate charged on
August 30, 2000, as published in the <EM>Wall Street Journal</EM> plus 1.75% per
annum and having a term of the lesser of 120 days from August 31, 2000, or the
business day that the Company acquires any entity or substantially all of the
assets of an entity (the "Guaranteed Note Maturity Date"), with interest and
principal due in a lump sum at the end of the Guaranteed Note Maturity Date, and
(iii) an unsecured promissory note (the "Unsecured Promissory Note"), executed
by the Company in favor of Waste Management Holdings in the aggregate principal
amount of</FONT></P>
<P>&nbsp;</P>
<P align=center>-27-</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">$3,500,000, and bearing interest at a rate of
7% per annum and having a five-year term with interest to be paid annually and
principal due at the end of the term of the Unsecured Promissory Note.<STRONG>
</STRONG>The $2.5 million guaranteed promissory note was paid in December 2000,
using proceeds received under our new senior credit facility. The cash portion
of the purchase price for DSSI was obtained pursuant to the terms of the
$3,000,000 Capital Loan Agreement, whereby Capital Bank loaned (the "$3,000,000
Capital Loan") the Company the aggregate principal amount of $3,000,000, as
evidenced by the $3,000,000 Capital Promissory Note, having a maturity date of
July 1, 2001, and bearing an annual interest rate of 12%. On July&nbsp;9, 2001,
the $3,000,000 Capital loan was paid in full through the Exchange
Agreement.</FONT></P>
<P><FONT face="CG Times Regular">On June 1, 1999, the Company purchased all of
the outstanding stock of PFO, PFSG and PFMI and paid $8.7 million, as follows:
(i) $1 million in cash, (ii) five (5) year promissory notes totaling the
original principal amount of $4.7 million, bearing an annual rate of interest of
5.5% for the first three years and 7% for the last two years, with principal and
accrued interest payable in monthly installments of approximately $90,000 each,
and (iii) $3 million payable in the form of 1.5 million shares of the Company's
Common Stock based on each share having an agreed value of $2.00. If the average
of the closing price of the Company's Common Stock as quoted on the NASDAQ for
the five (5) trading days immediately preceding the date eighteen (18) months
after June 1, 1999 ("Valuation Date") is less than $2.00 per share, the Company
is to pay in cash or Common Stock or a combination thereof, at the Company's
option, the difference between</FONT> <FONT face="CG Times Regular">$3 million
and the value of the 1.5 million shares of Common Stock based on the five (5)
trading day average as quoted on the NASDAQ immediately preceding the Valuation
Date. Under the Company's loan agreement, the Company may pay such amount, if
any, only in Common Stock unless the lender agrees that the Company may satisfy
such in whole or in part in cash. However, the Company is not to issue in
connection with the acquisition of PFO, PFSG and PFMI more than 18% of the
outstanding shares of Common Stock at the closing of the acquisition of PFO,
PFSG and PFMI. In December 2000, 55,904 shares of Common Stock were issued
pursuant to the guarantee with the average price for the five days proceeding
the end of the valuation date being $1.93.</FONT></P>
<P><FONT face="CG Times Regular">On April 6, 2001, the Company commenced a
private placement offering of units (the "Offering") to accredited investors.
Each unit is comprised of one share of the Company's Common Stock and one
Warrant to purchase one share of Common Stock. The purchase price for each unit
was $1.75, and the exercise price of each Warrant included in the units is
$1.75, subject to adjustment under certain conditions. On June 15, 2001, the
Company revised the offering terms to comply with NASDAQ requirements. The
maximum units were reduced to 4.4 million from the original 5 million. The
amendment also required the Company to obtain shareholder approval prior to
exercising the Warrants issued as part of the units. Pursuant to the terms of
the Offering, the Company filed a preliminary proxy statement on October 19,
2001, for a Special Meeting of Shareholders to obtain approval for the exercise
of the Warrants, which is currently under review by the SEC. The Offering was
made pursuant to an exemption from registration under Section 4(2) of the
Securities Act of 1933, as amended (the "Act"), and/or Rule 506 of Regulation D
promulgated under the Act. The Offering was made only to accredited investors
through one or more broker/dealer placement agents. At the completion of the
offering, on July 30, 2001, 4,397,566 units were accepted for an aggregate
purchase price of $7,696,000. Expenses related to the offering subscriptions,
were approximately $814,000.</FONT></P>
<P><FONT face="CG Times Regular">During 2001, accrued dividends for the period
July 1, 2000, through December 31, 2000, in the amount of approximately $102,000
were paid in March 2001, in the form of 74,038 shares of Common Stock. Dividends
for the period January 1, 2001 through June 30, 2001, of approximately $82,000
were paid in the form of 43,638 shares of Common Stock. The accrued dividends
for the period July 1, 2001, through December 31, 2001, in the amount of
approximately $63,000 were paid in March 2002, in the form of 24,217 shares of
Common Stock. Under the Company's loan agreement, any dividends declared by the
Company's Board of Directors on its outstanding shares of Preferred Stock is
required to be paid in Common Stock of the Company.</FONT></P>
<P><FONT face="CG Times Regular">In summary, we have continued to take steps to
improve our operations and liquidity as discussed above. However, with the
M&amp;EC acquisition in 2001, we incurred and assumed certain debt obligations
and long-term liabilities, which had a short term impact on liquidity. We
anticipate continued improvement in the </FONT></P>
<P>&nbsp;</P>
<P align=center>-28-</P>
<P align=left>&nbsp;</P>
<P><FONT face="CG Times Regular">&nbsp;financial performance of the Company. If
we are unable to continue to improve our operations and, to become profitable on
an annualized basis, such would have a material adverse effect on our liquidity
position. </FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Discontinued Operations<BR></STRONG>On
January 27, 1997, an explosion and resulting tank fire occurred at the PFM
facility, a hazardous waste storage, processing and blending facility, located
in Memphis, Tennessee, which resulted in damage to certain hazardous waste
storage tanks located on the facility and caused certain limited contamination
at the facility. As a result of the damage and the related cost to rebuild this
operating unit, we decided to discontinue this line of business. Upon evaluation
of the above business decision, and given the loss of both the existing line of
business and its related customer base, we previously reported the Memphis
segment as a discontinued operation, pursuant to Paragraph 13 of APB 30. The
Company reclassified PFM balance sheet items to the corresponding accounts in
continuing operations for the periods ending December 31, 2001 and 2000, as the
remaining balances are solely for long-term remediation and closure purposes and
are better represented in the corresponding accrual accounts.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Known Trends and
Uncertainties<BR></STRONG><EM>Seasonality</EM>. Historically the Company has
experienced operating losses or decreased operating profits during the first and
fourth quarters of the Company's fiscal years due to a seasonal slowdown in
operations from poor weather conditions and overall reduced activities during
the holiday season. During the Company's second and third fiscal quarters there
has historically been an increase in operating profits. Management expects this
trend to continue in future years. However, the recent acquisitions and business
developments within the Nuclear Waste Management Services segment have resulted
in increased revenues during the first and fourth quarters of 2001.</FONT></P>
<P><FONT face="CG Times Regular"><EM></EM></FONT><FONT
face="CG Times Regular"><EM>Economic conditions. </EM>Economic downturns or
recessionary conditions can adversely affect the demand for the Company's
services, principally within the Industrial Waste Management Services segment.
Reductions in industrial production generally follow such economic conditions,
resulting in reduced levels of waste being generated and/or sent off for
treatment. The Company believes that its revenues and profits were negatively
affected within this segment by the recessionary conditions in 2001, and the
Company believes that this trend may continue into 2002.<EM></EM></FONT></P>
<P><FONT face="CG Times Regular"><EM>Significant contracts</EM>. The Company's
revenues are principally derived from numerous varied customers. However, PFGS
manages six contracts with the DRMS, a subagency of the DOD, which accounted for
8.0% of total consolidated revenues in 2001, and the newly acquired M&amp;EC
operates under three broad spectrum contracts ("Oak Ridge Contracts") which
attributed 8.5% of total consolidated revenues during 2001. As the Company
operates M&amp;EC for a full year and as expansions to the facility are
completed, the Company could see significantly higher total revenue percentages
increase under the Oak Ridge Contracts. There is no guarantee under the Oak
Ridge Contracts as they can be terminated by either party at any time on 30 days
prior notice, and could leave the Company vulnerable if the contracts were
terminated. The Company is working towards increasing other sources of revenues
at M&amp;EC to reduce the risk of reliance on one major source of
revenues.</FONT></P>
<P><FONT face="CG Times Regular"><EM>Insurance</EM>. The Company maintains
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. The Company evaluates its insurance
policies annually to determine adequacy, cost effectiveness and desired
deductible levels. Due to downturns in the economy and changes within the
environmental insurance market. The Company has no guarantee that it will be
able to obtain similar insurance in future years.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Environmental
Contingencies<BR></STRONG>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;</FONT></P>
<P>&nbsp;</P>
<P align=center>-29-</P>
<P align=left>&nbsp;</P>
<P><FONT face="CG Times Regular">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.</FONT></P>
<P><FONT face="CG Times Regular">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 nonhazardous,
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 wastes 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, in the future, be notified that we
are a PRP at a remedial action site, which could have a material adverse
effect.</FONT></P>
<P><FONT face="CG Times Regular">In addition to budgeted capital expenditures of
$11,000,000 for 2002 at the TSD facilities, which are necessary to maintain
permit compliance, improve operations and expand our business into new markets,
as discussed above under "BUSINESS -- Capital Spending, Certain Environmental
Expenditures" and "Liquidity and Capital Resources of the Company" of this
Management's Discussion and Analysis, we have also budgeted for 2002 an
additional $1,202,000 in environmental expenditures to comply with federal,
state and local regulations in connection with remediation of certain
contaminates at four locations. As previously discussed under "Business --
Capital Spending, Certain Environmental Expenditures and Potential Environmental
Liabilities," the four locations where these 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.
We have estimated the expenditures for 2002 to be approximately $287,000 at the
EPS site, $300,000 at the PFM location, $108,000 at the PFSG site and $507,000
at the PFMI site. Additional funds will be required for the next two to seven
years to properly remediate these sites. We expect to fund these expenses to
remediate these four sites from funds generated internally, however, no
assurances can be made that we will be able to do so.</FONT></P>
<P><FONT face="CG Times Regular">At December 31, 2001, the Company had accrued
environmental liabilities totaling $3,534,000, which reflects a decrease of
$808,000 from the December 31, 2000, balance of $4,342,000. The decrease
represents payments on remediation projects. The December 31, 2001, current and
long-term accrued environmental balance is recorded as follows: </FONT></P>
<TABLE width=653>
    <TR vAlign=top>
    <TD width=144><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular">&nbsp;</FONT></TD>
    <TD align=middle width=85><FONT face="CG Times Regular">PFD</FONT></TD>
    <TD align=middle width=9><FONT face="CG Times Regular">&nbsp;</FONT></TD>
    <TD align=middle width=84><FONT face="CG Times Regular">PFMI</FONT></TD>
    <TD align=middle width=6><FONT face="CG Times Regular">&nbsp;</FONT></TD>
    <TD align=middle width=80><FONT face="CG Times Regular">PFSG</FONT></TD>
    <TD align=middle width=16><FONT face="CG Times Regular">&nbsp;</FONT></TD>
    <TD align=middle width=81><FONT face="CG Times Regular">PFM</FONT></TD>
    <TD align=middle width=11><FONT face="CG Times Regular">&nbsp;</FONT></TD>
    <TD align=middle width=75><FONT face="CG Times Regular">Total</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=144></TD>
    <TD align=middle width=85>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=9></TD>
    <TD align=middle width=84>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=6></TD>
    <TD align=middle width=80>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=16></TD>
    <TD align=middle width=81>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=11></TD>
    <TD align=middle width=75>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD width=144><FONT face="CG Times Regular">Current accrual</FONT></TD>
    <TD align=right width=85><FONT face="CG Times Regular">$287,000</FONT></TD>
    <TD align=right width=9><FONT face="CG Times Regular">&nbsp;</FONT></TD>
    <TD align=right width=84><FONT face="CG Times Regular">$507,000</FONT></TD>
    <TD align=right width=6><FONT face="CG Times Regular">&nbsp;</FONT></TD>
    <TD align=right width=80><FONT face="CG Times Regular">$ 108,000</FONT></TD>
    <TD align=right width=16><FONT face="CG Times Regular">&nbsp;</FONT></TD>
    <TD align=right width=81><FONT face="CG Times Regular">$300,000</FONT></TD>
    <TD align=right width=11><FONT face="CG Times Regular">&nbsp;</FONT></TD>
    <TD align=right width=75><FONT
  face="CG Times Regular">$1,202,000</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=144><FONT face="CG Times Regular">Long-term accrual </FONT></TD>
    <TD align=right width=85><FONT face="CG Times Regular">254,000</FONT></TD>
    <TD align=right width=9><FONT face="CG Times Regular">&nbsp;</FONT></TD>
    <TD align=right width=84><FONT face="CG Times Regular">113,000</FONT></TD>
    <TD align=right width=6><FONT face="CG Times Regular">&nbsp;</FONT></TD>
    <TD align=right width=80><FONT face="CG Times Regular">1,292,000</FONT></TD>
    <TD align=right width=16><FONT face="CG Times Regular">&nbsp;</FONT></TD>
    <TD align=right width=81><FONT face="CG Times Regular">673,000</FONT></TD>
    <TD align=right width=11><FONT face="CG Times Regular">&nbsp;</FONT></TD>
    <TD align=right width=75><FONT
  face="CG Times Regular">2,332,000</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=144></TD>
    <TD align=right width=85>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=9></TD>
    <TD align=right width=84>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=6></TD>
    <TD align=right width=80>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=16></TD>
    <TD align=right width=81>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=11></TD>
    <TD align=right width=75>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD width=144><FONT
      face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total </FONT></TD>
    <TD align=right width=85><FONT face="CG Times Regular">$541,000</FONT></TD>
    <TD align=right width=9><FONT face="CG Times Regular">&nbsp;</FONT></TD>
    <TD align=right width=84><FONT face="CG Times Regular">$620,000</FONT></TD>
    <TD align=right width=6><FONT face="CG Times Regular">&nbsp;</FONT></TD>
    <TD align=right width=80><FONT
face="CG Times Regular">$1,400,000</FONT></TD>
    <TD align=right width=16><FONT face="CG Times Regular">&nbsp;</FONT></TD>
    <TD align=right width=81><FONT face="CG Times Regular">$973,000</FONT></TD>
    <TD align=right width=11><FONT face="CG Times Regular">&nbsp;</FONT></TD>
    <TD align=right width=75><FONT
  face="CG Times Regular">$3,534,000</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=144></TD>
    <TD align=right width=85>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right width=9></TD>
    <TD align=right width=84>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right width=6></TD>
    <TD align=right width=80>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right width=16></TD>
    <TD align=right width=81>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right width=11></TD>
    <TD align=right width=75>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD></TR></TABLE>
<P><FONT face="CG Times Regular"><U></U></FONT><FONT
face="CG Times Regular"><STRONG>Interest Rate Swap<BR></STRONG>The Company
entered into an interest rate swap agreement effective December 22, 2000, to
modify the interest characteristics of its outstanding debt from a floating
basis to a fixed rate, thus reducing the impact of interest rate changes on
future income. This agreement involves the receipt of floating rate amounts in
exchange for fixed rate interest payments over the life of the agreement without
an exchange of the underlying principal amount. The differential to be paid or
received is accrued as interest rates change and recognized as an adjustment to
interest expense related to the debt. The related amount payable to or
receivable from counter parties is included in other assets or liabilities. The
value of the interest rate swap at January 1, 2001, was deminimus. At December
31, 2001, the market value of the interest rate swap was in an unfavorable value
position of $158,000 and was recorded as a liability and the loss was recorded
as other comprehensive loss in the stockholders' equity section of the balance
sheet (see Note 6 to Notes to Consolidated Financial Statements).</FONT></P>
<P><FONT face="CG Times Regular"><STRONG></STRONG></FONT><FONT
face="CG Times Regular"><STRONG>Recent Accounting Pronouncements<BR></STRONG>In
June 2001, the Financial Accounting Standards Board finalized FASB Statements
No. 141, <EM>Business Combinations </EM>("SFAS 141"), and No. 142, <EM>Goodwill
and Other Intangible Assets </EM>("SFAS 142"). SFAS</FONT></P>
<P>&nbsp;</P>
<P align=center><FONT face="CG Times Regular">-30-</FONT></P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">141 requires the use of the purchase method of
accounting and prohibits the use of the pooling-of-interests method of
accounting for business combinations initiated after June 30, 2001. SFAS 141
also requires that the Company recognize acquired intangible assets apart from
goodwill if the acquired intangible assets meet certain criteria, SFAS 141
applies to all business combinations initiated after June 30, 2001, and for
purchase business combinations completed on or after July 1<EM>, </EM>2001. It
also requires, upon adoption of SFAS 142, that the Company reclassify the
carrying amounts of intangible assets and goodwill based on the criteria in SFAS
141.</FONT></P>
<P><FONT face="CG Times Regular">SFAS 142 requires, among other things, that
companies no longer amortize goodwill, but instead test goodwill for impairment
at least annually. In addition, SFAS 142 requires that the Company
identify</FONT> <FONT face="CG Times Regular">reporting units for the purposes
of assessing potential future impairments of goodwill, reassess the useful lives
of other existing recognized intangible assets, and cease amortization of
intangible assets with an indefinite useful life. An intangible asset with an
indefinite useful life should be tested for impairment in accordance with the
guidance in SFAS 142. SFAS 142 is required to be applied in fiscal years
beginning after December 15, 2001, to all goodwill and other intangible assets
recognized at that date, regardless of when those assets were initially
recognized. SFAS 142 requires the Company to complete a transitional goodwill
impairment test six months from the date of adoption. The Company is also
required to reassess the useful lives of other intangible assets within the
first interim quarter after adoption of SFAS 142.</FONT></P>
<P><FONT face="CG Times Regular">The Company's previous business combinations
were accounted for using the purchase method. As of December 31, 2001, the net
carrying amount of goodwill is approximately $6,509,000 and other intangible
assets are approximately $20,765,000. Amortization expense during the years
ended December 31, 2001, 2000 and 1999, was approximately $1,575,000, $948,000
and $675,000, respectively. Effective January&nbsp;1, 2002, the Company will
discontinue amortizing indefinite life intangible assets, and is in the process
of evaluating intangible assets for impairment. At this time, the Company does
not expect there to be an impairment to the intangible assets.</FONT></P>
<P><FONT face="CG Times Regular">In June 2001, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 143 ("FAS
143"), Accounting for Asset Retirement Obligations, effective for the fiscal
years beginning after June 15, 2002. This statement provides the accounting for
the cost of legal obligations associated with the retirement of long-lived
assets. FAS 143 requires that companies recognize the fair value of a liability
for asset retirement obligations in the period in which the obligations are
incurred and capitalize that amount as a part of the book value of the
long-lived asset. That cost is then depreciated over the remaining life of the
underlying long-lived asset. The Company is currently evaluating the impact of
the adoption of FAS 143.</FONT></P>
<P><FONT face="CG Times Regular">In August 2001, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets" ("FAS 144").
This statement supersedes FAS 121 "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed of" and Accounting Principals
Board Opinion No. 30, "Reporting Results of Operations - Reporting the Effects
of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions." This Statement retains the
fundamental provisions of FAS 121 for recognition and measurement of impairment,
but amends the accounting and reporting standards for segments of a business to
be disposed of. The provisions of this statement are required to be adopted no
later than fiscal years beginning after December 31, 2001, with early adoption
encouraged. The Company is currently evaluating the impact of the adoption of
FAS 144.</FONT></P>
<TABLE width="100%">
    <TR vAlign=top>
    <TD><FONT face="CG Times Regular"><STRONG>ITEM 7A.</STRONG></FONT></TD>
    <TD><FONT face="CG Times Regular"><STRONG>QUANTITATIVE AND QUALITATIVE
      DISCLOSURES ABOUT MARKET RISK </STRONG></FONT></TD></TR></TABLE>
<P><FONT face="CG Times Regular"></FONT><FONT face="CG Times Regular">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 the
Company's variable rate loan arrangements with PNC, as described under Note 6 to
Notes to Consolidated Financial Statements. As discussed therein, the Company
entered into an interest rate swap agreement to modify the interest
characteristics of $3.5 million of its $7.0 million term loan with PNC Bank,
from a floating rate basis to a fixed rate, thus reducing the impact of interest
rate changes on this portion of the debt.</FONT></P>
<P>&nbsp;</P>
<P align=center><FONT face="CG Times Regular">-31-</FONT></P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular"><STRONG>SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS<BR></STRONG>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,</P>
<TABLE width=633></FONT>
    <TR vAlign=top>
    <TD width=21></TD>
    <TD align=middle width=42><FONT face="CG Times Regular"></FONT>* </TD>
    <TD width=550><FONT face="CG Times Regular">
      <UL></UL>ability or inability to continue and improve operations and
      become profitable on an annualized basis;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=21></TD>
    <TD align=middle width=42><FONT face="CG Times Regular"></FONT>* </TD>
    <TD width=550><FONT face="CG Times Regular">the Company's ability to
      develop or adopt new and existing technologies in the conduct of its
      operations;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=21></TD>
    <TD align=middle width=42><FONT face="CG Times Regular"></FONT>* </TD>
    <TD width=550><FONT face="CG Times Regular">anticipated improvement in the
      financial performance of the Company;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=21></TD>
    <TD align=middle width=42><FONT face="CG Times Regular"></FONT>* </TD>
    <TD width=550><FONT face="CG Times Regular">ability to comply with the
      Company's general working capital requirements; </FONT></TD></TR>
  <TR vAlign=top>
    <TD width=21></TD>
    <TD align=middle width=42><FONT face="CG Times Regular"></FONT>* </TD>
    <TD width=550><FONT face="CG Times Regular">ability to retain or receive
      certain permits or patents;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=21></TD>
    <TD align=middle width=42><FONT face="CG Times Regular"></FONT>* </TD>
    <TD width=550><FONT face="CG Times Regular">ability to renew permits with
      minimal effort and costs;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=21></TD>
    <TD align=middle width=42><FONT face="CG Times Regular"></FONT>* </TD>
    <TD width=550><FONT face="CG Times Regular">ability to be able to continue
      to borrow under the Company's revolving line of credit;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle width=21></TD>
    <TD align=middle width=42><FONT face="CG Times Regular"></FONT>* </TD>
    <TD width=550><FONT face="CG Times Regular">
      <UL></UL>ability to generate sufficient cash flow from operations to fund
      all costs of operations and remediation of certain formerly leased
      property in Dayton, Ohio, and the Company's facilities in Memphis,
      Tennessee; Valdosta, Georgia and Detroit Michigan;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=21></TD>
    <TD align=middle width=42><FONT face="CG Times Regular"></FONT>* </TD>
    <TD width=550><FONT face="CG Times Regular">ability to remediate certain
      contaminated sites for projected amounts;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=21></TD>
    <TD align=middle width=42><FONT face="CG Times Regular"></FONT>* </TD>
    <TD width=550><FONT face="CG Times Regular">no impairment to intangible
      assets and does not expect a write down of intangible assets;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=21></TD>
    <TD align=middle width=42><FONT face="CG Times Regular"></FONT>* </TD>
    <TD width=550><FONT face="CG Times Regular">no intention to close any
      facilities; and</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=21></TD>
    <TD align=middle width=42><FONT face="CG Times Regular"></FONT>* </TD>
    <TD width=550><FONT face="CG Times Regular">ability to fund budgeted
      capital expenditures for 2002.</FONT></TD></TR></TABLE>
<P><FONT face="CG Times Regular">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:
<TABLE width=629></FONT>
    <TR vAlign=top>
    <TD width=18></TD>
    <TD align=middle width=42><FONT face="CG Times Regular"></FONT>* </TD>
    <TD width=549><FONT face="CG Times Regular">
      <UL></UL>general economic conditions;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=18></TD>
    <TD align=middle width=42><FONT face="CG Times Regular"></FONT>* </TD>
    <TD width=549><FONT face="CG Times Regular">material reduction in
      revenues;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=18></TD>
    <TD align=middle width=42><FONT face="CG Times Regular"></FONT>* </TD>
    <TD width=549><FONT face="CG Times Regular">
      <UL></UL>inability to collect in a timely manner a material amount of
      receivables; </FONT></TD></TR>
  <TR vAlign=top>
    <TD width=18></TD>
    <TD align=middle width=42><FONT face="CG Times Regular"></FONT>* </TD>
    <TD width=549><FONT face="CG Times Regular">
      <UL></UL>increased competitive pressures; </FONT></TD></TR>
  <TR vAlign=top>
    <TD width=18></TD>
    <TD align=middle width=42><FONT face="CG Times Regular"></FONT>* </TD>
    <TD width=549><FONT face="CG Times Regular">the ability to maintain and
      obtain required permits and approvals to conduct operations; </FONT></TD></TR>
  <TR vAlign=top>
    <TD width=18></TD>
    <TD align=middle width=42><FONT face="CG Times Regular"></FONT>* </TD>
    <TD width=549><FONT face="CG Times Regular">
      <UL></UL>the ability to develop new and existing technologies in the
      conduct of operations;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=18></TD>
    <TD align=middle width=42><FONT face="CG Times Regular"></FONT>* </TD>
    <TD width=549><FONT face="CG Times Regular">
      <UL></UL>ability to retain or renew certain required permits;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=18></TD>
    <TD align=middle width=42><FONT face="CG Times Regular"></FONT>* </TD>
    <TD width=549><FONT face="CG Times Regular">
      <UL></UL>discovery of additional contamination or expanded contamination
      at a certain Dayton, Ohio, property formerly leased by the Company or the
      Company's facilities at Memphis, Tennessee; Valdosta, Georgia and Detroit
      Michigan, which would result in a material increase in remediation
      expenditures;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=18></TD>
    <TD align=middle width=42><FONT face="CG Times Regular"></FONT>* </TD>
    <TD width=549><FONT face="CG Times Regular">
      <UL></UL>determination that PFM is the source of chlorinated compounds at
      the Allen Well Field;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=18></TD>
    <TD align=middle width=42><FONT face="CG Times Regular"></FONT>* </TD>
    <TD width=549><FONT face="CG Times Regular">
      <UL></UL>changes in federal, state and local laws and regulations,
      especially environmental laws and regulations, or in interpretation of
      such;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=18></TD>
    <TD align=middle width=42><FONT face="CG Times Regular"></FONT>* </TD>
    <TD width=549><FONT face="CG Times Regular">potential increases in
      equipment, maintenance, operating or labor costs;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=18></TD>
    <TD align=middle width=42><FONT face="CG Times Regular"></FONT>* </TD>
    <TD width=549><FONT face="CG Times Regular">management retention and
      development;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=18></TD>
    <TD align=middle width=42><FONT face="CG Times Regular"></FONT>* </TD>
    <TD width=549><FONT face="CG Times Regular">financial valuation of
      intangible assets is substantially less than expected;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=18></TD>
    <TD align=middle width=42><FONT face="CG Times Regular"></FONT>* </TD>
    <TD width=549><FONT face="CG Times Regular">the requirement to use
      internally generated funds for purposes not presently
    anticipated;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=18></TD>
    <TD align=middle width=42><FONT face="CG Times Regular"></FONT>* </TD>
    <TD width=549><FONT face="CG Times Regular">inability to become profitable
      on an annualized basis;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=18></TD>
    <TD align=middle width=42><FONT face="CG Times Regular"></FONT>* </TD>
    <TD width=549><FONT face="CG Times Regular">the inability of the Company
      to obtain under certain circumstances shareholder approval of the
      transaction in which certain Warrants were issued; </FONT></TD></TR>
  <TR vAlign=top>
    <TD width=18></TD>
    <TD align=middle width=42><FONT face="CG Times Regular"></FONT>* </TD>
    <TD width=549><FONT face="CG Times Regular">the inability of the Company
      to maintain the listing of its Common Stock on the NASDAQ;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=18></TD>
    <TD align=middle width=42><FONT face="CG Times Regular"></FONT>* </TD>
    <TD width=549><FONT face="CG Times Regular">the determination that PFMI or
      PFO was responsible for a material amount of remediation at certain
      Superfund sites; and</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=18></TD>
    <TD align=middle width=42><FONT face="CG Times Regular"></FONT>* </TD>
    <TD width=549><FONT face="CG Times Regular">
      <UL></UL>terminations of contracts with federal agencies or subcontracts
      involving federal agencies, or reduction in amount of waste delivered to
      the Company under these contracts or
subcontracts.</FONT></TD></TR></TABLE>
<P>&nbsp;</P>
<P align=center>-32-</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">The Company undertakes no obligations to update
publicly any forward-looking statement, whether as a result of new information,
future events or otherwise.</FONT></P>
<TABLE width="100%">
    <TR vAlign=top>
    <TD><FONT face="CG Times Regular"><STRONG></STRONG></FONT><FONT
      face="CG Times Regular"><STRONG>ITEM 8.</STRONG></FONT></TD>
    <TD><FONT face="CG Times Regular"><STRONG>FINANCIAL STATEMENTS AND
      SUPPLEMENTARY DATA </STRONG></FONT></TD></TR></TABLE>
<P><FONT face="CG Times Regular">Index to Consolidated Financial
Statements</FONT></P>
<TABLE width=629>
    <TR vAlign=top>
    <TD width=523><FONT face="CG Times Regular"><STRONG><U>Consolidated
      Financial Statements:</U> </STRONG></FONT><FONT
      face="CG Times Regular"></FONT></TD>
    <TD align=middle width=92><FONT face="CG Times Regular"><STRONG><U>Page
      No.</U></STRONG></FONT><FONT
  face="CG Times Regular"><U></U></FONT></TD></TR></TABLE>
<TABLE width=627>
    <TR vAlign=top>
    <TD width=521><FONT
      face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Report of
      Independent Certified Public
      Accountants<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;BDO
      Seidman, LLP</FONT>
      <P><FONT
      face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consolidated
      Balance Sheets as of December 31, 2001 and 2000</FONT></P>
      <P><FONT
      face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consolidated
      Statements of Operations for the years
      ended<BR></FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT
      face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;December 31,
      2001, 2000 and 1999</FONT></P>
      <P><FONT
      face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consolidated
      Statements of Cash Flows for
      the<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;years
      ended December 31, 2001, 2000 and 1999</FONT></P>
      <P><FONT
      face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consolidated
      Statements of Stockholders' Equity
      for<BR></FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT
      face="CG Times Regular">the years ended December 31, 2001, 2000 and
      1999</FONT></P>
      <P><FONT face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notes
      to Consolidated Financial Statements</FONT></P></TD>
    <TD align=middle width=92><FONT face="CG Times Regular"></FONT><BR
      WP="BR1">34 <BR WP="BR1"><BR WP="BR2"><FONT
      face="CG Times Regular">35</FONT>
      <P><FONT face="CG Times Regular"><BR>37</FONT></P><BR WP="BR1"><FONT
      face="CG Times Regular">38</FONT>
      <P><FONT face="CG Times Regular"><BR>39</FONT></P>
      <P><FONT face="CG Times Regular">40</FONT></P></TD></TR></TABLE>
<TABLE width=626>
    <TR vAlign=top>
    <TD width=520><FONT face="CG Times Regular"><STRONG><U>Financial Statement
      Schedule:</U> </STRONG></FONT><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle width=92><FONT
  face="CG Times Regular"></FONT></TD></TR></TABLE>
<TABLE width=625>
    <TR vAlign=top>
    <TD width=519><FONT
      face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;II&nbsp;&nbsp;&nbsp;Valuation
      and Qualifying Accounts for the years
      ended<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;December
      31, 2001, 2000 and 1999</FONT></TD>
    <TD align=middle width=92><FONT face="CG Times Regular">89</FONT>
      <P></P></TD></TR></TABLE>
<P><FONT face="CG Times Regular"><STRONG><U>Schedules
Omitted</U></STRONG></FONT><FONT face="CG Times Regular"></FONT></P>
<P><FONT face="CG Times Regular">In accordance with the rules of Regulation S-X,
other schedules are not submitted because (a) they are not applicable to or
required by the Company, or (b) the information required to be set forth therein
is included in the consolidated financial statements or notes
thereto.</FONT></P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P align=center>-33-</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular"><STRONG>Report of Independent Certified Public
Accountants<BR><BR><BR><BR></STRONG>Board of Directors<BR>Perma-Fix
Environmental Services, Inc.<BR><BR><BR>We have audited the accompanying
consolidated balance sheets of Perma-Fix Environmental Services, Inc. and
subsidiaries as of December&nbsp;31, 2001 and 2000, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 2001. We have also audited the
schedule listed in the accompanying index. These consolidated financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and schedule based on our audits.</FONT></P>
<P><FONT face="CG Times Regular">We conducted our audits in accordance with
auditing standards generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and schedule are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements and schedule.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
the financial statements and schedule. We believe that our audits provide a
reasonable basis for our opinion.</FONT></P>
<P><FONT face="CG Times Regular">In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the
financial position of Perma-Fix Environmental Services, Inc. and subsidiaries at
December&nbsp;31, 2001 and 2000, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 2001, in
conformity with accounting principles generally accepted in the United States of
America.</FONT></P>
<P><FONT face="CG Times Regular">Also, in our opinion, the schedule presents
fairly, in all material respects, the information set forth therein.</FONT></P>
<P
align=left><BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
/s/ BDO Seidman, LLP<BR><BR WP="BR1"><BR WP="BR2"><FONT
face="CG Times Regular">BDO Seidman, LLP<BR>Chicago, Illinois<BR>March 15,
2002</FONT> </P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P align=center><FONT face="CG Times Regular">-34-</FONT></P>
<P>&nbsp;</P>
<P align=center><FONT face="CG Times Regular"><STRONG>PERMA-FIX ENVIRONMENTAL
SERVICES, INC.<BR>CONSOLIDATED BALANCE SHEETS<BR></STRONG><EM>As of December
31</EM></FONT></P>
<TABLE width=653>
    <TR vAlign=top>
    <TD width=468><BR WP="BR1">(Amounts in Thousands, Except for Share
    Amounts)</TD>
    <TD align=middle width=69><FONT face="CG Times Regular"></FONT><BR
      WP="BR1">2001</TD>
    <TD align=middle width=13><FONT face="CG Times Regular"></FONT><BR
      WP="BR1"></TD>
    <TD align=middle width=77><BR WP="BR1">2000</TD></TR>
  <TR vAlign=top>
    <TD colSpan=4 width=645>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD width=468><FONT face="CG Times Regular">ASSETS</FONT></TD>
    <TD align=right width=69></TD>
    <TD align=right width=13></TD>
    <TD align=right width=77></TD></TR>
  <TR vAlign=top>
    <TD width=468><FONT face="CG Times Regular">Current Assets</FONT></TD>
    <TD align=right width=69></TD>
    <TD align=right width=13></TD>
    <TD align=right width=77></TD></TR>
  <TR vAlign=top>
    <TD width=468><FONT
      face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash</FONT></TD>
    <TD align=right width=69>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;860&nbsp;</TD>
    <TD align=right width=13></TD>
    <TD align=right width=77><FONT
      face="CG Times Regular">$&nbsp;&nbsp;&nbsp;&nbsp;498&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=468><FONT
      face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Restricted
      Cash</FONT></TD>
    <TD align=right width=69>20&nbsp;</TD>
    <TD align=right width=13></TD>
    <TD align=right width=77><FONT
  face="CG Times Regular">20&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=468><FONT
      face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable,
      net of allowance for
      doubtful<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;accounts
      of $725 and $894, respectively</FONT></TD>
    <TD align=right width=69><BR>17,191&nbsp;</TD>
    <TD align=right width=13></TD>
    <TD align=right width=77><BR>16,235&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width=468><FONT
      face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories</FONT></TD>
    <TD align=right width=69>756&nbsp;</TD>
    <TD align=right width=13></TD>
    <TD align=right width=77><FONT
  face="CG Times Regular">655&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=468><FONT
      face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid
      expenses</FONT></TD>
    <TD align=right width=69>1,651&nbsp;</TD>
    <TD align=right width=13></TD>
    <TD align=right width=77><FONT
    face="CG Times Regular">1,251&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=468><FONT
      face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other
      receivables</FONT></TD>
    <TD align=right width=69>142&nbsp;</TD>
    <TD align=right width=13></TD>
    <TD align=right width=77><FONT
    face="CG Times Regular">1,259&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=468></TD>
    <TD align=right width=69>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=13></TD>
    <TD align=right width=77>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD
      width=468>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total
      current assets</TD>
    <TD align=right width=69>20,620&nbsp;</TD>
    <TD align=right width=13></TD>
    <TD align=right width=77><FONT
      face="CG Times Regular">&nbsp;19,918&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=468></TD>
    <TD align=right width=69></TD>
    <TD align=right width=13></TD>
    <TD align=right width=77></TD></TR>
  <TR vAlign=top>
    <TD width=468>Property and equipment:</TD>
    <TD align=right width=69></TD>
    <TD align=right width=13></TD>
    <TD align=right width=77></TD></TR>
  <TR vAlign=top>
    <TD width=468>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Buildings and land</TD>
    <TD align=right width=69>15,210&nbsp;</TD>
    <TD align=right width=13></TD>
    <TD align=right width=77><FONT
    face="CG Times Regular">14,089&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=468>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Equipment</TD>
    <TD align=right width=69>26,915&nbsp;</TD>
    <TD align=right width=13></TD>
    <TD align=right width=77><FONT
    face="CG Times Regular">18,639&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=468>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Vehicles</TD>
    <TD align=right width=69>2,120&nbsp;</TD>
    <TD align=right width=13></TD>
    <TD align=right width=77><FONT
    face="CG Times Regular">2,359&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=468>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Leasehold improvements</TD>
    <TD align=right width=69>10,029&nbsp;</TD>
    <TD align=right width=13></TD>
    <TD align=right width=77><FONT
  face="CG Times Regular">16&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=468>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Office furniture and
    equipment</TD>
    <TD align=right width=69>1,657&nbsp;</TD>
    <TD align=right width=13></TD>
    <TD align=right width=77><FONT
    face="CG Times Regular">1,518&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=468>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Construction in progress</TD>
    <TD align=right width=69>4,382&nbsp;</TD>
    <TD align=right width=13></TD>
    <TD align=right width=77><FONT
    face="CG Times Regular">4,029&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=468></TD>
    <TD align=right width=69>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=13></TD>
    <TD align=right width=77>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD width=468></TD>
    <TD align=right width=69>60,313&nbsp;</TD>
    <TD align=right width=13></TD>
    <TD align=right width=77><FONT
    face="CG Times Regular">40,650&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=468>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Less accumulated
      depreciation/amortization</TD>
    <TD align=right width=69><FONT face="CG Times Regular">(11,940)</FONT></TD>
    <TD align=right width=13></TD>
    <TD align=right width=77><FONT
face="CG Times Regular">(9,961)</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=468></TD>
    <TD align=right width=69>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=13></TD>
    <TD align=right width=77>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD
      width=468>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
      property and equipment</TD>
    <TD align=right width=69><FONT
    face="CG Times Regular">48,373&nbsp;</FONT></TD>
    <TD align=right width=13></TD>
    <TD align=right width=77><FONT
    face="CG Times Regular">30,689&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=468></TD>
    <TD align=right width=69></TD>
    <TD align=right width=13></TD>
    <TD align=right width=77></TD></TR>
  <TR vAlign=top>
    <TD width=468>Intangibles and other assets:</TD>
    <TD align=right width=69></TD>
    <TD align=right width=13></TD>
    <TD align=right width=77></TD></TR>
  <TR vAlign=top>
    <TD width=468>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Permits, net of accumulated
      amortization of
      $3,372<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and
      $2,129, respectively</TD>
    <TD align=right width=69><BR>20,639&nbsp;</TD>
    <TD align=right width=13></TD>
    <TD align=right width=77><BR>13,338&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width=468>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Goodwill, net of accumulated
      amortization of
      $1,654<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and
      $1,323, respectively</TD>
    <TD align=right width=69><BR>6,509&nbsp;</TD>
    <TD align=right width=13></TD>
    <TD align=right width=77><BR>6,840&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width=468>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other assets</TD>
    <TD align=right width=69><FONT
    face="CG Times Regular">2,996&nbsp;</FONT></TD>
    <TD align=right width=13></TD>
    <TD align=right width=77><FONT
    face="CG Times Regular">1,986&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=468></TD>
    <TD align=right width=69>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=13></TD>
    <TD align=right width=77>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD
      width=468>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total
      assets</TD>
    <TD align=right width=69><FONT
      face="CG Times Regular">$&nbsp;99,137&nbsp;</FONT></TD>
    <TD align=right width=13></TD>
    <TD align=right width=77><FONT
      face="CG Times Regular">$&nbsp;72,771&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=468></TD>
    <TD align=right width=69>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right width=13></TD>
    <TD align=right width=77>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD></TR></TABLE>&nbsp;
<P>&nbsp;</P>
<P>&nbsp;</P>
<P align=center><FONT face="CG Times Regular">The accompanying notes are an
integral part of these consolidated financial statements.&nbsp;</FONT></P>
<P align=center><FONT face="CG Times Regular">-35-</FONT></P>
<P align=center>&nbsp;</P>
<P align=center><FONT face="CG Times Regular"><STRONG>PERMA-FIX ENVIRONMENTAL
SERVICES, INC.<BR>CONSOLIDATED BALANCE SHEETS, CONTINUED<BR></STRONG><EM>As of
December 31</EM></FONT></P>
<TABLE width=655>
    <TR vAlign=top>
    <TD width=478>(Amounts in Thousands, Except for Share Amounts)</TD>
    <TD align=middle width=70><FONT face="CG Times Regular">2001</FONT></TD>
    <TD align=middle width=7></TD>
    <TD align=middle width=74>
      <P align=right><FONT
face="CG Times Regular">2000</FONT></P></TD></TR></TABLE>
<HR align=left color=#000080 noShade SIZE=3>

<TABLE width=653>
    <TR vAlign=top>
    <TD width=479><FONT face="CG Times Regular"></FONT>LIABILITIES AND
      STOCKHOLDERS' EQUITY</TD>
    <TD align=right width=70></TD>
    <TD align=right width=10></TD>
    <TD align=right width=68></TD></TR>
  <TR vAlign=top>
    <TD width=479><FONT face="CG Times Regular">Current Liabilities:</FONT></TD>
    <TD align=right width=70></TD>
    <TD align=right width=10></TD>
    <TD align=right width=68></TD></TR>
  <TR vAlign=top>
    <TD width=479><FONT
      face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts
      Payable</FONT></TD>
    <TD align=right width=70>$&nbsp;&nbsp;&nbsp;&nbsp;7,167&nbsp;</TD>
    <TD align=right width=10></TD>
    <TD align=right width=68><FONT
      face="CG Times Regular">$&nbsp;&nbsp;&nbsp;&nbsp;7,809&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=479><FONT
      face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Current
      environmental accrual</FONT></TD>
    <TD align=right width=70>1,202&nbsp;</TD>
    <TD align=right width=10></TD>
    <TD align=right width=68><FONT
    face="CG Times Regular">1,229&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=479><FONT
      face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued
      expenses</FONT></TD>
    <TD align=right width=70>8,431&nbsp;</TD>
    <TD align=right width=10></TD>
    <TD align=right width=68><FONT
    face="CG Times Regular">7,307&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=479><FONT
      face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Current portion of
      long-term debt</FONT></TD>
    <TD align=right width=70>2,989&nbsp;</TD>
    <TD align=right width=10></TD>
    <TD align=right width=68><FONT
    face="CG Times Regular">6,402&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=479></TD>
    <TD align=right width=70>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=10></TD>
    <TD align=right width=68>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD width=479><FONT
      face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total
      current liabilities</FONT></TD>
    <TD align=right width=70>19,789&nbsp;</TD>
    <TD align=right width=10></TD>
    <TD align=right width=68><FONT
    face="CG Times Regular">22,747&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=479></TD>
    <TD align=right width=70></TD>
    <TD align=right width=10></TD>
    <TD align=right width=68></TD></TR>
  <TR vAlign=top>
    <TD width=479><FONT face="CG Times Regular">Environmental
    accruals</FONT></TD>
    <TD align=right width=70>2,332&nbsp;</TD>
    <TD align=right width=10></TD>
    <TD align=right width=68><FONT
    face="CG Times Regular">3,113&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=479><FONT face="CG Times Regular">Accrued closure
costs</FONT></TD>
    <TD align=right width=70>4,919&nbsp;</TD>
    <TD align=right width=10></TD>
    <TD align=right width=68><FONT
    face="CG Times Regular">5,338&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=479><FONT face="CG Times Regular">Other long-term
      liabilities</FONT></TD>
    <TD align=right width=70>814&nbsp;</TD>
    <TD align=right width=10></TD>
    <TD align=right width=68><FONT
  face="CG Times Regular">465&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=479>Long-term debt, less current portion</TD>
    <TD align=right width=70>28,157&nbsp;</TD>
    <TD align=right width=10></TD>
    <TD align=right width=68><FONT
    face="CG Times Regular">19,088&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=479></TD>
    <TD align=right width=70>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=10></TD>
    <TD align=right width=68>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD
      width=479>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total
      long-term liabilities</TD>
    <TD align=right width=70>36,222&nbsp;</TD>
    <TD align=right width=10></TD>
    <TD align=right width=68><FONT
    face="CG Times Regular">28,004&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=479></TD>
    <TD align=right width=70>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=10></TD>
    <TD align=right width=68>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD width=479>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      Total liabilities</TD>
    <TD align=right width=70>56,011&nbsp;</TD>
    <TD align=right width=10></TD>
    <TD align=right width=68><FONT
    face="CG Times Regular">50,751&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=479></TD>
    <TD align=right width=70></TD>
    <TD align=right width=10></TD>
    <TD align=right width=68></TD></TR>
  <TR vAlign=top>
    <TD width=479>Commitments and Contingencies (see Notes 6, 8, 9 and 12)</TD>
    <TD align=right width=70>--&nbsp;</TD>
    <TD align=right width=10></TD>
    <TD align=right width=68><FONT
  face="CG Times Regular">--&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=479></TD>
    <TD align=right width=70></TD>
    <TD align=right width=10></TD>
    <TD align=right width=68></TD></TR>
  <TR vAlign=top>
    <TD width=479>Preferred Stock of subsidiary, $1.00 par value; 1,467,396
      shares<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;authorized, $1,284,730 and 0
      shares issued and
      outstanding,<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;respectively, liquidation
      value $1.00 per share (see Note 4)</TD>
    <TD align=right width=70><BR><BR>1,285&nbsp;</TD>
    <TD align=right width=10></TD>
    <TD align=right width=68><BR><BR>--&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width=479></TD>
    <TD align=right width=70></TD>
    <TD align=right width=10></TD>
    <TD align=right width=68></TD></TR>
  <TR vAlign=top>
    <TD width=479>Stockholders' equity:</TD>
    <TD align=right width=70></TD>
    <TD align=right width=10></TD>
    <TD align=right width=68></TD></TR>
  <TR vAlign=top>
    <TD width=479>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Preferred Stock, $.001 par
      value; 2,000,000 shares
      authorized,<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,500
      and 4,187 shares issued and outstanding, respectively</TD>
    <TD align=right width=70><BR>--&nbsp;</TD>
    <TD align=right width=10></TD>
    <TD align=right width=68><BR>--&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width=479>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common Stock, $.001 par value;
      50,000,000 shares
      authorized,<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;35,008,005
      and 23,429,759 shares issued, including
      988,000<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
      held as treasury stock, respectively</TD>
    <TD align=right width=70><BR><BR>35&nbsp;</TD>
    <TD align=right width=10></TD>
    <TD align=right width=68><BR><BR>23&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width=479>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additional paid-in capital</TD>
    <TD align=right width=70><FONT
    face="CG Times Regular">66,042&nbsp;</FONT></TD>
    <TD align=right width=10></TD>
    <TD align=right width=68><FONT
    face="CG Times Regular">45,328&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=479>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accumulated deficit</TD>
    <TD align=right width=70><FONT face="CG Times Regular">(22,216)</FONT></TD>
    <TD align=right width=10></TD>
    <TD align=right width=68><FONT
  face="CG Times Regular">(21,469)</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=479>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest rate swap</TD>
    <TD align=right width=70><FONT face="CG Times Regular">(158)</FONT></TD>
    <TD align=right width=10></TD>
    <TD align=right width=68><FONT
  face="CG Times Regular">--&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=479></TD>
    <TD align=right width=70>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=10></TD>
    <TD align=right width=68>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD width=479></TD>
    <TD align=right width=70><FONT
    face="CG Times Regular">43,703&nbsp;</FONT></TD>
    <TD align=right width=10></TD>
    <TD align=right width=68><FONT
    face="CG Times Regular">23,882&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=479>Less Common Stock in treasury at cost; 988,000 shares</TD>
    <TD align=right width=70><FONT face="CG Times Regular">(1,862)</FONT></TD>
    <TD align=right width=10></TD>
    <TD align=right width=68><FONT
face="CG Times Regular">(1,862)</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=479></TD>
    <TD align=right width=70>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=10></TD>
    <TD align=right width=68>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD
      width=479>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total
      stockholders' equity</TD>
    <TD align=right width=70><FONT
    face="CG Times Regular">41,841&nbsp;</FONT></TD>
    <TD align=right width=10></TD>
    <TD align=right width=68><FONT
    face="CG Times Regular">22,020&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=479></TD>
    <TD align=right width=70>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=10></TD>
    <TD align=right width=68>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD
      width=479>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total
      liabilities and stockholders' equity</TD>
    <TD align=right width=70><FONT
      face="CG Times Regular">$&nbsp;99,137&nbsp;</FONT></TD>
    <TD align=right width=10></TD>
    <TD align=right width=68><FONT
      face="CG Times Regular">$&nbsp;72,771&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=479></TD>
    <TD align=right width=70>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right width=10></TD>
    <TD align=right width=68>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD></TR></TABLE>
<P><FONT face="CG Times Regular">
<CENTER>The accompanying notes are an integral part of these consolidated
financial statements.</CENTER></FONT>
<P></P>
<P align=center>-36-</P>
<P>&nbsp;</P>
<P align=center><FONT face="CG Times Regular"><STRONG>PERMA-FIX ENVIRONMENTAL
SERVICES, INC.<BR>CONSOLIDATED STATEMENTS OF OPERATIONS<BR></STRONG><EM>For the
years ended December 31</EM></FONT></P>
<TABLE width=653>
    <TR vAlign=top>
    <TD width=354><FONT face="CG Times Regular">(Amounts in Thousands, Except
      for Share Amounts)</FONT></TD>
    <TD align=middle width=87><FONT face="CG Times Regular">2001</FONT></TD>
    <TD align=middle width=85><FONT face="CG Times Regular">2000</FONT></TD>
    <TD align=middle width=77><FONT face="CG Times Regular">1999</FONT></TD>
    <TD align=middle width=18></TD></TR>
  <TR vAlign=top>
    <TD colSpan=4 width=621>
      <HR color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=18></TD></TR>
  <TR vAlign=top>
    <TD width=354><FONT face="CG Times Regular">Net revenues</FONT></TD>
    <TD align=right width=87><FONT face="CG Times Regular">$&nbsp;&nbsp;74,
      492&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=85><FONT
      face="CG Times Regular">$&nbsp;&nbsp;59,139&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=77>$&nbsp;&nbsp;46,464&nbsp;&nbsp;</TD>
    <TD align=middle width=18></TD></TR>
  <TR vAlign=top>
    <TD width=354><FONT face="CG Times Regular">Cost of goods sold</FONT></TD>
    <TD align=right width=87><FONT
      face="CG Times Regular">&nbsp;&nbsp;49,719&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=85><FONT
      face="CG Times Regular">40,910&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=77>31,271&nbsp;&nbsp;</TD>
    <TD align=middle width=18></TD></TR>
  <TR vAlign=top>
    <TD width=354></TD>
    <TD align=right width=87>
      <HR color=#000080 noShade SIZE=3 width="90%">
    </TD>
    <TD align=right width=85>
      <HR color=#000080 noShade SIZE=3 width="90%">
    </TD>
    <TD align=right width=77>
      <HR color=#000080 noShade SIZE=3 width="90%">
    </TD>
    <TD align=middle width=18></TD></TR>
  <TR vAlign=top>
    <TD width=354><FONT
      face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross
      profit</FONT></TD>
    <TD align=right width=87><FONT
      face="CG Times Regular">24,773&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=85><FONT
      face="CG Times Regular">18,229&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=77>15,193&nbsp;&nbsp;</TD>
    <TD align=middle width=18></TD></TR>
  <TR vAlign=top>
    <TD width=354><FONT face="CG Times Regular">Selling, general and
      administrative expenses</FONT></TD>
    <TD align=right width=87><FONT
      face="CG Times Regular">14,738&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=85><FONT
      face="CG Times Regular">12,765&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=77>10,299&nbsp;</TD>
    <TD align=middle width=18></TD></TR>
  <TR vAlign=top>
    <TD width=354><FONT face="CG Times Regular">Depreciation and
      amortization</FONT></TD>
    <TD align=right width=87>4,616&nbsp;&nbsp;</TD>
    <TD align=right width=85>3,651&nbsp;&nbsp;</TD>
    <TD align=right width=77>2,778&nbsp;&nbsp;</TD>
    <TD align=middle width=18></TD></TR>
  <TR vAlign=top>
    <TD width=354></TD>
    <TD align=right width=87>
      <HR color=#000080 noShade SIZE=3 width="90%">
    </TD>
    <TD align=right width=85>
      <HR color=#000080 noShade SIZE=3 width="90%">
    </TD>
    <TD align=right width=77>
      <HR color=#000080 noShade SIZE=3 width="90%">
    </TD>
    <TD align=middle width=18></TD></TR>
  <TR vAlign=top>
    <TD width=354><FONT
      face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income
      from operations</FONT></TD>
    <TD align=right width=87><FONT
      face="CG Times Regular">5,419&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=85>1,813&nbsp;&nbsp;</TD>
    <TD align=right width=77>2,116&nbsp;&nbsp;</TD>
    <TD align=middle width=18></TD></TR>
  <TR vAlign=top>
    <TD width=354><FONT face="CG Times Regular">Other income
    (expense):</FONT></TD>
    <TD align=right width=87></TD>
    <TD align=right width=85></TD>
    <TD align=right width=77></TD>
    <TD align=middle width=18></TD></TR>
  <TR vAlign=top>
    <TD width=354><FONT
      face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest
      income</FONT></TD>
    <TD align=right width=87><FONT
      face="CG Times Regular">29&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=85>41&nbsp;&nbsp;</TD>
    <TD align=right width=77>50&nbsp;&nbsp;</TD>
    <TD align=middle width=18></TD></TR>
  <TR vAlign=top>
    <TD width=354><FONT
      face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest
      expense</FONT></TD>
    <TD align=right width=87><FONT face="CG Times Regular">(3,038)</FONT></TD>
    <TD align=right width=85>(2,132)</TD>
    <TD align=right width=77>(650)</TD>
    <TD align=middle width=18></TD></TR>
  <TR vAlign=top>
    <TD width=354><FONT
      face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest
      expense-Warrants</FONT></TD>
    <TD align=right width=87><FONT face="CG Times Regular">(234)</FONT></TD>
    <TD align=right width=85>(344)</TD>
    <TD align=right width=77>--&nbsp;</TD>
    <TD align=middle width=18></TD></TR>
  <TR vAlign=top>
    <TD width=354><FONT
      face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest
      expense-financing fees</FONT></TD>
    <TD align=right width=87><FONT face="CG Times Regular">(2,732)</FONT></TD>
    <TD align=right width=85>(181)</TD>
    <TD align=right width=77>(67)</TD>
    <TD align=middle width=18></TD></TR>
  <TR vAlign=top>
    <TD width=354><FONT
      face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other</FONT></TD>
    <TD align=right width=87><FONT face="CG Times Regular">(46)</FONT></TD>
    <TD align=right width=85>247&nbsp;</TD>
    <TD align=right width=77>121&nbsp;</TD>
    <TD align=middle width=18></TD></TR>
  <TR vAlign=top>
    <TD width=354></TD>
    <TD align=right width=87>
      <HR color=#000080 noShade SIZE=3 width="90%">
    </TD>
    <TD align=right width=85>
      <HR color=#000080 noShade SIZE=3 width="90%">
    </TD>
    <TD align=right width=77>
      <HR color=#000080 noShade SIZE=3 width="90%">
    </TD>
    <TD align=middle width=18></TD></TR>
  <TR vAlign=top>
    <TD width=354><FONT
      face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
      income (loss)</FONT></TD>
    <TD align=right width=87>(602)</TD>
    <TD align=right width=85>(556)</TD>
    <TD align=right width=77>1,570&nbsp;</TD>
    <TD align=middle width=18></TD></TR>
  <TR vAlign=top>
    <TD width=354><FONT face="CG Times Regular">Preferred Stock
      dividends</FONT></TD>
    <TD align=right width=87>(145)</TD>
    <TD align=right width=85>(206)</TD>
    <TD align=right width=77>(308)</TD>
    <TD align=middle width=18></TD></TR>
  <TR vAlign=top>
    <TD width=354><FONT face="CG Times Regular">Gain on Preferred Stock
      redemption</FONT></TD>
    <TD align=right width=87>--&nbsp;</TD>
    <TD align=right width=85>--&nbsp;</TD>
    <TD align=right width=77>188&nbsp;</TD>
    <TD align=middle width=18></TD></TR>
  <TR vAlign=top>
    <TD width=354></TD>
    <TD align=right width=87>
      <HR color=#000080 noShade SIZE=3 width="90%">
    </TD>
    <TD align=right width=85>
      <HR color=#000080 noShade SIZE=3 width="90%">
    </TD>
    <TD align=right width=77>
      <HR color=#000080 noShade SIZE=3 width="90%">
    </TD>
    <TD align=middle width=18></TD></TR>
  <TR vAlign=top>
    <TD width=354><FONT
      face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
      income (loss) applicable to Common Stock</FONT></TD>
    <TD align=right width=87>$&nbsp;&nbsp;&nbsp;&nbsp;(747)&nbsp;</TD>
    <TD align=right width=85>$&nbsp;&nbsp;&nbsp;(762)&nbsp;</TD>
    <TD align=right width=77>$&nbsp;&nbsp;1,450&nbsp;&nbsp;</TD>
    <TD align=middle width=18></TD></TR>
  <TR vAlign=top>
    <TD width=354></TD>
    <TD align=right width=87>
      <HR color=#000080 noShade SIZE=5 width="90%">
    </TD>
    <TD align=right width=85>
      <HR color=#000080 noShade SIZE=5 width="90%">
    </TD>
    <TD align=right width=77>
      <HR color=#000080 noShade SIZE=5 width="90%">
    </TD>
    <TD align=middle width=18></TD></TR>
  <TR vAlign=top>
    <TD colSpan=4 width=603>
      <HR color=#000080 noShade SIZE=5>
    </TD>
    <TD align=middle width=18></TD></TR>
  <TR vAlign=top>
    <TD width=354><FONT face="CG Times Regular">Net income (loss) per common
      share:</FONT></TD>
    <TD align=right width=87></TD>
    <TD align=right width=85></TD>
    <TD align=right width=77></TD>
    <TD align=middle width=18></TD></TR>
  <TR vAlign=top>
    <TD width=354><FONT
      face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic</FONT></TD>
    <TD align=right width=87>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(.03)</TD>
    <TD align=right width=85>$&nbsp;&nbsp;&nbsp;&nbsp;(.04)</TD>
    <TD align=right width=77>$&nbsp;&nbsp;&nbsp;&nbsp;.08</TD>
    <TD align=middle width=18></TD></TR>
  <TR vAlign=top>
    <TD width=354></TD>
    <TD align=right width=87>
      <HR color=#000080 noShade SIZE=5 width="90%">
    </TD>
    <TD align=right width=85>
      <HR color=#000080 noShade SIZE=5 width="90%">
    </TD>
    <TD align=right width=77>
      <HR color=#000080 noShade SIZE=5 width="90%">
    </TD>
    <TD align=middle width=18></TD></TR>
  <TR vAlign=top>
    <TD width=354><FONT
      face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Diluted</FONT></TD>
    <TD align=right width=87>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(.03)</TD>
    <TD align=right width=85>$&nbsp;&nbsp;&nbsp;&nbsp;(.04)</TD>
    <TD align=right width=77>$&nbsp;&nbsp;&nbsp;&nbsp;.07</TD>
    <TD align=middle width=18></TD></TR>
  <TR vAlign=top>
    <TD width=354></TD>
    <TD align=right width=87>
      <HR color=#000080 noShade SIZE=5 width="90%">
    </TD>
    <TD align=right width=85>
      <HR color=#000080 noShade SIZE=5 width="90%">
    </TD>
    <TD align=right width=77>
      <HR color=#000080 noShade SIZE=5 width="90%">
    </TD>
    <TD align=middle width=18></TD></TR>
  <TR vAlign=top>
    <TD width=354><FONT face="CG Times Regular">Number of shares and potential
      common shares<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;used in computing net
      income (loss) per share:</FONT></TD>
    <TD align=right width=87></TD>
    <TD align=right width=85></TD>
    <TD align=right width=77></TD>
    <TD align=middle width=18></TD></TR>
  <TR vAlign=top>
    <TD
      width=354>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic</TD>
    <TD align=right width=87>27,235&nbsp;</TD>
    <TD align=right width=85>21,558&nbsp;</TD>
    <TD align=right width=77>17,488&nbsp;</TD>
    <TD align=middle width=18></TD></TR>
  <TR vAlign=top>
    <TD width=354></TD>
    <TD align=right width=87>
      <HR color=#000080 noShade SIZE=5 width="90%">
    </TD>
    <TD align=right width=85>
      <HR color=#000080 noShade SIZE=5 width="90%">
    </TD>
    <TD align=right width=77>
      <HR color=#000080 noShade SIZE=5 width="90%">
    </TD>
    <TD align=middle width=18></TD></TR>
  <TR vAlign=top>
    <TD
      width=354>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Diluted</TD>
    <TD align=right width=87>27,235&nbsp;</TD>
    <TD align=right width=85>21,558&nbsp;</TD>
    <TD align=right width=77>21,224&nbsp;</TD>
    <TD align=middle width=18></TD></TR>
  <TR vAlign=top>
    <TD width=354></TD>
    <TD align=right width=87>
      <HR color=#000080 noShade SIZE=5 width="90%">
    </TD>
    <TD align=right width=85>
      <HR color=#000080 noShade SIZE=5 width="90%">
    </TD>
    <TD align=right width=77>
      <HR color=#000080 noShade SIZE=5 width="90%">
    </TD>
    <TD align=middle width=18></TD></TR></TABLE>
<P align=center><FONT face="CG Times Regular"></FONT></P>
<P align=center>&nbsp;</P>
<P align=center>&nbsp;</P>
<P><FONT face="CG Times Regular">
<CENTER>The accompanying notes are an integral part of these consolidated
financial statements.</CENTER></FONT>
<P></P>
<P align=center>-37-</P>
<P align=center>&nbsp;</P>
<P align=center><FONT face="CG Times Regular"><STRONG>PERMA-FIX ENVIRONMENTAL
SERVICES, INC.<BR>CONSOLIDATED STATEMENTS OF CASH FLOWS<BR></STRONG><EM>For the
years ended December 31</EM></FONT></P>
<TABLE width=685>
    <TR vAlign=top>
    <TD width=444><FONT face="CG Times Regular" size=-1>(Amounts in
      Thousands)</FONT></TD>
    <TD align=middle width=61><FONT face="CG Times Regular"
    size=-1>2001</FONT></TD>
    <TD align=middle width=55><FONT face="CG Times Regular"
    size=-1>2000</FONT></TD>
    <TD align=middle width=57><FONT face="CG Times Regular"
    size=-1>1999</FONT></TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD colSpan=5 width=629>
      <HR align=right color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD width=444><FONT face="CG Times Regular" size=-1>Cash flows from
      operating activities:</FONT></TD>
    <TD align=right width=61><FONT face="CG Times Regular"
      size=-1>&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=55><FONT face="CG Times Regular"
      size=-1>&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=57><FONT size=2>&nbsp;</FONT></TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444><FONT size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net income
      (loss)</FONT></TD>
    <TD align=right width=61><FONT face="CG Times Regular"
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(602)</FONT></TD>
    <TD align=right width=55><FONT face="CG Times Regular"
      size=-1>&nbsp;&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;(556)</FONT></TD>
    <TD align=right width=57><FONT
    size=2>$&nbsp;&nbsp;1,570&nbsp;&nbsp;</FONT></TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444><FONT size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Adjustments to
      reconcile net income (loss) to cash provided by
      continuing&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;operations:</FONT></TD>
    <TD align=right width=61><FONT size=2>&nbsp;</FONT></TD>
    <TD align=right width=55></TD>
    <TD align=right width=57></TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444><FONT size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and
      amortization</FONT></TD>
    <TD align=right width=61><FONT face="CG Times Regular"
      size=2>&nbsp;4,616&nbsp;</FONT></TD>
    <TD align=right width=55><FONT face="CG Times Regular"
      size=2>&nbsp;&nbsp;3,651&nbsp;</FONT></TD>
    <TD align=right width=57><FONT size=2>2,778&nbsp;&nbsp;</FONT></TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444><FONT size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Provision for bad
      debt and other reserves</FONT></TD>
    <TD align=right width=61><FONT face="CG Times Regular"
      size=2>&nbsp;&nbsp;334&nbsp;</FONT></TD>
    <TD align=right width=55><FONT face="CG Times Regular"
      size=2>&nbsp;&nbsp;99&nbsp;</FONT></TD>
    <TD align=right width=57><FONT size=2>126&nbsp;&nbsp;</FONT></TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444><FONT size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss (Gain) on
      sale of plant, property and equipment</FONT></TD>
    <TD align=right width=61><FONT size=2>&nbsp;&nbsp;28&nbsp;</FONT></TD>
    <TD align=right width=55><FONT size=2>&nbsp;&nbsp;(122)</FONT></TD>
    <TD align=right width=57><FONT size=2>(30)&nbsp;</FONT></TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444><FONT size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Issuance of
      Warrants for financing and services</FONT></TD>
    <TD align=right width=61><FONT size=2>234&nbsp;</FONT></TD>
    <TD align=right width=55><FONT size=2>389&nbsp;</FONT></TD>
    <TD align=right width=57><FONT size=2>--&nbsp;</FONT></TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444><FONT face="CG Times Regular"
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Changes in assets and
      liabilities, net of effects from business acquisitions:</FONT></TD>
    <TD align=right width=61></TD>
    <TD align=right width=55></TD>
    <TD align=right width=57></TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444><FONT face="CG Times Regular"
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable</FONT></TD>
    <TD align=right width=61><FONT size=2>(4,153)</FONT></TD>
    <TD align=right width=55><FONT size=2>(1,002)</FONT></TD>
    <TD align=right width=57><FONT size=2>(3,126)</FONT></TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444><FONT face="CG Times Regular"
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses, inventories
      and other assets</FONT></TD>
    <TD align=right width=61><FONT face="CG Times Regular"
      size=2>&nbsp;&nbsp;512&nbsp;</FONT></TD>
    <TD align=right width=55><FONT size=2>(2,517)</FONT></TD>
    <TD align=right width=57><FONT size=2>(218)</FONT></TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444><FONT face="CG Times Regular"
      size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable and accrued
      expenses</FONT></TD>
    <TD align=right width=61><FONT size=2>(985)</FONT></TD>
    <TD align=right width=55><FONT size=2>210&nbsp;</FONT></TD>
    <TD align=right width=57><FONT size=2>(78)</FONT></TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444></TD>
    <TD align=right width=61>
      <HR align=right color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=right width=55>
      <HR align=right color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=right width=57>
      <HR align=right color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444><FONT face="CG Times Regular"
      size=-1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
      cash provided (used) by continuing operations</FONT></TD>
    <TD align=right width=61><FONT size=2>(16)</FONT></TD>
    <TD align=right width=55><FONT size=2>152&nbsp;</FONT></TD>
    <TD align=right width=57><FONT size=2>1,022&nbsp;</FONT></TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444></TD>
    <TD align=right width=61>
      <HR align=right color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=right width=55>
      <HR align=right color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=right width=57>
      <HR align=right color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444><FONT face="CG Times Regular" size=-1>Net cash used by
      discontinued operations</FONT></TD>
    <TD align=right width=61><FONT size=2>(188)</FONT></TD>
    <TD align=right width=55><FONT size=2>(379)</FONT></TD>
    <TD align=right width=57><FONT size=2>(1,285)</FONT></TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444><FONT face="CG Times Regular"
      size=-1>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=61>
      <HR align=right color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=right width=55>
      <HR align=right color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=right width=57>
      <HR align=right color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444><FONT size=2>Cash flows from investing activities:</FONT></TD>
    <TD align=right width=61></TD>
    <TD align=right width=55></TD>
    <TD align=right width=57></TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444><FONT face="CG Times Regular"
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Purchases of property and equipment,
      net</FONT></TD>
    <TD align=right width=61><FONT size=2>(4,081)</FONT></TD>
    <TD align=right width=55><FONT size=2>(3,170)</FONT></TD>
    <TD align=right width=57><FONT size=2>(1,834)&nbsp;</FONT></TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444><FONT size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from
      sale of plant, property and equipment</FONT></TD>
    <TD align=right width=61><FONT size=2>167&nbsp;</FONT></TD>
    <TD align=right width=55><FONT size=2>227&nbsp;</FONT></TD>
    <TD align=right width=57><FONT size=2>238&nbsp;</FONT></TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444><FONT size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Change in
      restricted cash, net</FONT></TD>
    <TD align=right width=61><FONT size=2>&nbsp;(18)</FONT></TD>
    <TD align=right width=55><FONT size=2>30&nbsp;</FONT></TD>
    <TD align=right width=57><FONT size=2>1,042&nbsp;</FONT></TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444><FONT size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash used for
      acquisition consideration</FONT></TD>
    <TD align=right width=61><FONT size=2>(10,083)</FONT> </TD>
    <TD align=right width=55><FONT size=2>(2,500)</FONT> </TD>
    <TD align=right width=57><FONT size=2>(1,000)</FONT> </TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444><FONT face="CG Times Regular"
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used for acquisition
      settlements</FONT></TD>
    <TD align=right width=61><FONT size=2>&nbsp;--&nbsp;</FONT></TD>
    <TD align=right width=55><FONT size=2>--&nbsp;</FONT></TD>
    <TD align=right width=57><FONT size=2>(1,616)</FONT></TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444><FONT size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided
      by (used by) discontinued operations</FONT></TD>
    <TD align=right width=61><FONT size=2>--&nbsp;</FONT> </TD>
    <TD align=right width=55><FONT size=2>265&nbsp;</FONT> </TD>
    <TD align=right width=57><FONT size=2>(47)</FONT> </TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444></TD>
    <TD align=right width=61>
      <HR align=right color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=right width=55>
      <HR align=right color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=right width=57>
      <HR align=right color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444><FONT
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
      cash used in investing activities</FONT></TD>
    <TD align=right width=61><FONT size=2>(14,015)</FONT> </TD>
    <TD align=right width=55><FONT size=2>(5,148)</FONT> </TD>
    <TD align=right width=57><FONT size=2>(3,217)</FONT> </TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444></TD>
    <TD align=right width=61>
      <HR align=right color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=right width=55>
      <HR align=right color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=right width=57>
      <HR align=right color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444><FONT size=2>Cash flows from financing activities:</FONT></TD>
    <TD align=right width=61></TD>
    <TD align=right width=55></TD>
    <TD align=right width=57></TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444><FONT size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Borrowings of
      revolving loan and term note facility</FONT></TD>
    <TD align=right width=61><FONT size=2>921&nbsp;</FONT> </TD>
    <TD align=right width=55><FONT size=2>3,731&nbsp;</FONT> </TD>
    <TD align=right width=57><FONT size=2>5,060&nbsp;</FONT> </TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444><FONT size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Principal
      repayments of long term debt</FONT></TD>
    <TD align=right width=61><FONT size=2>(3,136)</FONT> </TD>
    <TD align=right width=55><FONT size=2>(3,936)</FONT> </TD>
    <TD align=right width=57><FONT size=2>(861)</FONT> </TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444><FONT size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from
      issuance of long term debt</FONT></TD>
    <TD align=right width=61><FONT size=2>6,161&nbsp;</FONT> </TD>
    <TD align=right width=55><FONT size=2>3,750&nbsp;</FONT> </TD>
    <TD align=right width=57>--&nbsp; </TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444><FONT size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Redemption of
      Preferred Stock</FONT></TD>
    <TD align=right width=61><FONT size=2>--&nbsp;</FONT> </TD>
    <TD align=right width=55><FONT size=2>--&nbsp;</FONT> </TD>
    <TD align=right width=57><FONT size=2>(750)</FONT> </TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444><FONT size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from
      issuance of stock</FONT></TD>
    <TD align=right width=61><FONT size=2>10,635&nbsp;</FONT> </TD>
    <TD align=right width=55><FONT size=2>1,516&nbsp;</FONT> </TD>
    <TD align=right width=57><FONT size=2>143&nbsp;</FONT> </TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444><FONT size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Purchase of
      treasury stock</FONT></TD>
    <TD align=right width=61><FONT size=2>--&nbsp;</FONT> </TD>
    <TD align=right width=55>--&nbsp; </TD>
    <TD align=right width=57><FONT size=2>(50)</FONT> </TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444><FONT size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used by
      discontinued operations</FONT></TD>
    <TD align=right width=61><FONT size=2>--&nbsp;</FONT> </TD>
    <TD align=right width=55><FONT size=2>(4)</FONT> </TD>
    <TD align=right width=57><FONT size=2>(22)</FONT> </TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444></TD>
    <TD align=right width=61>
      <HR align=right color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=right width=55>
      <HR align=right color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=right width=57>
      <HR align=right color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444><FONT
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
      cash provided by financing activities</FONT></TD>
    <TD align=right width=61><FONT size=2>14,581&nbsp;</FONT> </TD>
    <TD align=right width=55><FONT size=2>5,057&nbsp;</FONT> </TD>
    <TD align=right width=57><FONT size=2>3,520&nbsp;</FONT> </TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444></TD>
    <TD align=right width=61>
      <HR align=right color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=right width=55>
      <HR align=right color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=right width=57>
      <HR align=right color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444><FONT size=2>Increase (decrease) in cash</FONT></TD>
    <TD align=right width=61><FONT size=2>362&nbsp;</FONT> </TD>
    <TD align=right width=55><FONT size=2>(318)</FONT> </TD>
    <TD align=right width=57><FONT size=2>40&nbsp;</FONT> </TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444></TD>
    <TD align=right width=61></TD>
    <TD align=right width=55></TD>
    <TD align=right width=57></TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444><FONT size=2>Cash at beginning of period</FONT></TD>
    <TD align=right width=61><FONT size=2>498&nbsp;</FONT> </TD>
    <TD align=right width=55><FONT size=2>816&nbsp;</FONT> </TD>
    <TD align=right width=57><FONT size=2>776&nbsp;</FONT> </TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444></TD>
    <TD align=right width=61>
      <HR align=right color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=right width=55>
      <HR align=right color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=right width=57>
      <HR align=right color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444><FONT size=2>Cash at end of period</FONT></TD>
    <TD align=right width=61><FONT
      size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;860&nbsp;</FONT> </TD>
    <TD align=right width=55><FONT
      size=2>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;498&nbsp;</FONT> </TD>
    <TD align=right width=57><FONT
      size=2>$&nbsp;&nbsp;&nbsp;&nbsp;816&nbsp;</FONT> </TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444></TD>
    <TD align=right width=61>
      <HR align=right color=#000080 noShade SIZE=5 width="95%">
    </TD>
    <TD align=right width=55>
      <HR align=right color=#000080 noShade SIZE=5 width="95%">
    </TD>
    <TD align=right width=57>
      <HR align=right color=#000080 noShade SIZE=5 width="95%">
    </TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444></TD>
    <TD align=right width=61></TD>
    <TD align=right width=55></TD>
    <TD align=right width=57></TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD colSpan=4 width=575>
      <HR align=right color=#000080 noShade SIZE=5>
    </TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444><FONT face="CG Times Regular" size=2>Supplemental
      disclosure:</FONT></TD>
    <TD align=right width=61></TD>
    <TD align=right width=55></TD>
    <TD align=right width=57></TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444><FONT face="CG Times Regular"
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest paid</FONT></TD>
    <TD align=right width=61><FONT size=2>$ &nbsp;&nbsp;2,656&nbsp;</FONT></TD>
    <TD align=right width=55><FONT
    size=2>$&nbsp;&nbsp;&nbsp;1,772&nbsp;</FONT></TD>
    <TD align=right width=57><FONT
      size=2>$&nbsp;&nbsp;&nbsp;&nbsp;942&nbsp;</FONT></TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444><FONT size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dividends
      paid</FONT></TD>
    <TD align=right width=61><FONT size=2>--&nbsp;</FONT> </TD>
    <TD align=right width=55><FONT size=2>--&nbsp;</FONT> </TD>
    <TD align=right width=57><FONT size=2>205&nbsp;</FONT> </TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444><FONT face="CG Times Regular" size=2>Non-cash investing and
      financing activities:</FONT></TD>
    <TD align=right width=61></TD>
    <TD align=right width=55></TD>
    <TD align=right width=57></TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444><FONT size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Issuance of
      Common Stock for services</FONT></TD>
    <TD align=right width=61><FONT size=2>63&nbsp;</FONT> </TD>
    <TD align=right width=55><FONT size=2>236&nbsp;</FONT> </TD>
    <TD align=right width=57><FONT size=2>40&nbsp;</FONT> </TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444><FONT face="CG Times Regular"
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Issuance of Common Stock for payment
      of dividends</FONT></TD>
    <TD align=right width=61><FONT size=2>184&nbsp;</FONT></TD>
    <TD align=right width=55><FONT size=2>214&nbsp;</FONT></TD>
    <TD align=right width=57><FONT size=2>221&nbsp;</FONT></TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444><FONT size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Issuance of
      Common Stock for acquisition</FONT></TD>
    <TD align=right width=61><FONT size=2>&nbsp;2,916&nbsp;</FONT></TD>
    <TD align=right width=55><FONT size=2>--&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=57><FONT size=2>3,000&nbsp;</FONT></TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444><FONT size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Issuance of
      Preferred Stock of subsidiary for acquisition</FONT></TD>
    <TD align=right width=61><FONT size=2>1,285&nbsp;</FONT> </TD>
    <TD align=right width=55><FONT size=2>--&nbsp;</FONT> </TD>
    <TD align=right width=57><FONT size=2>--&nbsp;</FONT> </TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444><FONT size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Issuance of
      Warrants for services and financing</FONT></TD>
    <TD align=right width=61><FONT size=2>&nbsp;3,550&nbsp;</FONT></TD>
    <TD align=right width=55><FONT size=2>997&nbsp;</FONT></TD>
    <TD align=right width=57><FONT size=2>--&nbsp;&nbsp;</FONT></TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444><FONT size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest rate
      swap valuation</FONT></TD>
    <TD align=right width=61><FONT size=2>158&nbsp;</FONT> </TD>
    <TD align=right width=55><FONT size=2>--&nbsp;</FONT> </TD>
    <TD align=right width=57><FONT size=2>--&nbsp;</FONT> </TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444><FONT size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Long-term debt
      incurred for purchase of property and equipment</FONT></TD>
    <TD align=right width=61><FONT size=2>517&nbsp;</FONT> </TD>
    <TD align=right width=55><FONT size=2>642&nbsp;</FONT> </TD>
    <TD align=right width=57><FONT size=2>826&nbsp;</FONT> </TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444><FONT size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Long-term debt
      incurred for acquisition</FONT></TD>
    <TD align=right width=61><FONT size=2>--&nbsp;</FONT> </TD>
    <TD align=right width=55><FONT size=2>6,000&nbsp;</FONT> </TD>
    <TD align=right width=57><FONT size=2>4,700&nbsp;</FONT> </TD>
    <TD align=middle width=36></TD></TR>
  <TR vAlign=top>
    <TD width=444><FONT size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Long-term debt
      and accrued interest exchanged for Common Stock</FONT></TD>
    <TD align=right width=61><FONT size=2>3,144&nbsp;</FONT> </TD>
    <TD align=right width=55><FONT size=2>--&nbsp;</FONT> </TD>
    <TD align=right width=57><FONT size=2>--&nbsp;</FONT> </TD>
    <TD align=middle width=36></TD></TR></TABLE>
<P align=center>The accompanying notes are an integral part of these
consolidated financial statements.</P>
<P align=center>-38-</P>
<P align=left>&nbsp;</P>
<P align=center><FONT face="CG Times Regular"><STRONG>PERMA-FIX ENVIRONMENTAL
SERVICES, INC.<BR>CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
EQUITY<BR></STRONG><EM>For the years ended December 31</EM> </P>
<TABLE width=655></FONT>
    <TR vAlign=top>
    <TD width=157><FONT size=1><BR><BR><BR>(Amounts in thousands,</FONT></TD>
    <TD align=middle width=88><FONT size=1><BR><BR><BR WP="BR1"><FONT
      face="CG Times Regular"><U>Preferred Stock </U></FONT></FONT></TD>
    <TD align=middle width=107>
      <P><U><FONT face="CG Times Regular" size=1><BR><BR><BR>Common Stock</FONT>
      </U></P></TD>
    <TD align=middle width=56><FONT size=1><BR WP="BR1"><BR
      WP="BR2">Redeem-<BR>able</FONT></TD>
    <TD align=middle width=51><FONT size=1><BR><BR
      WP="BR1">Additional<BR>Paid-In</FONT></TD>
    <TD align=middle width=38><FONT size=1><BR><BR
      WP="BR1">Interest<BR></FONT><FONT face="CG Times Regular"
      size=1>Rate</FONT></TD>
    <TD align=middle width=46><FONT size=1><BR><BR
      WP="BR1">Accumu-<BR>lated</FONT></TD>
    <TD align=middle width=5></TD>
    <TD align=middle width=54><FONT face="CG Times Regular"
      size=1><BR>Common<BR>Stock<BR>Held in</FONT> </TD>
    <TD align=middle width=3></TD>
    <TD align=middle width=46><FONT size=1><BR WP="BR1">Total<BR></FONT><FONT
      face="CG Times Regular"
size=1>Stock-<BR>holder's</FONT></TD></TR></TABLE>
<TABLE width=652>
    <TR vAlign=top>
    <TD width=145><FONT face="CG Times Regular" size=1>except for share
      amounts)</FONT></TD>
    <TD align=right width=44><U>
      <P align=center></U><FONT face="CG Times Regular"
    size=1>Shares</FONT></P></TD>
    <TD width=41><U>
      <P align=center></U><FONT face="CG Times Regular"
    size=1>Amount</FONT></P></TD>
    <TD align=right width=57><U>
      <P align=center></U><FONT face="CG Times Regular"
    size=1>Shares</FONT></P></TD>
    <TD align=right width=40><U>
      <P align=center></U><FONT face="CG Times Regular"
    size=1>Amount</FONT></P></TD>
    <TD width=55><U>
      <P align=center></U><FONT face="CG Times Regular"
      size=1>Warrants</FONT></P></TD>
    <TD align=right width=40><U>
      <P align=center></U><FONT face="CG Times Regular"
    size=1>Capital</FONT></P></TD>
    <TD align=right width=54><U>
      <P align=center></U><FONT face="CG Times Regular"
size=1>Swap</FONT></P></TD>
    <TD align=right width=42><U>
      <P align=center></U><FONT face="CG Times Regular"
    size=1>Deficit</FONT></P></TD>
    <TD align=right width=8></TD>
    <TD align=right width=53>
      <P align=left><FONT face="CG Times Regular" size=1>&nbsp;
      Treasury</FONT></P></TD>
    <TD align=right width=5></TD>
    <TD align=right width=50>
      <P align=center><FONT face="CG Times Regular"
  size=1>Equity</FONT></P></TD></TR></TABLE>
<HR color=#000080 noShade SIZE=3>

<TABLE width=664>
    <TR vAlign=top>
    <TD width=159><FONT face="CG Times Regular"
      size=-2><STRONG></STRONG></FONT><FONT face="CG Times Regular"
      size=-2><STRONG>Balance at December
      31,<BR>&nbsp;&nbsp;&nbsp;1998</STRONG></FONT></TD>
    <TD align=right width=36><FONT face="CG Times Regular" size=-2><BR>9,850
      </FONT></TD>
    <TD align=right width=5><FONT face="CG Times Regular" size=-2></FONT></TD>
    <TD align=right width=17><FONT face="CG Times Regular" size=-2><BR>$--
      </FONT></TD>
    <TD align=right width=5><FONT face="CG Times Regular" size=-2></FONT></TD>
    <TD align=right width=55><FONT face="CG Times Regular"
      size=1><BR>13,215,093</FONT></TD>
    <TD align=right width=4><FONT face="CG Times Regular" size=-2></FONT></TD>
    <TD align=right width=29>
      <P align=left><FONT face="CG Times Regular"
      size=-2><BR>$&nbsp;&nbsp;&nbsp;&nbsp;13</FONT></P></TD>
    <TD align=right width=3><FONT face="CG Times Regular" size=-2></FONT></TD>
    <TD align=right width=33><FONT face="CG Times Regular" size=-2><BR>$140
      </FONT></TD>
    <TD align=right width=2><FONT face="CG Times Regular" size=-2></FONT></TD>
    <TD align=right width=43><FONT face="CG Times Regular" size=-2><BR>$39,769
      </FONT></TD>
    <TD align=right width=13><FONT face="CG Times Regular" size=-2></FONT></TD>
    <TD align=right width=36><FONT face="CG Times Regular" size=-2><BR>$ --
      </FONT></TD>
    <TD align=right width=50><FONT face="CG Times Regular"
      size=-2><BR>$(22,157)</FONT></TD>
    <TD align=right width=5><FONT face="CG Times Regular" size=-2></FONT></TD>
    <TD align=right width=51><FONT face="CG Times Regular" size=-2><BR>$
      (1,812)</FONT></TD>
    <TD align=right width=6><FONT face="CG Times Regular" size=-2></FONT></TD>
    <TD align=right width=58><FONT face="CG Times Regular" size=-2><BR>$
      15,953&nbsp; </FONT></TD></TR>
  <TR vAlign=top>
    <TD width=159><FONT face="CG Times Regular" size=-2>Net income</FONT></TD>
    <TD align=right width=36><FONT face="CG Times Regular" size=1>--
</FONT></TD>
    <TD align=right width=5><FONT face="CG Times Regular" size=-2></FONT></TD>
    <TD align=right width=17><FONT face="CG Times Regular" size=1>--
</FONT></TD>
    <TD align=right width=5><FONT face="CG Times Regular" size=-2></FONT></TD>
    <TD align=right width=55><FONT face="CG Times Regular" size=1>--</FONT></TD>
    <TD align=right width=4><FONT face="CG Times Regular" size=-2></FONT></TD>
    <TD align=right width=29><FONT face="CG Times Regular" size=1>--
</FONT></TD>
    <TD align=right width=3><FONT face="CG Times Regular" size=-2></FONT></TD>
    <TD align=right width=33><FONT face="CG Times Regular" size=1>--
</FONT></TD>
    <TD align=right width=2><FONT face="CG Times Regular" size=-2></FONT></TD>
    <TD align=right width=43><FONT face="CG Times Regular" size=-2>--
    </FONT></TD>
    <TD align=right width=13><FONT face="CG Times Regular" size=-2></FONT></TD>
    <TD align=right width=36><FONT face="CG Times Regular" size=1>--
</FONT></TD>
    <TD align=right width=50><FONT face="CG Times Regular" size=-2>1,570
      </FONT></TD>
    <TD align=right width=5><FONT face="CG Times Regular" size=-2></FONT></TD>
    <TD align=right width=51><FONT face="CG Times Regular" size=-2>--
    </FONT></TD>
    <TD align=right width=6><FONT face="CG Times Regular" size=-2></FONT></TD>
    <TD align=right width=58><FONT face="CG Times Regular" size=-2>1,570&nbsp;
      </FONT></TD></TR>
  <TR vAlign=top>
    <TD width=159><FONT face="CG Times Regular" size=-2>Preferred Stock
      dividends</FONT></TD>
    <TD align=right width=36><FONT size=1>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=17><FONT size=1>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=55><FONT size=1>--</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=29><FONT size=1>--</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=33></TD>
    <TD align=right width=2></TD>
    <TD align=right width=43><FONT size=1>--</FONT></TD>
    <TD align=right width=13></TD>
    <TD align=right width=36><FONT size=1>--</FONT></TD>
    <TD align=right width=50><FONT size=1>(308)</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=51><FONT size=1>--</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=58><FONT size=1>(308)</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=159><FONT face="CG Times Regular" size=-2>Gain on Preferred
      Stock<BR>&nbsp;&nbsp;&nbsp;redemption</FONT></TD>
    <TD align=right width=36><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=17><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=55><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=29><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=33><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=2></TD>
    <TD align=right width=43><FONT size=1><BR>(188)</FONT></TD>
    <TD align=right width=13></TD>
    <TD align=right width=36><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=50><FONT size=1><BR>188</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=51><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=58><FONT size=1><BR>--&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=159><FONT face="CG Times Regular" size=-2>Issuance of Common
      Stock<BR>&nbsp;&nbsp;&nbsp;for Preferred Stock<BR>&nbsp;&nbsp;&nbsp;
      dividend</FONT></TD>
    <TD align=right width=36><FONT size=1><BR><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=17><FONT size=1><BR><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=55><FONT size=1><BR><BR>152,494</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=29><FONT size=1><BR><BR>--</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=33><FONT size=1><BR>&nbsp;<BR>--</FONT></TD>
    <TD align=right width=2></TD>
    <TD align=right width=43><FONT size=1><BR><BR>221</FONT></TD>
    <TD align=right width=13></TD>
    <TD align=right width=36><FONT size=1><BR><BR>--</FONT></TD>
    <TD align=right width=50><FONT size=1><BR><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=51><FONT size=1><BR><BR>--</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=58><FONT size=1><BR><BR>221&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=159><FONT face="CG Times Regular" size=-2>Issuance of Common
      Stock<BR>&nbsp;&nbsp;&nbsp;in&nbsp;exchange for Warrants</FONT></TD>
    <TD align=right width=36><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=17><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=55><FONT size=1><BR>200,000</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=29><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=33><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=2></TD>
    <TD align=right width=43><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=13></TD>
    <TD align=right width=36><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=50><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=51><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=58><FONT size=1><BR>--&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=159><FONT face="CG Times Regular" size=-2>Issuance of Common
      Stock<BR>&nbsp;&nbsp;&nbsp;for acquisition</FONT></TD>
    <TD align=right width=36><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=17><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=55><FONT size=1><BR>1,594,967</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=29><FONT size=1><BR>2</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=33><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=2></TD>
    <TD align=right width=43><FONT size=1><BR>2,998</FONT></TD>
    <TD align=right width=13></TD>
    <TD align=right width=36><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=50><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=51><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=58><FONT size=1><BR>3,000&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=159><FONT face="CG Times Regular" size=-2>Issuance of stock for
      cash<BR>&nbsp;&nbsp;&nbsp;and services</FONT></TD>
    <TD align=right width=36><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=17><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=55><FONT size=1><BR>81,560</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=29><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=33><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=2></TD>
    <TD align=right width=43><FONT size=1><BR>90</FONT></TD>
    <TD align=right width=13></TD>
    <TD align=right width=36><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=50><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=51><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=58><FONT size=1><BR>90</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=159><FONT face="CG Times Regular" size=-2>Conversion of
      Preferred<BR>&nbsp;&nbsp;&nbsp;Stock to Common</FONT></TD>
    <TD align=right width=36><FONT size=1><BR>(4,563)</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=17><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=55><FONT size=1><BR>6,119,135</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=29><FONT size=1><BR>6</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=33><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=2></TD>
    <TD align=right width=43><FONT size=1><BR>(6)</FONT></TD>
    <TD align=right width=13></TD>
    <TD align=right width=36><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=50><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=51><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=58><FONT size=1><BR>--&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=159><FONT face="CG Times Regular" size=1>Redemption of
      Preferred<BR>&nbsp;&nbsp;&nbsp;Stock</FONT></TD>
    <TD align=right width=36><FONT size=1><BR>(750)</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=17><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=55><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=29><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=33><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=2></TD>
    <TD align=right width=43><FONT size=1><BR>(750)</FONT></TD>
    <TD align=right width=13></TD>
    <TD align=right width=36><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=50><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=51><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=58><FONT size=1><BR>(750)</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=159><FONT face="CG Times Regular" size=-2>Redemption of
      Common<BR>&nbsp;&nbsp;&nbsp;Stock to Treasury Stock</FONT></TD>
    <TD align=right width=36><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=17><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=55><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=29><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=33><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=2></TD>
    <TD align=right width=43><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=13></TD>
    <TD align=right width=36><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=50><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=51><FONT size=1><BR>(50)</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=58><FONT size=1><BR>(50)</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=159><FONT face="CG Times Regular" size=-2>Exercise of
      Warrants</FONT></TD>
    <TD align=right width=36><FONT size=1>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=17><FONT size=1>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=55><FONT size=1>97,227</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=29><FONT size=1>--</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=33><FONT size=1>--</FONT></TD>
    <TD align=right width=2></TD>
    <TD align=right width=43><FONT size=1>48</FONT></TD>
    <TD align=right width=13></TD>
    <TD align=right width=36><FONT size=1>--</FONT></TD>
    <TD align=right width=50><FONT size=1>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=51><FONT size=1>--</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=58><FONT size=1>48&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=159><FONT size=1>Option Exercise</FONT></TD>
    <TD align=right width=36><FONT size=1>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=17><FONT size=1>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=55><FONT size=1>41,300</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=29><FONT size=1>--</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=33><FONT size=1>--</FONT></TD>
    <TD align=right width=2></TD>
    <TD align=right width=43><FONT size=1>45</FONT></TD>
    <TD align=right width=13></TD>
    <TD align=right width=36><FONT size=1>--</FONT></TD>
    <TD align=right width=50><FONT size=1>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=51><FONT size=1>--</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=58><FONT size=1>45&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=159><FONT size=1>Expiration of
      redeemable<BR>&nbsp;&nbsp;&nbsp;Warrants</FONT></TD>
    <TD align=right width=36><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=17><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=55><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=29><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=33><FONT size=1><BR>(140)</FONT></TD>
    <TD align=right width=2></TD>
    <TD align=right width=43><FONT size=1><BR>140</FONT></TD>
    <TD align=right width=13></TD>
    <TD align=right width=36><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=50><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=51><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=58><FONT size=1><BR>--&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=159></TD>
    <TD align=right width=36>
      <HR color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=right width=5></TD>
    <TD align=right width=17>
      <HR color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=right width=5></TD>
    <TD align=right width=55>
      <HR color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=right width=4></TD>
    <TD align=right width=29>
      <HR color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=right width=3></TD>
    <TD align=right width=33>
      <HR color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=right width=2></TD>
    <TD align=right width=43>
      <HR color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=right width=13></TD>
    <TD align=right width=36>
      <HR color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=right width=50>
      <HR color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=right width=5></TD>
    <TD align=right width=51>
      <HR color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=right width=6></TD>
    <TD align=right width=58>
      <HR color=#000080 noShade SIZE=3 width="95%">
    </TD></TR>
  <TR vAlign=top>
    <TD width=159><FONT size=1><B>Balance at December
      31,<BR>&nbsp;&nbsp;&nbsp;1999</B></FONT></TD>
    <TD align=right width=36><FONT size=1><BR>4,537</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=17><FONT size=1><BR>$--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=55><FONT size=1><BR>21,501,776</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=29><FONT size=1><BR>$21</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=33><FONT size=1><BR>$ --</FONT></TD>
    <TD align=right width=2></TD>
    <TD align=right width=43><FONT size=1><BR>$42,367</FONT></TD>
    <TD align=right width=13></TD>
    <TD align=right width=36><FONT size=1><BR>$ --</FONT></TD>
    <TD align=right width=50><FONT size=1><BR>$(20,707)</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=51><FONT size=1><BR>$(1,862)</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=58><FONT size=1><BR>$&nbsp;19,819</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=159></TD>
    <TD align=right width=36>
      <HR color=#000080 noShade SIZE=5 width="95%">
    </TD>
    <TD align=right width=5></TD>
    <TD align=right width=17>
      <HR color=#000080 noShade SIZE=5 width="95%">
    </TD>
    <TD align=right width=5></TD>
    <TD align=right width=55>
      <HR color=#000080 noShade SIZE=5 width="95%">
    </TD>
    <TD align=right width=4></TD>
    <TD align=right width=29>
      <HR color=#000080 noShade SIZE=5 width="95%">
    </TD>
    <TD align=right width=3></TD>
    <TD align=right width=33>
      <HR color=#000080 noShade SIZE=5 width="95%">
    </TD>
    <TD align=right width=2></TD>
    <TD align=right width=43>
      <HR color=#000080 noShade SIZE=5 width="95%">
    </TD>
    <TD align=right width=13></TD>
    <TD align=right width=36>
      <HR color=#000080 noShade SIZE=5 width="95%">
    </TD>
    <TD align=right width=50>
      <HR color=#000080 noShade SIZE=5 width="95%">
    </TD>
    <TD align=right width=5></TD>
    <TD align=right width=51>
      <HR color=#000080 noShade SIZE=5 width="95%">
    </TD>
    <TD align=right width=6></TD>
    <TD align=right width=58>
      <HR color=#000080 noShade SIZE=5 width="95%">
    </TD></TR>
  <TR vAlign=top>
    <TD width=159><FONT size=1>Net loss</FONT></TD>
    <TD align=right width=36><FONT size=1>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=17><FONT size=1>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=55><FONT size=1>--</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=29><FONT size=1>--</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=33><FONT size=1>--</FONT></TD>
    <TD align=right width=2></TD>
    <TD align=right width=43><FONT size=1>--</FONT></TD>
    <TD align=right width=13></TD>
    <TD align=right width=36><FONT size=1>--</FONT></TD>
    <TD align=right width=50><FONT size=1>(556)</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=51><FONT size=1>--</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=58><FONT size=1>(556)</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=159><FONT size=1>Preferred Stock dividends</FONT></TD>
    <TD align=right width=36><FONT size=1>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=17><FONT size=1>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=55><FONT size=1>--</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=29><FONT size=1>--</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=33><FONT size=1>--</FONT></TD>
    <TD align=right width=2></TD>
    <TD align=right width=43><FONT size=1>--</FONT></TD>
    <TD align=right width=13></TD>
    <TD align=right width=36><FONT size=1>--</FONT></TD>
    <TD align=right width=50><FONT size=1>(206)</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=51><FONT size=1>--</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=58><FONT size=1>(206)</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=159><FONT size=1>Issuance of Common
      Stock<BR>&nbsp;&nbsp;&nbsp;&nbsp;for Preferred Stock<BR>&nbsp;&nbsp;&nbsp;
      dividend</FONT></TD>
    <TD align=right width=36><FONT size=1><BR><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=17><FONT size=1><BR><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=55><FONT size=1><BR><BR>168,825</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=29><FONT size=1><BR><BR>--</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=33><FONT size=1><BR><BR>--</FONT></TD>
    <TD align=right width=2></TD>
    <TD align=right width=43><FONT size=1><BR><BR>214</FONT></TD>
    <TD align=right width=13></TD>
    <TD align=right width=36><FONT size=1><BR><BR>--</FONT></TD>
    <TD align=right width=50><FONT size=1><BR><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=51><FONT size=1><BR><BR>--</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=58><FONT size=1><BR><BR>214</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=159><FONT size=1>Issuance of Common
      Stock<BR>&nbsp;&nbsp;&nbsp;for acquisition</FONT></TD>
    <TD align=right width=36><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=17><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=55><FONT size=1><BR>55,904</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=29><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=33><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=2></TD>
    <TD align=right width=43><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=13></TD>
    <TD align=right width=36><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=50><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=51><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=58><FONT size=1><BR>--</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=159><FONT size=1>Issuance of stock for
      cash<BR>&nbsp;&nbsp;&nbsp;and services</FONT></TD>
    <TD align=right width=36><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=17><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=55><FONT size=1><BR>219,703</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=29><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=33><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=2></TD>
    <TD align=right width=43><FONT size=1><BR>276</FONT></TD>
    <TD align=right width=13></TD>
    <TD align=right width=36><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=50><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=51><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=58><FONT size=1><BR>276</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=159><FONT size=1>Conversion of
      Preferred<BR>&nbsp;&nbsp;&nbsp;Stock to Common Stock</FONT></TD>
    <TD align=right width=36><FONT size=1><BR>(350)</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=17><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=55><FONT size=1><BR>322,351</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=29><FONT size=1><BR>1</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=33><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=2></TD>
    <TD align=right width=43><FONT size=1><BR>(1)</FONT></TD>
    <TD align=right width=13></TD>
    <TD align=right width=36><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=50><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=51><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=58><FONT size=1><BR>--</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=159><FONT face="CG Times Regular" size=1>Issuance of Warrants
      in&nbsp;<BR>&nbsp;&nbsp;&nbsp;conjunction with financing</FONT></TD>
    <TD align=right width=36><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=17><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=55><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=29><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=33><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=2></TD>
    <TD align=right width=43><FONT size=1><BR>997</FONT></TD>
    <TD align=right width=13></TD>
    <TD align=right width=36><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=50><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=51><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=58><FONT size=1><BR>997</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=159><FONT face="CG Times Regular" size=1>Issuance of Warrants
      for<BR>&nbsp;&nbsp;&nbsp;services</FONT></TD>
    <TD align=right width=36><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=17><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=55><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=29><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=33><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=2></TD>
    <TD align=right width=43><FONT size=1><BR>163</FONT></TD>
    <TD align=right width=13></TD>
    <TD align=right width=36><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=50><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=51><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=58><FONT size=1><BR>163</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=159><FONT face="CG Times Regular" size=1>Exercise of
      Warrants</FONT></TD>
    <TD align=right width=36><FONT size=1>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=17><FONT size=1>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=55><FONT size=1>1,161,200</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=29><FONT size=1>1</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=33><FONT size=1>--</FONT></TD>
    <TD align=right width=2></TD>
    <TD align=right width=43><FONT size=1>1,312</FONT></TD>
    <TD align=right width=13></TD>
    <TD align=right width=36><FONT size=1>--</FONT></TD>
    <TD align=right width=50><FONT size=1>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=51><FONT size=1>--</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=58><FONT size=1>1,313</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=159></TD>
    <TD align=right width=36>
      <HR color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=right width=5></TD>
    <TD align=right width=17>
      <HR color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=right width=5></TD>
    <TD align=right width=55>
      <HR color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=right width=4></TD>
    <TD align=right width=29>
      <HR color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=right width=3></TD>
    <TD align=right width=33>
      <HR color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=right width=2></TD>
    <TD align=right width=43>
      <HR color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=right width=13></TD>
    <TD align=right width=36>
      <HR color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=right width=50>
      <HR color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=right width=5></TD>
    <TD align=right width=51>
      <HR color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=right width=6></TD>
    <TD align=right width=58>
      <HR color=#000080 noShade SIZE=3 width="95%">
    </TD></TR>
  <TR vAlign=top>
    <TD width=159><FONT face="CG Times Regular" size=1><B>Balance at December
      31,<BR>&nbsp;&nbsp;&nbsp;2000</B></FONT></TD>
    <TD align=right width=36><FONT size=1>4,187</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=17><FONT size=1>$--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=55><FONT size=1>23,429,759</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=29><FONT size=1>$23</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=33><FONT size=1>$ --</FONT></TD>
    <TD align=right width=2></TD>
    <TD align=right width=43><FONT size=1>$45,328</FONT></TD>
    <TD align=right width=13></TD>
    <TD align=right width=36><FONT size=1>$ --</FONT></TD>
    <TD align=right width=50><FONT size=1>$(21,469)</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=51><FONT size=1>$&nbsp;(1,862)</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=58><FONT size=1>$ 22,020</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=159></TD>
    <TD align=right width=36>
      <HR color=#000080 noShade SIZE=5 width="95%">
    </TD>
    <TD align=right width=5></TD>
    <TD align=right width=17>
      <HR color=#000080 noShade SIZE=5 width="95%">
    </TD>
    <TD align=right width=5></TD>
    <TD align=right width=55>
      <HR color=#000080 noShade SIZE=5 width="95%">
    </TD>
    <TD align=right width=4></TD>
    <TD align=right width=29>
      <HR color=#000080 noShade SIZE=5 width="95%">
    </TD>
    <TD align=right width=3></TD>
    <TD align=right width=33>
      <HR color=#000080 noShade SIZE=5 width="95%">
    </TD>
    <TD align=right width=2></TD>
    <TD align=right width=43>
      <HR color=#000080 noShade SIZE=5 width="95%">
    </TD>
    <TD align=right width=13></TD>
    <TD align=right width=36>
      <HR color=#000080 noShade SIZE=5 width="95%">
    </TD>
    <TD align=right width=50>
      <HR color=#000080 noShade SIZE=5 width="95%">
    </TD>
    <TD align=right width=5></TD>
    <TD align=right width=51>
      <HR color=#000080 noShade SIZE=5 width="95%">
    </TD>
    <TD align=right width=6></TD>
    <TD align=right width=58>
      <HR color=#000080 noShade SIZE=5 width="95%">
    </TD></TR>
  <TR vAlign=top>
    <TD width=159><FONT face="CG Times Regular" size=1>Comprehensive
      Loss:</FONT></TD>
    <TD align=right width=36></TD>
    <TD align=right width=5></TD>
    <TD align=right width=17></TD>
    <TD align=right width=5></TD>
    <TD align=right width=55></TD>
    <TD align=right width=4></TD>
    <TD align=right width=29></TD>
    <TD align=right width=3></TD>
    <TD align=right width=33></TD>
    <TD align=right width=2></TD>
    <TD align=right width=43></TD>
    <TD align=right width=13></TD>
    <TD align=right width=36></TD>
    <TD align=right width=50></TD>
    <TD align=right width=5></TD>
    <TD align=right width=51></TD>
    <TD align=right width=6></TD>
    <TD align=right width=58></TD></TR>
  <TR vAlign=top>
    <TD width=159><FONT face="CG Times Regular" size=1>&nbsp;&nbsp;&nbsp;Net
      loss</FONT></TD>
    <TD align=right width=36><FONT size=1>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=17><FONT size=1>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=55><FONT size=1>--</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=29><FONT size=1>--</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=33>--</TD>
    <TD align=right width=2></TD>
    <TD align=right width=43><FONT size=1>--</FONT></TD>
    <TD align=right width=13></TD>
    <TD align=right width=36><FONT size=1>--</FONT></TD>
    <TD align=right width=50><FONT size=1>(602)</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=51><FONT size=1>--</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=58><FONT size=1>(602)</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=159><FONT face="CG Times Regular" size=1>&nbsp;&nbsp;&nbsp;Other
      comprehensive loss:</FONT></TD>
    <TD align=right width=36></TD>
    <TD align=right width=5></TD>
    <TD align=right width=17></TD>
    <TD align=right width=5></TD>
    <TD align=right width=55></TD>
    <TD align=right width=4></TD>
    <TD align=right width=29></TD>
    <TD align=right width=3></TD>
    <TD align=right width=33></TD>
    <TD align=right width=2></TD>
    <TD align=right width=43></TD>
    <TD align=right width=13></TD>
    <TD align=right width=36></TD>
    <TD align=right width=50></TD>
    <TD align=right width=5></TD>
    <TD align=right width=51></TD>
    <TD align=right width=6></TD>
    <TD align=right width=58></TD></TR>
  <TR vAlign=top>
    <TD width=159><FONT face="CG Times Regular"
      size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest rate swap</FONT></TD>
    <TD align=right width=36><FONT size=1>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=17><FONT size=1>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=55><FONT size=1>--</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=29><FONT size=1>--</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=33><FONT size=1>--</FONT></TD>
    <TD align=right width=2></TD>
    <TD align=right width=43><FONT size=1>--</FONT></TD>
    <TD align=right width=13></TD>
    <TD align=right width=36><FONT size=1>(158)</FONT></TD>
    <TD align=right width=50><FONT size=1>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=51><FONT size=1>--</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=58><FONT size=1>(158)</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=159></TD>
    <TD align=right width=36></TD>
    <TD align=right width=5></TD>
    <TD align=right width=17></TD>
    <TD align=right width=5></TD>
    <TD align=right width=55></TD>
    <TD align=right width=4></TD>
    <TD align=right width=29></TD>
    <TD align=right width=3></TD>
    <TD align=right width=33></TD>
    <TD align=right width=2></TD>
    <TD align=right width=43></TD>
    <TD align=right width=13></TD>
    <TD align=right width=36></TD>
    <TD align=right width=50></TD>
    <TD align=right width=5></TD>
    <TD align=right width=51></TD>
    <TD align=right width=6></TD>
    <TD align=right width=58>
      <HR color=#000080 noShade SIZE=3 width="95%">
    </TD></TR>
  <TR vAlign=top>
    <TD width=159><FONT
      size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Comprehensive
      loss</FONT></TD>
    <TD align=right width=36><FONT size=1>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=17><FONT size=1>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=55><FONT size=1>--</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=29><FONT size=1>--</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=33><FONT size=1>--</FONT></TD>
    <TD align=right width=2></TD>
    <TD align=right width=43><FONT size=1>--</FONT></TD>
    <TD align=right width=13></TD>
    <TD align=right width=36><FONT size=1>--</FONT></TD>
    <TD align=right width=50><FONT size=1>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=51><FONT size=1>--</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=58><FONT size=1>(760)</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=159><FONT size=1>Preferred Stock dividend</FONT></TD>
    <TD align=right width=36><FONT size=1>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=17><FONT size=1>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=55><FONT size=1>--</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=29><FONT size=1>--</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=33><FONT size=1>--</FONT></TD>
    <TD align=right width=2></TD>
    <TD align=right width=43><FONT size=1>--</FONT></TD>
    <TD align=right width=13></TD>
    <TD align=right width=36><FONT size=1>--</FONT></TD>
    <TD align=right width=50><FONT size=1>(145)</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=51><FONT size=1>--</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=58><FONT size=1>(145)</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=159><FONT size=1>Issuance of Common
      Stock<BR>&nbsp;&nbsp;&nbsp;for Preferred Stock<BR>&nbsp;&nbsp;
      dividend</FONT></TD>
    <TD align=right width=36><FONT size=1><BR><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=17><FONT size=1><BR><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=55><FONT size=1><BR><BR>117,676</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=29><FONT size=1><BR><BR>--</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=33><FONT size=1><BR><BR>--</FONT></TD>
    <TD align=right width=2></TD>
    <TD align=right width=43><FONT size=1><BR><BR>184</FONT></TD>
    <TD align=right width=13></TD>
    <TD align=right width=36><FONT size=1><BR><BR>--</FONT></TD>
    <TD align=right width=50><FONT size=1><BR><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=51><FONT size=1><BR><BR>--</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=58><FONT size=1><BR><BR>184</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=159><FONT size=1>Issuance of Common
      Stock<BR>&nbsp;&nbsp;&nbsp;for cash and services</FONT></TD>
    <TD align=right width=36><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=17><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=55><FONT size=1><BR>120,784</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=29><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=33><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=2></TD>
    <TD align=right width=43><FONT size=1><BR>165</FONT></TD>
    <TD align=right width=13></TD>
    <TD align=right width=36><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=50><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=51><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=58><FONT size=1><BR>165</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=159><FONT size=1>Conversion of
      Preferred<BR>&nbsp;&nbsp;&nbsp;Stock to&nbsp;Common Stock</FONT></TD>
    <TD align=right width=36><FONT size=1><BR>(1,735)</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=17><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=55><FONT size=1><BR>1,156,666</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=29><FONT size=1><BR>1</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=33><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=2></TD>
    <TD align=right width=43><FONT size=1><BR>(1)</FONT></TD>
    <TD align=right width=13></TD>
    <TD align=right width=36><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=50><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=51><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=58><FONT size=1><BR>--</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=159><FONT size=1>Issuance of Common
      Stock<BR>&nbsp;&nbsp;&nbsp;in&nbsp;conjunction
      with<BR>&nbsp;&nbsp;&nbsp;acquisition</FONT></TD>
    <TD align=right width=36><FONT size=1><BR><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=17><FONT size=1><BR><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=55><FONT size=1><BR><BR>1,944,242</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=29><FONT size=1><BR><BR>2</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=33><FONT size=1><BR><BR>--</FONT></TD>
    <TD align=right width=2></TD>
    <TD align=right width=43><FONT size=1><BR><BR>2,914</FONT></TD>
    <TD align=right width=13></TD>
    <TD align=right width=36><FONT size=1><BR><BR>--</FONT></TD>
    <TD align=right width=50><FONT size=1><BR><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=51><FONT size=1><BR><BR>--</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=58><FONT size=1><BR><BR>2,916</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=159><FONT size=1>Issuance of Common
      Stock<BR>&nbsp;&nbsp;&nbsp;from Private
      Placement<BR>&nbsp;&nbsp;&nbsp;Offering</FONT></TD>
    <TD align=right width=36><FONT size=1><BR><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=17><FONT size=1><BR><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=55><FONT size=1><BR><BR>4,397,566</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=29><FONT size=1><BR><BR>5</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=33><FONT size=1><BR><BR>--</FONT></TD>
    <TD align=right width=2></TD>
    <TD align=right width=43><FONT size=1><BR><BR>6,877</FONT></TD>
    <TD align=right width=13></TD>
    <TD align=right width=36><FONT size=1><BR><BR>--</FONT></TD>
    <TD align=right width=50><FONT size=1><BR><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=51><FONT size=1><BR><BR>--</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=58><FONT size=1><BR><BR>6,882</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=159><FONT size=1>Exchange of Preferred
      Stock<BR>&nbsp;&nbsp;&nbsp;Series 14, 15 &amp; 16
      for<BR>&nbsp;&nbsp;&nbsp;Series 17</FONT></TD>
    <TD align=right width=36><FONT size=1><BR><BR>48</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=17><FONT size=1><BR><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=55><FONT size=1><BR><BR>--</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=29><FONT size=1><BR><BR>--</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=33><FONT size=1><BR><BR>--</FONT></TD>
    <TD align=right width=2></TD>
    <TD align=right width=43><FONT size=1><BR><BR>--</FONT></TD>
    <TD align=right width=13></TD>
    <TD align=right width=36><FONT size=1><BR><BR>--</FONT></TD>
    <TD align=right width=50><FONT size=1><BR><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=51><FONT size=1><BR><BR>--</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=58><FONT size=1><BR><BR>--</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=159><FONT size=1>Debt for equity exchange</FONT></TD>
    <TD align=right width=36><FONT size=1>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=17><FONT size=1>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=55><FONT size=1>1,999,437</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=29><FONT size=1>2</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=33><FONT size=1>--</FONT></TD>
    <TD align=right width=2></TD>
    <TD align=right width=43><FONT size=1>3,142</FONT></TD>
    <TD align=right width=13></TD>
    <TD align=right width=36><FONT size=1>--</FONT></TD>
    <TD align=right width=50><FONT size=1>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=51><FONT size=1>--</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=58><FONT size=1>3,144</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=159><FONT size=1>Issuance of Warrants
      for<BR>&nbsp;&nbsp;&nbsp;services and financing</FONT></TD>
    <TD align=right width=36><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=17><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=55><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=29><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=33><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=2></TD>
    <TD align=right width=43><FONT size=1><BR>3,784</FONT></TD>
    <TD align=right width=13></TD>
    <TD align=right width=36><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=50><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=51><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=58><FONT size=1><BR>3,784</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=159><FONT size=1>Exercise of Warrants
      and<BR>&nbsp;&nbsp;&nbsp;options</FONT></TD>
    <TD align=right width=36><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=17><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=55><FONT size=1><BR>1,841,875</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=29><FONT size=1><BR>2</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=33><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=2></TD>
    <TD align=right width=43><FONT size=1><BR>3,649</FONT></TD>
    <TD align=right width=13></TD>
    <TD align=right width=36><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=50><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=51><FONT size=1><BR>--</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=58><FONT size=1><BR>3,651</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=159></TD>
    <TD align=right width=36>
      <HR align=right color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=right width=5></TD>
    <TD align=right width=17>
      <HR align=right color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=right width=5></TD>
    <TD align=right width=55>
      <HR align=right color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=right width=4></TD>
    <TD align=right width=29>
      <HR align=right color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=right width=3></TD>
    <TD align=right width=33>
      <HR align=right color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=right width=2></TD>
    <TD align=right width=43>
      <HR align=right color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=right width=13></TD>
    <TD align=right width=36>
      <HR align=right color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=right width=50>
      <HR align=right color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=right width=5></TD>
    <TD align=right width=51>
      <HR align=right color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=right width=6></TD>
    <TD align=right width=58>
      <HR align=right color=#000080 noShade SIZE=3 width="95%">
    </TD></TR>
  <TR vAlign=top>
    <TD width=159><FONT face="CG Times Regular" size=1><B>Balance at December
      31,<BR>&nbsp;&nbsp;&nbsp;2001</B></FONT></TD>
    <TD align=right width=36><FONT size=1><BR>2,500</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=17><FONT size=1><BR>$--</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=55><FONT size=1><BR>35,008,005</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=29><FONT size=1><BR>$&nbsp;35</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=33><FONT face="CG Times Regular" size=1><BR>$
      --</FONT></TD>
    <TD align=right width=2></TD>
    <TD align=right width=43><FONT face="CG Times Regular"
      size=1><BR>$66,042</FONT></TD>
    <TD align=right width=13></TD>
    <TD align=right width=36><FONT face="CG Times Regular"
      size=1><BR>$(158)</FONT></TD>
    <TD align=right width=50><FONT face="CG Times Regular"
      size=1><BR>$(22,216)</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=51><FONT face="CG Times Regular"
      size=1><BR>$&nbsp;(1,862)</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=58><FONT face="CG Times Regular"
      size=1><BR>$&nbsp;41,841&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=159></TD>
    <TD align=right width=36>
      <HR align=right color=#000080 noShade SIZE=5 width="95%">
    </TD>
    <TD align=right width=5></TD>
    <TD align=right width=17>
      <HR align=right color=#000080 noShade SIZE=5 width="95%">
    </TD>
    <TD align=right width=5></TD>
    <TD align=right width=55>
      <HR align=right color=#000080 noShade SIZE=5 width="95%">
    </TD>
    <TD align=right width=4></TD>
    <TD align=right width=29>
      <HR align=right color=#000080 noShade SIZE=5 width="95%">
    </TD>
    <TD align=right width=3></TD>
    <TD align=right width=33>
      <HR align=right color=#000080 noShade SIZE=5 width="95%">
    </TD>
    <TD align=right width=2></TD>
    <TD align=right width=43>
      <HR align=right color=#000080 noShade SIZE=5 width="95%">
    </TD>
    <TD align=right width=13></TD>
    <TD align=right width=36>
      <HR align=right color=#000080 noShade SIZE=5 width="95%">
    </TD>
    <TD align=right width=50>
      <HR align=right color=#000080 noShade SIZE=5 width="95%">
    </TD>
    <TD align=right width=5></TD>
    <TD align=right width=51>
      <HR align=right color=#000080 noShade SIZE=5 width="95%">
    </TD>
    <TD align=right width=6></TD>
    <TD align=right width=58>
      <HR align=right color=#000080 noShade SIZE=5 width="95%">
    </TD></TR></TABLE>
<P align=center><FONT face="CG Times Regular">The accompanying notes are an
integral part of these consolidated financial statements.</FONT></P>
<P align=center>-39-</P>
<P align=center>&nbsp;</P>
<P align=center><FONT face="CG Times Regular"><STRONG>PERMA-FIX ENVIRONMENTAL
SERVICES, INC.<BR>Notes to Consolidated Financial Statements<BR>December 31,
2001, 2000 and 1999</STRONG></FONT></P>
<HR color=#000080 noShade SIZE=5 width="90%">

<TABLE width="100%">
    <TR vAlign=top>
    <TD><FONT
      face="CG Times Regular"><STRONG>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOTE
      1<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;DESCRIPTION OF BUSINESS AND BASIS OF
      PRESENTATION</STRONG></FONT> </TD></TR></TABLE>
<P><FONT face="CG Times Regular">Perma-Fix Environmental Services, Inc. (the
Company, which may be referred to as we, us, or our) is a Delaware corporation,
engaged through its subsidiaries, in:</FONT></P>
<TABLE width=653>
    <TR vAlign=top>
    <TD align=middle width=72><FONT face="CG Times Regular">*&nbsp;</FONT></TD>
    <TD colSpan=2 width=1171><FONT face="CG Times Regular">Industrial Waste
      Management Services, which includes:</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle width=1></TD>
    <TD width=111>
      <P align=center><FONT face="CG Times Regular">*</FONT></P></TD>
    <TD width=1333><FONT face="CG Times Regular">treatment, storage,
      processing, and disposal of hazardous and nonhazardous waste; and
    </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=right width=1></TD>
    <TD width=111><FONT face="CG Times Regular">
      <P align=center>*</FONT></P></TD>
    <TD width=1333><FONT face="CG Times Regular">industrial waste and
      wastewater management services, including the collection, treatment,
      processing and disposal of hazardous and non-hazardous
  waste.</FONT></TD></TR></TABLE>
<TABLE width=653>
    <TR vAlign=top>
    <TD width=31>
      <P align=center><FONT face="CG Times Regular">*&nbsp;</FONT></P></TD>
    <TD colSpan=2 width=602><FONT face="CG Times Regular">Nuclear Waste
      Management Services, which includes:</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=31></TD>
    <TD width=48><FONT face="CG Times Regular">
      <P align=center>*</FONT></P></TD>
    <TD width=554><FONT face="CG Times Regular">treatment, storage, processing
      and disposal of mixed waste (which is both low-level radioactive and
      hazardous waste); and</FONT></TD></TR></TABLE>
<TABLE width=653>
    <TR vAlign=top>
    <TD width=30></TD>
    <TD width=48>
      <P align=center><FONT face="CG Times Regular">*</FONT></P></TD>
    <TD width=555><FONT face="CG Times Regular">nuclear and low-level
      radioactive waste treatment, processing and disposal, which includes
      research, development, on and off-site waste remediation and
      processing.</FONT></TD></TR></TABLE>
<TABLE width=653>
    <TR vAlign=top>
    <TD width=43><FONT face="CG Times Regular">*&nbsp;</FONT></TD>
    <TD width=903><FONT face="CG Times Regular">Consulting Engineering
      Services, which includes:</FONT></TD></TR></TABLE>
<TABLE width=653>
    <TR vAlign=top>
    <TD width=30></TD>
    <TD width=47>
      <P align=center><FONT face="CG Times Regular">*</FONT></P></TD>
    <TD width=556><FONT face="CG Times Regular">broad-scope environmental
      issues, including environmental management programs, regulatory
      permitting, compliance and auditing, landfill design, field testing and
      characterization.</FONT></TD></TR></TABLE>
<P><FONT face="CG Times Regular">We have grown through both acquisitions and
internal development. Our present objective is to focus on the operations,
maximize the profitability and to continue the research and development of
innovative technologies for the treatment of nuclear, mixed waste and industrial
waste. Such research and development expenses, although important, are not
considered material.<STRONG></STRONG></FONT></P>
<P><FONT face="CG Times Regular">We are subject to certain risks: (1) We are
involved in the treatment, handling, storage and transportation of hazardous and
nonhazardous, mixed and industrial wastes and wastewater. Such activities
contain risks against which we believe we are adequately insured, and (2) in
general, certain product lines within the Industrial Waste Management Services
segment, in which we operate, are characterized by competition among a number of
larger, more established companies with significantly greater
resources.</FONT></P>
<P><FONT face="CG Times Regular">Our consolidated financial statements for the
year 1999 include the accounts of Perma-Fix Environmental Services, Inc.
("PESI") and our wholly-owned subsidiaries, Schreiber, Yonley and Associates
("SYA"), Perma-Fix Treatment Services, Inc. ("PFTS"), Perma-Fix of Florida, Inc.
("PFF"), Perma-Fix of Dayton, Inc. ("PFD") and, Perma-Fix of Ft. Lauderdale,
Inc. ("PFFL"), and effective June 1, 1999, Perma-Fix of Orlando, Inc. ("PFO"),
Perma-Fix of South Georgia, Inc. ("PFSG") and Perma-Fix of Michigan, Inc.
("PFMI") which have been included in our consolidated financial statements in
1999, from the date of acquisition. Effective August 31, 2000, we acquired
Diversified Scientific Services, Inc. ("DSSI"), which has been included in our
consolidated financial statements in 2000, from the date of acquisition.
Effective June&nbsp;25, 2001, we acquired East Tennessee Materials &amp; Energy
Corporation ("M&amp;EC"), which has been included in our consolidated financial
statements in 2001, from the date of acquisition. </FONT></P>
<HR color=#000080 noShade SIZE=5 width="90%">

<TABLE width=653>
    <TR vAlign=top>
    <TD width=25></TD>
    <TD width=614><FONT face="CG Times Regular"><STRONG>NOTE 2<BR>SUMMARY OF
      SIGNIFICANT ACCOUNTING POLICIES</STRONG></FONT> </TD></TR></TABLE>
<P><FONT face="CG Times Regular"><STRONG>Principles of
Consolidation<BR></STRONG>Our consolidated financial statements include our
accounts and our wholly-owned subsidiaries after elimination of all significant
intercompany accounts and transactions.</FONT></P>
<P>&nbsp;</P>
<P align=center>-40-</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular"><STRONG>Reclassifications<BR></STRONG>Certain
prior year amounts have been reclassified to conform with the current year
presentation.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Use of Estimates<BR></STRONG>In
preparing financial statements in conformity with generally accepted accounting
principles, 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. See Note 8 and 9
for management estimates of closure costs and environmental liabilities. Actual
results could differ from those estimates.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG></STRONG></FONT><FONT
face="CG Times Regular"><STRONG>Restricted Cash<BR></STRONG>Restricted cash,
which is classified as a current asset, remained constant at $20,000 for
December 31, 2001 and 2000. In addition to this current asset, a trust fund of
$442,000, which is classified as a long term asset, increased $18,000 at
December 31, 2001, as compared to $424,000 as of December 31, 2000. These
restricted instruments reflect secured collateral relative to the various
financial assurance instruments guaranteeing the standard RCRA closure bonding
requirements for the PFFL TSD facility, while the long-term portion reflects
cash held for long-term commitments related to the RCRA remedial action at a
facility affiliated with PFD as further discussed in Note 9. The letter of
credit secured by the current restricted cash renews annually, and the Company
plans to replace the letter of credit with other alternative financial assurance
instruments.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Inventories<BR></STRONG>Inventories
consist of fly ash, cement kiln dust, treatment chemicals and certain supplies
and replacement parts as utilized in maintenance of the operating equipment.
Inventories are valued at the lower of cost or market with cost determined by
the first-in, first-out method.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG></STRONG></FONT><FONT
face="CG Times Regular"><STRONG>Property and Equipment<BR></STRONG>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 tax
purposes. Generally, annual depreciation rates range from ten to forty years for
buildings (including improvements) and three to seven years for office furniture
and equipment, vehicles, and decontamination and processing equipment. Leasehold
improvements are capitalized and depreciated over the lesser of the life 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 improvements which extend the useful lives of the
assets are capitalized.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Construction in
Progress<BR></STRONG>The Company has recorded as of December 31, 2001,
$4,382,000 in current construction in progress projects. It is estimated that
the Company will incur an additional $1,307,000 to complete the current projects
by the end of 2003.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Intangible
Assets<BR></STRONG>Intangible assets relating to acquired businesses consist
primarily of the cost of purchased businesses in excess of the estimated fair
value of net assets acquired ("goodwill") and the recognized permit value of
the</FONT> <FONT face="CG Times Regular">business. Goodwill has been generally
amortized over 20 to 40 years and permits amortized over 10 to 20 years.
Amortization expense approximated $1,575,000, $948,000, and $675,000 for the
years ended 2001, 2000, and 1999, respectively. We continually reevaluate the
propriety of the carrying amount of permits and goodwill as well as the
amortization period to determine whether current events and circumstances
warrant adjustments to the carrying value and estimates of useful lives.
Effective January 1, 2002, we will adopt SFAS 142 and will obtain a financial
valuation of our intangible assets. At this time, we do not believe there will
be an impairment to intangible assets, and do not expect a write-down of our
intangible assets. Effective January 1, 2002, we will discontinue amortizing our
indefinite life intangible assets as required by SFAS 142.</FONT></P>
<P>&nbsp;</P>
<P align=center><FONT face="CG Times Regular">-41-</FONT></P>
<P align=left>&nbsp;</P>
<P align=left>&nbsp;</P>
<P><FONT face="CG Times Regular"><STRONG>Accrued Closure
Costs<BR></STRONG>Accrued closure costs represent our estimated environmental
liability to clean up our facilities in the event of closure.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Income Taxes<BR></STRONG>We account for
income taxes under Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes", which requires use of the liability method. SFAS
No. 109 provides that deferred tax assets and liabilities are recorded based on
the differences between the tax basis of assets and liabilities and their
carrying amounts for financial reporting purposes, referred to as temporary
differences. Deferred tax assets or liabilities at the end of each period are
determined using the currently enacted tax rates to apply to taxable income in
the periods in which the deferred tax assets or liabilities are expected to be
settled or realized.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Comprehensive
Income<BR></STRONG>Comprehensive income</FONT><FONT color=#0000ff
face="CG Times Regular"><STRONG> </STRONG></FONT><FONT
face="CG Times Regular">is defined as the change in equity (net assets) of a
business enterprise during a period from transactions and other events and
circumstances from non-owner sources. It includes all changes in equity during a
period except those resulting from investments by owners and distributions to
owners. Comprehensive income has two components, net income and other
comprehensive income, and is included on the balance sheet in the equity
section. Other comprehensive income for the Company consists of the market value
of the interest rate swap. See below under Interest Rate Swap for more
information on the interest rate swap.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Net Revenues<BR></STRONG>Revenues for
services and reimbursable costs are recognized at the time services are
rendered. No customer accounted for more than ten percent (10%) of consolidated
net revenues.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Self-Insurance<BR></STRONG>We have a
self-insurance program for certain health benefits. The cost of such benefits is
recognized as expense in the period in which the claim occurred, including
estimates of claims incurred but not reported. Claims expense for 2001 was
approximately $1,881,000, as compared to $1,533,000 and $1,093,000 for 2000 and
1999, respectively.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Net Income (Loss) Per
Share<BR></STRONG>Basic EPS is based on the weighted average number of shares of
Common Stock outstanding during the year. Diluted EPS includes the dilutive
effect of potential common shares. Diluted loss per share for the years ended
December 31, 2001 and 2000 do not include potential common shares as their
effect would be anti-dilutive.</FONT></P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P align=center><FONT face="CG Times Regular">-42-</FONT></P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">The following is a reconciliation of basic net
income (loss) per share to diluted net income (loss) per share for the years
ended December 31, 2001, 2000 and 1999:</FONT></P>
<TABLE width=653>
    <TR vAlign=top>
    <TD width=348><FONT face="CG Times Regular">(Amounts in
      Thousands,<BR>Except for Share Amounts)</FONT></TD>
    <TD width=15><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle width=77><BR WP="BR1">2001</TD>
    <TD align=middle width=11><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle width=73><BR WP="BR1">2000</TD>
    <TD align=middle width=13><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle width=72><BR WP="BR2"><FONT
      face="CG Times Regular"></FONT>1999</TD></TR></TABLE>
<HR align=left color=#000080 noShade SIZE=3>

<TABLE border=0 height=123 width="100%">
    <TR>
    <TD height=19 width="54%">Net income (loss) applicable
      to<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common Stock - basic</TD>
    <TD height=19 width="3%"></TD>
    <TD align=right height=19
      width="13%"><BR>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(747)</TD>
    <TD align=right height=19 width="3%"></TD>
    <TD align=right height=19
      width="12%"><BR>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(762)</TD>
    <TD align=right height=19 width="3%"></TD>
    <TD align=right height=19 width="12%"><BR>$&nbsp;&nbsp;&nbsp;&nbsp;
    1,450&nbsp;</TD></TR>
  <TR>
    <TD height=21 width="54%">Effect of dilutive securities:</TD>
    <TD height=21 width="3%"></TD>
    <TD align=right height=21 width="13%"></TD>
    <TD align=right height=21 width="3%"></TD>
    <TD align=right height=21 width="12%"></TD>
    <TD align=right height=21 width="3%"></TD>
    <TD align=right height=21 width="12%"></TD></TR>
  <TR>
    <TD height=21 width="54%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Preferred Stock
      dividends</TD>
    <TD height=21 width="3%"></TD>
    <TD align=right height=21 width="13%">--&nbsp;</TD>
    <TD align=right height=21 width="3%"></TD>
    <TD align=right height=21 width="12%">--&nbsp;</TD>
    <TD align=right height=21 width="3%"></TD>
    <TD align=right height=21 width="12%">308&nbsp;</TD></TR>
  <TR>
    <TD height=21 width="54%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gain on Preferred
      Stock redemption</TD>
    <TD height=21 width="3%"></TD>
    <TD align=right height=21 width="13%">--&nbsp;</TD>
    <TD align=right height=21 width="3%"></TD>
    <TD align=right height=21 width="12%">--&nbsp;</TD>
    <TD align=right height=21 width="3%"></TD>
    <TD align=right height=21 width="12%">(188)</TD></TR>
  <TR>
    <TD height=21 width="54%"></TD>
    <TD height=21 width="3%"></TD>
    <TD align=right height=21 width="13%">
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right height=21 width="3%"></TD>
    <TD align=right height=21 width="12%">
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right height=21 width="3%"></TD>
    <TD align=right height=21 width="12%">
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR>
    <TD height=21 width="54%">Net income (loss) applicable
      to<BR>&nbsp;&nbsp;&nbsp;&nbsp; Common Stock - diluted</TD>
    <TD height=21 width="3%"></TD>
    <TD align=right height=21
      width="13%"><BR>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(747)</TD>
    <TD align=right height=21 width="3%"></TD>
    <TD align=right height=21
      width="12%"><BR>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(762)</TD>
    <TD align=right height=21 width="3%"></TD>
    <TD align=right height=21
      width="12%"><BR>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,570&nbsp;</TD></TR>
  <TR>
    <TD height=21 width="54%"></TD>
    <TD height=21 width="3%"></TD>
    <TD align=right height=21 width="13%">
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right height=21 width="3%"></TD>
    <TD align=right height=21 width="12%">
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right height=21 width="3%"></TD>
    <TD align=right height=21 width="12%">
      <HR align=left color=#000080 noShade SIZE=5>
    </TD></TR>
  <TR>
    <TD height=21 width="54%">Basic net income (loss) per share</TD>
    <TD height=21 width="3%"></TD>
    <TD align=right height=21
      width="13%">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(.03)</TD>
    <TD align=right height=21 width="3%"></TD>
    <TD align=right height=21
      width="12%">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(.04)</TD>
    <TD align=right height=21 width="3%"></TD>
    <TD align=right height=21
      width="12%">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.08&nbsp;</TD></TR>
  <TR>
    <TD height=21 width="54%"></TD>
    <TD height=21 width="3%"></TD>
    <TD align=right height=21 width="13%">
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right height=21 width="3%"></TD>
    <TD align=right height=21 width="12%">
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right height=21 width="3%"></TD>
    <TD align=right height=21 width="12%">
      <HR align=left color=#000080 noShade SIZE=5>
    </TD></TR>
  <TR>
    <TD height=21 width="54%">Diluted net income (loss) per share</TD>
    <TD height=21 width="3%"></TD>
    <TD align=right height=21
      width="13%">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(.03)</TD>
    <TD align=right height=21 width="3%"></TD>
    <TD align=right height=21
      width="12%">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(.04)</TD>
    <TD align=right height=21 width="3%"></TD>
    <TD align=right height=21
      width="12%">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.07&nbsp;</TD></TR>
  <TR>
    <TD height=21 width="54%"></TD>
    <TD height=21 width="3%"></TD>
    <TD align=right height=21 width="13%">
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right height=21 width="3%"></TD>
    <TD align=right height=21 width="12%">
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right height=21 width="3%"></TD>
    <TD align=right height=21 width="12%">
      <HR align=left color=#000080 noShade SIZE=5>
    </TD></TR>
  <TR>
    <TD height=21 width="54%">Weighted average shares outstanding - basic</TD>
    <TD height=21 width="3%"></TD>
    <TD align=right height=21 width="13%">27,235&nbsp;</TD>
    <TD align=right height=21 width="3%"></TD>
    <TD align=right height=21 width="12%">21,558&nbsp;</TD>
    <TD align=right height=21 width="3%"></TD>
    <TD align=right height=21 width="12%">17,488&nbsp;</TD></TR>
  <TR>
    <TD height=21 width="54%">Potential shares exercisable under
      stock<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;option plans</TD>
    <TD height=21 width="3%"></TD>
    <TD align=right height=21 width="13%"><BR>--&nbsp;</TD>
    <TD align=right height=21 width="3%"></TD>
    <TD align=right height=21 width="12%"><BR>--&nbsp;</TD>
    <TD align=right height=21 width="3%"></TD>
    <TD align=right height=21 width="12%"><BR>505&nbsp;</TD></TR>
  <TR>
    <TD height=21 width="54%">Potential shares upon exercise of Warrants</TD>
    <TD height=21 width="3%"></TD>
    <TD align=right height=21 width="13%">--&nbsp;</TD>
    <TD align=right height=21 width="3%"></TD>
    <TD align=right height=21 width="12%">--&nbsp;</TD>
    <TD align=right height=21 width="3%"></TD>
    <TD align=right height=21 width="12%">160&nbsp;</TD></TR>
  <TR>
    <TD height=21 width="54%">Potential share upon conversion
      of<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Preferred Stock</TD>
    <TD height=21 width="3%"></TD>
    <TD align=right height=21 width="13%"><BR>--&nbsp;</TD>
    <TD align=right height=21 width="3%"></TD>
    <TD align=right height=21 width="12%"><BR>--&nbsp;</TD>
    <TD align=right height=21 width="3%"></TD>
    <TD align=right height=21 width="12%"><BR>3,071&nbsp;</TD></TR>
  <TR>
    <TD height=21 width="54%"></TD>
    <TD height=21 width="3%"></TD>
    <TD align=right height=21 width="13%">
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right height=21 width="3%"></TD>
    <TD align=right height=21 width="12%">
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right height=21 width="3%"></TD>
    <TD align=right height=21 width="12%">
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR>
    <TD height=21 width="54%">Weighted average shares outstanding - diluted</TD>
    <TD height=21 width="3%"></TD>
    <TD align=right height=21 width="13%">27,235&nbsp;</TD>
    <TD align=right height=21 width="3%"></TD>
    <TD align=right height=21 width="12%">21,558&nbsp;</TD>
    <TD align=right height=21 width="3%"></TD>
    <TD align=right height=21 width="12%">21,224&nbsp;</TD></TR>
  <TR>
    <TD height=21 width="54%"></TD>
    <TD height=21 width="3%"></TD>
    <TD align=right height=21 width="13%">
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right height=21 width="3%"></TD>
    <TD align=right height=21 width="12%">
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right height=21 width="3%"></TD>
    <TD align=right height=21 width="12%">
      <HR align=left color=#000080 noShade SIZE=5>
    </TD></TR></TABLE>
<HR align=left color=#000080 noShade SIZE=3>

<TABLE border=0 width="100%">
    <TR>
    <TD width="54%">Potential shares excluded from above weighted<BR>average
      share calculations due to their<BR>antidilutive effect include:</TD>
    <TD width="3%"></TD>
    <TD width="13%"></TD>
    <TD width="2%"></TD>
    <TD width="13%"></TD>
    <TD width="3%"></TD>
    <TD width="12%"></TD></TR>
  <TR>
    <TD width="54%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon exercise of options</TD>
    <TD width="3%"></TD>
    <TD align=right width="13%">2,966,805&nbsp;</TD>
    <TD align=right width="2%"></TD>
    <TD align=right width="13%">2,090,949&nbsp;</TD>
    <TD align=right width="3%"></TD>
    <TD align=right width="12%">959,949&nbsp;</TD></TR>
  <TR>
    <TD width="54%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon exercise of Warrants</TD>
    <TD width="3%">&nbsp;</TD>
    <TD align=right width="13%">&nbsp;14,468,052&nbsp;</TD>
    <TD align=right width="2%"></TD>
    <TD align=right width="13%">6,438,582&nbsp;</TD>
    <TD align=right width="3%"></TD>
    <TD align=right width="12%">4,962,463&nbsp;</TD></TR>
  <TR>
    <TD width="54%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon conversion of Preferred
      Stock</TD>
    <TD width="3%"></TD>
    <TD align=right width="13%">1,666,667&nbsp;</TD>
    <TD align=right width="2%"></TD>
    <TD align=right width="13%">2,791,333&nbsp;</TD>
    <TD align=right width="3%"></TD>
    <TD align=right width="12%">--&nbsp;</TD></TR></TABLE>
<P><FONT face="CG Times Regular"><STRONG>Interest Rate Swap<BR></STRONG>The
Company entered into an interest rate swap agreement effective December 22,
2000, to modify the interest characteristics of its outstanding debt from a
floating basis to a fixed rate, thus reducing the impact of interest rate
changes on future income. This agreement involves the receipt of floating rate
amounts in exchange for fixed rate interest payments over the life of the
agreement without an exchange of the underlying principal amount. The
differential to be paid or received is accrued as interest rates change and
recognized as an adjustment to interest expense related to the debt. The related
amount payable to or receivable from counter parties is included in other assets
or liabilities. The value of the interest rate swap at January 1, 2001, was
deminimus. At December 31, 2001, the market value of the interest rate swap was
in an unfavorable value position of $158,000 and was recorded as a liability and
the loss was recorded as other comprehensive loss in the stockholders' equity
section of the balance sheet (see Note 6).<STRONG></STRONG></FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Fair Value of Financial
Instruments<BR></STRONG>The book values of cash, trade accounts receivable,
trade accounts payable and accrued expenses approximate their fair values
principally because of the short-term maturities of these instruments. The fair
value of our long-term debt is estimated based on the current rates offered to
us for debt of similar terms and maturities. Under this method, our fair value
of long-term debt was not significantly different from the stated value at
December 31, 2001 and 2000. </FONT></P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P align=center>-43-</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular"><STRONG>Recent Accounting
Pronouncements<BR></STRONG>In June 2001, the Financial Accounting Standards
Board finalized FASB Statements No. 141, <EM>Business Combinations </EM>("SFAS
141"), and No. 142, <EM>Goodwill and Other Intangible Assets </EM>("SFAS 142").
SFAS 141 requires the use of the purchase method of accounting and prohibits the
use of the pooling-of-interests method of accounting for business combinations
initiated after June 30, 2001. SFAS 141 also requires that the Company recognize
acquired intangible assets apart from goodwill if the acquired intangible assets
meet certain criteria, SFAS 141 applies to all business combinations initiated
after June 30, 2001, and for purchase business combinations completed on or
after July 1<EM>, </EM>2001. It also requires, upon adoption of SFAS 142, that
the Company reclassify the carrying amounts of intangible assets and goodwill
based on the criteria in SFAS 141.</FONT></P>
<P><FONT face="CG Times Regular">SFAS 142 requires, among other things, that
companies no longer amortize goodwill, but instead test goodwill for impairment
at least annually. In addition, SFAS 142 requires that the Company identify
reporting units for the purposes of assessing potential future impairments of
goodwill, reassess the useful lives of other existing recognized intangible
assets, and cease amortization of intangible assets with an indefinite useful
life. An intangible asset with an indefinite useful life should be tested for
impairment in accordance with the guidance in SFAS 142. SFAS 142 is required to
be applied in fiscal years beginning after December 15, 2001, to all goodwill
and other intangible assets recognized at that date, regardless of when those
assets were initially recognized. SFAS 142 requires the Company to complete a
transitional goodwill impairment test six months from the date of adoption. The
Company is also required to reassess the useful lives of other intangible assets
within the first interim quarter after adoption of SFAS 142.</FONT></P>
<P><FONT face="CG Times Regular">The Company's previous business combinations
were accounted for using the purchase method. As of December 31, 2001, the net
carrying amount of goodwill is approximately $6,509,000 and other intangible
assets are approximately $20,765,000. Amortization expense during the years
ended December 31, 2001, 2000 and 1999, was approximately $1,575,000, $948,000
and $675,000, respectively. Effective January 1, 2002, the Company will
discontinue amortizing indefinite life intangible assets, and is in the process
of evaluating intangible assets for impairment. At this time, the Company does
not expect there to be an impairment of the intangible assets.</FONT></P>
<P><FONT face="CG Times Regular">In June 2001, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 143 ("FAS
143"), Accounting for Asset Retirement Obligations, effective for the fiscal
years beginning after June 15, 2002. This statement provides the accounting for
the cost of legal obligations associated with the retirement of long-lived
assets. FAS 143 requires that companies recognize the fair value of a liability
for asset retirement obligations in the period in which the obligations are
incurred and capitalize that amount as a part of the book value of the
long-lived asset. That cost is then depreciated over the remaining life of the
underlying long-lived asset. The Company is currently evaluating the impact of
the adoption of FAS 143.</FONT></P>
<P><FONT face="CG Times Regular">In August 2001, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets" ("FAS 144").
This statement supersedes FAS 121 "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed of" and Accounting Principals
Board Opinion No. 30, "Reporting Results of Operations - Reporting the Effects
of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions." This Statement retains the
fundamental provisions of FAS 121 for recognition and measurement of impairment,
but amends the accounting and reporting standards for segments of a business to
be disposed of. The provisions of this statement are required to be adopted no
later than fiscal years beginning after December 31, 2001, with early adoption
encouraged. The Company is currently evaluating the impact of the adoption of
FAS 144.</FONT></P>
<HR color=#000080 noShade SIZE=5 width="90%">

<TABLE width=620>
    <TR vAlign=top>
    <TD width=26></TD>
    <TD width=580><FONT face="CG Times Regular"><STRONG>NOTE 3<BR>DISCONTINUED
      OPERATIONS</STRONG></FONT> </TD></TR></TABLE>
<P><FONT face="CG Times Regular"><STRONG></STRONG></FONT><FONT
face="CG Times Regular">On January 27, 1997, an explosion and resulting tank
fire occurred at the PFM facility, a hazardous waste storage, processing and
blending facility, located in Memphis, Tennessee, which resulted in damage
to</FONT></P>
<P>&nbsp;</P>
<P align=center><FONT face="CG Times Regular">-44-</FONT></P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">certain hazardous waste storage tanks located
on the facility and caused certain limited contamination at the facility. As a
result of the damage and the related cost to rebuild this operating unit, we
decided to discontinue this line of business. Upon evaluation of the above
business decision, and given the loss of both the existing line of business and
its related customer base, we previously reported the Memphis segment as a
discontinued operation, pursuant to Paragraph 13 of APB 30. The Company
reclassified PFM balance sheet items to the corresponding accounts in continuing
operations for the periods ending December 31, 2001 and 2000, as the remaining
balances are solely for long-term remediation and closure purposes and are
better represented in the corresponding accrual accounts.</FONT></P>
<P><FONT face="CG Times Regular">Net assets and liabilities of PFM at the end of
2001 and 2000 as reclassified to continuing operations, in thousands of dollars,
consisted of the following:</FONT></P>
<TABLE height=449 width=546>
    <TR vAlign=top>
    <TD height=21 width=364></TD>
    <TD align=middle height=21 width=68><FONT
      face="CG Times Regular"></FONT><FONT
face="CG Times Regular">2001</FONT></TD>
    <TD align=middle height=21 width=22><FONT
    face="CG Times Regular"></FONT></TD>
    <TD align=middle height=21 width=66></FONT><FONT
      face="CG Times Regular">2000</FONT></TD></TR>
  <TR vAlign=top>
    <TD height=21 width=364></TD>
    <TD align=middle height=21 width=68>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle height=21 width=22></TD>
    <TD align=middle height=21 width=66>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD height=21 width=364><FONT face="CG Times Regular">Current
      assets:</FONT></TD>
    <TD align=right height=21 width=68></TD>
    <TD align=right height=21 width=22></TD>
    <TD align=right height=21 width=66></TD></TR>
  <TR vAlign=top>
    <TD height=21 width=364><FONT
      face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts
      receivable</FONT></TD>
    <TD align=right height=21
      width=68>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;--&nbsp;</TD>
    <TD align=right height=21 width=22></TD>
    <TD align=right height=21 width=66><FONT
      face="CG Times Regular">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;42&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD height=21 width=364></TD>
    <TD align=right height=21 width=68>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right height=21 width=22></TD>
    <TD align=right height=21 width=66>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD height=21 width=364></TD>
    <TD align=right height=21
      width=68>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    --&nbsp;</TD>
    <TD align=right height=21 width=22></TD>
    <TD align=right height=21
      width=66>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;42&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD height=21 width=364></TD>
    <TD align=right height=21 width=68>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right height=21 width=22></TD>
    <TD align=right height=21 width=66>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD></TR>
  <TR vAlign=top>
    <TD height=21 width=364><FONT face="CG Times Regular">Current
      liabilities:</FONT></TD>
    <TD align=right height=21 width=68></TD>
    <TD align=right height=21 width=22></TD>
    <TD align=right height=21 width=66></TD></TR>
  <TR vAlign=top>
    <TD height=21 width=364>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable</TD>
    <TD align=right height=21 width=68><FONT
      face="CG Times Regular">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10&nbsp;</FONT></TD>
    <TD align=right height=21 width=22></TD>
    <TD align=right height=21 width=66><FONT
      face="CG Times Regular">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;46&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD height=21 width=364>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued
      environmental costs</TD>
    <TD align=right height=21 width=68><FONT
      face="CG Times Regular">300&nbsp;</FONT></TD>
    <TD align=right height=21 width=22></TD>
    <TD align=right height=21 width=66><FONT
      face="CG Times Regular">236&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD height=21 width=364></TD>
    <TD align=right height=21 width=68>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right height=21 width=22></TD>
    <TD align=right height=21 width=66>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD height=20 width=364></TD>
    <TD align=right height=20 width=68><FONT
      face="CG Times Regular">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;310&nbsp;</FONT></TD>
    <TD align=right height=20 width=22></TD>
    <TD align=right height=20 width=66><FONT
      face="CG Times Regular">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;282&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD height=21 width=364>Long-term liabilities:</TD>
    <TD align=right height=21 width=68>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right height=21 width=22></TD>
    <TD align=right height=21 width=66>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD></TR>
  <TR vAlign=top>
    <TD height=21 width=364>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued closure
    cost</TD>
    <TD align=right height=21 width=68><FONT
      face="CG Times Regular">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;225&nbsp;</FONT></TD>
    <TD align=right height=21 width=22></TD>
    <TD align=right height=21 width=66><FONT
      face="CG Times Regular">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;220&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD height=21 width=364><FONT
      face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued
      environmental costs</FONT></TD>
    <TD align=right height=21 width=68><FONT
      face="CG Times Regular">673&nbsp;</FONT></TD>
    <TD align=right height=21 width=22></TD>
    <TD align=right height=21 width=66><FONT
      face="CG Times Regular">333&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD height=21 width=364></TD>
    <TD align=right height=21 width=68>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right height=21 width=22></TD>
    <TD align=right height=21 width=66>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD height=21 width=364></TD>
    <TD align=right height=21 width=68><FONT
      face="CG Times Regular">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;898&nbsp;</FONT></TD>
    <TD align=right height=21 width=22></TD>
    <TD align=right height=21 width=66><FONT
      face="CG Times Regular">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;553</FONT></TD></TR>
  <TR vAlign=top>
    <TD height=21 width=364></TD>
    <TD align=right height=21 width=68>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right height=21 width=22></TD>
    <TD align=right height=21 width=66>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD></TR></TABLE>
<P><FONT face="CG Times Regular">Accounts receivable were extinguished during
2001 from payments and writeoffs of uncollectible accounts. Accounts payable
represents payables associated with the remediation project at PFM. Accrued
closure costs related to PFM increased $5,000 to $225,000 at December 31, 2001,
as a result of adjustments for inflationary factors (see Note 8). Accrued
current and long-term environmental costs were $973,000, at December 31, 2001
(see Note 9).</FONT></P>
<HR color=#000080 noShade SIZE=5 width="90%">
&nbsp;
<TABLE width=621>
    <TR vAlign=top>
    <TD width=26></TD>
    <TD width=581><FONT face="CG Times Regular"><STRONG>NOTE</STRONG>
      <STRONG>4<BR>ACQUISITIONS</STRONG></FONT> </TD></TR></TABLE>
<P><FONT face="CG Times Regular"><STRONG>Acquisition - Perma-Fix of Orlando,
Inc., Perma-Fix of South Georgia, Inc. and Perma-Fix of Michigan,
Inc.<BR></STRONG>On May 27, 1999, (i) the Company, Perma-Fix of Orlando, Inc.
(f/k/a Chemical Conservation Corporation), a Florida corporation ("PFO");
Perma-Fix of South Georgia, Inc. (f/k/a Chemical Conservation of Georgia, Inc.),
a Georgia corporation ("PFSG"); The Thomas P. Sullivan Living Trust, dated
September 6, 1978 ("TPS Trust"); The Ann L. Sullivan Living Trust, dated
September 6, 1978 ("ALS Trust"); Thomas P. Sullivan, an individual ("TPS"); and
Ann L. Sullivan, an individual ("ALS"), entered into a Stock Purchase Agreement
("Chem-Con Stock Purchase Agreement"), wherein the Company agreed to purchase
all of the outstanding capital stock of PFO and PFSG from the ALS Trust pursuant
to the terms of the Chem-Con Stock Purchase Agreement, and (ii) the Company,
Perma-Fix of Michigan, Inc. (f/k/a Chem-Met Services, Inc.), a Michigan
corporation ("PFMI"), the TPS Trust, the ALS Trust, TPS and ALS entered into a
Stock Purchase Agreement ("Chem-Met Stock Purchase Agreement"), whereby the
Company agreed to purchase all of the outstanding capital stock of PFMI from the
TPS Trust pursuant to the terms of the Chem-Met Stock Purchase Agreement. The
Chem-Con Stock Purchase Agreement and the</FONT> <FONT
face="CG Times Regular">Chem-Met Stock Purchase Agreement are collectively
referred to as the "Stock Purchase Agreements." TPS and ALS are husband and
wife.</FONT></P>
<P><FONT face="CG Times Regular">On May 27, 1999, the Stock Purchase Agreements
and related transaction documents ("Documents") were executed and placed into
escrow pending satisfaction of certain conditions precedent to closing. On June
1, 1999, the conditions precedent to closing of the Stock Purchase Agreements
were completed, the Stock Purchase Agreements were consummated and the Documents
were released from escrow.</FONT></P>
<P>&nbsp;</P>
<P align=center>-45-</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">Under the terms of the Stock Purchase
Agreements, the purchase price paid by the Company in connection with the
acquisition of PFO, PFSG and PFMI was $8,700,000, consisting of (i) $1,000,000
in cash paid at closing, (ii) three promissory notes ("Promissory Notes"), in
the aggregate amount of $4,700,000, to be paid in equal monthly installments of
principal and interest of approximately $90,000 over five years and having an
interest rate of 5.5% for the first three years and 7% for the remaining two
years, with payment of such Promissory Notes being guaranteed by PFMI under a
non-recourse guaranty, which non-recourse guaranty is secured by certain real
estate owned by PFMI, and (iii) $3,000,000 paid in the form of 1,500,000 shares
of Perma-Fix Common Stock, par value $.001 per share ("Common Stock"), paid to
the ALS Trust at closing; however, if the ALS Trust owns any of such shares of
Common Stock at the end of eighteen (18) months from the June 1, 1999, closing
date (the "Guarantee Period") and the market value (as determined below) per
share of Common Stock at the end of the Guarantee Period is less than $2.00 per
share, the Company shall pay the ALS Trust, within ten (10) business days after
the end of the Guarantee Period, an amount equal to the sum determined by
multiplying the number of shares of Common Stock issued to the ALS Trust under
the Stock Purchase Agreements that are still owned by the ALS Trust at the end
of the Guarantee Period by $2.00 less the market value (as determined below) of
such shares of Common Stock owned by the ALS Trust at the end of the Guarantee
Period, with such amount, if any, payable by the Company to the ALS Trust, at
the Company's option, in cash or in Common Stock or a combination thereof.
Notwithstanding anything to the contrary, the aggregate number of shares of
Common Stock issued or issuable under the Stock Purchase Agreements for any
reason whatsoever shall not exceed eighteen percent (18%) of the number of
issued and outstanding shares of Common Stock on the date immediately preceding
the June 1, 1999, closing date. The market value of each share of Common Stock
at the end of the Guarantee Period will be determined based on the average of
the closing sale price per share of Common Stock as reported on the NASDAQ
SmallCap Market ("NASDAQ") for the five (5) consecutive trading days ending with
the trading day immediately prior to the end of the Guarantee Period. Under the
Company's loan agreement, the Company could only pay any such amount due the ALS
Trust at the end of the Guarantee Period in Common Stock unless the lender
agrees that the Company may satisfy all or part of such in cash. In December
2000, 55,904 shares of Common Stock were issued pursuant to the guarantee with
the average price for the five days proceeding the end of the guarantee period
being $1.93.</FONT></P>
<P><FONT face="CG Times Regular">The cash portion of the purchase price for PFO,
PFSG and PFMI was obtained through borrowing from the Company's then primary
lender. The Company anticipates that the Promissory Notes will be paid with
working capital generated from operations and/or borrowing under the Company's
current revolving credit facility with PNC Bank. In connection with the closing,
using funds borrowed from its then lender, the Company paid an aggregate of
approximately $3,843,000 to satisfy certain obligations of PFMI.</FONT></P>
<P><FONT face="CG Times Regular">The acquisition was accounted for using the
purchase method effective June 1, 1999, and accordingly, the assets and
liabilities as of this date are included in the accompanying consolidated
financial statements. As of December 31, 1999, the Company has performed a
purchase price allocation. Accordingly, the purchase price was allocated to the
net assets acquired and net liabilities assumed based on their estimated fair
values. Included in this allocation were acquired assets of approximately
$15,831,000 and assumed liabilities of approximately $15,039,000, against total
consideration of $8,700,000. This allocation resulted in goodwill and intangible
permits of $2,714,000 and $5,194,000, respectively. The goodwill and intangible
permits are being amortized on a straight line basis over 20 years. The results
of the acquired businesses have been included in the consolidated financial
statements since the date of acquisition.</FONT></P>
<P><FONT face="CG Times Regular">The Company accrued for the estimated closure
costs, determined pursuant to RCRA guidelines, for the three regulated
facilities acquired. This accrual, recorded at $218,000, represents the
potential future liability to close and remediate such facilities, should such a
cessation of operations ever occur. The Company also recognized long-term
environmental accruals totaling $4,319,000. See Note 9 regarding environmental
activities.</FONT></P>
<P><FONT face="CG Times Regular">At the date of acquisition, the Company also
initiated the payoff of a Small Business Administration ("SBA") loan, in the
full amount of $971,000. Prior to the acquisition, as required by a loan
agreement between the SBA and the previous owners ("SBA Loan Agreement"), the
previous owners had placed approximately</FONT></P>
<P>&nbsp;</P>
<P align=center><FONT face="CG Times Regular">-46-</FONT></P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">$331,000 of restricted cash into an SBA trust
account. Pursuant to the acquisition and terms of the SBA Loan Agreement, the
Company placed the remaining payoff amount ($640,000) into the SBA trust account
(restricted cash), thereby fully funding the loan repayment. The SBA loan
repayment process requires various filings and notifications which take
approximately sixty days, at which time funds are withdrawn from the trust
account. Effective August 1, 1999, restricted cash was withdrawn from the SBA
trust account and the SBA loan was repaid in full.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Acquisition - Diversified Scientific
Services, Inc.<BR></STRONG>On May 16, 2000, the Company and Waste Management
Holdings, Inc., a Delaware corporation ("Waste Management Holdings") entered
into a Stock Purchase Agreement which was subsequently amended on August 31,
2000 (together, the "Stock Purchase Agreement"), wherein the Company agreed to
purchase all of the outstanding capital stock of DSSI from Waste Management
Holdings pursuant to the terms of the Stock Purchase Agreement. On August 31,
2000, the conditions precedent to closing of the Stock Purchase Agreement were
completed and the Stock Purchase Agreement was consummated.</FONT></P>
<P><FONT face="CG Times Regular">Under the terms of the Stock Purchase
Agreement, the purchase price paid by the Company in connection with the DSSI
acquisition was $8,500,000, consisting of (i) $2,500,000 in cash at closing,
(ii) a guaranteed promissory note (the "Guaranteed Note"), guaranteed by DSSI,
with the DSSI guarantee secured by certain assets of DSSI (except for accounts
receivable, general intangibles, contract rights, cash, real property and
proceeds thereof), executed by the Company in favor of Waste Management Holdings
in the aggregate principal amount of $2,500,000 and bearing interest at a rate
equal to the prime rate charged on August 30, 2000, as published in the <EM>Wall
Street Journal</EM> plus 1.75% per annum and having a term of the lesser of 120
days from August 31, 2000, or the business day that the Company acquires any
entity or substantially all of the assets of an entity (the "Guaranteed Note
Maturity Date"), with interest and principal due in a lump sum at the end of the
Guaranteed Note Maturity Date, and (iii) an unsecured promissory note (the
"Unsecured Promissory Note"), executed by the Company in favor of Waste
Management Holdings in the aggregate principal amount of $3,500,000, and bearing
interest at a rate of 7% per annum and having a five-year term with interest to
be paid annually and principal due at the end of the term of the Unsecured
Promissory Note. The guaranteed note in the principal amount of $2,500,000 was
subsequently repaid in full in December 2000, in conjunction with the new PNC
Bank credit facility. See Note 6 for additional discussion of this PNC Bank
credit facility. <STRONG></STRONG></FONT></P>
<P><FONT face="CG Times Regular">The cash portion of the purchase price for DSSI
was obtained pursuant to the terms of a short term bridge loan agreement (the
"$3,000,000 RBB Loan Agreement") with Capital Bank- Grawe Gruppe AG (f/k/a RBB
Bank Aktiengesellschaft), a bank organized under the laws of Austria ("Capital
Bank"), whereby Capital Bank loaned (the "$3,000,000 Capital Loan") the Company
the aggregate principal amount of $3,000,000, as evidenced by a Promissory Note
(the "$3,000,000 Capital Promissory Note") in the face amount of $3,000,000,
having a maturity date of July 1, 2001, and bearing an annual interest rate of
12%. The Capital Loan was exchanged for common stock in July 2001 (see Note
6)<STRONG>.</STRONG></FONT></P>
<P><FONT face="CG Times Regular">The principal business of DSSI, conducted at
its facility in Kingston, Tennessee, is the permitted transportation, storage
and treatment of hazardous waste and mixed waste (waste containing both low
level radioactive and hazardous waste) and the disposal of or recycling of mixed
waste in DSSI's treatment unit located at DSSI's facility. The Company is using
the DSSI facility for substantially the same purposes as such was being used
prior to the acquisition by the Company.<STRONG></STRONG></FONT></P>
<P><FONT face="CG Times Regular">The acquisition was accounted for using the
purchase method effective August 31, 2000, and accordingly, the assets and
liabilities as of this date are included in the accompanying consolidated
financial statements. As of September 1, 2000, the Company had performed a
preliminary purchase price allocation based upon information available as of
this date. Accordingly, the purchase price had been preliminarily allocated to
the net assets acquired and net liabilities assumed based on their estimated
fair values. Included in this preliminary allocation were acquired assets of
approximately $9,165,000 and assumed liabilities of approximately $6,007,000,
against total consideration of $8,500,000. This preliminary allocation resulted
in an excess purchase price over the fair value of the net assets acquired of
$5,400,000 which was assigned to </FONT></P>
<P>&nbsp;</P>
<P align=center><FONT face="CG Times Regular">-47-</FONT></P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">permits. The permits are being amortized on a
straight line basis over 20 years. The results of the acquired business have
been included in the consolidated financial statements since the date of
acquisition. </FONT></P>
<P><FONT face="CG Times Regular">The Company accrued for the estimated closure
costs, determined pursuant to the Resource Conservation and Recovery Act of
1976, as amended ("RCRA") guidelines and the Boiler and Industrial Furnace
Regulations under RCRA ("BIF"), for the regulated facility acquired. This
accrual, originally recorded at $4,106,000, represents the potential future
liability to close and remediate such facilities, should such a cessation of
operations ever occur. In conjunction with the final purchase price allocation,
as completed in August 2001, the Company reevaluated the accrued closure costs
recorded at acquisition through purchase accounting. The recalculation of
closure costs, pursuant to state regulatory guidelines, resulted in a decrease
in accrued closure costs of approximately $2,480,000 and an offsetting decrease
in the value assigned to permits. No insurance or third party recovery was taken
into account in determining the Company's cost estimates or reserve, nor do the
Company's cost estimates or reserve reflect any discount for present value
purposes.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Acquisition - East Tennessee Materials
and Energy Corporation<BR></STRONG>On June 25, 2001, the Company completed the
acquisition of M&amp;EC, pursuant to the terms of the Stock Purchase Agreement,
dated January 18, 2001, (the "Purchase Agreement"), between the Company,
M&amp;EC, all of the shareholders of M&amp;EC and Bill Hillis. Pursuant to the
terms of the Purchase Agreement, all of the outstanding voting stock of M&amp;EC
was acquired by the Company and M&amp;EC with (a) M&amp;EC acquiring 20% of the
outstanding shares of voting stock of M&amp;EC (held as treasury stock), and (b)
the Company acquiring all of the remaining outstanding shares of M&amp;EC voting
stock (collectively, the "M&amp;EC Acquisition"). As a result, the Company now
owns all of the issued and outstanding voting capital stock of
M&amp;EC.</FONT></P>
<P><FONT face="CG Times Regular">The purchase price paid by the Company for the
M&amp;EC voting stock was approximately $2,396,000, which was paid by the
Company issuing 1,597,576 shares of the Company's Common Stock to the
shareholders of M&amp;EC, with each share of Common Stock having an agreed value
of $1.50, the closing price of the Common Stock as represented on the NASDAQ on
the date of the initial letter of intent relating to this acquisition. In
addition, as partial consideration of the M&amp;EC Acquisition, M&amp;EC issued
shares of its newly created Series B Preferred Stock to shareholders of M&amp;EC
having a stated value of approximately $1,285,000.<STRONG> </STRONG>The Series B
Preferred Stock is non-voting and non-convertible, has a $1.00 liquidation
preference per share and may be redeemed at the option of M&amp;EC at any time
after one year from the date of issuance for the per share price of $1.00.
Following the first 12 months after the original issuance of the Series B
Preferred Stock, the holders of the Series B Preferred Stock will be entitled to
receive, when, as, and if declared by the Board of Directors of M&amp;EC out of
legally available funds, dividends at the rate of 5% per year per share applied
to the amount of $1.00 per share, which shall be fully cumulative. As a
condition to the closing of the acquisition, the Company also issued 346,666
shares of the Company's Common Stock to certain creditors of M&amp;EC in
satisfaction of $520,000 of M&amp;EC's liabilities.</FONT></P>
<P><FONT face="CG Times Regular">Prior to the date of acquisition, the Company
was operating under a subcontract agreement for the design and construction of
M&amp;EC's facility. Pursuant to the subcontract agreement, the Company, as of
the date of acquisition, had loaned and advanced M&amp;EC approximately $2.3
million for working capital purposes and had billed approximately $9.8 million
related to the construction of the new facility. At the date of closing, the
Company advanced funds to M&amp;EC to pay certain liabilities to the IRS, 401(k)
plans and several debt holders, in the aggregate amount of $2,048,000. During
2001, the net cash used for acquisition, including the above noted construction
and advanced funds, totaled approximately $10,083,000.</FONT></P>
<P><FONT face="CG Times Regular">As a condition to the closing of the M&amp;EC
Acquisition, M&amp;EC entered into an installment agreement with the Internal
Revenue Service (the "IRS") relating to various withholding taxes owing by
M&amp;EC in the amount of approximately $923,000 ("M&amp;EC Installment
Agreement"). The M&amp;EC Installment Agreement provides for the payment of such
withholding taxes over a term of approximately eight years. In addition, as a
condition to such closing, one of M&amp;EC's shareholders, Performance
Development Corporation, a Tennessee corporation ("PDC") and two corporations
affiliated with PDC, PDC Services Corporation ("PDC Services") and Management
Technologies, Inc. ("MTI") each entered into an installment agreement with the
IRS relating to withholding taxes owing by each of PDC, PDC Services and MTI
("PDC Installment Agreement"). The PDC Installment Agreement provides for the
payment of semiannual installments over a</FONT></P>&nbsp;
<P align=center>-48-</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">term of eight years in the aggregate amount of
approximately $3,714,000. The M&amp;EC Installment Agreement and the PDC
Installment Agreement provides that (a) the Company does not have any liability
for any taxes, interest or penalty with respect to M&amp;EC, PDC, PDC Services
or MTI; (b) M&amp;EC will be solely liable for paying the obligations of
M&amp;EC under the M&amp;EC Installment Agreement; (c) the IRS will not assert
any liability against the Company, M&amp;EC or any current or future related
affiliate of the Company for any tax, interest or penalty of PDC, PDC Services
or MTI; and (d) as long as the payments of M&amp;EC under its installment
agreement are made timely, pursuant to the terms of the installment agreement,
the IRS will not file a notice of a federal tax lien, change or cancel the
installment agreement, or take any other type of action against M&amp;EC with
respect to the withholding taxes and interest set forth in the installment
agreement. The Company did not acquire any interest in PDC, PDC Services or
MTI.</FONT></P>
<P><FONT face="CG Times Regular">Prior to the closing of the M&amp;EC
Acquisition, PDC had advanced monies to, and performed certain services for
M&amp;EC totaling an aggregate of $3.7 million. In payment of such advances and
services and as a condition to closing, M&amp;EC issued a Promissory Note, dated
June 7, 2001, to PDC in the principal amount of approximately $3.7 million. The
promissory note is payable over eight years to correspond to payments due to the
IRS under the PDC Installment Agreement. PDC has directed M&amp;EC to make all
payments under the promissory note directly to the IRS to be applied to PDC's
obligations under its installment agreement with the IRS. </FONT></P>
<P><FONT face="CG Times Regular">In connection with the closing of the M&amp;EC
Acquisition, the Company also made certain corrective contributions to
M&amp;EC's 401(k) Plan and to the 401(k) Plan of PDC. The total amount of
corrective contributions made to the M&amp;EC 401(k) Plan and the PDC 401(k)
Plan was $1.8 million. The Company utilized a portion of the proceeds of its
private placement offering described in Note 11 and a portion of its working
capital line of credit to fund the corrective contributions to the 401(k) Plans
described above.</FONT></P>
<P><FONT face="CG Times Regular">The acquisition was accounted for using the
purchase method effective June 25, 2001, and accordingly, the fair values of the
assets and liabilities of M&amp;EC as of this date are included in the
accompanying consolidated financial statements. As of June 25, 2001, the Company
has performed a preliminary purchase price allocation based upon information
available as of this date. Accordingly, the purchase price has been
preliminarily allocated to the net assets and net liabilities of M&amp;EC based
on their estimated fair values. Included in this preliminary allocation were
assets of approximately $18,160,000, liabilities of approximately</FONT> <FONT
face="CG Times Regular">$11,171,000 and $12,124,000 due to the Company from
M&amp;EC pursuant to its subcontract agreement, against total consideration of
$4,014,000, consisting of $2,396,000 for Common Stock issued, $1,285,000 for
M&amp;EC Preferred Series B liquidation value and $333,000 for the forgiveness
of a receivable from an M&amp;EC related party. This preliminary allocation has
resulted in an excess purchase price assigned to intangible permits of
$9,149,000. The intangible permits are being amortized on a straight line basis
over 10 years. The preliminary purchase price allocation is subject to
completing the valuation of certain assets, which have not been finalized, and
may or may not result in a change to the estimated fair market values assigned.
The results of the acquired businesses have been included in the consolidated
financial statements since the date of acquisition.</FONT></P>
<P><FONT face="CG Times Regular">The Company accrued for the estimated closure
costs, determined pursuant to RCRA guidelines, for the acquired facility. This
accrual, recorded at $2,025,000, represents the potential future liability to
close and remediate the facility, should such a cessation of operations ever
occur. No insurance or third party recovery was taken into account in
determining the Company's cost estimates or reserve, nor do the Company's cost
estimates or reserves reflect any discount for present value
purposes.</FONT></P>
<P><FONT face="CG Times Regular">M&amp;EC completed the initial phase of
construction of its low-level radioactive and hazardous waste ("mixed waste")
treatment facility in Oak Ridge, Tennessee, during the third quarter of 2001.
The 150,000 square-foot facility, located on the grounds of the Oak Ridge K-25
Weapons Facility of the Department of Energy ("DOE"), uses Perma-Fix's various
proprietary technologies to treat mixed waste coming from governmental,
institutional and commercial generators nationwide. M&amp;EC operates under both
a hazardous waste treatment and storage permit and a license to store and treat
low-level radioactive waste, one of only a few such facilities in the country.
M&amp;EC also has three subcontracts with Bechtel-Jacobs Company,
LLC,</FONT></P>
<P>&nbsp;</P>
<P align=center>-49-</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">DOE's site manager, which were awarded in 1998
and covers the treatment of millions of cubic feet of legacy, operational and
remediation nuclear waste. The facility began accepting waste in June 2001, and
became operational in the third quarter of 2001.</FONT></P>
<P><FONT face="CG Times Regular">The following unaudited pro forma information
presents the consolidated statement of operations of the Company as if the
acquisition had taken place on January 1, 2000. M&amp;EC had a December&nbsp;31
fiscal year end and therefore for purposes of the following pro forma
information, their results for the years ended December 31, 2001 and 2000, have
been consolidated with the Company's results for the years ended December 31,
2001 and 2000, and DSSI's results for January 1, 2000 through August 30, 2000,
prior to the Company's acquisition of DSSI.</FONT></P>
<TABLE width=593>
    <TR vAlign=top>
    <TD width=102></TD>
    <TD width=732></TD>
    <TD width=236>
      <P align=center><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular">Year Ended</FONT></P></TD></TR></TABLE>
<TABLE width=592>
    <TR vAlign=top>
    <TD width=444></TD>
    <TD align=middle colSpan=2 width=134><FONT
      face="CG Times Regular">December 31,</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=444></TD>
    <TD align=middle colSpan=2 width=134>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD width=444>
      <P align=right><FONT face="CG Times Regular">(Amount in thousands, except
      per share amounts (unaudited))&nbsp;&nbsp;</FONT></P></TD>
    <TD align=middle width=64><FONT face="CG Times Regular">2001</FONT></TD>
    <TD align=middle width=70><FONT
  face="CG Times Regular">2000</FONT></TD></TR></TABLE>
<HR color=#000080 noShade SIZE=5 width="80%">

<TABLE width=593>
    <TR vAlign=top>
    <TD align=right width=55></TD>
    <TD align=right width=383><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=70></TD>
    <TD align=right width=65></TD></TR>
  <TR vAlign=top>
    <TD width=55></TD>
    <TD width=383></FONT><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular"></FONT><FONT face="CG Times Regular">Net
      revenues</FONT></TD>
    <TD align=right width=70><FONT face="CG Times Regular">$74,659&nbsp;
      </FONT></TD>
    <TD align=right width=65><FONT face="CG Times Regular">$63,426&nbsp;
      </FONT></TD></TR>
  <TR vAlign=top>
    <TD width=55></TD>
    <TD width=383><FONT face="CG Times Regular">Net loss applicable to Common
      Stock</FONT></TD>
    <TD align=right width=70><FONT face="CG Times Regular">(3,603)</FONT></TD>
    <TD align=right width=65><FONT
face="CG Times Regular">(3,818)</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=55></TD>
    <TD width=383><FONT face="CG Times Regular">Net loss per share:</FONT></TD>
    <TD width=70><FONT face="CG Times Regular"></FONT></TD>
    <TD width=65></TD></TR>
  <TR vAlign=top>
    <TD width=55></TD>
    <TD width=383><FONT
      face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic</FONT></TD>
    <TD align=right width=70><FONT face="CG Times Regular">(.13)</FONT></TD>
    <TD align=right width=65><FONT face="CG Times Regular">(.16)</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=55></TD>
    <TD width=383><FONT
      face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Diluted</FONT></TD>
    <TD align=right width=70><FONT face="CG Times Regular">(.13)</FONT></TD>
    <TD align=right width=65><FONT face="CG Times Regular">(.16)</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=55></TD>
    <TD width=383><FONT face="CG Times Regular">Weighted average number of
      common shares outstanding </FONT></TD>
    <TD width=70><FONT face="CG Times Regular"></FONT></TD>
    <TD width=65></TD></TR>
  <TR vAlign=top>
    <TD width=55></TD>
    <TD width=383><FONT
      face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic</FONT></TD>
    <TD align=right width=70><FONT face="CG Times Regular">28,173&nbsp;
    </FONT></TD>
    <TD align=right width=65><FONT face="CG Times Regular">23,502&nbsp;
    </FONT></TD></TR>
  <TR vAlign=top>
    <TD width=55></TD>
    <TD width=383><FONT
      face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Diluted</FONT></TD>
    <TD align=right width=70><FONT face="CG Times Regular">28,173&nbsp;
    </FONT></TD>
    <TD align=right width=65><FONT face="CG Times Regular">23,502&nbsp;
    </FONT></TD></TR></TABLE>
<P><FONT face="CG Times Regular">These unaudited pro forma results have been
prepared for comparative purposes only and include certain adjustments, such as
additional amortization expense as a result of intangible permits, additional
dividend expense on the Series B Preferred, elimination of interest expense
related to debt retired with Common Stock, elimination of Preferred Stock
dividends from the M&amp;EC Series A Preferred exchanged prior to closing and
elimination of management fees paid to DSSI's parent prior to the August 2000
acquisition. They do not purport to be indicative of the results of operations
that actually would have resulted on the date indicated, or which may result in
the future.</FONT></P>
<HR color=#000080 noShade SIZE=5 width="90%">

<TABLE width=619>
    <TR vAlign=top>
    <TD width=27></TD>
    <TD width=578><FONT face="CG Times Regular"><STRONG>NOTE</STRONG>
      <STRONG>5<BR>PREFERRED STOCK ISSUANCE AND CONVERSION</STRONG></FONT>
  </TD></TR></TABLE>
<P><FONT face="CG Times Regular">As of January 1, 2001, 4,187 shares of the
Company's Preferred Stock were issued and outstanding. During 2001, 1,735 of
such shares were converted into 1,171,336 shares of Common Stock including
14,670 shares issued in payment of accrued dividends, with the remaining 2,452
shares of Preferred Stock exchanged for 2,500 shares of a new Series 17
Preferred Stock issued and outstanding as of December 31, 2001. </FONT></P>
<P><FONT face="CG Times Regular">The Preferred Stock issuances and activity for
the year ended December 31, 2001, are as follows:</FONT></P>
<TABLE width=656>
    <TR vAlign=top>
    <TD width=306><BR WP="BR1"><BR WP="BR2"><FONT
      face="CG Times Regular"><U></U></FONT>Preferred Stock Description</TD>
    <TD align=middle width=2><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle width=102><FONT
      face="CG Times Regular">Preferred<BR>Stock<BR>Holder</FONT> </TD>
    <TD align=middle width=2><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle width=56><BR WP="BR1"><FONT
      face="CG Times Regular"></FONT>Dividend<BR><FONT
      face="CG Times Regular">Rate</FONT></TD>
    <TD align=middle width=6><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle width=64><FONT face="CG Times Regular"></FONT>
      <P><FONT face="CG Times Regular"><BR>Preferred<BR>Shares</FONT></P></TD>
    <TD align=middle width=2><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle width=69><FONT
      face="CG Times Regular">Converted<BR>Common<BR>Shares</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=306>
      <HR align=left color=#000080 noShade SIZE=3 width="58%">
    </TD>
    <TD align=middle width=2></TD>
    <TD align=middle width=102>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=2></TD>
    <TD align=middle width=56>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=6></TD>
    <TD align=middle width=64>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=2></TD>
    <TD align=middle width=69>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR></TABLE>
<TABLE width=658>
    <TR vAlign=top>
    <TD width=301><FONT face="CG Times Regular"><STRONG>Series 14</STRONG>
      (Exchanged for Series 3 and 11)</FONT></TD>
    <TD width=3><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle width=100></FONT><FONT face="CG Times Regular">Capital
      Bank</FONT><FONT face="CG Times Regular" size=-2>(1)</FONT><FONT
      face="CG Times Regular"></FONT></TD>
    <TD align=right width=5><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle width=52></FONT><FONT
face="CG Times Regular">6%</FONT></TD>
    <TD align=right width=5><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=67></TD>
    <TD align=right width=5><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=64></TD></TR>
  <TR vAlign=top>
    <TD width=301>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Balance at December 31,
2000</TD>
    <TD width=3></TD>
    <TD align=middle width=100></TD>
    <TD align=right width=5></TD>
    <TD align=middle width=52></TD>
    <TD align=right width=5></TD>
    <TD align=right width=67>1,769&nbsp;</TD>
    <TD align=right width=5></TD>
    <TD align=right width=64></TD></TR>
  <TR vAlign=top>
    <TD width=301>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Conversion - April 2001</TD>
    <TD width=3></TD>
    <TD align=middle width=100></TD>
    <TD align=right width=5></TD>
    <TD align=middle width=52></TD>
    <TD align=right width=5></TD>
    <TD align=right width=67>(1,314)</TD>
    <TD align=right width=5></TD>
    <TD align=right width=64>876,000&nbsp; </TD></TR>
  <TR vAlign=top>
    <TD width=301>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exchange - April 2001</TD>
    <TD width=3></TD>
    <TD align=middle width=100></TD>
    <TD align=right width=5></TD>
    <TD align=middle width=52></TD>
    <TD align=right width=5></TD>
    <TD align=right width=67>(455)</TD>
    <TD align=right width=5></TD>
    <TD align=right width=64></TD></TR>
  <TR vAlign=top>
    <TD width=301></TD>
    <TD width=3></TD>
    <TD align=middle width=100></TD>
    <TD align=right width=5></TD>
    <TD align=middle width=52></TD>
    <TD align=right width=5></TD>
    <TD align=right width=67>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=5></TD>
    <TD align=right width=64></TD></TR>
  <TR vAlign=top>
    <TD width=301>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Balance at December 31,
2001</TD>
    <TD width=3></TD>
    <TD align=middle width=100></TD>
    <TD align=right width=5></TD>
    <TD align=middle width=52></TD>
    <TD align=right width=5></TD>
    <TD align=right width=67>0&nbsp;</TD>
    <TD align=right width=5></TD>
    <TD align=right width=64></TD></TR>
  <TR vAlign=top>
    <TD width=301></TD>
    <TD width=3></TD>
    <TD align=middle width=100></TD>
    <TD align=right width=5></TD>
    <TD align=middle width=52></TD>
    <TD align=right width=5></TD>
    <TD align=right width=67>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right width=5></TD>
    <TD align=right width=64></TD></TR>
  <TR vAlign=top>
    <TD width=301><FONT face="CG Times Regular"><STRONG>Series 15</STRONG>
      (Exchanged for Series 4,6,8, and 12)</FONT> </TD>
    <TD width=3><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle width=100></FONT><FONT face="CG Times Regular">Capital
      Bank</FONT><FONT face="CG Times Regular" size=-2>(1)</FONT><FONT
      face="CG Times Regular"></FONT></TD>
    <TD align=right width=5><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle width=52></FONT><FONT
face="CG Times Regular">4%</FONT></TD>
    <TD align=right width=5><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=67><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=5><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=64></TD></TR>
  <TR vAlign=top>
    <TD width=301>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Balance at December 31,
2000</TD>
    <TD width=3></TD>
    <TD align=middle width=100></TD>
    <TD align=right width=5></TD>
    <TD align=middle width=52></TD>
    <TD align=right width=5></TD>
    <TD align=right width=67>616&nbsp;</TD>
    <TD align=right width=5></TD>
    <TD align=right width=64></TD></TR>
  <TR vAlign=top>
    <TD width=301>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Conversion - April 2001</TD>
    <TD width=3></TD>
    <TD align=middle width=100></TD>
    <TD align=right width=5></TD>
    <TD align=middle width=52></TD>
    <TD align=right width=5></TD>
    <TD align=right width=67>(416)</TD>
    <TD align=right width=5></TD>
    <TD align=right width=64>277,333&nbsp; </TD></TR>
  <TR vAlign=top>
    <TD width=301>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exchange - April 2001</TD>
    <TD width=3></TD>
    <TD align=middle width=100></TD>
    <TD align=right width=5></TD>
    <TD align=middle width=52></TD>
    <TD align=right width=5></TD>
    <TD align=right width=67>(200)</TD>
    <TD align=right width=5></TD>
    <TD align=right width=64></TD></TR>
  <TR vAlign=top>
    <TD width=301></TD>
    <TD width=3></TD>
    <TD align=middle width=100></TD>
    <TD align=right width=5></TD>
    <TD align=middle width=52></TD>
    <TD align=right width=5></TD>
    <TD align=right width=67>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=5></TD>
    <TD align=right width=64></TD></TR>
  <TR vAlign=top>
    <TD width=301>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Balance at December 31,
2001</TD>
    <TD width=3></TD>
    <TD align=middle width=100></TD>
    <TD align=right width=5></TD>
    <TD align=middle width=52></TD>
    <TD align=right width=5></TD>
    <TD align=right width=67>0&nbsp;</TD>
    <TD align=right width=5></TD>
    <TD align=right width=64></TD></TR>
  <TR vAlign=top>
    <TD width=301></TD>
    <TD width=3></TD>
    <TD align=middle width=100></TD>
    <TD align=right width=5></TD>
    <TD align=middle width=52></TD>
    <TD align=right width=5></TD>
    <TD align=right width=67>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right width=5></TD>
    <TD align=right width=64></TD></TR>
  <TR vAlign=top>
    <TD colSpan=9 width=602>
      <P>&nbsp;</P>
      <P align=center><FONT face="CG Times Regular">-50-</FONT></P>
      <P>&nbsp;</P></TD></TR>
  <TR vAlign=top>
    <TD width=301></TD>
    <TD width=3></TD>
    <TD align=middle width=100></TD>
    <TD align=right width=5></TD>
    <TD align=middle width=52></TD>
    <TD align=right width=5></TD>
    <TD align=right width=67></TD>
    <TD align=right width=5></TD>
    <TD align=right width=64></TD></TR>
  <TR vAlign=top>
    <TD width=301><FONT face="CG Times Regular"><STRONG>Series 16</STRONG>
      (Exchanged for Series 10 and 13)</FONT> </TD>
    <TD width=3><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle width=100></FONT><FONT face="CG Times Regular">Capital
      Bank</FONT><FONT face="CG Times Regular" size=-2>(1)</FONT><FONT
      face="CG Times Regular"></FONT></TD>
    <TD align=right width=5><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle width=52></FONT><FONT
face="CG Times Regular">4%</FONT></TD>
    <TD align=right width=5><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=67></TD>
    <TD align=right width=5><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=64></TD></TR>
  <TR vAlign=top>
    <TD width=301>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Balance at December 31,
2000</TD>
    <TD width=3></TD>
    <TD align=middle width=100></TD>
    <TD align=right width=5></TD>
    <TD align=middle width=52></TD>
    <TD align=right width=5></TD>
    <TD align=right width=67>1,802&nbsp;</TD>
    <TD align=right width=5></TD>
    <TD align=right width=64></TD></TR>
  <TR vAlign=top>
    <TD width=301>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Conversion - January 2001</TD>
    <TD width=3></TD>
    <TD align=middle width=100></TD>
    <TD align=right width=5></TD>
    <TD align=middle width=52></TD>
    <TD align=right width=5></TD>
    <TD align=right width=67>(5)</TD>
    <TD align=right width=5></TD>
    <TD align=right width=64>3,333&nbsp; </TD></TR>
  <TR vAlign=top>
    <TD width=301>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exchange - April 2001</TD>
    <TD width=3></TD>
    <TD align=middle width=100></TD>
    <TD align=right width=5></TD>
    <TD align=middle width=52></TD>
    <TD align=right width=5></TD>
    <TD align=right width=67>(1,797)</TD>
    <TD align=right width=5></TD>
    <TD align=right width=64></TD></TR>
  <TR vAlign=top>
    <TD width=301></TD>
    <TD width=3></TD>
    <TD align=middle width=100></TD>
    <TD align=right width=5></TD>
    <TD align=middle width=52></TD>
    <TD align=right width=5></TD>
    <TD align=right width=67>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=5></TD>
    <TD align=right width=64></TD></TR>
  <TR vAlign=top>
    <TD width=301>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Balance at December 31,
2001</TD>
    <TD width=3></TD>
    <TD align=middle width=100></TD>
    <TD align=right width=5></TD>
    <TD align=middle width=52></TD>
    <TD align=right width=5></TD>
    <TD align=right width=67>0&nbsp;</TD>
    <TD align=right width=5></TD>
    <TD align=right width=64></TD></TR>
  <TR vAlign=top>
    <TD width=301></TD>
    <TD width=3></TD>
    <TD align=middle width=100></TD>
    <TD align=right width=5></TD>
    <TD align=middle width=52></TD>
    <TD align=right width=5></TD>
    <TD align=right width=67>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right width=5></TD>
    <TD align=right width=64></TD></TR>
  <TR vAlign=top>
    <TD colSpan=2 width=304><FONT face="CG Times Regular"><STRONG>Series
      17</STRONG> (Exchanged for Series 14, 15 and 16)</FONT> </TD>
    <TD align=middle width=100></FONT><FONT face="CG Times Regular">Capital
      Bank</FONT><FONT face="CG Times Regular" size=-2>(1)</FONT><FONT
      face="CG Times Regular"></FONT></TD>
    <TD align=right width=5><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle width=52></FONT><FONT
face="CG Times Regular">5%</FONT></TD>
    <TD align=right width=5><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=67></TD>
    <TD align=right width=5><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=64></TD></TR>
  <TR vAlign=top>
    <TD width=301>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Balance at December 31,
2001</TD>
    <TD width=3></TD>
    <TD align=middle width=100></TD>
    <TD align=right width=5></TD>
    <TD align=middle width=52></TD>
    <TD align=right width=5></TD>
    <TD align=right width=67>2,500&nbsp; </TD>
    <TD align=right width=5></TD>
    <TD align=right width=64></TD></TR>
  <TR vAlign=top>
    <TD width=301></TD>
    <TD width=3></TD>
    <TD align=middle width=100></TD>
    <TD align=right width=5></TD>
    <TD align=middle width=52></TD>
    <TD align=right width=5></TD>
    <TD align=right width=67>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right width=5></TD>
    <TD align=right width=64></TD></TR></TABLE>
<P></FONT><FONT face="CG Times Regular"></FONT><FONT
face="CG Times Regular"><SUP>(1)</SUP> Capital Bank (f/k/a RBB Bank) is a
banking institution which holds the Company's shares of stock on behalf of
numerous clients.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Series 3 Preferred/Series 11
Preferred/Series 14 Preferred<BR></STRONG>On July 17, 1996, we issued to RBB
Bank 5,500 shares of newly-created Series 3 Class C Convertible Preferred Stock
("Series 3 Preferred") at a price of $1,000 per share in a private placement
under Sections 4(2) and/or 3(b) and/or Rule 506 of Regulation D under the
Securities Act of 1933, as amended (the "Securities Act"). The Series 3
Preferred had a liquidation preference over the Common Stock equal to $1,000
consideration per outstanding share of Series 3 Preferred, plus an amount equal
to all unpaid dividends accrued thereon. As of January 1, 1999, 4,000 shares of
Series 3 Preferred remained issued and outstanding as a result of prior
conversions of the Series 3 Preferred. On April 20, 1999, the holder of the
Series 3 Preferred converted 2,231 shares of the Series 3 Preferred into
3,090,563 shares of Common Stock of the Company, leaving 1,769 shares of Series
3 Preferred issued and outstanding.</FONT></P>
<P><FONT face="CG Times Regular">On July 15, 1999, the Company exchanged the
1,769 outstanding shares of Series 3 Preferred, all of which were held by
Capital Bank, for an equal number of shares of newly created Series 11 Class K
Convertible Preferred Stock par value $.001 per share ("Series 11 Preferred").
On August 3, 1999, the Company exchanged the 1,769 outstanding shares of Series
11 Preferred, all of which were held by Capital Bank, for</FONT> <FONT
face="CG Times Regular">an equal number of shares of newly created Series 14
Class N Convertible Preferred Stock par value $.001 per share ("Series 14
Preferred"). The terms of the Series 3 Preferred, Series 11 Preferred and Series
14 Preferred were substantially the same and the fair value of the new Series
did not exceed the fair value of the Series exchanged. On April 6, 2001, Capital
Bank converted 1,314 shares of the Series 14 Preferred into 876,000 shares of
Common Stock of the Company and exchanged the remaining 455 shares of the Series
14 Preferred into a new Series 17 Class Q preferred Stock ("Series 17
Preferred"). The exchanges were made in private placements under Section 4(2)
and/or Section 3(a)(9) of the Securities Act.</FONT></P>
<P><FONT face="CG Times Regular">The Series 3 Preferred, Series 11 Preferred and
Series 14 Preferred each accrued dividends on a cumulative basis at a rate of
six percent (6%) per annum, which dividends were payable semiannually when and
as declared by the Board of Directors. Dividends are paid, at the Company's
option, in the form of cash or Common Stock. During 2001, accrued dividends on
the Series 3 Preferred, Series 11 Preferred and Series 14 Preferred in the
combined total of approximately $35,000 were paid in the form of 16,307 shares
of Common Stock of the Company.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Series 4 Preferred/Series 6
Preferred/Series 8 Preferred/Series 12 Preferred/Series 15
Preferred<BR></STRONG>On or about February 28, 1998, the Company issued to
Capital Bank 2,500 shares of newly-created Series 8 Class H Preferred Stock, par
value $.001 per share ("Series 8 Preferred") in exchange for 2,500 shares of
Series 6 Class F Preferred Stock, par value $.001 per share ("Series 6
Preferred") which had been issued to Capital Bank in 1997. The Series 6
Preferred, along with certain Warrants allowing the purchase of 375,000 shares
of Common Stock at an exercise price of $1.8125 per share and the purchase of
281,250 shares of Common Stock at the exercise price of $2.125 per share had
been issued to Capital Bank in exchange for an equal number of shares of Series
4 Class D Preferred Stock, par value $.001 per share ("Series 4</FONT></P>
<P>&nbsp;</P>
<P align=center>-51-</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">Preferred") and Warrants allowing the purchase
of 187,500 shares of Common Stock at an exercise price of $2.10 per share and
the purchase of 187,500 shares of Common Stock at the exercise price of $2.50
per share.</FONT></P>
<P><FONT face="CG Times Regular">The Series 8 Preferred had a liquidation
preference over the Common Stock equal to $1,000 consideration per outstanding
share of Series 8 Preferred, plus an amount equal to all unpaid dividends
accrued thereon. As of January 1, 1999, 2,500 shares of Series 8 Preferred
remained issued and outstanding. On April 20, 1999, the holder of the Series 8
Preferred converted 1,584 shares of the Series 8 Preferred into 2,057,143 shares
of Common Stock of the Company, leaving 616 shares of Series 8 Preferred issued
and outstanding.</FONT></P>
<P><FONT face="CG Times Regular">On July 15, 1999, (i) the outstanding shares of
Series 8 Preferred, all of which were held by Capital Bank, were exchanged for
an equal number of shares of newly created Series 12 Class L Convertible
Preferred Stock, par value $.001 per share ("Series 12 Preferred"), and (ii) 300
shares of Series 12 Preferred were redeemed by the Company for $1,000 per share,
leaving 616 shares of Series 12 Preferred issued and outstanding. On August 3,
1999, the 616 outstanding shares of Series 12 Preferred, all of which were held
by Capital Bank, were exchanged for an equal number of shares of newly created
Series 15 Class O Convertible Preferred Stock, par value $.001 per share
("Series 15 Preferred"). The terms of the Series 8 Preferred, Series 12
Preferred and Series 15 Preferred were substantially the same and the fair value
of the new Series did not exceed the fair value of the Series exchanged. On
April 6, 2001, Capital Bank converted 416 shares of the Series 15 Preferred into
277,333 shares of the Company's Common Stock and exchanged the remaining 200
shares of the Series 15 Preferred into the new Series 17 Preferred. The
exchanges were made in private placements under Section 4(2) and/or Section
3(a)(9) of the Securities Act.</FONT></P>
<P><FONT face="CG Times Regular">The Series 8 Preferred, Series 12 Preferred and
Series 15 Preferred each accrued dividends on a cumulative basis at a rate of
four percent (4%) per annum which dividends were payable semiannually when and
as declared by the Board of Directors. During 2001, accrued dividends on the
Series 8 Preferred, Series 12 Preferred and Series 15 Preferred, in the combined
total of approximately $64,000 were paid in the form of 3,786 shares of Common
Stock of the Company. </FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Series 10 Preferred/Series 13
Preferred/Series 16 Preferred<BR></STRONG>On or about June 30, 1998, the Company
issued to Capital Bank 3,000 shares of newly-created Series 10 Class J Preferred
Stock, par value $.001 per share ("Series 10 Preferred") at a price of $1,000
per share in a private placement under Section 4(2) of the Securities Act and/or
Rule 506 of Regulation D under the Securities Act. The Series 10 Preferred has a
liquidation preference over the Common Stock equal to $1,000 consideration per
outstanding share of Series 10 Preferred, plus an amount equal to all unpaid
dividends accrued thereon. As of January 1, 1999, there were 3,000 shares of
Series 10 Preferred which were issued and outstanding. On April 20, 1999, the
holder of the Series 10 Preferred converted 748 shares of Series 10 Preferred
into 971,429 shares of Common Stock, leaving 2,252 shares of Series 10 Preferred
issued and outstanding. </FONT></P>
<P><FONT face="CG Times Regular">On July 15, 1999, (i) the outstanding shares of
Series 10 Preferred, all of which were held by Capital Bank, were exchanged for
an equal number of shares of newly created Series 13 Class M Convertible
Preferred Stock, par value $.001 per share ("Series 13 Preferred"), and (ii) 450
shares of Series 13 Preferred were redeemed by the Company for $1,000 per share,
leaving 1,802 shares of Series 13 Preferred issued and outstanding. On August 3,
1999, the 1,802 outstanding shares of Series 13 Preferred, all of which were
held by Capital Bank, were exchanged for an equal number of shares of newly
created Series 16 Class P Convertible Preferred Stock, par value $.001 per share
("Series 16 Preferred"). On January 2, 2001, Capital Bank converted 5 shares of
the Series 16 Preferred for 3,333 shares of the Company's Common Stock. The
terms of the Series 10 Preferred, Series 13 Preferred and Series 16 Preferred
were substantially the same and the fair value of the new Series did not exceed
the fair value of the Series exchanged. On April&nbsp;6, 2001, Capital Bank
exchanged the 1,797 outstanding shares of Series 16 Preferred into Series 17
Preferred. The exchanges were made in private placements under Section 4(2)
and/or Section 3(a)(9) of the Securities Act. </FONT></P>
<P><FONT face="CG Times Regular">The Series 10 Preferred, Series 13 Preferred
and Series 16 Preferred each accrued dividends on a cumulative basis at a rate
of four percent (4%) per annum which dividends were payable semiannually
when</FONT></P>
<P>&nbsp;</P>
<P align=center><FONT face="CG Times Regular">-52-</FONT></P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">and as declared by the Board of Directors.
During 2001, accrued dividends on the Series 10 Preferred, Series 13 Preferred
and Series 16 Preferred, in the combined total of approximately $19,000 were
paid in the form of 11,044 shares of Common Stock of the Company.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Series 17
Preferred<BR></STRONG>Effective as of April 6, 2001, The Company and Capital
Bank entered into a Conversion and Exchange Agreement, whereby Capital Bank
converted a portion of the Company's Preferred Stock owned of record by Capital
Bank, as agent for certain of its accredited investors, for shares of the
Company's Common Stock and exchanged the remaining Preferred Stock held by
Capital Bank for shares of the Company's newly designated Series 17 Preferred
Stock.</FONT></P>
<P><FONT face="CG Times Regular">Prior to the consummation of the Conversion and
Exchange Agreement, Capital Bank owned of record, as its agent for certain of
its accredited investors, 1,769 shares of the Company's Series 14 Preferred ,
616 shares of the Company's Series 15 Preferred, and 1,797 shares of the
Company's Series 16 Preferred. Capital Bank converted 1,314 shares of Series 14
Preferred and 416 shares of Series 15 Preferred into an aggregate of 1,153,333
shares of the Company's Common Stock on April 6, 2001. Capital Bank then
exchanged the remaining shares of Series 14 Preferred, Series 15 Preferred, and
Series 16 Preferred for a total of 2,500 shares of the Series 17 Preferred. As a
result of the consummation of the Conversion and Exchange Agreement, no shares
of Series 14 Preferred, Series 15 Preferred, or Series 16 Preferred remain
outstanding.</FONT></P>
<P><FONT face="CG Times Regular">The Series 17 Preferred may be converted into
shares of Common Stock at any time at a conversion price of $1.50 per share,
subject to adjustment as set forth in the Certificate of Designations relating
to the Series 17 Preferred. The Series 17 Preferred has a "stated value" of
$1,000 per share. The Corporation may, at its sole option, redeem, in whole or
in part, at any time, and from time to time the then outstanding Series
17</FONT> <FONT face="CG Times Regular">Preferred at the following cash
redemption prices if redeemed during the following periods: (a)<STRONG>
</STRONG>within 12 months from June 1, 2001 - $1,100 per share, and (b) after
June 1, 2002 - $1,200 per share. Upon any notice of redemption, Capital Bank
shall have only five business days to exercise its conversion rights regarding
the redeemed shares.</FONT></P>
<P><FONT face="CG Times Regular">The Series 17 Preferred accrues dividends on a
cumulative basis at a rate of five percent (5%) per annum which dividends are
payable semiannually when and as declared by the Board of Directors. During
2001, accrued dividends on the Series 17 Preferred of approximately $92,000 were
paid in the form of 36,718 shares of the Company's Common Stock, of which 24,217
were issued in March 2002.</FONT></P>
<P><FONT face="CG Times Regular">The issuance of the Series 17 Preferred under
the terms of the Conversion and Exchange Agreement was made in a private
placement under Section 4(2) and/or Regulation D of the Securities Act of 1933,
as amended. The Warrants previously issued to Capital Bank in connection with
the Series 14 Preferred, Series 15 Preferred, and Series 16 Preferred have not
changed. The Company performed a calculation of the carrying value of the new
Series 17 Preferred and determined that it does not exceed the carrying value of
the exchanged Series of Preferred (Series 14, 15 and 16) and therefore no
beneficial conversion dividends were recorded as a result of this
exchange.</FONT></P>
<P><FONT face="CG Times Regular">The Conversion and Exchange Agreement, dated
May 25, 2001 (the "Series 17 Agreement") was extensively negotiated between the
Company and holders of the Series 14 Preferred, Series 15 Preferred, and Series
16 Preferred for many weeks prior to April 6, 2001. Although the terms of the
Series 17 Agreement were agreed on April 6, 2001, the Series 17 Agreement was
not memorialized in the form of a written agreement until May 25, 2001. The
delay in memorializing the Series 17 Agreement was primarily due to the fact
that the Company's executive officers and its counsel were focused upon, and
devoting substantially all of their time to, completing the acquisition by the
Company of M&amp;EC and completing a $7.7 million private placement. In
executing the Series 17 Agreement, the Company's counsel advised the Company,
and the Company agreed that, rather than "back-dating" the Series 17 Agreement,
it was appropriate to note that the Series 17 Agreement was executed on May 25,
2001, even though the terms of the agreement had been reached and the parties
became committed to the agreement on April 6, 2001.</FONT></P>
<P>&nbsp;</P>
<P align=center>-53-</P>
<P>&nbsp;</P><FONT face="CG Times Regular">Both the Company and the holders of
the Series 17 Preferred have relied upon April 6, 2001, as being the effective
date of the Series 17 Agreement. In fact, the beneficial holders of 1,314 shares
of PESI's Series 14 Preferred and 416 shares of the Series 15 Preferred
converted such shares of preferred stock into PESI common stock on April 6,
2001, in reliance on the completion on the Series 17 Agreement and in accordance
with the terms of the Series 17 Agreement as agreed to on that date and
memorialized on May&nbsp;25, 2001.</FONT><FONT face="CG Times Regular"></FONT>
<P><FONT face="CG Times Regular"></FONT><FONT
face="CG Times Regular"><STRONG>Series 5 Preferred/Series 7 Preferred/Series 9
Preferred<BR></STRONG>On or about April 30, 1998, the Company issued to The
Infinity Fund, L.P. ("Infinity") 350 shares of newly-created Series 9 Class I
Preferred Stock, par value $.001 per share ("Series 9 Preferred") in exchange
for 350 shares of Series 7 Class G Preferred Stock, par value $.001 per share
("Series 7 Preferred") which had been issued to Infinity in 1997. The Series 7
Preferred, along with certain Warrants allowing the purchase of 35,000 shares of
Common Stock at an exercise price of $1.8125 per share were issued to RBB Bank
in exchange for an equal number of shares of Series 5 Class E Preferred Stock,
par value $.001 per share ("Series 5 Preferred") and Warrants allowing the
purchase of 187,500 shares of Common Stock at an exercise price of $2.10 per
share and the purchase of 187,500 shares of Common Stock at the exercise price
of $2.50 per share. The exchanges were made in private placements under Section
4(2) and/or Section 3(a)(9) of the Securities Act. The terms of the Series 9
Preferred are substantially the same as the terms of the Series 7 Preferred and
Series 5 and the fair value of the new Series did not exceed the fair value of
the Series exchanged. As of January 1, 2000, there were 350 shares of Series 9
Preferred which were issued and outstanding.</FONT></P>
<P><FONT face="CG Times Regular">The Series 9 Preferred had a liquidation
preference over the Common Stock equal to $1,000 consideration per outstanding
share of Series 9 Preferred, plus an amount equal to all unpaid dividends
accrued thereon. The Series 9 Preferred accrued dividends on a cumulative basis
at a rate of four percent (4%) per annum. Such dividends were payable
semiannually when and as declared by the Board of Directors. Dividends were
paid, at the Company's option, in the form of cash or Common Stock. </FONT></P>
<P><FONT face="CG Times Regular">In February and March 2000 all of the 350
shares of Series 9 Preferred were converted to 324,610 shares of Common Stock,
including 2,259 shares issued in payment of accrued dividends on the Series 9
Preferred from January 1, 2000, until the dates of conversion. As a result of
the conversions, the Series 9 Preferred are no longer outstanding.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Reasons for Exchanges<BR></STRONG>The
Company engaged in the various exchanges of its then outstanding preferred stock
for a newly issued series of preferred stock in order to provide conversion
terms more favorable to the Company and to improve the Company's capital
structure. Prior to the most recent exchanges, the floating conversion price of
the Company's preferred stock resulted in the holders of the preferred stock
realizing decreasing conversion prices for an increasing number of shares of
common stock. By engaging in the exchanges, the Company has set the conversion
price at a fixed price, and the total number of shares issuable upon conversion
of the preferred stock is now fixed at a specified number. The exchanges have
also enabled the Company to simplify its capital structure. The Company
previously had up to three separate series of convertible preferred stock
outstanding at one time. As a result of the series of exchanges and conversions
of a certain number of preferred stock, ending in the exchange for the currently
outstanding Series 17 Preferred, the Company now has only one series of
preferred stock outstanding, and instead of floating conversion rates, the
Series 17 Preferred has a fixed rate. The Company believes that this simplified
capital structure (a) helps facilitate the Company's borrowing and capital
raising efforts, and (b) improves the ability of the Company's investors and
market professionals to analyze the Company's financial status.</FONT></P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P align=center><FONT face="CG Times Regular">-54-</FONT></P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<HR color=#000080 noShade SIZE=5 width="90%">

<TABLE width=623>
    <TR vAlign=top>
    <TD width=26></TD>
    <TD width=583><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular"><STRONG>NOTE</STRONG> <STRONG>6<BR>LONG-TERM
      DEBT</STRONG></FONT> </TD></TR></TABLE>
<P><FONT face="CG Times Regular">Long-term debt at December 31 includes the
following (in thousands):</FONT></P>
<TABLE width=653>
    <TR vAlign=top>
    <TD width=484></TD>
    <TD width=9></TD>
    <TD align=middle width=63><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular"></FONT><FONT
face="CG Times Regular">2001</FONT></TD>
    <TD align=middle width=5><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle width=60></FONT><FONT
    face="CG Times Regular">2000</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=484></TD>
    <TD width=9></TD>
    <TD align=middle width=63>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=5></TD>
    <TD align=middle width=60>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD width=484><FONT face="CG Times Regular">Revolving loan facility dated
      December 22, 2000,
      borrowings</FONT>&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT
      face="CG Times Regular"> based upon eligible accounts receivable, subject
      to monthly borrowing</FONT>&nbsp;<FONT
      face="CG Times Regular"><BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; base
      calculation, variable interest paid monthly at prime rate plus
      1%&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (5.75% at December 31, 2001),
      balance due in December 2005.</FONT>
      <P>&nbsp;</P></TD>
    <TD width=9></TD>
    <TD align=right width=63><BR><BR><BR>$&nbsp;&nbsp;7,663&nbsp;
      <P>&nbsp;</P></TD>
    <TD align=right width=5></TD>
    <TD align=right width=60><BR><BR><BR>$&nbsp;&nbsp;7,078&nbsp;
      <P>&nbsp;</P></TD></TR>
  <TR vAlign=top>
    <TD width=484><FONT face="CG Times Regular">Term Loan Agreement dated
      December 22, 2000, payable in<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;equal
      monthly installments of principal of $83, balance due
      in<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;December 2005, variable interest paid
      monthly at prime rate<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;plus 1 1/2% (6.25%
      at December 31, 2001).</FONT>
      <P>&nbsp;</P></TD>
    <TD width=9></TD>
    <TD align=right width=63><BR><BR><BR>6,083&nbsp;</TD>
    <TD align=right width=5></TD>
    <TD align=right width=60><BR><BR><BR>7,000&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width=484><FONT face="CG Times Regular">Revolving loan facility dated
      January 15, 1998, as amended<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;May 27,
      1999, borrowings based upon eligible
      accounts<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;receivable, subject to monthly
      borrowing base calculation,<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;variable
      interest paid monthly at prime rate plus 1 3/4%.</FONT>
      <P>&nbsp;</P></TD>
    <TD width=9></TD>
    <TD align=right width=63><BR><BR><BR>--&nbsp;</TD>
    <TD align=right width=5></TD>
    <TD align=right width=60><BR><BR><BR>(1,253)</TD></TR>
  <TR vAlign=top>
    <TD width=484><FONT face="CG Times Regular">Three promissory notes dated
      May 27, 1999, payable in equal<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;monthly
      installments of principal and interest of $90 over
      60<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;months, due June 2004, interest at
      5.5% for the first three years<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and 7% for
      remaining two years.</FONT>
      <P>&nbsp;</P></TD>
    <TD width=9></TD>
    <TD align=right width=63><BR><BR><BR>2,495&nbsp;</TD>
    <TD align=right width=5></TD>
    <TD align=right width=60><BR><BR><BR>3,413&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width=484><FONT face="CG Times Regular">Promissory note dated July 14,
      2000, as amended December 19,
      2000,<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;repaid in full on September 10,
      2001, interest paid at annual rate<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
      10%.</FONT>
      <P>&nbsp;</P></TD>
    <TD width=9></TD>
    <TD align=right width=63><BR><BR>--&nbsp;</TD>
    <TD align=right width=5></TD>
    <TD align=right width=60><BR><BR>750&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width=484>Promissory note dated August 29, 2000, as amended December
      19,<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2000, repaid in full effective July
      9, 2001, through conversion to<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common
      Stock, interest paid at annual rate of 12%.
      <P>&nbsp;</P></TD>
    <TD width=9></TD>
    <TD align=right width=63><BR><BR>--&nbsp;</TD>
    <TD align=right width=5></TD>
    <TD align=right width=60><BR><BR>3,000&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width=484>Promissory note dated August 31, 2000, payable in lump sum
      in<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;August 2005, interest paid annually at
      7%.
      <P>&nbsp;</P></TD>
    <TD width=9></TD>
    <TD align=right width=63><BR>3,500&nbsp;</TD>
    <TD align=right width=5></TD>
    <TD align=right width=60><BR>3,500&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width=484>Senior subordinated notes dated July 31, 2001, payable in
      lump sum<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;on July 31, 2006, interest
      payable quarterly at an annual
      interest<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;rate of 13.5%, net of
      unamortized debt discount of $1,487.
      <P>&nbsp;</P></TD>
    <TD width=9></TD>
    <TD align=right width=63><BR><BR>4,138&nbsp;</TD>
    <TD align=right width=5></TD>
    <TD align=right width=60><BR><BR>--&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width=484>Promissory note dated June 25, 2001, payable in
      semiannual<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;installments on June 30 and
      December 31 through December 31,<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2008,
      variable interest accrues at the applicable federal
      rate<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;determined under the IRS Code
      Section (8.0% on December 31,<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2001) and
      is payable in lump sum at the end of installment period.
      <P>&nbsp;</P></TD>
    <TD width=9></TD>
    <TD align=right width=63><BR><BR><BR><BR>3,634&nbsp;</TD>
    <TD align=right width=5></TD>
    <TD align=right width=60><BR><BR><BR><BR>--&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width=484>Promissory note dated June 25, 2001, payable in
      semiannual<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;installments on June 30 and
      December 31 through December 31,<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2008,
      variable interest accrues at the applicable federal
      rate<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;determined under the IRS Code
      Section (8.0% on December 31, 2001)<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and
      is payable in lump sum at the end of installment period.
      <P>&nbsp;</P></TD>
    <TD width=9></TD>
    <TD align=right width=63><BR><BR><BR><BR>903&nbsp;</TD>
    <TD align=right width=5></TD>
    <TD align=right width=60><BR><BR><BR><BR>--&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width=484>Various capital lease and promissory note obligations,
      payable 2002<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;to 2006, interest at rates
      ranging from 7.5% to 17.9%.</TD>
    <TD width=9></TD>
    <TD align=right width=63><BR>2,730&nbsp;</TD>
    <TD align=right width=5></TD>
    <TD align=right width=60><BR>2,002</TD></TR>
  <TR vAlign=top>
    <TD width=484></TD>
    <TD width=9></TD>
    <TD align=right width=63>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=5></TD>
    <TD align=right width=60>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD width=484></TD>
    <TD width=9></TD>
    <TD align=right width=63>31,146&nbsp;</TD>
    <TD align=right width=5></TD>
    <TD align=right width=60>25,490&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width=484>Less current portion of long-term debt</TD>
    <TD width=9></TD>
    <TD align=right width=63>2,989&nbsp;</TD>
    <TD align=right width=5></TD>
    <TD align=right width=60>6,402&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width=484></TD>
    <TD width=9></TD>
    <TD align=right width=63>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=5></TD>
    <TD align=right width=60>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD width=484></TD>
    <TD width=9></TD>
    <TD align=right width=63>$28,157&nbsp;</TD>
    <TD align=right width=5></TD>
    <TD align=right width=60>$19,088&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width=484></TD>
    <TD width=9></TD>
    <TD align=right width=63>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right width=5></TD>
    <TD align=right width=60>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD></TR></TABLE>
<P><FONT face="CG Times Regular">On December 22, 2000, the company entered into
a Revolving Credit, Term Loan and Security Agreement ("Agreement") with PNC
Bank, National Association, a national banking association ("PNC") acting as
agent ("Agent") for lenders, and as issuing bank. The Agreement provides for a
term loan in the amount of $7,000,000, which requires principal repayments based
upon a seven-year amortization, payable over five</FONT></P>
<P>&nbsp;</P>
<P align=center>-55-</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">years, with monthly installments of $83,000 and
the remaining unpaid principal balance due on December&nbsp;22, 2005. Payments
commenced on February 1, 2001. The Agreement also provided for a revolving line
of credit ("Revolving Credit") with a maximum principal amount outstanding at
any one time of $15,000,000. 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 Agent
reasonably deems proper and necessary. The Revolving Credit advances shall be
due and payable in full on December 22, 2005. As of December 31, 2001, our
availability under the revolving credit facility was $4,080,000 based on our
eligible receivables.</FONT></P>
<P><FONT face="CG Times Regular">Pursuant to the Agreement the Term Loan bears
interest at a floating rate equal to the prime rate plus 1&nbsp;1/2%, and the
Revolving Credit at a floating rate equal to the prime rate plus 1%. The Company
incurred approximately $2,190,000 in financing fees relative to the solicitation
and closing of this Agreement which are being amortized over the term of the
Agreement. Included in such financing fees are (i) PNC Bank commitment fee of
$220,000, (ii) investment banking fees of $559,000, (iii) investment banking
Warrants valued at $867,000 (non-cash), (iv) legal fees of approximately
$275,000 and (v) appraisals, valuations and other closing related expenses of
approximately $269,000. The Agreement also contains certain management and
credit limit fees payable throughout the term. The loans are subject to a
prepayment fee of 1 1/2% in the first year, 1% in the second and third years and
3/4% after the third anniversary until termination date. </FONT></P>
<P><FONT face="CG Times Regular">As security for prompt payment and performance
of the Agreement, the Company granted a security interest in all receivables,
equipment, general intangibles, inventory, investment property, real property,
subsidiary stock and other assets of the Company and subsidiaries. The Agreement
contains affirmative covenants including, but not limited to, maintenance of
indebtedness and collateral, management reports and disclosures and fair
presentation of financial statements and disclosures. The Agreement also
contains a tangible adjusted net worth covenant and a fixed charge coverage
ratio covenant, both of which begin effective March 31, 2001, as defined in the
Agreement, and which the Company was in compliance at December 31,
2001.</FONT></P>
<P><FONT face="CG Times Regular">The proceeds of the Agreement were utilized to
repay in full on December 22, 2000 the outstanding balance of the Congress
revolver and term loan, and to repay in full the guaranteed promissory note to
Waste Management Holding, dated August 31, 2000 in the principal amount of
$2,500,000 as incurred pursuant to the DSSI acquisition. The balance of the
Congress revolving loan on December 22, 2000, as repaid pursuant to the PNC
Agreement was $5,491,000. Subsequent to closing, additional funds in the amount
of $1,253,000 were deposited in the Congress revolver and subsequently forwarded
to PNC in January 2001. The balance of the Congress term loan on December 22,
2000 as report pursuant to the PNC Agreement was $2,266,000.</FONT></P>
<P><FONT face="CG Times Regular">In December 2000, the Company entered into an
interest rate swap agreement related to its term loan. This hedge, has
effectively fixed the interest rate on the notional amount of $3,500,000 of the
floating rate $7,000,000 PNC term loan debt. The Company will pay the
counterparty interest at a fixed rate equal to the base rate of 6.25%, for a
period from December 22, 2000, through December 22, 2005, in exchange for the
counterparty paying the Company one month LIBOR rate for the same term (2.14% at
December 31, 2001). The value of the interest rate swap at January 1, 2001, was
deminimus. At December 31, 2001, the market value of the interest rate swap was
in an unfavorable value position of $158,000 and was recorded as a liability and
the loss was recorded as other comprehensive loss on the Statement of
Stockholders' Equity.</FONT></P>
<P><FONT face="CG Times Regular">Pursuant to the terms of the Stock Purchase
Agreements in connection with the acquisition of Perma-Fix of Orlando, Inc.
("PFO"), Perma-Fix of South Georgia, Inc. ("PFSG") and Perma-Fix of Michigan,
Inc. ("PFMI"), a portion of the consideration was paid in the form of the
Promissory Notes, in the aggregate amount of $4,700,000 payable to the former
owners of PFO, PFSG and PFMI. The Promissory Notes are paid in equal monthly
installments of principal and interest of approximately $90,000 over five years
with the first installment due on July 1, 1999, and having an interest rate of
5.5% for the first three years and 7% for the remaining two years. The aggregate
outstanding balance of the Promissory Notes total $2,495,000 at December 31,
2001, of which $957,000 is in the current portion. Payments of such Promissory
Notes are</FONT></P>
<P>&nbsp;</P>
<P align=center><FONT face="CG Times Regular">-56-</FONT></P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">guaranteed by PFMI under a non-recourse
guaranty, which non-recourse guaranty is secured by certain real estate owned by
PFMI. These Promissory Notes are subject to subordination agreements with the
Company's senior and subordinated lenders.</FONT></P>
<P><FONT face="CG Times Regular">On July 14, 2000, the Company entered into a
letter agreement ("$750,000 Capital Loan Agreement") with Capital Bank-Grawe
Gruppe AG (f/k/a RBB Bank Aktiengesellschaft) organized under the laws of
Austria ("Capital Bank"), pursuant to which Capital Bank, acting as agent for
certain investors who provided the funds, loaned (the "$750,000 Capital Loan")
the Company the aggregate principal amount of $750,000, as evidenced by the
$750,000 Capital Promissory Note in the face amount of $750,000, bearing an
annual interest rate of 10.0% per annum. The purpose of the $750,000 Capital
Loan is to provide interim financing to facilitate the acquisition of DSSI and
M&amp;EC (see Note 4) and to fund certain capital expansions at the Company's
existing facilities. The principal amount of this Note and accrued interest
thereon was initially payable in full upon the earlier of (i) December 31, 2000,
or (ii) ten business days after the Company raises $3,000,000 or more through a
private placement of capital securities. On December 19, 2000, this agreement
was amended pursuant to the terms of the PNC Revolving Credit and Term Loan
Agreement, which extended the due date of the principal and interest to July 1,
2001. On September 11, 2001, the Company paid the principal balance of $750,000
and accrued interest of $87,000 with proceeds from the exercise of
Warrants.</FONT></P>
<P><FONT face="CG Times Regular">On August 29, 2000, the Company entered into a
short term bridge loan agreement with Capital Bank in connection with the
Company's acquisition of DSSI. This loan agreement (the "$3,000,000 Capital Loan
Agreement") was between the Company and Capital Bank, pursuant to which Capital
Bank, acting as agent for certain investors who provided the funds, loaned (the
"$3,000,000 Capital Loan") the Company the aggregate principal amount of
$3,000,000, as evidenced by a Promissory Note (the "$3,000,000 Capital
Promissory Note") in the face amount of $3,000,000, having an initial maturity
date of November 29, 2000, and bearing an annual interest rate of 12%. On
December 19, 2000, this agreement was also amended pursuant to the terms of the
PNC Revolving Credit and Term Loan Agreement, which extended the due date of the
principal and interest to July 1, 2001.</FONT></P>
<P><FONT face="CG Times Regular">The Company entered into an agreement (the
"Exchange Agreement") with Capital Bank, to issue to Capital Bank, as agent for
certain of its accredited investors, 1,893,505 shares of the Company's Common
Stock and a Warrant to purchase up to 1,839,405 shares of Common Stock at an
exercise price of $1.75 per share (the "Capital Bank Warrant"), in satisfaction
of all amounts due or to become due under the $3,000,000 Capital Loan Agreement
and the related $3,000,000 Capital Promissory Note, including the Company's
obligations to issue to Capital Bank shares of Common Stock if the $3,000,000
Capital Promissory Note was not paid by certain due dates. The $3,000,000
Capital Promissory Note became due on July 1, 2001. The Exchange Agreement was
completed effective as of July 9, 2001.</FONT></P>
<P><FONT face="CG Times Regular">Upon the closing of the Exchange Agreement, the
Company (a) paid to Capital Bank a closing fee of $325,000, payable $75,000 cash
and by the issuance by the Company of 105,932 shares of the Company's Common
Stock, such number of shares being equal to the quotient of $250,000 divided by
the last closing bid price of the Common Stock as quoted on the NASDAQ on June
26, 2001, and (b) issued certain five</FONT> <FONT face="CG Times Regular">year
Warrants for the purchase of up to 625,000 shares of Common Stock at a purchase
price of $1.75 per share.</FONT></P>
<P><FONT face="CG Times Regular">On August 31, 2000, as part of the
consideration for the purchase of DSSI, the Company issued to Waste Management
Holdings a long term unsecured promissory note (the "Unsecured Promissory Note")
in the aggregate principal amount of $3,500,000, bearing interest at a rate of
7% per annum and having a five-year term with interest to be paid annually and
principal due at the end of the term of the Unsecured Promissory
Note.</FONT></P>
<P><FONT face="CG Times Regular">On January 31, 2001, the Company entered into a
definitive loan agreement (the "Loan Agreement"), with BHC Interim Funding, L.P.
("BHC"). Pursuant to the terms of the Loan Agreement, BHC agreed to loan to the
Company the principal amount of $6 million (the "BHC Loan"), with $3.5 million
of the BHC Loan funded at the closing of the BHC Loan on February 2, 2001, and
an additional $2.5 million funded in March</FONT></P>
<P>&nbsp;</P>
<P align=center>-57-</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">2001. The outstanding principal amount of the
BHC Loan was payable on March 30, 2002, with interest payable monthly on the
outstanding principal balance of the BHC Loan at the annual rate of $13.75%. The
proceeds from the BHC Loan were used for the Company's working capital purposes
and for construction of M&amp;EC's facility. On July 31, 2001, the Company paid
off the BHC Loan, including interest and early termination fees, with new long
term debt as discussed below in the amount of $5,625,000 and with proceeds from
the Private Placement Offering as discussed in Note 11. Of the original prepaid
financing fees of $2,041,000, the unamortized balance of $1,440,000 was
written-off in the quarter ended September 30, 2001.</FONT></P>
<P><FONT face="CG Times Regular">On July 31, 2001, the Company issued
approximately $5.6 million of its 13.50% Senior Subordinated Notes due July 31,
2006 (the "Notes"). The Notes were issued pursuant to the terms of a Note and
Warrant Purchase Agreement, dated July 31, 2001 (the "Purchase Agreement"),
between the Company, Associated Mezzanine Investors - PESI, L.P. ("AMI"), and
Bridge East Capital, L.P. ("BEC"). The Notes are unsecured and are
unconditionally guaranteed by the subsidiaries of the Company. The Company's
payment obligations under the Notes are subordinate to the Company's payment
obligations to its primary lender and to certain other debts of the Company up
to an aggregate amount of $25 million. The net proceeds from the sale of the
Notes were used to repay the BHC short-term loan agreement. </FONT></P>
<P><FONT face="CG Times Regular">Under the terms of the Purchase Agreement, the
Company also issued to AMI and BEC Warrants to purchase up to 1,281,731 shares
of the Company's Common Stock ("Warrant Shares") at an initial exercise price of
$1.50 per share (the "Warrants"), subject to adjustment under certain
conditions. The Warrants were valued at $1,622,000 using the Black-Sholes
Pricing Model and such valuation was recorded as a discount to the Notes to be
amortized over the term of the Notes. The Warrants may be exercised at any time
during a seven-year term and provide for cashless exercise. The number of shares
issuable upon exercise of the Warrants is subject to adjustment pursuant to
certain anti-dilution provisions. </FONT></P>
<P><FONT face="CG Times Regular">The Notes may be prepaid at any time, subject
to a 13.50% premium prior to July 31, 2003, a 6.75% premium prior to July 31,
2004, a 3.375% premium prior to July 31, 2005, and no premium thereafter. Upon a
Change of Control of the Company (as defined in the Purchase Agreement) or if
Dr. Louis F. Centofanti ceases for any reason to be the President and Chief
Executive Officer of the Company, the holders of the Notes have the option to
require the Company to prepay all amounts owing under the Notes plus, if the
prepayment is a result of a Change of Control, the applicable prepayment
premium.</FONT></P>
<P><FONT face="CG Times Regular">The holders of at least 25% of the Warrants or
the Warrant Shares may, at any time and from time to time during the term of the
Warrants, request on two occasions registration with the Securities and Exchange
Commission ("SEC") of the Warrant Shares. In addition, the holders of the
Warrants are entitled, subject to certain conditions, to include the Warrant
Shares in a registration statement covering other securities which the Company
proposes to register. On October 1, 2001, the Company filed an S-3 Registration
Statement with the SEC covering the Warrants.</FONT></P>
<P><FONT face="CG Times Regular">The Notes and Warrants were sold pursuant to an
exemption from registration under Section 4(2) of the Securities Act of 1933, as
amended (the "Act"), and/or Rule 506 of Regulation D promulgated under the Act,
and, therefore, were not registered under the Act. Accordingly, the Notes may
not be offered or sold in the United States absent registration or pursuant to
an applicable exemption from the registration requirements of the Act. The
Company incurred prepaid financing fees of approximately $1,296,000 for the
closing of the AMI and BEC Notes, which will be amortized over the term of the
notes. Included in such financing fees are (a) closing fees of $200,000 to AMI
and $75,000 to Bridge East Management, LLC; (b) investment banking fees of
$291,000; (c) investment banking Warrants of $389,000 (non-cash); (d) legal fees
of $269,000; and (e) other closing related costs of approximately
$72,000.</FONT></P>
<P><FONT face="CG Times Regular">In connection with the sale of the Notes, the
Company, AMI, and BEC entered into an Option Agreement, dated July 31, 2001 (the
"Option Agreement"). Pursuant to the Option Agreement, the Company granted each
Purchaser an irrevocable option requiring the Company to purchase any or all of
the Warrants or the shares of Common Stock issuable under the Warrants (the
"Warrant Shares") then held by the Purchaser (the "Put Option"). The Put Option
may be exercised at any time commencing July 31, 2004, and ending</FONT></P>
<P align=center><FONT face="CG Times Regular">-58-</FONT></P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">July&nbsp;31, 2008. In addition, each Purchaser
granted to the Company an irrevocable option to purchase all the Warrants or the
Warrant Shares then held by the Purchaser (the "Call Option"). The Call Option
may be exercised at any time commencing July 31, 2005, and ending July 31, 2008.
The purchase price under the Put Option and the Call Option is based on the
quotient obtained by dividing (a) the sum of six times the Company's
consolidated EBITDA for the period of the 12 most recent consecutive months
minus Net Debt plus the Warrant Proceeds by (b) the Company's Diluted Shares (as
the terms EBITDA, Net Debt, Warrant Proceeds, and Diluted Shares are defined in
the Option Agreement). Pursuant to the guidance under EITF 00-19 on accounting
for and financial presentation of securities that could potentially be settled
in a Company's own stock. The put warrants would be classified outside of equity
based on the ability of the holder to require cash settlement. Also, EITF Topic
D-98 discusses the accounting for a security that will become redeemable at a
future determinable date and its redemption is variable. This is the case with
the Warrants as the date is fixed, but the put or call price varies. The EITF
gives two possible methodologies for valuing the securities. The Company has
selected to account for the changes in redemption value immediately as they
occur and the Company will adjust the carrying value of the security to equal
the redemption value at the end of each reporting period. On December 31, 2001,
the purchase price under the Put Option was in a negative position and as such
no liability was recorded for the redemption of the Put Option.</FONT></P>
<P><FONT face="CG Times Regular">In connection with the sale of the Notes, Ann
L. Sullivan Living Trust, dated September 6, 1978, and the Thomas P. Sullivan
Living Trust, dated September 8, 1978 (collectively the "Sullivan Trusts") each
have entered into a certain Subordination Agreement, dated July 30, 2001. Thomas
P. Sullivan, a trustee of the Thomas P. Sullivan Living Trust, is a director of
the Company. Under the terms of the Subordination Agreement, the Sullivan Trusts
have subordinated all amounts owing by the Company to the Sullivan Trusts in
favor of the Company's obligations under the Notes. Notwithstanding the
subordination, the Company may (a) as long as no event of default under the
Purchase Agreement has occurred and is continuing and if such payments would not
create an event of default, continue to make regularly scheduled payments of
principal and interest owing under certain promissory notes, dated May 28, 1999,
in the original aggregate principal amount of $4.7 million, which were issued to
the Sullivan Trusts in connection with the Company's acquisition of Perma-Fix of
Michigan, Inc., Perma-Fix of South Georgia, Inc., and Perma-Fix of Orlando,
Inc.; and (b) make such payments as may be required pursuant to a certain
Mortgage, dated May 28, 1999, by Perma-Fix of Michigan, Inc. in favor of the
Sullivan Trusts. The outstanding principal amount due to the Sullivan Trusts is
approximately $2.5 million.</FONT></P>
<P><FONT face="CG Times Regular">In conjunction with the Company's acquisition
of M&amp;EC, M&amp;EC entered into an installment agreement with the Internal
Revenue Service ("IRS") for a principal amount of $923,000 dated June 7, 2001,
for certain withholding taxes owed by M&amp;EC. The installment agreement is
payable over eight years on a semiannual basis on June 30 and December 31.
Interest is accrued at the applicable law rate ("Applicable Rate")</FONT> <FONT
face="CG Times Regular">pursuant to the provisions of section 6621 of the
Internal Revenue Code of 1986 as amended. Such rate is adjusted on a quarterly
basis and payable in lump sum at the end of the installment period. On December
31, 2001, the rate was 8% (see Note 4). On December 31, 2001, the outstanding
balance is $941,000 including accrued interest of approximately
$38,000.</FONT></P>
<P><FONT face="CG Times Regular">M&amp;EC also issued a promissory note for a
principal amount of $3.7 million to PDC, dated June 7, 2001, for monies advanced
to M&amp;EC for certain services performed by PDC. The promissory note is
payable over eight years on a semiannual basis on June 30 and December 31.
Interest is accrued at the applicable rate (8.00% on December 31, 2001) and
payable in lump sum at the end of the loan period. On December 31, 2001, the
outstanding balance is $3,809,000 including accrued interest of approximately
$175,000. PDC has directed M&amp;EC to make all payments under the promissory
note directly to the IRS to be applied to PDC's obligations under its
installment agreement with the IRS (see Note 4).</FONT></P>
<P><FONT face="CG Times Regular"><STRONG></STRONG></FONT><FONT
face="CG Times Regular">The aggregate amount of the maturities of long-term debt
maturing in future years as of December 31, 2001, is $2,989,000 in 2002;
$3,161,000 in 2003; $2,371,000 in 2004; $15,550,000 in 2005; and $7,075,000 in
2006.</FONT></P>
<P>&nbsp;</P>
<P align=center>-59-</P>
<P>&nbsp;</P>
<HR color=#000080 noShade SIZE=5 width="90%">
&nbsp;
<TABLE width=621>
    <TR vAlign=top>
    <TD width=31></TD>
    <TD width=576><FONT face="CG Times Regular"><STRONG>NOTE</STRONG>
      <STRONG>7<BR>ACCRUED EXPENSES</STRONG></FONT> </TD></TR></TABLE>
<P><FONT face="CG Times Regular">Accrued expenses at December 31 include the
following (in thousands):</FONT></P>
<TABLE width=567>
    <TR vAlign=top>
    <TD width=57></TD>
    <TD width=350></TD>
    <TD align=middle width=61><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular">2001</FONT></TD>
    <TD align=middle width=19><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle width=57></FONT><FONT
    face="CG Times Regular">2000</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=57></TD>
    <TD width=350></TD>
    <TD align=middle width=61>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=19></TD>
    <TD align=middle width=57>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD width=57></TD>
    <TD width=350><FONT face="CG Times Regular">Salaries and employee
      benefits</FONT></TD>
    <TD align=right width=61>$&nbsp;2,342&nbsp;</TD>
    <TD align=middle width=19></TD>
    <TD align=right width=57><FONT
      face="CG Times Regular">$&nbsp;1,857&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=57></TD>
    <TD width=350><FONT face="CG Times Regular">Accrued sales, property and
      other tax</FONT></TD>
    <TD align=right width=61>735&nbsp;</TD>
    <TD align=middle width=19></TD>
    <TD align=right width=57><FONT
  face="CG Times Regular">782&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=57></TD>
    <TD width=350><FONT face="CG Times Regular">Waste disposal and other
      operating related expenses</FONT></TD>
    <TD align=right width=61>4,840&nbsp;</TD>
    <TD align=middle width=19></TD>
    <TD align=right width=57><FONT
    face="CG Times Regular">4,331&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=57></TD>
    <TD width=350><FONT face="CG Times Regular">Other</FONT></TD>
    <TD align=right width=61>514&nbsp;</TD>
    <TD align=middle width=19></TD>
    <TD align=right width=57><FONT
  face="CG Times Regular">337&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=57></TD>
    <TD width=350></TD>
    <TD align=right width=61>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=19></TD>
    <TD align=right width=57>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD width=57></TD>
    <TD width=350>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total accrued
expenses</TD>
    <TD align=right width=61>
      <P align=right><FONT
      face="CG Times Regular">$&nbsp;8,431&nbsp;&nbsp;</FONT></P></TD>
    <TD align=middle width=19></TD>
    <TD align=right width=57><FONT
      face="CG Times Regular">$&nbsp;7,307&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=57></TD>
    <TD width=350></TD>
    <TD align=middle width=61>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=middle width=19></TD>
    <TD align=middle width=57>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD></TR></TABLE>&nbsp;
<HR color=#000080 noShade SIZE=5 width="90%">

<TABLE width=619>
    <TR vAlign=top>
    <TD width=23></TD>
    <TD width=582><FONT face="CG Times Regular"><STRONG>NOTE</STRONG>
      <STRONG>8<BR>ACCRUED CLOSURE COSTS</STRONG></FONT> </TD></TR></TABLE>
<P><FONT face="CG Times Regular">The Company accrues for the estimated closure
costs as determined pursuant to RCRA guidelines for all fixed-based regulated
facilities, even though the Company does not intend to or have present plans to
close any of the Company's existing facilities. The permits and/or licenses
define the waste which may be received at the facility in question and the
treatment or process used to handle and/or store the waste. In addition, the
permits and/or licenses specify, in detail, the process and steps that a
hazardous waste or mixed waste facility must follow should the facility be
closed or cease operating as a hazardous waste or mixed waste facility. Closure
procedures and cost calculations in connection with closure of a facility are
based on guidelines developed by the federal and/or state regulatory authorities
under RCRA and the other appropriate statutes or regulations promulgated
pursuant to the statutes. The closure procedures are very specific to the waste
accepted and processes used at each facility. The Company recognizes the closure
cost as a contingent liability on the balance sheet. Since all the Company's
facilities are acquired facilities, the closure cost for each facility was
recognized pursuant to a business combination and recorded as part of the
purchase price allocation to assets acquired and liabilities assumed.
</FONT></P>
<P><FONT face="CG Times Regular">The closure calculation is increased annually
for inflation based on RCRA guidelines, and for any approved changes or
expansions to the facility, which may result in either an increase or decrease
in the approved closure amount. An increase resulting from changes or expansions
is recorded to expense over the term of such a renewed/expanded permit,
generally five (5) years, and annual inflation factor increases are expensed
during the current year. </FONT></P>
<P><FONT face="CG Times Regular">During 2001, the accrued long-term closure cost
decreased by $419,000 to a total of $4,919,000 as compared to the 2000 total of
$5,338,000. This decrease is principally a result of the reevaluation of the
purchase price allocation in 2001 of the acquisition of DSSI during 2000, of
approximately $2,480,000 with an offsetting decrease to intangible assets (see
Note 4 regarding the acquisition of DSSI). This decrease was partially offset by
an increase in accrued closure costs of $2,025,000 as a result of the
acquisition of M&amp;EC, and normal inflation factor increases accounted for the
remaining increase of $36,000.</FONT></P>
<HR color=#000080 noShade SIZE=5 width="90%">

<TABLE width=619>
    <TR vAlign=top>
    <TD width=20></TD>
    <TD width=585><FONT face="CG Times Regular"><STRONG>NOTE</STRONG>
      <STRONG>9<BR>ENVIRONMENTAL LIABILITIES</STRONG></FONT>
</TD></TR></TABLE>
<P><FONT face="CG Times Regular">The Company has four (4) remediation projects,
which are currently in progress at four (4) of the permitted facilities owned
and operated by subsidiaries of the Company. These remediation projects,
principally entail the removal of contaminated soil and remediation of
surrounding ground water. All of the remedial clean-up projects in question were
an issue for that facility for years prior to the acquisition by the Company 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. Due to the fact that these are RCRA permitted facilities, the
remediation activities are closely reviewed and monitored by the applicable
state regulators. Although the Company has recognized certain environmental
liabilities as a result of environmental concerns at, or due to the operations
of, a particular facility at the time of acquisition as part of the acquisition
cost, subsequent to </FONT></P>
<P>&nbsp;</P>
<P align=center><FONT face="CG Times Regular">-60-</FONT></P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">the acquisition of these facilities by the
Company, the Company has not recognized new environmental liabilities as a
result of the operations of the facilities after acquisition because, in part,
due to the stringent operational procedures instituted at the facilities after
they have been acquired by the Company. </FONT></P>
<P><FONT face="CG Times Regular">At December 31, 2001, the Company had accrued
environmental liabilities totaling $3,534,000, which reflects a decrease of
$808,000 from the December 31, 2000, balance of $4,342,000. The decrease
represents payments on remediation projects. The December 31, 2001 current and
long-term accrued environmental balance is recorded as follows: </FONT></P>
<TABLE width="100%">
    <TR vAlign=top>
    <TD><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular">&nbsp;</FONT></TD>
    <TD align=middle><FONT face="CG Times Regular">PFD</FONT></TD>
    <TD align=middle><FONT face="CG Times Regular">&nbsp;</FONT></TD>
    <TD align=middle><FONT face="CG Times Regular">PFMI</FONT></TD>
    <TD align=middle><FONT face="CG Times Regular">&nbsp;</FONT></TD>
    <TD align=middle><FONT face="CG Times Regular">PFSG</FONT></TD>
    <TD align=middle><FONT face="CG Times Regular">&nbsp;</FONT></TD>
    <TD align=middle><FONT face="CG Times Regular">PFM</FONT></TD>
    <TD align=middle><FONT face="CG Times Regular">&nbsp;</FONT></TD>
    <TD align=middle><FONT face="CG Times Regular">Total</FONT></TD></TR>
  <TR vAlign=top>
    <TD></TD>
    <TD align=middle>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle></TD>
    <TD align=middle>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle></TD>
    <TD align=middle>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle></TD>
    <TD align=middle>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle></TD>
    <TD align=middle>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD><FONT face="CG Times Regular">Current accrual</FONT></TD>
    <TD align=right><FONT face="CG Times Regular">$287,000</FONT></TD>
    <TD align=right><FONT face="CG Times Regular">&nbsp;</FONT></TD>
    <TD align=right><FONT face="CG Times Regular">$507,000</FONT></TD>
    <TD align=right><FONT face="CG Times Regular">&nbsp;</FONT></TD>
    <TD align=right><FONT face="CG Times Regular">$ 108,000</FONT></TD>
    <TD align=right><FONT face="CG Times Regular">&nbsp;</FONT></TD>
    <TD align=right><FONT face="CG Times Regular">$300,000</FONT></TD>
    <TD align=right><FONT face="CG Times Regular">&nbsp;</FONT></TD>
    <TD align=right><FONT face="CG Times Regular">$1,202,000</FONT></TD></TR>
  <TR vAlign=top>
    <TD><FONT face="CG Times Regular">Long-term accrual </FONT></TD>
    <TD align=right><FONT face="CG Times Regular">254,000</FONT></TD>
    <TD align=right><FONT face="CG Times Regular">&nbsp;</FONT></TD>
    <TD align=right><FONT face="CG Times Regular">113,000</FONT></TD>
    <TD align=right><FONT face="CG Times Regular">&nbsp;</FONT></TD>
    <TD align=right><FONT face="CG Times Regular">1,292,000</FONT></TD>
    <TD align=right><FONT face="CG Times Regular">&nbsp;</FONT></TD>
    <TD align=right><FONT face="CG Times Regular">673,000</FONT></TD>
    <TD align=right><FONT face="CG Times Regular">&nbsp;</FONT></TD>
    <TD align=right><FONT face="CG Times Regular">2,332,000</FONT></TD></TR>
  <TR vAlign=top>
    <TD></TD>
    <TD align=right>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right></TD>
    <TD align=right>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right></TD>
    <TD align=right>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right></TD>
    <TD align=right>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right></TD>
    <TD align=right>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD><FONT face="CG Times Regular">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total
      </FONT></TD>
    <TD align=right><FONT face="CG Times Regular">$541,000</FONT></TD>
    <TD align=right><FONT face="CG Times Regular">&nbsp;</FONT></TD>
    <TD align=right><FONT face="CG Times Regular">$620,000</FONT></TD>
    <TD align=right><FONT face="CG Times Regular">&nbsp;</FONT></TD>
    <TD align=right><FONT face="CG Times Regular">$1,400,000</FONT></TD>
    <TD align=right><FONT face="CG Times Regular">&nbsp;</FONT></TD>
    <TD align=right><FONT face="CG Times Regular">$973,000</FONT></TD>
    <TD align=right><FONT face="CG Times Regular">&nbsp;</FONT></TD>
    <TD align=right><FONT face="CG Times Regular">$3,534,000</FONT></TD></TR>
  <TR vAlign=top>
    <TD></TD>
    <TD align=right>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right></TD>
    <TD align=right>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right></TD>
    <TD align=right>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right></TD>
    <TD align=right>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right></TD>
    <TD align=right>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD></TR></TABLE>
<P><FONT face="CG Times Regular"><U></U></FONT><FONT face="CG Times Regular">In
June 1994, the Company acquired from Quadrex Corporation and/or a subsidiary of
Quadrex Corporation (collectively, "Quadrex") three TSD companies, including the
PFD facility. The former owners of PFD had merged EPS with PFD, which was
subsequently sold to Quadrex. Through the Company's acquisition of PFD in 1994
from Quadrex, the Company was indemnified by Quadrex for costs associated with
remediating a 1989 former RCRA facility leased by PFD ("Leased Property"), which
entails remediation of soil and/or groundwater restoration. The Leased Property
used by EPS to operate its facility is separate and apart from the property on
which PFD's facility is located. In conjunction with the subsequent bankruptcy
filing by Quadrex, and the Company's recording of purchase accounting for the
acquisition of PFD, the Company recognized an environmental liability of
approximately $1,200,000 for the remediation of this leased facility. This
facility has pursued remedial activities for the past seven years and after
evaluating various technologies, is seeking approval from appropriate
governmental authority for the final remedial process, through the utilization
of third party consultants, which should extend for two (2) to three (3) years
after approval by the appropriate governmental authorities of the final remedial
process. For the year ended December 31, 2001, the Company incurred $86,000 in
remedial costs which reduced the reserve. The Company has estimated the
potential liability related to the remaining remedial activity of the above
property to be approximately $541,000, representing the remaining reserve
balance, of which the Company anticipates spending approximately $287,000 during
2002, with the remaining $254,000 over the subsequent two-year period.
</FONT></P>
<P><FONT face="CG Times Regular">In conjunction with the acquisition of PFMI
during 1999, the Company recognized an environmental accrual of $2,120,000. This
amount represented the Company's estimate of the long-term costs to remove
contaminated soil at the PFMI acquired facility in Detroit, Michigan. The
facility has pursued remedial activities over the past three (3) years, which
have proceeded on schedule and are anticipated to be completed during 2003. For
the year ended December 31, 2001, the Company incurred $426,000 in remedial
costs which reduced the reserve. The Company's estimate of the potential
liability at December 31, 2001, for the PFMI remediation is $620,000, of which
the Company anticipates spending $507,000 during 2002, with the remaining
$113,000 in 2003. </FONT></P>
<P><FONT face="CG Times Regular">During 1999, the Company recognized an
environmental accrual of $2,199,000, in conjunction with the acquisition of
PFSG. This amount represented the Company's estimate of the long- term costs to
remove contaminated soil and to undergo groundwater remediation activities at
the PFSG acquired facility in Valdosta, Georgia. PFSG, in conjunction with third
party consultants, have over the past three (3) years, completed the initial
valuation and selected the remedial process to be utilized. The planning and
approval process will continue throughout 2002, with remedial activities
beginning in 2003. For the year ended December 31, 2001, the Company incurred
$94,000 in environmental costs which reduced the reserve. The Company's estimate
of the potential liability at December 31, 2001, for the PFSG remediation is
$1,400,000, of which the Company anticipates spending $108,000 during 2002, with
the remaining $1,292,000 to be spent over the next five (5) to seven (7) years.
</FONT></P>&nbsp;
<P align=center>-61-</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">Pursuant to the Company's acquisition,
effective December 31, 1993, of Perma-Fix of Memphis, Inc. (f/k/a American
Resource Recovery, Inc.), the Company assumed certain liabilities relative to
the removal of contaminated soil and to undergo groundwater remediation at the
facility. Prior to the Company's ownership of Perma-Fix of Memphis, Inc., the
owners installed monitoring and treatment equipment to restore the groundwater
to acceptable standards in accordance with federal, state and local authorities.
The groundwater remediation at this facility has been ongoing since
approximately 1990, and, subject to the approval of the appropriate agency,
Perma-Fix of Memphis, Inc. intends to begin final remediation of this facility.
For the year ended December 31, 2001, the Company incurred $229,000 in remedial
costs which reduced the reserve. The Company's estimate of the potential
liability at December 31, 2001, for completion of this project is $973,000, of
which the Company anticipates spending $300,000 in 2002 and the remaining
$673,000 over the next three (3) to five (5) years. </FONT></P>
<P><FONT face="CG Times Regular">Prior to the acquisition of these facilities,
the Company performed, or had performed, due diligence on each of these
environmental projects, and also reviewed/utilized reports obtained form third
party engineering firms who have been either engaged by the prior owners or by
our Company to assist in our review. Based upon the Company's expertise and the
analysis performed, the Company has accrued its best estimate of the cost to
complete the remedial projects. No insurance or third party recovery was taken
into account in determining the Company's cost estimates or reserve, nor do the
Company's cost estimates or reserves reflect any discount for present value
purposes. The Company does not believe that any adverse changes to its estimates
would be material to the Company. The circumstances that could affect the
outcome range from new technologies, that are being developed every day that
reduce the Company's overall costs, to increased contamination levels that could
arise as the Company completes remediation which could increase the Company's
costs, neither of which the Company anticipates at this time.</FONT></P>
<HR color=#000080 noShade SIZE=5 width="90%">

<TABLE width=623>
    <TR vAlign=top>
    <TD width=26></TD>
    <TD width=583><FONT face="CG Times Regular"><STRONG>NOTE</STRONG>
      <STRONG>10<BR>INCOME TAXES</STRONG></FONT> </TD></TR></TABLE>
<P><FONT face="CG Times Regular">At December 31, 2001, we had temporary
differences and net operating loss carry forwards which gave rise to deferred
tax assets and liabilities at December 31, as follows (in thousands):</FONT></P>
<TABLE width=606>
    <TR vAlign=top>
    <TD width=255></TD>
    <TD width=17></TD>
    <TD align=middle width=90><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular"></FONT><FONT
face="CG Times Regular">2001</FONT></TD>
    <TD align=middle width=11><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle width=82></FONT><FONT
    face="CG Times Regular">2000</FONT></TD>
    <TD align=middle width=18><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle width=89></FONT><FONT
    face="CG Times Regular">1999</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=255></TD>
    <TD width=17></TD>
    <TD align=middle width=90>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=11></TD>
    <TD align=middle width=82>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=18></TD>
    <TD align=middle width=89>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD width=255><FONT face="CG Times Regular">Deferred tax assets:</FONT></TD>
    <TD width=17><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=90></TD>
    <TD align=right width=11></TD>
    <TD width=82></TD>
    <TD align=right width=18></TD>
    <TD align=right width=89></TD></TR>
  <TR vAlign=top>
    <TD width=255>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net operating losses</TD>
    <TD width=17></TD>
    <TD align=right
      width=90>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6,512&nbsp;</TD>
    <TD align=right width=11></TD>
    <TD align=right
    width=82>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4,550&nbsp;</TD>
    <TD align=right width=18></TD>
    <TD align=right
      width=89>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4,384&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width=255>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Environmental reserves</TD>
    <TD width=17></TD>
    <TD align=right width=90>967&nbsp;</TD>
    <TD align=right width=11></TD>
    <TD align=right width=82>820&nbsp;</TD>
    <TD align=right width=18></TD>
    <TD align=right width=89>505&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width=255>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Impairment of assets</TD>
    <TD width=17></TD>
    <TD align=right width=90>7,611&nbsp;</TD>
    <TD align=right width=11></TD>
    <TD align=right width=82>7,611&nbsp;</TD>
    <TD align=right width=18></TD>
    <TD align=right width=89>560&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width=255>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other</TD>
    <TD width=17></TD>
    <TD align=right width=90>175&nbsp;</TD>
    <TD align=right width=11></TD>
    <TD align=right width=82>98&nbsp;</TD>
    <TD align=right width=18></TD>
    <TD align=right width=89>189&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width=255>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Valuation allowance</TD>
    <TD width=17></TD>
    <TD align=right width=90>(8,956)</TD>
    <TD align=right width=11></TD>
    <TD align=right width=82>(7,356)</TD>
    <TD align=right width=18></TD>
    <TD align=right width=89>(5,116)</TD></TR>
  <TR vAlign=top>
    <TD width=255></TD>
    <TD width=17></TD>
    <TD align=right width=90>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=11></TD>
    <TD align=right width=82>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=18></TD>
    <TD align=right width=89>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD
      width=255>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred
      tax assets</TD>
    <TD width=17></TD>
    <TD align=right width=90>6,309&nbsp;</TD>
    <TD align=right width=11></TD>
    <TD align=right width=82>5,723&nbsp;</TD>
    <TD align=right width=18></TD>
    <TD align=right width=89>522&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width=255>Deferred tax liabilities:</TD>
    <TD width=17></TD>
    <TD align=right width=90></TD>
    <TD align=right width=11></TD>
    <TD align=right width=82></TD>
    <TD align=right width=18></TD>
    <TD align=right width=89></TD></TR>
  <TR vAlign=top>
    <TD width=255>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and
    amortization</TD>
    <TD width=17></TD>
    <TD align=right width=90>(6,124)</TD>
    <TD align=right width=11></TD>
    <TD align=right width=82>(5,723)</TD>
    <TD align=right width=18></TD>
    <TD align=right width=89>(522)</TD></TR>
  <TR vAlign=top>
    <TD width=255>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other</TD>
    <TD width=17></TD>
    <TD align=right width=90>(185)</TD>
    <TD align=right width=11></TD>
    <TD align=right width=82>--&nbsp;</TD>
    <TD align=right width=18></TD>
    <TD align=right width=89>--&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width=255></TD>
    <TD width=17></TD>
    <TD align=right width=90>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=11></TD>
    <TD align=right width=82>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=18></TD>
    <TD align=right width=89>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD width=255>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred tax liabilities</TD>
    <TD width=17></TD>
    <TD align=right width=90>(6,309)</TD>
    <TD align=right width=11></TD>
    <TD align=right width=82>(5,723)</TD>
    <TD align=right width=18></TD>
    <TD align=right width=89>(522)</TD></TR>
  <TR vAlign=top>
    <TD width=255>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net tax asset (liability)</TD>
    <TD width=17></TD>
    <TD align=right
      width=90>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;--&nbsp;</TD>
    <TD align=right width=11></TD>
    <TD align=right
      width=82>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;--&nbsp;</TD>
    <TD align=right width=18></TD>
    <TD align=right
      width=89>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;--&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width=255></TD>
    <TD width=17><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=90>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right width=11></TD>
    <TD align=right width=82>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right width=18></TD>
    <TD align=right width=89>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD></TR></TABLE>
<P><FONT face="CG Times Regular">A reconciliation between the expected tax
benefit using the federal statutory rate of 34% and the provision for income
taxes as reported in the accompanying consolidated statements of operations is
as follows (in thousands):</FONT></P>
<TABLE width=603>
    <TR vAlign=top>
    <TD width=256><FONT face="CG Times Regular"></FONT></TD>
    <TD width=13><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle width=94></FONT><FONT
    face="CG Times Regular">2001</FONT></TD>
    <TD align=middle width=10><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle width=81></FONT><FONT
    face="CG Times Regular">2000</FONT></TD>
    <TD align=middle width=16><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle width=89></FONT><FONT
    face="CG Times Regular">1999</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=256></TD>
    <TD width=13></TD>
    <TD align=middle width=94>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=10></TD>
    <TD align=middle width=81>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=16></TD>
    <TD align=middle width=89>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD width=256>Tax expense (benefit) at statutory rate</TD>
    <TD width=13></TD>
    <TD align=right
      width=94>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      (205)</TD>
    <TD align=right width=10></TD>
    <TD align=right width=81>$
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(189)</TD>
    <TD align=right width=16></TD>
    <TD align=right width=89><FONT face="CG Times Regular">$
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;534&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=256>Goodwill amortization</TD>
    <TD width=13></TD>
    <TD align=right width=94>440&nbsp;</TD>
    <TD align=right width=10></TD>
    <TD align=right width=81>241&nbsp;</TD>
    <TD align=right width=16></TD>
    <TD align=right width=89><FONT
  face="CG Times Regular">155&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=256>Other</TD>
    <TD width=13></TD>
    <TD align=right width=94>(651)</TD>
    <TD align=right width=10></TD>
    <TD align=right width=81>100&nbsp;</TD>
    <TD align=right width=16></TD>
    <TD align=right width=89><FONT
  face="CG Times Regular">65&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=256><FONT face="CG Times Regular">Deferred tax assets
      acquired</FONT></TD>
    <TD width=13></TD>
    <TD align=right width=94><FONT face="CG Times Regular">(1,184)</FONT></TD>
    <TD align=right width=10></TD>
    <TD align=right width=81><FONT face="CG Times Regular">(2,392)</FONT></TD>
    <TD align=right width=16></TD>
    <TD align=right width=89><FONT face="CG Times Regular">(855)</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=256><FONT face="CG Times Regular">Increase (decrease) in
      valuation allowance</FONT></TD>
    <TD width=13></TD>
    <TD align=right width=94><FONT
    face="CG Times Regular">1,600&nbsp;</FONT></TD>
    <TD align=right width=10></TD>
    <TD align=right width=81><FONT
    face="CG Times Regular">2,240&nbsp;</FONT></TD>
    <TD align=right width=16></TD>
    <TD align=right width=89><FONT
  face="CG Times Regular">101&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=256></TD>
    <TD width=13></TD>
    <TD align=right width=94>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=10></TD>
    <TD align=right width=81>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=16></TD>
    <TD align=right width=89>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD width=256><FONT face="CG Times Regular">Provision for income
      taxes</FONT></TD>
    <TD width=13></TD>
    <TD align=right width=94><FONT face="CG Times Regular">$
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;--&nbsp;</FONT></TD>
    <TD align=right width=10></TD>
    <TD align=right width=81><FONT face="CG Times Regular">$
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;--&nbsp;</FONT></TD>
    <TD align=right width=16></TD>
    <TD align=right width=89><FONT
      face="CG Times Regular">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      --&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=256></TD>
    <TD width=13></TD>
    <TD align=right width=94>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right width=10></TD>
    <TD align=right width=81>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right width=16></TD>
    <TD align=right width=89>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD></TR></TABLE>
<P align=center><FONT face="CG Times Regular">-62-</FONT></P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">We have recorded a valuation allowance to state
our deferred tax assets at estimated net realizable value due to the uncertainty
related to realization of these assets through future taxable income. Our
valuation allowance increased by approximately $1,600,000, $2,240,000 and
$101,000 for the years ended December 31, 2001, 2000 and 1999, respectively,
which represents the effect of changes in the temporary differences and net
operating losses (NOLs), as amended. Included in deferred tax assets is an
impairment of assets for $7,611,000 for 2001 and 2000, of which approximately
$7,051,000 is in conjunction with the Company's acquisition of DSSI in August
2000. This deferred tax asset is a result of an impairment charge related to
fixed assets and goodwill of approximately $24.5 million recorded by DSSI in
1997 prior to the Company's acquisition of DSSI. This write-off will not be
deductible for tax purposes until the assets are disposed. </FONT></P>
<P><FONT face="CG Times Regular">We have estimated net operating loss
carryforwards for federal income tax purposes of approximately $19,152,000 at
December 31, 2001. These net operating losses can be carried forward and applied
against future taxable income, if any, and expire in the years 2007 through
2021. However, as a result of various stock offerings and certain acquisitions,
the use of these NOLs will be limited under the provisions of Section 382 of the
Internal Revenue Code of 1986, as amended. Additionally, NOLs may be further
limited under the provisions of Treasury Regulation 1.1502-21 regarding Separate
Return Limitation Years.</FONT></P>
<HR color=#000080 noShade SIZE=5 width="90%">

<TABLE width=632>
    <TR vAlign=top>
    <TD width=20></TD>
    <TD width=598><FONT face="CG Times Regular"><STRONG>NOTE</STRONG>
      <STRONG>11<BR>CAPITAL STOCK, EMPLOYEE STOCK PLAN AND INCENTIVE
      COMPENSATION</STRONG></FONT> </TD></TR></TABLE>
<P><FONT face="CG Times Regular"><STRONG>Private Placement
Offering<BR></STRONG>On April 6, 2001, the Company commenced a private placement
offering of units (the "Offering") to accredited investors. Each unit is
comprised of one share of the Company's Common Stock and one Warrant to purchase
one share of Common Stock. The purchase price for each unit was $1.75, and the
exercise price of each Warrant included in the units is $1.75, subject to
adjustment under certain conditions. On June 15, 2001, the Company revised the
offering terms to comply with NASDAQ requirements. The maximum units were
reduced to 4.4 million from the original 5 million. The amendment also required
the Company to obtain shareholder approval prior to exercising the Warrants
issued as part of the units. Pursuant to the terms of the Offering, the Company
filed a preliminary proxy statement on October 19, 2001, for a Special Meeting
of Shareholders to obtain approval for the exercise of the Warrants, which is
currently under review by the SEC. The Offering was made pursuant to an
exemption from registration under Section 4(2) of the Securities Act of 1933, as
amended (the "Act"), and/or Rule 506 of Regulation D promulgated under the Act.
The Offering was made only to accredited investors through one or more
broker/dealer placement agents. At the completion of the offering, on July 30,
2001, 4,397,566 units were accepted for an aggregate purchase price of
$7,696,000. Expenses related to the offering subscriptions, were approximately
$814,000.</FONT></P>
<P><FONT face="CG Times Regular"></FONT><FONT
face="CG Times Regular"><STRONG>Employee Stock Purchase Plan<BR></STRONG>At the
Company's Annual Meeting of Stockholders ("Annual Meeting") as held on December
12, 1996, the stockholders approved the adoption of the Perma-Fix Environmental
Services, Inc. 1996 Employee Stock Purchase Plan. This plan provides eligible
employees of the Company and its subsidiaries, who wish to become stockholders,
an opportunity to purchase Common Stock of the Company through payroll
deductions. The maximum number of shares of Common Stock of the Company that may
be issued under the plan will be 500,000 shares. The plan provides that shares
will be purchased two (2) times per year and that the exercise price per share
shall be eighty-five percent (85%) of the market value of each such share of
Common Stock on the offering date on which such offer commences or on the
exercise date on which the offer period expires, whichever is lowest. The first
purchase period commenced July 1, 1997. The following table details the
resulting employee stock purchase totals.</FONT></P>
<P>&nbsp;</P>
<P align=center>-63-</P>
<P align=left>&nbsp;</P>
<TABLE width=586>
    <TR vAlign=top>
    <TD align=middle width=135></TD>
    <TD align=middle width=393><BR WP="BR1"><FONT
      face="CG Times Regular">Purchase Period</FONT></TD>
    <TD align=middle width=37></TD>
    <TD align=middle width=96>
      <P align=center><FONT face="CG Times Regular"><BR>Proceeds</FONT></P></TD>
    <TD align=middle width=21></TD>
    <TD align=middle width=120><FONT
      face="CG Times Regular">Shares<BR>Purchased</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left width=135></TD>
    <TD align=left width=393>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=37></TD>
    <TD align=right width=96>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=21></TD>
    <TD align=right width=120>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD align=left width=135></TD>
    <TD align=left width=393>July 1 - December 31, 1997</TD>
    <TD align=middle width=37></TD>
    <TD align=right
    width=96>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16,000&nbsp;</TD>
    <TD align=right width=21></TD>
    <TD align=right width=120><FONT
      face="CG Times Regular">8,276&nbsp;&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left width=135></TD>
    <TD align=left width=393>January 1 - June 30, 1998</TD>
    <TD align=middle width=37></TD>
    <TD align=right width=96>17,000&nbsp;</TD>
    <TD align=right width=21></TD>
    <TD align=right width=120><FONT
      face="CG Times Regular">10,732&nbsp;&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left width=135></TD>
    <TD align=left width=393>July 1 - December 31, 1998</TD>
    <TD align=middle width=37></TD>
    <TD align=right width=96>22,000&nbsp;</TD>
    <TD align=right width=21></TD>
    <TD align=right width=120><FONT
      face="CG Times Regular">17,517&nbsp;&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left width=135></TD>
    <TD align=left width=393>January 1 - June 30, 1999</TD>
    <TD align=middle width=37></TD>
    <TD align=right width=96>28,000&nbsp;</TD>
    <TD align=right width=21></TD>
    <TD align=right width=120><FONT
      face="CG Times Regular">21,818&nbsp;&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left width=135></TD>
    <TD align=left width=393>July 1 - December 31, 1999</TD>
    <TD align=middle width=37></TD>
    <TD align=right width=96>49,000&nbsp;</TD>
    <TD align=right width=21></TD>
    <TD align=right width=120><FONT
      face="CG Times Regular">48,204&nbsp;&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left width=135></TD>
    <TD align=left width=393><FONT face="CG Times Regular">January 1 - June
      30, 2000</FONT></TD>
    <TD align=middle width=37></TD>
    <TD align=right width=96><FONT
    face="CG Times Regular">54,000&nbsp;</FONT></TD>
    <TD align=right width=21></TD>
    <TD align=right width=120><FONT
      face="CG Times Regular">53,493&nbsp;&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left width=135></TD>
    <TD align=left width=393><FONT face="CG Times Regular">July 1 - December
      31, 2000</FONT></TD>
    <TD align=middle width=37></TD>
    <TD align=right width=96><FONT
    face="CG Times Regular">52,000&nbsp;</FONT></TD>
    <TD align=right width=21></TD>
    <TD align=right width=120><FONT
      face="CG Times Regular">46,632&nbsp;&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left width=135></TD>
    <TD align=left width=393><FONT face="CG Times Regular">January 1 - June
      30, 2001</FONT></TD>
    <TD align=middle width=37></TD>
    <TD align=right width=96><FONT
    face="CG Times Regular">48,000&nbsp;</FONT></TD>
    <TD align=right width=21></TD>
    <TD align=right width=120><FONT
      face="CG Times Regular">43,324&nbsp;&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left width=135></TD>
    <TD align=left width=393>July 1 - December 31, 2001</TD>
    <TD align=middle width=37></TD>
    <TD align=right width=96><FONT
    face="CG Times Regular">69,000&nbsp;</FONT></TD>
    <TD align=right width=21></TD>
    <TD align=right width=120><FONT
      face="CG Times Regular">33,814&nbsp;&nbsp;&nbsp;</FONT></TD></TR></TABLE>
<P><FONT face="CG Times Regular">The shares for the purchase period ending
December 31, 2001, were purchased in February 2002. </FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Employment Options<BR></STRONG>During
October 1997, Dr. Centofanti entered into a three (3) year Employment Agreement
with us which provided for, among other things, an annual salary of $110,000,
subject to annual inflationary increases and the issuance of Non-qualified Stock
Options ("Non-qualified Stock Options"). The Non-qualified Stock Options provide
Dr. Centofanti with the right to purchase an aggregate of 300,000 shares of
Common Stock</FONT> <FONT face="CG Times Regular">as follows: (i) after one year
100,000 shares of Common Stock at a price of $2.25 per share, (ii) after two
years 100,000 shares of Common Stock at a price of $2.50 per share, and (iii)
after three years 100,000 shares of Common Stock at a price of $3.00 per share.
The Non-qualified Stock Options expire in October 2007.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Stock Option Plans<BR></STRONG>On
December 16, 1991, we adopted a Performance Equity Plan (the "Plan"), under
which 500,000 shares of the Company's Common Stock are reserved for issuance,
pursuant to which officers, directors and key employees are eligible to receive
incentive or Non-qualified stock options. Incentive awards consist of stock
options, restricted stock awards, deferred stock awards, stock appreciation
rights and other stock-based awards. Incentive stock options granted under the
Plan are exercisable for a period of up to ten years from the date of grant at
an exercise price which is not less than the market price of the Common Stock on
the date of grant, except that the term of an incentive stock option granted
under the Plan to a stockholder owning more than 10% of the then-outstanding
shares of Common Stock may not exceed five years and the exercise price may not
be less than 110% of the market price of the Common Stock on the date of grant.
All grants of options under the Performance Equity Plan have been made at an
exercise price not less than the market price of the Common Stock at the date of
grant. On December 16, 2001, the Plan expired. No new options will be issued
under the Plan, but the options issued under the Plan prior to the expiration
date will remain in effect until their respective maturity dates.</FONT></P>
<P><FONT face="CG Times Regular">Effective September 13, 1993, we adopted a
Non-qualified Stock Option Plan pursuant to which officers and key employees can
receive long-term performance-based equity interests in the Company. The maximum
number of shares of Common Stock as to which stock options may be granted in any
year shall not exceed twelve percent (12%) of the number of common shares
outstanding on December 31 of the preceding year, less the number of shares
covered by the outstanding stock options issued under the Company's 1991
Performance Equity Plan as of December 31 of such preceding year. The option
grants under the plan are exercisable for a period of up to ten years from the
date of grant at an exercise price which is not less than the market price of
the Common Stock at date of grant.</FONT></P>
<P><FONT face="CG Times Regular">Effective December 12, 1993, we adopted the
1992 Outside Directors Stock Option Plan, pursuant to which options to purchase
an aggregate of 100,000 shares of Common Stock had been authorized. This plan
provides for the grant of options on an annual basis to each outside director of
the Company to purchase up to 5,000 shares of Common Stock. The options have an
exercise price equal to the closing trading price, or, if not available, the
fair market value of the Common Stock on the date of grant. The plan also
provides for the grant of additional options to purchase up to 10,000 shares of
Common Stock on the</FONT></P>
<P>&nbsp;</P>
<P align=center>-64-</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">foregoing terms to each outside director upon
election to the Board. During our annual meeting held on December 12, 1994, the
stockholders approved the Second Amendment to our 1992 Outside Directors Stock
Option Plan which, among other things, (i) increased from 100,000 to 250,000 the
number of shares reserved for issuance under the plan, and (ii) provides for
automatic issuance to each director of the Company, who is not an employee of
the Company, a certain number of shares of Common Stock in lieu of sixty-five
percent (65%) of the cash payment of the fee payable to each director for his
services as director. The Third Amendment to the Outside Directors Plan, as
approved at the December 1996 Annual Meeting, provided that each eligible
director shall receive, at such eligible director's option, either sixty-five
percent (65%) or one hundred percent (100%) of the fee payable to such director
for services rendered to the Company as a member of the Board in Common Stock.
In either case, the number of shares of Common Stock of the Company issuable to
the eligible director shall be determined by valuing the Common Stock of the
Company at seventy-five percent (75%) of its fair market value as defined by the
Outside Directors Plan. The Fourth Amendment to the Outside Directors Plan, was
approved at the May 1998 Annual Meeting and increased the number of authorized
shares from 250,000 to 500,000 reserved for issuance under the plan.</FONT></P>
<P><FONT face="CG Times Regular">We applied APB Opinion 25, "Accounting for
Stock Issued to Employees," and related interpretations in accounting for
options issued to employees and directors. Accordingly, no compensation cost has
been recognized for options granted to employees and directors at exercise
prices which equal or exceed the market price of the Company's Common Stock at
the date of grant. Should options be granted at exercise prices below market
prices, compensation cost is measured and recognized as the difference between
market price and exercise price at the date of grant.</FONT></P>
<P><FONT face="CG Times Regular">Statement of Financial Accounting Standards No.
123 ("FAS 123") "Accounting for Stock-Based Compensation," requires us to
provide pro forma information regarding net income and earnings per share as if
compensation cost for our employee and directors stock options had been
determined in accordance with the fair market value-based method prescribed in
FAS 123. We estimate the fair value of each stock option at the grant date by
using the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 2001, 2000 and 1999, respectively: no dividend
yield for all years; an expected life of ten years for all years; expected
volatility of 36.92%, 39.6%, and 40.0%; and risk-free interest rates of 4.60%,
6.08%, and 5.70%.</FONT></P>
<P><FONT face="CG Times Regular">Under the accounting provisions of FASB
Statement 123, our net income (loss) and net income (loss) per share would have
been reduced to the pro forma amounts indicated below (in thousands except for
per share amounts): </FONT></P>
<TABLE width=631>
    <TR vAlign=top>
    <TD width=298></TD>
    <TD width=4></TD>
    <TD align=middle width=87><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular"></FONT><FONT
face="CG Times Regular">2001</FONT></TD>
    <TD align=middle width=5><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle width=89></FONT><FONT
    face="CG Times Regular">2000</FONT></TD>
    <TD align=middle width=11><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle width=93></FONT><FONT
    face="CG Times Regular">1999</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=298></TD>
    <TD width=4><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=87>
      <HR align=right color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=5><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=89>
      <HR align=right color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=11><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=93>
      <HR align=right color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD width=298>Net income (loss) applicable to Common Stock</TD>
    <TD width=4></TD>
    <TD align=right width=87></TD>
    <TD align=right width=5></TD>
    <TD align=right width=89></TD>
    <TD align=right width=11></TD>
    <TD align=right width=93></TD></TR>
  <TR vAlign=top>
    <TD width=298>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As reported</TD>
    <TD width=4></TD>
    <TD align=right
      width=87>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(747)</TD>
    <TD align=right width=5></TD>
    <TD align=right
      width=89>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(762)</TD>
    <TD align=right width=11></TD>
    <TD align=right
      width=93>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,450&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width=298>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pro forma</TD>
    <TD width=4></TD>
    <TD align=right width=87>(1,703)</TD>
    <TD align=right width=5></TD>
    <TD align=right width=89>(1,186)</TD>
    <TD align=right width=11></TD>
    <TD align=right width=93>1,417&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width=298>Basic net income (loss) per share</TD>
    <TD width=4></TD>
    <TD align=right width=87></TD>
    <TD align=right width=5></TD>
    <TD align=right width=89></TD>
    <TD align=right width=11></TD>
    <TD align=right width=93></TD></TR>
  <TR vAlign=top>
    <TD width=298>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As reported</TD>
    <TD width=4></TD>
    <TD align=right
      width=87>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(.03)</TD>
    <TD align=right width=5></TD>
    <TD align=right
      width=89>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(.04)</TD>
    <TD align=right width=11></TD>
    <TD align=right
      width=93>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.08&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width=298>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pro forma</TD>
    <TD width=4></TD>
    <TD align=right width=87>(.06)</TD>
    <TD align=right width=5></TD>
    <TD align=right width=89>(.06)</TD>
    <TD align=right width=11></TD>
    <TD align=right width=93>.08&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width=298>Diluted net income (loss) per share</TD>
    <TD width=4></TD>
    <TD align=right width=87></TD>
    <TD align=right width=5></TD>
    <TD align=right width=89></TD>
    <TD align=right width=11></TD>
    <TD align=right width=93></TD></TR>
  <TR vAlign=top>
    <TD width=298>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As reported</TD>
    <TD width=4></TD>
    <TD align=right
      width=87>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(.03)</TD>
    <TD align=right width=5></TD>
    <TD align=right
      width=89>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(.04)</TD>
    <TD align=right width=11></TD>
    <TD align=right
      width=93>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.07&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD width=298>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pro forma</TD>
    <TD width=4></TD>
    <TD align=right width=87>(.06)</TD>
    <TD align=right width=5></TD>
    <TD align=right width=89>(.06)</TD>
    <TD align=right width=11></TD>
    <TD align=right width=93>.07&nbsp;</TD></TR></TABLE>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P align=center>-65-</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">A summary of the status of options under the
plans as of December 31, 2001, 2000 and 1999 and changes during the years ending
on those dates is presented below:</FONT></P>
<TABLE width=663>
    <TR vAlign=top>
    <TD width=235></TD>
    <TD align=middle width=136><FONT size=2>2001</FONT></TD>
    <TD align=middle width=4></TD>
    <TD align=middle width=124><FONT size=2>2000</FONT></TD>
    <TD align=middle width=6></TD>
    <TD align=middle width=120><FONT size=2>1999</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=235></TD>
    <TD align=middle width=136>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=4></TD>
    <TD align=middle width=124>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=6></TD>
    <TD align=middle width=120>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR></TABLE>
<TABLE width=665>
    <TR vAlign=top>
    <TD width=260></TD>
    <TD align=middle width=65><FONT size=2><BR WP="BR1"><BR WP="BR2"><BR
      WP="BR2">Shares</FONT></TD>
    <TD align=middle width=7><FONT face="CG Times Regular" size=-1></FONT></TD>
    <TD align=middle width=55><FONT
      size=2>Weighted<BR>Average<BR>Exercise<BR>Price</FONT></TD>
    <TD align=middle width=5></TD>
    <TD align=middle width=52><FONT size=2><BR WP="BR1"><BR><BR
      WP="BR2">Shares</FONT></TD>
    <TD align=middle width=7></TD>
    <TD align=middle width=61><FONT
      size=2>Weighted<BR>Average<BR>Exercise<BR>Price</FONT> </TD>
    <TD align=middle width=3></TD>
    <TD align=middle width=49><FONT size=2><BR WP="BR1"><BR WP="BR2"><BR
      WP="BR2">Shares</FONT></TD>
    <TD align=middle width=5></TD>
    <TD align=middle width=56><FONT
      size=2>Weighted<BR>Average<BR>Exercise<BR>Price</FONT> </TD></TR>
  <TR vAlign=top>
    <TD width=260></TD>
    <TD align=middle width=65>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=7></TD>
    <TD align=middle width=55>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=5></TD>
    <TD align=middle width=52>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=7></TD>
    <TD align=middle width=61>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=3></TD>
    <TD align=middle width=49>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=5></TD>
    <TD align=middle width=56>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD width=260><FONT face="CG Times Regular" size=-1><STRONG><U>Performance
      Equity Plan</U></STRONG>:</FONT></TD>
    <TD align=right width=65></TD>
    <TD align=right width=7></TD>
    <TD align=right width=55></TD>
    <TD align=right width=5></TD>
    <TD align=right width=52></TD>
    <TD align=right width=7></TD>
    <TD align=right width=61></TD>
    <TD align=right width=3></TD>
    <TD align=right width=49></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56></TD></TR>
  <TR vAlign=top>
    <TD width=260><FONT size=2>&nbsp;&nbsp;&nbsp;Balance at beginning of
      year</FONT></TD>
    <TD align=right width=65><FONT size=2>251,149&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=55><FONT size=2>$2.33&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=52><FONT size=2>260,149&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=61><FONT size=2>$2.28&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=49><FONT size=2>341,832&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT size=2>$2.23&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=260><FONT
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exercised</FONT></TD>
    <TD align=right width=65><FONT size=2>(10,000)</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=55><FONT size=2>1.00&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=52><FONT size=2>--&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=61><FONT size=2>--&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=49><FONT size=2>(23,000)</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT size=2>1.00&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=260><FONT
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Forfeited</FONT></TD>
    <TD align=right width=65><FONT size=2>(67,144)</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=55><FONT size=2>2.99&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=52><FONT size=2>(9,000)</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=61><FONT size=2>1.25&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=49><FONT size=2>(58,683)</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT size=2>2.44&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=260></TD>
    <TD align=right width=65>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=7></TD>
    <TD align=right width=55></TD>
    <TD align=right width=5></TD>
    <TD align=right width=52>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=7></TD>
    <TD align=right width=61></TD>
    <TD align=right width=3></TD>
    <TD align=right width=49>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=5></TD>
    <TD align=right width=56></TD></TR>
  <TR vAlign=top>
    <TD width=260><FONT size=2>&nbsp;&nbsp;&nbsp;Balance at end of
    year</FONT></TD>
    <TD align=right width=65><FONT size=2>174,005&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=55><FONT size=2>2.14&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=52><FONT size=2>251,149&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=61><FONT size=2>2.33&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=49><FONT size=2>260,149&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT size=2>2.28&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=260></TD>
    <TD align=right width=65>
      <HR color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right width=7></TD>
    <TD align=right width=55></TD>
    <TD align=right width=5></TD>
    <TD align=right width=52>
      <HR color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right width=7></TD>
    <TD align=right width=61></TD>
    <TD align=right width=3></TD>
    <TD align=right width=49>
      <HR color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right width=5></TD>
    <TD align=right width=56></TD></TR>
  <TR vAlign=top>
    <TD width=260><FONT size=2>&nbsp;&nbsp;&nbsp;Options exercisable at year
      end</FONT></TD>
    <TD align=right width=65><FONT size=2>156,805&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=55><FONT size=2>2.24&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=52><FONT size=2>213,748&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=61><FONT size=2>2.53&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=49><FONT size=2>195,749&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT size=2>2.66&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=260></TD>
    <TD align=right width=65></TD>
    <TD align=right width=7></TD>
    <TD align=right width=55></TD>
    <TD align=right width=5></TD>
    <TD align=right width=52></TD>
    <TD align=right width=7></TD>
    <TD align=right width=61></TD>
    <TD align=right width=3></TD>
    <TD align=right width=49></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56></TD></TR>
  <TR vAlign=top>
    <TD width=260><FONT face="CG Times Regular"
      size=-1><STRONG><U>Non-qualified Stock Option Plan:</U></STRONG></FONT></TD>
    <TD align=right width=65></TD>
    <TD align=right width=7></TD>
    <TD align=right width=55></TD>
    <TD align=right width=5></TD>
    <TD align=right width=52></TD>
    <TD align=right width=7></TD>
    <TD align=right width=61></TD>
    <TD align=right width=3></TD>
    <TD align=right width=49></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56></TD></TR>
  <TR vAlign=top>
    <TD width=260><FONT size=2>&nbsp;&nbsp;&nbsp;Balance at beginning of
      year</FONT></TD>
    <TD align=right width=65><FONT size=2>1,319,800&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=55><FONT size=2>$1.33&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=52><FONT size=2>837,800&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=61><FONT size=2>$1.37&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=49><FONT size=2>885,300&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT size=2>$1.37&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=260><FONT
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Granted</FONT></TD>
    <TD align=right width=65><FONT size=2>918,000&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=55><FONT size=2>1.75&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=52><FONT size=2>510,000&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=61><FONT size=2>1.27&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=49><FONT size=2>--&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT size=2>--&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=260><FONT
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exercised</FONT></TD>
    <TD align=right width=65><FONT size=2>--&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=55><FONT size=2>--&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=52><FONT size=2>--&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=61><FONT size=2>--&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=49><FONT size=2>(18,300)</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT
    size=2>&nbsp;&nbsp;1.17&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=260><FONT
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Forfeited</FONT></TD>
    <TD align=right width=65><FONT size=2>--&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=55><FONT size=2>--&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=52><FONT size=2>(28,000)</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=61><FONT size=2>1.26&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=49><FONT size=2>(29,200)</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT size=2>1.29&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=260></TD>
    <TD align=right width=65>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=7></TD>
    <TD align=right width=55></TD>
    <TD align=right width=5></TD>
    <TD align=right width=52>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=7></TD>
    <TD align=right width=61></TD>
    <TD align=right width=3></TD>
    <TD align=right width=49>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=5></TD>
    <TD align=right width=56></TD></TR>
  <TR vAlign=top>
    <TD width=260><FONT size=2>&nbsp;&nbsp;&nbsp;Balance at end of
    year</FONT></TD>
    <TD align=right width=65><FONT size=2>2,237,800</FONT> </TD>
    <TD align=right width=7></TD>
    <TD align=right width=55><FONT size=2>1.50&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=52><FONT size=2>1,319,800</FONT> </TD>
    <TD align=right width=7></TD>
    <TD align=right width=61><FONT size=2>1.33&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=49><FONT size=2>837,800</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT size=2>1.37&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=260></TD>
    <TD align=right width=65>
      <HR align=right color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right width=7></TD>
    <TD align=right width=55><FONT size=2>&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=52>
      <HR align=right color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right width=7></TD>
    <TD align=right width=61></TD>
    <TD align=right width=3></TD>
    <TD align=right width=49>
      <HR align=right color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT size=2>&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=260><FONT size=2>&nbsp;&nbsp;&nbsp;Options exercisable at year
      end</FONT></TD>
    <TD align=right width=65><FONT size=2>788,900&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=55><FONT size=2>1.37</FONT>&nbsp;</TD>
    <TD align=right width=5></TD>
    <TD align=right width=52><FONT size=2>542,000&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=61><FONT size=2>1.44&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=49><FONT size=2>376,300&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT size=2>1.47&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=260></TD>
    <TD align=right width=65></TD>
    <TD align=right width=7></TD>
    <TD align=right width=55></TD>
    <TD align=right width=5></TD>
    <TD align=right width=52></TD>
    <TD align=right width=7></TD>
    <TD align=right width=61></TD>
    <TD align=right width=3></TD>
    <TD align=right width=49></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56></TD></TR>
  <TR vAlign=top>
    <TD width=260><FONT size=2>&nbsp;&nbsp;&nbsp;Weighted average fair value
      of<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;options
      granted during the
      year<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;at exercise
      prices which
      equal<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;market
      price of stock at
      date&nbsp;<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
      grant</FONT></TD>
    <TD align=right width=65><FONT
    size=2><BR><BR><BR><BR>918,000&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=55><FONT
      size=2><BR><BR><BR><BR>.99&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=52><FONT
    size=2><BR><BR><BR><BR>510,000&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=61><FONT
      size=2><BR><BR><BR><BR>.79&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=49><FONT size=2><BR><BR><BR><BR>--&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT
size=2><BR><BR><BR><BR>--&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=260></TD>
    <TD align=right width=65></TD>
    <TD align=right width=7></TD>
    <TD align=right width=55></TD>
    <TD align=right width=5></TD>
    <TD align=right width=52></TD>
    <TD align=right width=7></TD>
    <TD align=right width=61></TD>
    <TD align=right width=3></TD>
    <TD align=right width=49></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56></TD></TR>
  <TR vAlign=top>
    <TD width=260><FONT face="CG Times Regular" size=-1><STRONG><U>Outside
      Directors Stock Option Plan:</U></STRONG></FONT></TD>
    <TD align=right width=65></TD>
    <TD align=right width=7></TD>
    <TD align=right width=55></TD>
    <TD align=right width=5></TD>
    <TD align=right width=52></TD>
    <TD align=right width=7></TD>
    <TD align=right width=61></TD>
    <TD align=right width=3></TD>
    <TD align=right width=49></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56></TD></TR>
  <TR vAlign=top>
    <TD width=260><FONT size=2>&nbsp;&nbsp;&nbsp;Balance at beginning of
      year</FONT></TD>
    <TD align=right width=65><FONT size=2>225,000&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=55><FONT size=2>$2.31&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=52><FONT size=2>210,000&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=61><FONT size=2>$2.36&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=49><FONT size=2>175,000&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT size=2>$2.58&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=260><FONT
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Granted</FONT></TD>
    <TD align=right width=65><FONT size=2>30,000&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=55><FONT size=2>2.59&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=52><FONT size=2>15,000&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=61><FONT size=2>1.69&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=49><FONT size=2>35,000&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT size=2>1.24&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=260><FONT
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=65>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=7></TD>
    <TD align=right width=55></TD>
    <TD align=right width=5></TD>
    <TD align=right width=52>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=7></TD>
    <TD align=right width=61></TD>
    <TD align=right width=3></TD>
    <TD align=right width=49>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=5></TD>
    <TD align=right width=56></TD></TR>
  <TR vAlign=top>
    <TD width=260><FONT
      size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Balance at
      end of year</FONT></TD>
    <TD align=right width=65><FONT size=2>255,000&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=55><FONT size=2>2.34&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=52><FONT size=2>225,000&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=61><FONT size=2>2.31&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=49><FONT size=2>210,000&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT size=2>2.36&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=260></TD>
    <TD align=right width=65>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right width=7></TD>
    <TD align=right width=55></TD>
    <TD align=right width=5></TD>
    <TD align=right width=52>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right width=7></TD>
    <TD align=right width=61></TD>
    <TD align=right width=3></TD>
    <TD align=right width=49>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right width=5></TD>
    <TD align=right width=56></TD></TR>
  <TR vAlign=top>
    <TD width=260><FONT size=2>&nbsp;&nbsp;&nbsp;Options exercisable at year
      end</FONT></TD>
    <TD align=right width=65><FONT size=2>240,000&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=55><FONT size=2>2.32&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=52><FONT size=2>225,000&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=61><FONT size=2>2.31&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=49><FONT size=2>210,000&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT size=2>2.36&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=260></TD>
    <TD align=right width=65></TD>
    <TD align=right width=7></TD>
    <TD align=right width=55></TD>
    <TD align=right width=5></TD>
    <TD align=right width=52></TD>
    <TD align=right width=7></TD>
    <TD align=right width=61></TD>
    <TD align=right width=3></TD>
    <TD align=right width=49></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56></TD></TR>
  <TR vAlign=top>
    <TD width=260><FONT size=2>&nbsp;&nbsp;&nbsp;Weighted average fair value
      of<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;options
      granted during the year
      at<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;exercise
      prices which
      equal<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;market
      price of stock at
      date<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
      grant</FONT></TD>
    <TD align=right width=65><FONT
    size=2><BR><BR><BR><BR>30,000&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=55><FONT
      size=2><BR><BR><BR><BR>1.47&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=52><FONT
    size=2><BR><BR><BR><BR>15,000&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=61><FONT
      size=2><BR><BR><BR><BR>1.06&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=49><FONT
    size=2><BR><BR><BR><BR>35,000&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT
      size=2><BR><BR><BR><BR>.74&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=260></TD>
    <TD align=right width=65></TD>
    <TD align=right width=7></TD>
    <TD align=right width=55></TD>
    <TD align=right width=5></TD>
    <TD align=right width=52></TD>
    <TD align=right width=7></TD>
    <TD align=right width=61></TD>
    <TD align=right width=3></TD>
    <TD align=right width=49></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56></TD></TR></TABLE>
<P>&nbsp;</P>&nbsp;
<P>&nbsp;</P>
<P align=center>-66-</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular"></FONT><FONT face="CG Times Regular">The
following table summarizes information about options under the plan outstanding
at December 31, 2001:</FONT><FONT face="CG Times Regular" size=-1></FONT></P>
<TABLE width=653>
    <TR vAlign=top>
    <TD width=166></TD>
    <TD align=middle width=281><FONT face="CG Times Regular"
      size=-1></FONT><FONT face="CG Times Regular" size=-1>Options
      Outstanding</FONT></TD>
    <TD align=middle width=6><FONT face="CG Times Regular" size=-1></FONT></TD>
    <TD align=middle width=174></FONT><FONT face="CG Times Regular"
      size=-1>Options Exercisable</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=166></TD>
    <TD align=middle width=281>
      <HR align=right color=#000080 noShade SIZE=3 width="90%">
    </TD>
    <TD align=middle width=6></TD>
    <TD align=middle width=174>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR></TABLE>
<TABLE width=654>
    <TR vAlign=top>
    <TD width=190><FONT size=2><BR WP="BR1"><BR WP="BR2"><BR
      WP="BR1">Description and Range<BR>of Exercise Prices</FONT></TD>
    <TD align=middle width=12></TD>
    <TD align=middle width=80><FONT size=2><BR
      WP="BR1"><BR>Number<BR>Outstanding at<BR>Dec. 31, 2001</FONT></TD>
    <TD align=middle width=6></TD>
    <TD align=middle width=71><FONT
      size=2>Weighted<BR>Average<BR>Remaining<BR>Contractual<BR>Life</FONT></TD>
    <TD align=middle width=4></TD>
    <TD align=middle width=62><FONT
      size=2><BR>Weighted<BR>Average<BR>Exercise<BR>Price</FONT></TD>
    <TD align=middle width=8></TD>
    <TD align=middle width=81><FONT size=2><BR><BR
      WP="BR1">Number<BR>Exercisable at<BR>Dec. 31, 2001</FONT></TD>
    <TD align=middle width=6></TD>
    <TD align=middle width=66><FONT
      size=2><BR>Weighted<BR>Average<BR>Exercise<BR>Price</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=190>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=12></TD>
    <TD align=middle width=80>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=6></TD>
    <TD align=middle width=71>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=4></TD>
    <TD align=middle width=62>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=8></TD>
    <TD align=middle width=81>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=6></TD>
    <TD align=middle width=66>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR></TABLE>
<TABLE width="100%">
    <TR vAlign=top>
    <TD><FONT size=2><B>Performance Equity
Plan:</B></FONT></TD></TR></TABLE>
<TABLE width=653>
    <TR vAlign=top>
    <TD width=192><FONT face="CG Times Regular" size=-1>1992 Awards
      ($3.02)</FONT> </TD>
    <TD width=10><FONT face="CG Times Regular" size=-1></FONT></TD>
    <TD align=right width=80><FONT face="CG Times Regular"
      size=-1>79,505&nbsp;</FONT></TD>
    <TD align=right width=7><FONT face="CG Times Regular" size=-1></FONT></TD>
    <TD align=right width=72><FONT face="CG Times Regular" size=-1>.2
      years&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=4><FONT face="CG Times Regular" size=-1></FONT></TD>
    <TD align=right width=61><FONT face="CG Times Regular" size=-1>$
      3.02&nbsp;&nbsp; </FONT></TD>
    <TD align=right width=5><FONT face="CG Times Regular" size=-1></FONT></TD>
    <TD align=right width=79><FONT face="CG Times Regular"
      size=-1>79,505&nbsp;</FONT></TD>
    <TD align=right width=8><FONT face="CG Times Regular" size=-1></FONT></TD>
    <TD align=right width=67><FONT face="CG Times Regular" size=-1>$
      3.02&nbsp;&nbsp; </FONT></TD></TR>
  <TR vAlign=top>
    <TD width=192><FONT size=2>1993 Awards ($5.25)</FONT></TD>
    <TD width=10></TD>
    <TD align=right width=80><FONT size=2>6,500&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=72><FONT size=2>1.8 years&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=61><FONT size=2>5.25&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=79><FONT size=2>6,500&nbsp;</FONT></TD>
    <TD align=right width=8></TD>
    <TD align=right width=67><FONT size=2>5.25&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=192><FONT size=2>1996 Awards ($1.00)</FONT></TD>
    <TD width=10></TD>
    <TD align=right width=80><FONT size=2>45,000&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=72><FONT size=2>4.4 years&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=61><FONT size=2>1.00&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=79><FONT size=2>45,000&nbsp;</FONT></TD>
    <TD align=right width=8></TD>
    <TD align=right width=67><FONT size=2>1.00&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=192><FONT size=2>1998 Awards ($1.25)</FONT></TD>
    <TD width=10></TD>
    <TD align=right width=80><FONT size=2>43,000&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=72><FONT size=2>6.8 years&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=61><FONT size=2>1.25&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=79><FONT size=2>25,800&nbsp;</FONT></TD>
    <TD align=right width=8></TD>
    <TD align=right width=67><FONT size=2>1.25&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=192></TD>
    <TD width=10></TD>
    <TD align=right width=80>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=7></TD>
    <TD align=right width=72></TD>
    <TD align=right width=4></TD>
    <TD align=right width=61></TD>
    <TD align=right width=5></TD>
    <TD align=right width=79>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=8></TD>
    <TD align=right width=67></TD></TR>
  <TR vAlign=top>
    <TD width=192></TD>
    <TD width=10></TD>
    <TD align=right width=80><FONT size=2>174,005&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=72><FONT size=2>4.4 years&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=61><FONT size=2>2.14&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=79><FONT size=2>156,805&nbsp;</FONT></TD>
    <TD align=right width=8></TD>
    <TD align=right width=67><FONT size=2>2.24&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=192></TD>
    <TD width=10></TD>
    <TD align=right width=80>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right width=7></TD>
    <TD align=right width=72></TD>
    <TD align=right width=4></TD>
    <TD align=right width=61></TD>
    <TD align=right width=5></TD>
    <TD align=right width=79>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right width=8></TD>
    <TD align=right width=67></TD></TR>
  <TR vAlign=top>
    <TD width=192><FONT size=2><B>Non-qualified Stock Option
    Plan:</B></FONT></TD>
    <TD width=10></TD>
    <TD align=right width=80></TD>
    <TD align=right width=7></TD>
    <TD align=right width=72></TD>
    <TD align=right width=4></TD>
    <TD align=right width=61></TD>
    <TD align=right width=5></TD>
    <TD align=right width=79></TD>
    <TD align=right width=8></TD>
    <TD align=right width=67></TD></TR>
  <TR vAlign=top>
    <TD width=192><FONT size=2>1994 Awards ($4.75)</FONT></TD>
    <TD width=10></TD>
    <TD align=right width=80><FONT size=2>300&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=72><FONT size=2>2.2 years&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=61><FONT size=2>$4.75&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=79><FONT size=2>300&nbsp;</FONT></TD>
    <TD align=right width=8></TD>
    <TD align=right width=67><FONT size=2>$4.75&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=192><FONT size=2>1995 Awards ($2.88)</FONT></TD>
    <TD width=10></TD>
    <TD align=right width=80><FONT size=2>85,000&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=72><FONT size=2>3.0 years</FONT>&nbsp;&nbsp;</TD>
    <TD align=right width=4></TD>
    <TD align=right width=61><FONT size=2>2.88&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=79><FONT size=2>85,000&nbsp;</FONT></TD>
    <TD align=right width=8></TD>
    <TD align=right width=67><FONT size=2>2.88&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=192><FONT size=2>1996 Awards ($1.00)</FONT></TD>
    <TD width=10></TD>
    <TD align=right width=80><FONT size=2>270,000&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=72><FONT size=2>4.4 years</FONT>&nbsp;&nbsp;</TD>
    <TD align=right width=4></TD>
    <TD align=right width=61><FONT size=2>1.00&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=79><FONT size=2>270,000&nbsp;</FONT></TD>
    <TD align=right width=8></TD>
    <TD align=right width=67><FONT size=2>1.00&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=192><FONT size=2>1997 Awards ($1.375)</FONT></TD>
    <TD width=10></TD>
    <TD align=right width=80><FONT size=2>244,500&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=72><FONT size=2>5.3 years&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=61><FONT size=2>1.38&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=79><FONT size=2>195,600&nbsp;</FONT></TD>
    <TD align=right width=8></TD>
    <TD align=right width=67><FONT size=2>1.38&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=192><FONT size=2>1998 Awards ($1.25)</FONT></TD>
    <TD width=10></TD>
    <TD align=right width=80><FONT size=2>235,000&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=72><FONT size=2>6.8 years&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=61><FONT size=2>1.25&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=79><FONT size=2>141,000&nbsp;</FONT></TD>
    <TD align=right width=8></TD>
    <TD align=right width=67><FONT size=2>1.25&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=192><FONT size=2>2000 Awards ($1.25-$1.50)</FONT></TD>
    <TD width=10></TD>
    <TD align=right width=80><FONT size=2>485,000&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=72><FONT size=2>8.3 years&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=61><FONT size=2>1.26&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=79><FONT size=2>97,000&nbsp;</FONT></TD>
    <TD align=right width=8></TD>
    <TD align=right width=67><FONT size=2>1.26&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=192><FONT size=2>2001 Awards ($1.75)</FONT></TD>
    <TD width=10></TD>
    <TD align=right width=80><FONT size=2>918,000&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=72><FONT size=2>9.3 years&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=61><FONT size=2>1.75&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=79><FONT size=2>--&nbsp;</FONT></TD>
    <TD align=right width=8></TD>
    <TD align=right width=67><FONT size=2>--&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=192></TD>
    <TD width=10></TD>
    <TD align=right width=80>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=7></TD>
    <TD align=right width=72></TD>
    <TD align=right width=4></TD>
    <TD align=right width=61></TD>
    <TD align=right width=5></TD>
    <TD align=right width=79>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=8></TD>
    <TD align=right width=67></TD></TR>
  <TR vAlign=top>
    <TD width=192></TD>
    <TD width=10></TD>
    <TD align=right width=80><FONT size=2>2,237,800&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=72><FONT size=2>7.8 years&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=61><FONT size=2>1.50&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=79><FONT size=2>788,900&nbsp;</FONT></TD>
    <TD align=right width=8></TD>
    <TD align=right width=67><FONT size=2>1.37&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=192></TD>
    <TD width=10></TD>
    <TD align=right width=80>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right width=7></TD>
    <TD align=right width=72></TD>
    <TD align=right width=4></TD>
    <TD align=right width=61></TD>
    <TD align=right width=5></TD>
    <TD align=right width=79>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right width=8></TD>
    <TD align=right width=67></TD></TR>
  <TR vAlign=top>
    <TD colSpan=3 width=282><FONT size=2><B>Outside Directors Stock Option
      Plan:</B></FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=72></TD>
    <TD align=right width=4></TD>
    <TD align=right width=61></TD>
    <TD align=right width=5></TD>
    <TD align=right width=79></TD>
    <TD align=right width=8></TD>
    <TD align=right width=67></TD></TR>
  <TR vAlign=top>
    <TD width=192><FONT size=2>1993 Awards ($3.02)</FONT></TD>
    <TD width=10></TD>
    <TD align=right width=80><FONT size=2>45,000&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=72><FONT size=2>.5 years&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=61><FONT size=2>$&nbsp;3.02&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=79><FONT size=2>45,000&nbsp;</FONT></TD>
    <TD align=right width=8></TD>
    <TD align=right width=67><FONT size=2>$&nbsp;3.02&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=192><FONT size=2>1994 Awards ($3.00-$3.22)</FONT></TD>
    <TD width=10></TD>
    <TD align=right width=80><FONT size=2>45,000&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=72><FONT size=2>2.8 years&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=61><FONT size=2>3.04&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=79><FONT size=2>45,000&nbsp;</FONT></TD>
    <TD align=right width=8></TD>
    <TD align=right width=67><FONT size=2>3.04&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=192><FONT size=2>1995 Awards ($3.25)</FONT></TD>
    <TD width=10></TD>
    <TD align=right width=80><FONT size=2>20,000&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=72><FONT size=2>3.0 years&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=61><FONT size=2>3.25 &nbsp;&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=79><FONT size=2>20,000&nbsp;</FONT></TD>
    <TD align=right width=8></TD>
    <TD align=right width=67><FONT size=2>3.25&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=192><FONT size=2>1996 Awards ($1.75)</FONT></TD>
    <TD width=10></TD>
    <TD align=right width=80><FONT size=2>35,000&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=72><FONT size=2>4.9 years&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=61><FONT size=2>1.75&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=79><FONT size=2>35,000&nbsp;</FONT></TD>
    <TD align=right width=8></TD>
    <TD align=right width=67><FONT size=2>1.75&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=192><FONT size=2>1997 Awards ($2.125)</FONT></TD>
    <TD width=10></TD>
    <TD align=right width=80><FONT size=2>15,000&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=72><FONT size=2>5.9 years&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=61><FONT size=2>2.13&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=79><FONT size=2>15,000&nbsp;</FONT></TD>
    <TD align=right width=8></TD>
    <TD align=right width=67><FONT size=2>2.13&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=192><FONT size=2>1998 Awards ($1.75)</FONT></TD>
    <TD width=10></TD>
    <TD align=right width=80><FONT size=2>15,000&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=72><FONT size=2>6.4 years&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=61><FONT size=2>1.38&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=79><FONT size=2>15,000&nbsp;</FONT></TD>
    <TD align=right width=8></TD>
    <TD align=right width=67><FONT size=2>1.38&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=192><FONT size=2>1999 Awards ($1.2188-$1.25)</FONT></TD>
    <TD width=10></TD>
    <TD align=right width=80><FONT size=2>35,000&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=72><FONT size=2>7.7 years&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=61><FONT size=2>1.24&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=79><FONT size=2>35,000&nbsp;</FONT></TD>
    <TD align=right width=8></TD>
    <TD align=right width=67><FONT size=2>1.24&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=192><FONT size=2>2000 Awards ($1.688)</FONT></TD>
    <TD width=10></TD>
    <TD align=right width=80><FONT size=2>15,000&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=72><FONT size=2>9.0 years&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=61><FONT size=2>1.69&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=79><FONT size=2>15,000&nbsp;</FONT></TD>
    <TD align=right width=8></TD>
    <TD align=right width=67><FONT size=2>1.69&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=192><FONT size=2>2001 Awards ($2.43-$2.75)</FONT></TD>
    <TD width=10></TD>
    <TD align=right width=80><FONT size=2>30,000&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=72><FONT size=2>9.6 years&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=61><FONT size=2>2.59&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=79><FONT size=2>15,000&nbsp;</FONT></TD>
    <TD align=right width=8></TD>
    <TD align=right width=67><FONT size=2>2.43&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=192></TD>
    <TD width=10></TD>
    <TD align=right width=80>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=7></TD>
    <TD align=right width=72></TD>
    <TD align=right width=4></TD>
    <TD align=right width=61></TD>
    <TD align=right width=5></TD>
    <TD align=right width=79>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right width=8></TD>
    <TD align=right width=67></TD></TR>
  <TR vAlign=top>
    <TD width=192></TD>
    <TD width=10></TD>
    <TD align=right width=80><FONT size=2>255,000&nbsp;</FONT></TD>
    <TD align=right width=7></TD>
    <TD align=right width=72><FONT size=2>5.5 years&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=4></TD>
    <TD align=right width=61><FONT size=2>2.34&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=79><FONT size=2>240,000&nbsp;</FONT></TD>
    <TD align=right width=8></TD>
    <TD align=right width=67><FONT size=2>2.32&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=192></TD>
    <TD width=10></TD>
    <TD align=right width=80>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right width=7></TD>
    <TD align=right width=72></TD>
    <TD align=right width=4></TD>
    <TD align=right width=61></TD>
    <TD align=right width=5></TD>
    <TD align=right width=79>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=right width=8></TD>
    <TD align=right width=67></TD></TR></TABLE>
<P><FONT face="CG Times Regular"><STRONG></STRONG></FONT><FONT
face="CG Times Regular"><STRONG>Warrants<BR></STRONG>We have issued various
Warrants pursuant to acquisitions, private placements, debt and debt conversion
and to facilitate certain financing arrangements. The Warrants principally are
for a term of three to five years and entitle the holder to purchase one share
of Common Stock for each warrant at the stated exercise price.</FONT></P>
<P><FONT face="CG Times Regular">In connection with the Preferred Stock
issuances as discussed fully in Note 5, we issued Warrants during 1997 for the
purchase of 1,591,250 shares of Common Stock of which 1,157,750 shares are
currently outstanding. During 1999 the Company entered into a consulting
agreement for certain investor relations services whereby we agreed to pay a
consulting fee and agreed to issue two Common Stock purchase Warrants for an
aggregate of up to 480,000 shares of Common Stock (which were issued in fiscal
2000), with 240,000 exercisable at an exercise price equal to $1.20 per share
and 240,000 at $1.40 per share. During 2000 the Company entered into a
consulting agreement for certain investment banking services whereby we agreed
to pay a consulting fee and initially agreed to issue Warrants in the aggregate
amount of</FONT> <FONT face="CG Times Regular">up to 150,000 shares of Common
Stock exercisable at an exercise price equal to $1.44 per share. During 2000 the
Company entered into a financial advisory and consulting agreement to assist in
preparing for a private placement offering of our Common Stock. Under the terms
of the consulting agreement the Company issued two Warrants consisting of one
Warrant in the amount of 250,000 shares of Common Stock for a period of five (5)
years at an exercise price of $1.50, and one Warrant in the amount of 360,000
shares of Common Stock for a period of five (5) years at an exercise price of
$1.75. During 2001 the Company entered into a consulting agreement, and pursuant
to the terms of such agreement the Company issued a Warrant for the exercise of
20,000 shares of Common Stock for a period of five (5) years at an
exercise</FONT></P>
<P>&nbsp;</P>
<P align=center>-67-</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">price of $2.35 per share. Upon completion of a
new term loan and revolving credit line agreement (see note 6) Warrants were
issued to certain investment banking firms and intermediaries for an aggregate
amount of up to 1,283,332 shares of Common Stock exercisable at an exercise
price equal to $1.44 per share. During 2000 and 2001 pursuant to financing in
relation to the DSSI acquisition<STRONG>, </STRONG>we issued seven (7) Warrants
for an aggregate amount of up to 1,020,000 shares of Common Stock to Capital
Bank, with 150,000 shares exercisable at an exercise price equal to $1.50 per
share, 150,000 shares exercisable at an exercise price equal to $1.63 per share,
300,000 shares exercisable at an exercise price equal to $1.88 per share,
105,000 shares exercisable at an exercise price equal to $1.42 per share,
105,000 shares exercisable at an exercise price equal to $1.97 per share,
105,000 shares exercisable at an exercise price equal to $1.94 per share and
105,000 shares exercisable at an exercise price equal to $1.81 per share. During
2001 the Company issued, as part of completing the interim financing with BHC,
warrants for an aggregate amount of 1,167,141 shares of Common Stock. One
warrant was issued to BHC as partial payment for closing fees for the sub debt
financing in the amount of 817,142 shares of Common Stock for a period of five
(5) years and exercisable at an exercise price of $1.46 per share, and other
Warrants issued to certain investment banking firms and intermediaries in the
aggregate amount of 349,999 shares of Common Stock for a period of five (5)
years at an exercise price of $1.44 per share. Pursuant to an agreement with
Capital Bank in July 2001 for the satisfaction of all amounts due under the $3
million loan agreement with Capital Bank, the Company issued two Warrants for an
aggregate amount of 2,464,405 shares of Common Stock for a period of five (5)
years at an exercise price of $1.75 per share. During 2001 the Company issued
Warrants to investors as part of a private placement offering ("Offering") and
to appointed placement agents for assistance in completing the Offering, for an
aggregate of 4,505,566 shares of Common Stock for a period of five (5) years at
an exercise price of $1.75 per share. The Warrants under the Offering are not
exercisable until the Company obtains Shareholder approval for the exercise of
the Warrants at a Special Stockholders' meeting to be held. On July 31, 2001,
pursuant to closing the long-term financing with AMI and BEC, the Company issued
Warrants in the aggregate amount of 1,609,858 shares of Common Stock consisting
of two Warrants to AMI and BEC for an aggregate amount of 1,281,731 shares of
Common Stock for a period of seven (7) years and exercisable at an exercise
price of $1.50 per share, and Warrants issued to certain investment banking
firms and intermediaries in the aggregate amount of 328,127 shares of Common
Stock for a period of five (5) years at an exercise price of $1.44 per share.
The Black-Scholes valuation of all warrants issued during 2001 and 2000 was
approximately $3,784,000 and $1,160,000, respectively, using the following
weighted average assumptions: no dividend yield, an expected life ranging from
three (3) to seven (7) years, expected volatility ranging from 25.0% to 53.5%
and a risk-free interest rate of 4.25% to 4.99%. During 2001, a total of
1,831,875 Warrants were exercised for proceeds in the amount of $3,641,000 and
830,625 Warrants expired. During 2000, a total of 1,161,200 Warrants were
exercised for proceeds in the amount of $1,313,000 and 113,513 Warrants
expired.</FONT></P>
<P><FONT face="CG Times Regular">The following details the Warrants currently
outstanding as of December 31, 2001:</FONT></P>
<TABLE width=653>
    <TR vAlign=top>
    <TD width=278><BR WP="BR1"><FONT
      face="CG Times Regular"></FONT>Warrant<BR><FONT
      face="CG Times Regular">Series</FONT></TD>
    <TD width=3><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle width=103><FONT face="CG Times Regular">Number
      of<BR>Underlying Shares</FONT> </TD>
    <TD align=middle width=7><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle width=117><BR WP="BR1"><FONT
      face="CG Times Regular"></FONT>Exercise<BR><FONT
      face="CG Times Regular">Price</FONT></TD>
    <TD align=middle width=7><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle width=94><BR WP="BR2"><FONT
      face="CG Times Regular"></FONT>Expiration<BR><FONT
      face="CG Times Regular">Date</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=278>
      <HR align=left color=#000080 noShade SIZE=3 width="25%">
    </TD>
    <TD width=3></TD>
    <TD align=middle width=103>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=7></TD>
    <TD align=middle width=117>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=7></TD>
    <TD align=middle width=94>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD width=278>&nbsp;&nbsp;&nbsp;Class D Preferred Stock Warrants</TD>
    <TD width=3></TD>
    <TD align=right width=103>1,157,750&nbsp;</TD>
    <TD align=middle width=7></TD>
    <TD align=middle width=117>$1.81 - $3.00</TD>
    <TD align=middle width=7></TD>
    <TD align=middle width=94><FONT face="CG Times Regular">6/02 -
    6/03</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=278>&nbsp;&nbsp;&nbsp;Consulting Warrants</TD>
    <TD width=3></TD>
    <TD align=right width=103>1,260,000&nbsp;</TD>
    <TD align=middle width=7></TD>
    <TD align=middle width=117>$1.20 - $2.35</TD>
    <TD align=middle width=7></TD>
    <TD align=middle width=94><FONT face="CG Times Regular">4/03 -
    1/05</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=278>&nbsp;&nbsp;&nbsp;PNC Financing Warrants</TD>
    <TD width=3></TD>
    <TD align=right width=103>1,283,332&nbsp;</TD>
    <TD align=middle width=7></TD>
    <TD align=middle width=117>$1.44</TD>
    <TD align=middle width=7></TD>
    <TD align=middle width=94><FONT face="CG Times Regular">12/05</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=278><FONT face="CG Times Regular">&nbsp;&nbsp;&nbsp;RBB
      Financing Warrants</FONT></TD>
    <TD width=3></TD>
    <TD align=right width=103>1,020,000&nbsp;</TD>
    <TD align=middle width=7></TD>
    <TD align=middle width=117>$1.42 - $1.94</TD>
    <TD align=middle width=7></TD>
    <TD align=middle width=94><FONT face="CG Times Regular">8/03 -
    3/04</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=278><FONT face="CG Times Regular">&nbsp;&nbsp;&nbsp;BHC
      Financing Warrants</FONT></TD>
    <TD width=3></TD>
    <TD align=right width=103>1,167,141&nbsp;</TD>
    <TD align=middle width=7></TD>
    <TD align=middle width=117>$1.44 - $1.46</TD>
    <TD align=middle width=7></TD>
    <TD align=middle width=94><FONT face="CG Times Regular">1/06 -
    3/06</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=278><FONT face="CG Times Regular">&nbsp;&nbsp;&nbsp;Debt for
      Equity Exchange Warrants</FONT></TD>
    <TD width=3></TD>
    <TD align=right width=103>2,464,405&nbsp;</TD>
    <TD align=middle width=7></TD>
    <TD align=middle width=117>$1.75</TD>
    <TD align=middle width=7></TD>
    <TD align=middle width=94><FONT face="CG Times Regular">7/06</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=278><FONT face="CG Times Regular">&nbsp;&nbsp;&nbsp;Private
      Placement Warrants</FONT></TD>
    <TD width=3></TD>
    <TD align=right width=103>4,505,566&nbsp;</TD>
    <TD align=middle width=7></TD>
    <TD align=middle width=117>$1.75</TD>
    <TD align=middle width=7></TD>
    <TD align=middle width=94><FONT face="CG Times Regular">7/06</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=278><FONT face="CG Times Regular">&nbsp;&nbsp;&nbsp;AMI and BEC
      Financing Warrants</FONT></TD>
    <TD width=3></TD>
    <TD align=right width=103>1,609,858&nbsp;</TD>
    <TD align=middle width=7></TD>
    <TD align=middle width=117>$1.44 - $1.50</TD>
    <TD align=middle width=7></TD>
    <TD align=middle width=94><FONT face="CG Times Regular">7/06 -
    7/08</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=278></TD>
    <TD width=3></TD>
    <TD align=right width=103>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=7></TD>
    <TD align=middle width=117></TD>
    <TD align=middle width=7></TD>
    <TD align=middle width=94></TD></TR>
  <TR vAlign=top>
    <TD width=278></TD>
    <TD width=3></TD>
    <TD align=right width=103>14,468,052&nbsp;</TD>
    <TD align=middle width=7></TD>
    <TD align=middle width=117></TD>
    <TD align=middle width=7></TD>
    <TD align=middle width=94></TD></TR>
  <TR vAlign=top>
    <TD width=278></TD>
    <TD width=3></TD>
    <TD align=right width=103>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD>
    <TD align=middle width=7></TD>
    <TD align=middle width=117></TD>
    <TD align=middle width=7></TD>
    <TD align=middle width=94></TD></TR></TABLE>
<P>&nbsp;</P>
<P align=center>-68-</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular"><STRONG></STRONG></FONT><FONT
face="CG Times Regular"><STRONG>Shares Reserved<BR></STRONG>At December 31,
2001, we were required to reserve approximately 19.1 million shares of Common
Stock for future issuance under all of the above options and warrant
arrangements and the convertible Series 17 Preferred Stock. (See Note 5.) As of
December 31, 2001, 34,020,005 shares of Common stock were issued and
outstanding, leaving only 15,979,995 authorized shares (including 988,000
treasury shares) available to satisfy our existing reserve obligations. We are
preparing for a shareholder's meeting to vote on an increase to the number of
Common shares authorized. If the stockholders do not approve the increase, we
may be unable to fulfill all our obligations to issue Common Stock. This could
put us in default under various obligations to issue Common Stock, which could
initiate certain actions against us for losses and damages. Such actions could
have a material adverse affect on the Company.</FONT></P>
<HR color=#000080 noShade SIZE=5 width="90%">

<TABLE width=622>
    <TR vAlign=top>
    <TD width=27></TD>
    <TD width=581><FONT face="CG Times Regular"><STRONG>NOTE</STRONG>
      <STRONG>12<BR>COMMITMENTS AND CONTINGENCIES</STRONG></FONT>
</TD></TR></TABLE>
<P><FONT face="CG Times Regular"><STRONG>Hazardous Waste<BR></STRONG>In
connection with our waste management services, we handle both hazardous and
nonhazardous 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.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Legal<BR></STRONG>PFMI, which was
purchased by the Company effective June 1, 1999, has been advised that it is
considered a potentially responsible party ("PRP") in three Superfund sites, two
of which had no relationship with PFMI according to PFMI records. The
relationship of PFMI to the third site, if any, is currently being investigated
by the Company. PFO, which was also purchased by the Company effective June 1,
1999, has been advised that it is a PRP in two Superfund sites. The Company is
currently investigating the relationship of PFO to the two sites.</FONT></P>
<P><FONT face="CG Times Regular">PFFL has been advised by the EPA that a release
or threatened release of hazardous substances has been documented by the EPA at
the former facility of Florida Petroleum Reprocessors (the "Site"), which is
located approximately 3,000 feet northwest of the PFFL facility in Davie,
Florida. However, studies conducted by, or under the direction of, the EPA,
together with data previously provided to PFFL by the EPA, do not indicate that
the PFFL facility in Davie, Florida, has contributed to the deep groundwater
contamination associated with the Site. As a result, we are unable to determine
with any degree of certainty what exposure, if any, PFFL may have as a result of
the documented release from the Site.</FONT></P>
<P><FONT face="CG Times Regular">PFD is required to remediate a parcel of leased
property ("Leased Property"), which was formerly used as a Resource Conservation
and Recovery Act of 1976 storage facility that was operated as a storage
and</FONT> <FONT face="CG Times Regular">solvent recycling facility by a company
that was merged with PFD prior to the Company's acquisition of PFD. The Leased
Property contains certain contaminated waste in the soils and groundwater. The
Company was indemnified by the seller of PFD for costs associated with
remediating the Leased Property, which entails remediation of soil and/or
groundwater restoration. However, during 1995, the seller filed for bankruptcy.
Prior to the acquisition of PFD by the Company, the seller had established a
trust fund ("Remediation Trust Fund"), which it funded with the seller's stock
to support the remedial activity on the Leased Property pursuant to the
agreement with the Ohio Environmental Protection Agency ("Ohio EPA"). After the
Company purchased PFD, it was required to advance $250,000 into the Remediation
Trust Fund due to the reduction in the value of the seller's stock that
comprised the Remediation Trust Fund, which stock had been sold by the trustee
prior to the seller's filing bankruptcy and has subsequently put an additional
$192,000 into the remediation trust fund. PFD brought action against the owners
and former operators of the Leased Property to remediate the Leased Property
and/or to recover any cost incurred by PFD in connection therewith.</FONT></P>
<P>&nbsp;</P>
<P align=center>-69-</P>
<P>&nbsp;</P>
<P><FONT face="CG Times">PFMI was previously named as a PRP under the Indiana
state equivalent to the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980 at the Four County Landfill site near
DeLong, Indiana. In March 1999, PFMI the Indiana Department of Environmental
Management ("IDEM"), and the members of the Four County Landfill Group and the
Four County Landfill Operable Unit One RD/RA Group (the "Groups") entered into
an Agreed Order (the "Agreed Order") in an administrative proceeding before IDEM
pursuant to which PFMI received a full and complete release from the Groups, a
covenant from IDEM not to sue or take any administrative action against PFMI
with respect to present or future liability relating to the site (with the
exception of liability, if any, associated with loss of natural resources), and
protection from contribution actions of third parties relating to the
site.</FONT></P>
<P><FONT face="CG Times">On July 13, 2001, the United States of America (the
"Government") filed an action against PFMI and others, including members of the
group, seeking to recover response costs allegedly incurred by the United States
Environmental Protection Agency ("EPA") in connection with the Four County
Landfill site. According to the demand, the Government is seeking to recover
approximately $576,000, and the action is currently stayed while the parties
pursue settlement negotiations. At this point we are unable to determine what
exposure PFMI may have to the Government in this regard.</FONT><FONT
face="CG Times Regular"></FONT></P>
<P><FONT face="CG Times Regular">In addition to the above matters and in the
normal course of conducting its business, we are involved in various other
litigation. We are not a party to any litigation or governmental proceeding
which our management believes could result in any judgments or fines against us
that would have a material adverse affect on our financial position, liquidity
or results of future operations.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Permits<BR></STRONG>We are subject to
various regulatory requirements, including the procurement of requisite licenses
and permits at our facilities. These licenses and permits are subject to
periodic renewal without which our operations would be adversely affected. We
anticipate that, once a license or permit is issued with respect to a facility,
the license or permit will be renewed at the end of its term if the facility's
operations are in compliance with the applicable regulatory
requirements.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Accrued Closure Costs and Environmental
Liabilities<BR></STRONG>We maintain various closure cost financial assurance
instruments to guarantee the proper decommissioning of our RCRA facilities upon
cessation of operations. Additionally, in the course of owning and operating
on-site treatment, storage and disposal facilities, we are subject to corrective
action proceedings to restore soil and/or groundwater to its original state.
These activities are governed by federal, state and local regulations and we
maintain the appropriate accruals for restoration. As discussed in Note 8 and 9,
we have recorded accrued liabilities for estimated closure costs and identified
environmental remediation costs.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Insurance<BR></STRONG>Our business
exposes us to various risks, including claims for causing damage to property or
injuries to persons or claims alleging negligence or professional errors or
omissions in the performance of its services, which claims could be substantial.
We believe that our coverage is adequate to insure us against the various types
of risks encountered.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Operating Leases<BR></STRONG>We lease
certain facilities and equipment under operating leases. Future minimum rental
payments as of December 31, 2001, required under these leases are $1,859,000 in
2002, $1,573,000 in 2003, $1,134,000 in 2004, $960,000 in 2005 and $672,000 in
2006.</FONT></P>
<P><FONT face="CG Times Regular">Net rent expense relating to our operating
leases was $2,922,000, $2,245,000 and $1,958,000 for 2001, 2000 and 1999,
respectively.</FONT></P>
<P>&nbsp;</P>
<P align=center><FONT face="CG Times Regular">-70-</FONT></P>
<P>&nbsp;</P>
<HR color=#000080 noShade SIZE=5 width="90%">

<TABLE width=619>
    <TR vAlign=top>
    <TD width=27></TD>
    <TD width=578><FONT face="CG Times Regular"><STRONG>NOTE</STRONG>
      <STRONG>13<BR>PROFIT SHARING PLAN</STRONG></FONT> </TD></TR></TABLE>
<P><FONT face="CG Times Regular">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 18% 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 elected not to provide any matching contributions for the years prior to
1999. However, beginning January 1, 1999, we agreed to match up to 25% of our
employees contributions, not to exceed 3% of a participants compensation. In
conjunction with the PFMI, PFO and PFSG acquisition in 1999, a similar 401(k)
Plan was assumed and maintained for such acquired companies, until such time as
the plans were merged, which occurred on August 1, 2000. We contributed $241,000
and $166,000 in matching funds during 2001 and 2000, respectively.</FONT></P>
<HR color=#000080 noShade SIZE=5 width="90%">

<TABLE width=620>
    <TR vAlign=top>
    <TD width=27></TD>
    <TD width=579><FONT face="CG Times Regular"><STRONG>NOTE</STRONG>
      <STRONG>14<BR>OPERATING SEGMENTS</STRONG></FONT> </TD></TR></TABLE>
<P><FONT face="CG Times Regular"></FONT><FONT face="CG Times Regular">During
2001, we were engaged in eleven operating segments. Pursuant to FAS 131, we
define an operating segment as:</FONT></P>
<TABLE width=653>
    <TR vAlign=top>
    <TD align=middle width=24></TD>
    <TD align=middle width=31>*</TD>
    <TD width=578><FONT face="CG Times Regular">A business activity from which
      we may earn revenue and incur expenses;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle width=24></TD>
    <TD align=middle width=31><FONT face="CG Times Regular">*</FONT></TD>
    <TD width=578><FONT face="CG Times Regular">Whose operating results are
      regularly reviewed by the President of the segment to make decisions about
      resources to be allocated within the segment and assess its performance;
      and</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle width=24></TD>
    <TD align=middle width=31><FONT face="CG Times Regular">*</FONT></TD>
    <TD width=578><FONT face="CG Times Regular">For which discrete financial
      information is available.</FONT></TD></TR></TABLE>
<P><FONT face="CG Times Regular">We therefore define our operating segments as
each separate facility or location that we operate. These segments however,
exclude the Corporate headquarters which does not generate revenue and Perma-Fix
of Memphis, Inc., a discontinued operation, which is reported with Corporate
headquarters as there were no earnings for PFM for the periods represented below
and net balance sheet items are immaterial. See Note 3 regarding discontinued
operations. The accounting policies of the operating segments are the same as in
Note 2.</FONT></P>
<P><FONT face="CG Times Regular">Pursuant to FAS 131 we have aggregated our
operating segments into three reportable segments to ease in the presentation
and understanding of our business. Each reportable segment has President who
manages and makes decisions for the reportable segment as a whole. The results
of the reportable segments are then</FONT> <FONT
face="CG Times Regular">reviewed by the Company's chief operating decision
maker. We used the following criteria to aggregate our segments:</FONT></P>
<TABLE width=653>
    <TR vAlign=top>
    <TD align=middle width=47></TD>
    <TD align=middle width=48>*</TD>
    <TD width=538><FONT face="CG Times Regular">The nature of our products and
      services;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle width=47></TD>
    <TD align=middle width=48><FONT face="CG Times Regular">*</FONT></TD>
    <TD width=538><FONT face="CG Times Regular">The nature of the production
      processes;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle width=47></TD>
    <TD align=middle width=48><FONT face="CG Times Regular">*</FONT></TD>
    <TD width=538><FONT face="CG Times Regular">The type or class of customer
      for our products and services; </FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle width=47></TD>
    <TD align=middle width=48><FONT face="CG Times Regular">*</FONT></TD>
    <TD width=538><FONT face="CG Times Regular">The methods used to distribute
      our products or provide our services; and</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle width=47></TD>
    <TD align=middle width=48><FONT face="CG Times Regular">*</FONT></TD>
    <TD width=538><FONT face="CG Times Regular">The nature of the regulatory
      environment.</FONT></TD></TR></TABLE>
<P><FONT face="CG Times Regular">During 2000, in conjunction with the expansion
of the Perma-Fix of Florida nuclear, mixed waste facility, the acquisition of
Diversified Scientific Services, Inc. and expanded Oak Ridge, Tennessee, mixed
waste activities, the Company has established a Nuclear Waste Management
Services segment, in addition to the two previously reported segments. Our
reportable segments are now defined as follows:</FONT></P>
<P><FONT face="CG Times Regular">The Industrial Waste Management Services
segment, which provides on-and-off site treatment, storage, processing and
disposal of hazardous and nonhazardous industrial and commercial and wastewater
through</FONT></P>
<P>&nbsp;</P>
<P align=center>-71-</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">our six TSD facilities; Perma-Fix Treatment
Services, Inc., Perma-Fix of Dayton, Inc., Perma-Fix of Ft. Lauderdale, Inc.,
Perma-Fix of Orlando, Inc., Perma-Fix of South Georgia, Inc., and Perma-Fix of
Michigan, Inc. We provide through Perma-Fix Government Services various waste
management services to certain governmental agencies.</FONT></P>
<P><FONT face="CG Times Regular">The Nuclear Waste Management Services segment,
which provides treatment, storage, processing and disposal services. Included in
such is research, development, on and off-site waste remediation of nuclear
mixed and low-level radioactive waste through our three TSD facilities;
Perma-Fix of Florida, Inc., Diversified Scientific Services, Inc., and the East
Tennessee Materials and Energy Corporation ("M&amp;EC").</FONT></P>
<P><FONT face="CG Times Regular">The Consulting Engineering Services segment
provides environmental engineering and regulatory compliance services through
Schreiber, Yonley &amp; Associates, Inc. which includes oversight
management</FONT> <FONT face="CG Times Regular">of environmental restoration
projects, air and soil sampling and compliance and training activities, as well
as, engineering support as needed by our other segments. During 1999, the
business and operations of Mintech, Inc., our second engineering company located
in Tulsa, Oklahoma, was merged into and consolidated with the SYA
operations.</FONT></P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P align=center>-72-</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">The table below shows certain financial
information by business segment for 2001, 2000 and 1999 and excludes the results
of operations of the discontinued operations.</FONT></P>
<TABLE width="100%">
    <TR vAlign=top>
    <TD><B>Segment Reporting 12/31/01</B></TD></TR></TABLE>
<TABLE width=655>
    <TR vAlign=top>
    <TD align=middle width=176></TD>
    <TD align=middle width=2></TD>
    <TD align=middle width=58><FONT face="CG Times Regular"
      size=2>Industrial<BR>Waste Services</FONT> </TD>
    <TD align=middle width=5></TD>
    <TD align=middle width=56><FONT face="CG Times Regular"
      size=2>Nuclear<BR>Waste<BR>Services</FONT></TD>
    <TD align=middle width=3></TD>
    <TD align=middle width=71><FONT size=2><BR WP="BR1"><BR
      WP="BR2">Engineering</FONT></TD>
    <TD align=middle width=6></TD>
    <TD align=middle width=56><FONT size=2><BR WP="BR1">Segments<BR><FONT
      face="CG Times Regular">Total </FONT></FONT></TD>
    <TD align=middle width=4></TD>
    <TD align=middle width=62><FONT size=2><BR WP="BR1">Corporate<BR><FONT
      face="CG Times Regular">Other<SUP>(2)</SUP></FONT></FONT></TD>
    <TD align=middle width=3></TD>
    <TD align=middle width=73><FONT size=2><BR WP="BR1">Consolidated<BR><FONT
      face="CG Times Regular">Total</FONT></FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle width=176></TD>
    <TD align=middle width=2></TD>
    <TD align=middle width=58>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=5></TD>
    <TD align=middle width=56>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=3></TD>
    <TD align=middle width=71>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=6></TD>
    <TD align=middle width=56>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=4></TD>
    <TD align=middle width=62>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=3></TD>
    <TD align=middle width=73>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD align=left colSpan=2 width=178><FONT size=2>Revenue from
      external&nbsp;<BR>&nbsp;&nbsp;&nbsp;customers <SUP>(5)</SUP></FONT></TD>
    <TD align=right width=58><FONT size=2><BR>$&nbsp;42,355&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT size=2><BR>$&nbsp;28,932&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=71><FONT size=2><BR>$&nbsp;3,205&nbsp;</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=56><FONT size=2><BR>$&nbsp;74,492&nbsp;</FONT> </TD>
    <TD align=right width=4></TD>
    <TD align=right width=62><FONT
      size=2><BR>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      --&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=73><BR><FONT size=2>$&nbsp;74,492&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left width=176><FONT size=2>Intercompany revenues</FONT></TD>
    <TD align=middle width=2></TD>
    <TD align=right width=58><FONT size=2>3,799&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT size=2>5,093&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=71><FONT size=2>245&nbsp;</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=56><FONT size=2>9,137&nbsp;</FONT> </TD>
    <TD align=right width=4></TD>
    <TD align=right width=62><FONT size=2>--&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=73><FONT size=2>9,137&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left width=176><FONT size=2>Interest income&nbsp;</FONT></TD>
    <TD align=middle width=2></TD>
    <TD align=right width=58><FONT size=2>21&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT size=2>--&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=71><FONT size=2>--&nbsp;</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=56><FONT size=2>21&nbsp;</FONT> </TD>
    <TD align=right width=4></TD>
    <TD align=right width=62><FONT size=2>8&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=73><FONT size=2>29&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left width=176><FONT size=2>Interest expense</FONT></TD>
    <TD align=middle width=2></TD>
    <TD align=right width=58><FONT size=2>932&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT size=2>1,909&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=71><FONT size=2>36&nbsp;</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=56><FONT size=2>2,877&nbsp;</FONT> </TD>
    <TD align=right width=4></TD>
    <TD align=right width=62><FONT size=2>161&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=73><FONT size=2>3,038&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left width=176><FONT size=2>Interest expense-Warrants</FONT></TD>
    <TD align=middle width=2></TD>
    <TD align=right width=58><FONT size=2>--&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT size=2>--&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=71><FONT size=2>--&nbsp;</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=56><FONT size=2>--&nbsp;</FONT> </TD>
    <TD align=right width=4></TD>
    <TD align=right width=62><FONT size=2>234&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=73><FONT size=2>234&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left width=176><FONT face="CG Times Regular" size=2>Interest
      expense-financing fees</FONT></TD>
    <TD align=middle width=2></TD>
    <TD align=right width=58><FONT size=2>6&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT size=2>605&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=71><FONT size=2>--&nbsp;</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=56><FONT size=2>611&nbsp;</FONT> </TD>
    <TD align=right width=4></TD>
    <TD align=right width=62><FONT size=2>2,121&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=73><FONT size=2>2,732&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left width=176><FONT face="CG Times Regular" size=2>Depreciation
      and amortization</FONT></TD>
    <TD align=middle width=2></TD>
    <TD align=right width=58><FONT size=2>2,659&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT size=2>1,787&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=71><FONT size=2>90&nbsp;</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=56><FONT size=2>4,536&nbsp;</FONT> </TD>
    <TD align=right width=4></TD>
    <TD align=right width=62><FONT size=2>80&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=73><FONT size=2>4,616&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left width=176><FONT face="CG Times Regular" size=2>Segment
      profit (loss)</FONT></TD>
    <TD align=middle width=2></TD>
    <TD align=right width=58><FONT size=2>(150)</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT size=2>884&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=71><FONT size=2>200&nbsp;</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=56><FONT size=2>934&nbsp;</FONT> </TD>
    <TD align=right width=4></TD>
    <TD align=right width=62><FONT size=2>(1,681)</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=73><FONT size=2>(747)</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left width=176><FONT face="CG Times Regular" size=2>Segment
      assets</FONT></TD>
    <TD align=middle width=2></TD>
    <TD align=right width=58><FONT size=2>41,838&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT size=2>51,079&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=71><FONT size=2>2,100&nbsp;</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=56><FONT size=2>95,017&nbsp;</FONT> </TD>
    <TD align=right width=4></TD>
    <TD align=right width=62><FONT size=2>4,120&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=73><FONT size=2>99,137</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left width=176><FONT face="CG Times Regular" size=2>Expenditures
      for segment assets</FONT></TD>
    <TD align=middle width=2></TD>
    <TD align=right width=58><FONT size=2>1,757</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT size=2>2,817&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=71><FONT size=2>14&nbsp;</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=56><FONT size=2>4,588&nbsp;</FONT> </TD>
    <TD align=right width=4></TD>
    <TD align=right width=62><FONT size=2>10&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=73><FONT size=2>4,598&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left width=176></TD>
    <TD align=middle width=2></TD>
    <TD align=right width=58></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56></TD>
    <TD align=right width=3></TD>
    <TD align=right width=71></TD>
    <TD align=right width=6></TD>
    <TD align=right width=56></TD>
    <TD align=right width=4></TD>
    <TD align=right width=62></TD>
    <TD align=right width=3></TD>
    <TD align=right width=73></TD></TR>
  <TR vAlign=top>
    <TD align=left colSpan=13 width=575><B>Segment Reporting
12/31/00</B></TD></TR>
  <TR>
    <TD align=middle width=176></TD>
    <TD align=middle width=2></TD>
    <TD align=middle width=58><FONT face="CG Times Regular"
      size=2>Industrial<BR>Waste Services</FONT> </TD>
    <TD align=middle width=5></TD>
    <TD align=middle width=56><FONT face="CG Times Regular"
      size=2>Nuclear<BR>Waste<BR>Services</FONT></TD>
    <TD align=middle width=3></TD>
    <TD align=middle width=71><FONT size=2><BR WP="BR1"><BR
      WP="BR2">Engineering</FONT></TD>
    <TD align=middle width=6></TD>
    <TD align=middle width=56><FONT size=2><BR WP="BR1">Segments<BR><FONT
      face="CG Times Regular">Total </FONT></FONT></TD>
    <TD align=middle width=4></TD>
    <TD align=middle width=62><FONT size=2><BR WP="BR1">Corporate<BR><FONT
      face="CG Times Regular">Other<SUP>(2)</SUP></FONT></FONT></TD>
    <TD align=middle width=3></TD>
    <TD align=middle width=73><FONT size=2><BR WP="BR1">Consolidated<BR><FONT
      face="CG Times Regular">Total</FONT></FONT></TD></TR>
  <TR>
    <TD align=middle width=176></TD>
    <TD align=middle width=2></TD>
    <TD align=middle width=58>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=5></TD>
    <TD align=middle width=56>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=3></TD>
    <TD align=middle width=71>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=6></TD>
    <TD align=middle width=56>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=4></TD>
    <TD align=middle width=62>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=3></TD>
    <TD align=middle width=73>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD align=left width=176><FONT size=2>Revenue from external
      &nbsp;&nbsp;&nbsp;customers<SUP>(5)</SUP></FONT></TD>
    <TD align=middle width=2></TD>
    <TD align=right width=58><FONT size=2><BR>$&nbsp;44,191&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT size=2><BR>$&nbsp;11,737&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=71><FONT
    size=2><BR>$&nbsp;&nbsp;3,211&nbsp;</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=56><FONT size=2><BR>$&nbsp;59,139&nbsp;</FONT> </TD>
    <TD align=right width=4></TD>
    <TD align=right width=62><FONT
      size=2><BR>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;--&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=73><FONT
    size=2><BR>$&nbsp;59,139&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left width=176><FONT size=2>Intercompany revenues</FONT></TD>
    <TD align=middle width=2></TD>
    <TD align=right width=58><FONT size=2>4,130&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT size=2>1,315&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=71><FONT size=2>149&nbsp;</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=56><FONT size=2>5,594&nbsp;</FONT> </TD>
    <TD align=right width=4></TD>
    <TD align=right width=62><FONT
      size=2>--&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=73><FONT size=2>5,594&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left width=176><FONT size=2>Interest income</FONT></TD>
    <TD align=middle width=2></TD>
    <TD align=right width=58><FONT size=2>27&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT size=2>--&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=71><FONT size=2>--&nbsp;</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=56><FONT size=2>27&nbsp;</FONT> </TD>
    <TD align=right width=4></TD>
    <TD align=right width=62><FONT
      size=2>14&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=73><FONT size=2>41&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left width=176><FONT size=2>Interest expense</FONT></TD>
    <TD align=middle width=2></TD>
    <TD align=right width=58><FONT size=2>1,183&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT size=2>445&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=71><FONT size=2>59&nbsp;</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=56><FONT size=2>1,687&nbsp;</FONT> </TD>
    <TD align=right width=4></TD>
    <TD align=right width=62><FONT
      size=2>445&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=73><FONT size=2>2,132&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left width=176><FONT size=2>Interest expense-Warrants</FONT></TD>
    <TD align=middle width=2></TD>
    <TD align=right width=58><FONT size=2>--&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT size=2>--&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=71><FONT size=2>--&nbsp;</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=56><FONT size=2>--&nbsp;</FONT> </TD>
    <TD align=right width=4></TD>
    <TD align=right width=62><FONT
      size=2>344&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=73><FONT size=2>344&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left width=176><FONT size=2>Interest expense-financing
      fees</FONT></TD>
    <TD align=middle width=2></TD>
    <TD align=right width=58><FONT size=2>8&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT size=2>--&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=71><FONT size=2>--&nbsp;</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=56><FONT size=2>8&nbsp;</FONT> </TD>
    <TD align=right width=4></TD>
    <TD align=right width=62><FONT
      size=2>173&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=73><FONT size=2>181&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left width=176><FONT size=2>Depreciation and
    amortization</FONT></TD>
    <TD align=middle width=2></TD>
    <TD align=right width=58><FONT size=2>2,793&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT size=2>703&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=71><FONT size=2>83&nbsp;</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=56><FONT size=2>3,579&nbsp;</FONT> </TD>
    <TD align=right width=4></TD>
    <TD align=right width=62><FONT
      size=2>72&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=73><FONT size=2>3,651&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left width=176><FONT size=2>Segment profit (loss)</FONT></TD>
    <TD align=middle width=2></TD>
    <TD align=right width=58><FONT size=2>(1,296)</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT size=2>914&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=71><FONT size=2>131&nbsp;</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=56><FONT size=2>(251)</FONT> </TD>
    <TD align=right width=4></TD>
    <TD align=right width=62><FONT
      size=2>(511)<SUP>&nbsp;&nbsp;&nbsp;</SUP></FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=73><FONT size=2>(762)</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left width=176><FONT size=2>Segment
    assets<SUP>(1)</SUP></FONT></TD>
    <TD align=middle width=2></TD>
    <TD align=right width=58><FONT size=2>46,546&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT size=2>19,816&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=71><FONT size=2>2,483&nbsp;</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=56><FONT size=2>68,845&nbsp;</FONT> </TD>
    <TD align=right width=4></TD>
    <TD align=right width=62><FONT size=2>3,926<SUP>(3)</SUP></FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=73><FONT size=2>72,771&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left width=176><FONT size=2>Expenditures for segment
      assets</FONT></TD>
    <TD align=middle width=2></TD>
    <TD align=right width=58><FONT size=2>2,152&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT size=2>587&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=71><FONT size=2>51&nbsp;</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=56><FONT size=2>2,790&nbsp;</FONT> </TD>
    <TD align=right width=4></TD>
    <TD align=right width=62><FONT
      size=2>46&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=73><FONT size=2>2,836&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left width=176></TD>
    <TD align=middle width=2></TD>
    <TD align=right width=58></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56></TD>
    <TD align=right width=3></TD>
    <TD align=right width=71></TD>
    <TD align=right width=6></TD>
    <TD align=right width=56></TD>
    <TD align=right width=4></TD>
    <TD align=right width=62></TD>
    <TD align=right width=3></TD>
    <TD align=right width=73></TD></TR>
  <TR vAlign=top>
    <TD align=left colSpan=13 width=575><B>Segment Reporting
12/31/99</B></TD></TR>
  <TR>
    <TD align=middle width=176></TD>
    <TD align=middle width=2></TD>
    <TD align=middle width=58><FONT face="CG Times Regular"
      size=2>Industrial<BR>Waste Services</FONT> </TD>
    <TD align=middle width=5></TD>
    <TD align=middle width=56><FONT face="CG Times Regular"
      size=2>Nuclear<BR>Waste<BR>Services</FONT></TD>
    <TD align=middle width=3></TD>
    <TD align=middle width=71><FONT size=2><BR WP="BR1"><BR
      WP="BR2">Engineering</FONT></TD>
    <TD align=middle width=6></TD>
    <TD align=middle width=56><FONT size=2><BR WP="BR1">Segments<BR><FONT
      face="CG Times Regular">Total </FONT></FONT></TD>
    <TD align=middle width=4></TD>
    <TD align=middle width=62><FONT size=2><BR WP="BR1">Corporate<BR><FONT
      face="CG Times Regular">Other<SUP>(2)</SUP></FONT></FONT></TD>
    <TD align=middle width=3></TD>
    <TD align=middle width=73><FONT size=2><BR WP="BR1">Consolidated<BR><FONT
      face="CG Times Regular">Total</FONT></FONT></TD></TR>
  <TR>
    <TD align=middle width=176></TD>
    <TD align=middle width=2></TD>
    <TD align=middle width=58>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=5></TD>
    <TD align=middle width=56>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=3></TD>
    <TD align=middle width=71>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=6></TD>
    <TD align=middle width=56>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=4></TD>
    <TD align=middle width=62>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=3></TD>
    <TD align=middle width=73>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD align=left width=176><FONT size=2>Revenue from external
      customers<SUP>(5)</SUP></FONT></TD>
    <TD align=middle width=2></TD>
    <TD align=right width=58><FONT size=2><BR>$&nbsp;34,756&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT
      size=2><BR>$&nbsp;&nbsp;&nbsp;6,997&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=71><FONT
    size=2><BR>$&nbsp;&nbsp;4,711&nbsp;</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=56><FONT size=2><BR>$&nbsp;46,464&nbsp;</FONT> </TD>
    <TD align=right width=4></TD>
    <TD align=right width=62><FONT
      size=2><BR>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;--&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=73><FONT size=2><BR>$&nbsp;46,464&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left width=176><FONT size=2>Intercompany revenues</FONT></TD>
    <TD align=middle width=2></TD>
    <TD align=right width=58><FONT size=2>2,776&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT size=2>346&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=71><FONT size=2>396&nbsp;</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=56><FONT size=2>3,518&nbsp;</FONT> </TD>
    <TD align=right width=4></TD>
    <TD align=right width=62><FONT
      size=2>--&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=73><FONT size=2>3,518&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left width=176><FONT size=2>Interest income</FONT></TD>
    <TD align=middle width=2></TD>
    <TD align=right width=58><FONT size=2>37&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT size=2>&nbsp;5&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=71><FONT size=2>--&nbsp;</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=56><FONT size=2>42&nbsp;</FONT> </TD>
    <TD align=right width=4></TD>
    <TD align=right width=62><FONT
      size=2>8&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=73><FONT size=2>50&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left width=176><FONT size=2>Interest expense</FONT></TD>
    <TD align=middle width=2></TD>
    <TD align=right width=58><FONT size=2>500&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT size=2>121&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=71><FONT size=2>35&nbsp;</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=56><FONT size=2>656&nbsp;</FONT> </TD>
    <TD align=right width=4></TD>
    <TD align=right width=62><FONT size=2>(6)<SUP>(4)</SUP></FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=73><FONT size=2>650&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left width=176><FONT size=2>Interest expense-Warrants</FONT></TD>
    <TD align=middle width=2></TD>
    <TD align=right width=58><FONT size=2>--&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT size=2>--&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=71><FONT size=2>--&nbsp;</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=56><FONT size=2>--&nbsp;</FONT> </TD>
    <TD align=right width=4></TD>
    <TD align=right width=62><FONT size=2>--&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=73><FONT size=2>--&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left width=176><FONT size=2>Interest expense-financing
      fees</FONT></TD>
    <TD align=middle width=2></TD>
    <TD align=right width=58><FONT size=2>--&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT size=2>--&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=71><FONT size=2>--&nbsp;</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=56><FONT size=2>--&nbsp;</FONT> </TD>
    <TD align=right width=4></TD>
    <TD align=right width=62><FONT
      size=2>67&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=73><FONT size=2>67&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left width=176><FONT size=2>Depreciation and
    amortization</FONT></TD>
    <TD align=middle width=2></TD>
    <TD align=right width=58><FONT size=2>2,227&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT size=2>443&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=71><FONT size=2>90&nbsp;</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=56><FONT size=2>2,760&nbsp;</FONT> </TD>
    <TD align=right width=4></TD>
    <TD align=right width=62><FONT
      size=2>18&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=73><FONT size=2>2,778&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left width=176><FONT size=2>Segment profit (loss)</FONT></TD>
    <TD align=middle width=2></TD>
    <TD align=right width=58><FONT size=2>1,559&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT size=2>(34)</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=71><FONT size=2>(75)</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=56><FONT size=2>1,450&nbsp;</FONT> </TD>
    <TD align=right width=4></TD>
    <TD align=right width=62><FONT
      size=2>--&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=73><FONT size=2>1,450&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left width=176><FONT size=2>Segment
    assets<SUP>(1)</SUP></FONT></TD>
    <TD align=middle width=2></TD>
    <TD align=right width=58><FONT size=2>44,494&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT size=2>6,433&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=71><FONT size=2>2,565&nbsp;</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=56><FONT size=2>53,492&nbsp;</FONT> </TD>
    <TD align=right width=4></TD>
    <TD align=right width=62><FONT size=2>1,152<SUP>(3)</SUP></FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=73><FONT size=2>54,644&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left width=176><FONT size=2>Expenditures for segment
      assets</FONT></TD>
    <TD align=middle width=2></TD>
    <TD align=right width=58><FONT size=2>1,824&nbsp;</FONT></TD>
    <TD align=right width=5></TD>
    <TD align=right width=56><FONT size=2>606&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=71><FONT size=2>20&nbsp;</FONT></TD>
    <TD align=right width=6></TD>
    <TD align=right width=56><FONT size=2>2,450&nbsp;</FONT> </TD>
    <TD align=right width=4></TD>
    <TD align=right width=62><FONT size=2>210&nbsp;&nbsp;&nbsp;</FONT></TD>
    <TD align=right width=3></TD>
    <TD align=right width=73><FONT
size=2>2,660&nbsp;</FONT></TD></TR></TABLE>
<P><FONT face="CG Times Regular"></FONT><FONT
face="CG Times Regular"><SUP>(1)</SUP> Segment assets have been adjusted for
intercompany accounts to reflect actual assets for each segment.</FONT></P>
<P><FONT face="CG Times Regular"><SUP>(2)</SUP> Amounts reflect the activity for
corporate headquarters, and the activity for PFM, which is a discontinued
operation, not included in the segment information (See Note 3).</FONT></P>
<P><FONT face="CG Times Regular"><SUP>(3)</SUP> Amounts include segment assets
for PFM of $42,000 and $377,000 for 2000 and 1999, respectively.</FONT></P>
<P><FONT face="CG Times Regular"><SUP>(4)</SUP> Amount reflects interest expense
adjustment to PFM allocated to discontinued operations.</FONT></P>
<P><FONT face="CG Times Regular"><SUP>(5)</SUP> The consolidated revenues within
the Industrial Waste Management Services segment include DRMS contracts for 2001
which total $5,996,000 (or 8.0%) of total revenue, $7,606,000 (or 12.9%) for the
year ended December 31, 2000, and $5,277,000 (or 11.4%) for the year ended
December 31, 1999. </FONT></P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P align=center><FONT face="CG Times Regular">-73-</FONT></P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<HR color=#000080 noShade SIZE=5 width="90%">

<TABLE width=621>
    <TR vAlign=top>
    <TD width=29></TD>
    <TD width=578><FONT face="CG Times Regular"><STRONG>NOTE</STRONG>
      <STRONG>15<BR>QUARTERLY OPERATING RESULTS</STRONG></FONT>
</TD></TR></TABLE>
<P><FONT face="CG Times Regular">Unaudited quarterly operating results are
summarized as follows (in thousands, except per share data):</FONT></P>
<TABLE width=653>
    <TR vAlign=top>
    <TD width=278></TD>
    <TD align=middle width=361><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular">Three Months Ended (unaudited)</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=278></TD>
    <TD align=middle width=361>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR></TABLE>
<TABLE width="100%">
    <TR vAlign=top>
    <TD></TD>
    <TD align=middle><FONT face="CG Times Regular">March 31</FONT></TD>
    <TD align=right></TD>
    <TD align=middle><FONT face="CG Times Regular">June 30</FONT></TD>
    <TD align=right></TD>
    <TD align=right>
      <P align=center><FONT face="CG Times Regular">September 30</FONT></P></TD>
    <TD align=right></TD>
    <TD align=middle><FONT face="CG Times Regular">December 31</FONT></TD></TR>
  <TR vAlign=top>
    <TD></TD>
    <TD align=middle>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right></TD>
    <TD align=middle>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right></TD>
    <TD align=right>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=right></TD>
    <TD align=middle>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD><FONT face="CG Times Regular">2001</FONT></TD>
    <TD align=middle></TD>
    <TD align=right></TD>
    <TD align=middle></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=middle></TD></TR>
  <TR vAlign=top>
    <TD>
      <HR align=left color=#000080 noShade SIZE=3 width="15%">
    </TD>
    <TD align=middle></TD>
    <TD align=right></TD>
    <TD align=middle></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=middle></TD></TR>
  <TR vAlign=top>
    <TD><FONT face="CG Times Regular">Revenues</FONT></TD>
    <TD align=middle>$18,712</TD>
    <TD align=right></TD>
    <TD align=middle>$17,840</TD>
    <TD align=right></TD>
    <TD align=right>$17,386&nbsp;</TD>
    <TD align=right></TD>
    <TD align=right>$20,554&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD>Gross Profit</TD>
    <TD align=right><FONT face="CG Times Regular">5,189&nbsp;</FONT></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular">5,106&nbsp;</FONT></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular">6,572&nbsp;</FONT></TD>
    <TD align=right></TD>
    <TD align=right>7,906&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD>Net income (loss) applicable to<BR>&nbsp;&nbsp;&nbsp;Common Stock</TD>
    <TD align=right><BR>(572)</TD>
    <TD align=right></TD>
    <TD align=right><BR>(746)</TD>
    <TD align=right></TD>
    <TD align=right><BR>(613)</TD>
    <TD align=right></TD>
    <TD align=right><BR>1,184&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD>Basic net income (loss) per common share</TD>
    <TD align=right><FONT face="CG Times Regular">(.03)</FONT></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular">(.03)</FONT></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular">(.02)</FONT></TD>
    <TD align=right></TD>
    <TD align=right>.03&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD>Diluted net income (loss) per common share</TD>
    <TD align=right><FONT face="CG Times Regular">(.03)</FONT></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular">(.03)</FONT></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular">(.02)</FONT></TD>
    <TD align=right></TD>
    <TD align=right>.03&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD>Shareholder's equity</TD>
    <TD align=right><FONT face="CG Times Regular">23,258&nbsp;</FONT></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular">30,289&nbsp;</FONT></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular">40,408&nbsp;</FONT></TD>
    <TD align=right></TD>
    <TD align=right>41,841&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD>Total assets</TD>
    <TD align=right><FONT face="CG Times Regular">80,876&nbsp;</FONT></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular">97,169&nbsp;</FONT></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular">99,180&nbsp;</FONT></TD>
    <TD align=right></TD>
    <TD align=right>99,137&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD colSpan=8>
      <HR align=left color=#000080 noShade SIZE=5>
    </TD></TR>
  <TR vAlign=top>
    <TD><FONT face="CG Times Regular">2000</FONT></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right></TD></TR>
  <TR vAlign=top>
    <TD>
      <HR align=left color=#000080 noShade SIZE=3 width="15%">
    </TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right></TD>
    <TD align=right></TD></TR>
  <TR vAlign=top>
    <TD><FONT face="CG Times Regular">Revenues</FONT></TD>
    <TD align=right>$13,589&nbsp;</TD>
    <TD align=right></TD>
    <TD align=right>$14,492&nbsp;</TD>
    <TD align=right></TD>
    <TD align=right>$15,360&nbsp;</TD>
    <TD align=right></TD>
    <TD align=right>$15,698&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD><FONT face="CG Times Regular">Gross Profit</FONT></TD>
    <TD align=right>4,047&nbsp;</TD>
    <TD align=right></TD>
    <TD align=right>4,485&nbsp;</TD>
    <TD align=right></TD>
    <TD align=right>5,170&nbsp;</TD>
    <TD align=right></TD>
    <TD align=right>4,527&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD>Net income (loss) applicable to<BR>&nbsp;&nbsp; Common Stock</TD>
    <TD align=right><BR>(491)</TD>
    <TD align=right></TD>
    <TD align=right><BR>262&nbsp;</TD>
    <TD align=right></TD>
    <TD align=right><BR>606&nbsp;</TD>
    <TD align=right></TD>
    <TD align=right><BR>(1,139)</TD></TR>
  <TR vAlign=top>
    <TD>Basic net income (loss) per common share</TD>
    <TD align=right><FONT face="CG Times Regular">(.02)</FONT></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular">.01&nbsp;</FONT></TD>
    <TD align=right></TD>
    <TD align=right>.03&nbsp;</TD>
    <TD align=right></TD>
    <TD align=right>(.06)</TD></TR>
  <TR vAlign=top>
    <TD>Diluted net income (loss) per common share</TD>
    <TD align=right><FONT face="CG Times Regular">(.02)</FONT></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular">.01&nbsp;</FONT></TD>
    <TD align=right></TD>
    <TD align=right>.03&nbsp;</TD>
    <TD align=right></TD>
    <TD align=right>(.06)</TD></TR>
  <TR vAlign=top>
    <TD>Shareholder's equity</TD>
    <TD align=right><FONT face="CG Times Regular">20,217&nbsp;</FONT></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular">20,479&nbsp;</FONT></TD>
    <TD align=right></TD>
    <TD align=right>21,297&nbsp;</TD>
    <TD align=right></TD>
    <TD align=right>22,020</TD></TR>
  <TR vAlign=top>
    <TD>Total assets</TD>
    <TD align=right><FONT face="CG Times Regular">55,551&nbsp;</FONT></TD>
    <TD align=right></TD>
    <TD align=right><FONT face="CG Times Regular">55,271&nbsp;</FONT></TD>
    <TD align=right></TD>
    <TD align=right>70,866&nbsp;</TD>
    <TD align=right></TD>
    <TD align=right>72,771</TD></TR></TABLE>
<P>&nbsp;</P>
<TABLE width="100%">
    <TR vAlign=top>
    <TD><FONT face="CG Times Regular"><STRONG></STRONG></FONT><FONT
      face="CG Times Regular"><STRONG>ITEM 9.</STRONG></FONT> </TD>
    <TD><FONT face="CG Times Regular"><STRONG>CHANGES IN AND DISAGREEMENTS
      WITH ACCOUNTANTS ON<BR>ACCOUNTING AND FINANCIAL DISCLOSURE</STRONG></FONT>
    </TD></TR></TABLE>
<P><FONT face="CG Times Regular">None.</FONT></P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P align=center><FONT face="CG Times Regular">-74-</FONT></P>
<P>&nbsp;</P>
<P align=center><FONT face="CG Times Regular"><STRONG></STRONG></FONT><FONT
face="CG Times Regular"><STRONG>PART III</STRONG></FONT></P>
<TABLE width="100%">
    <TR vAlign=top>
    <TD><FONT face="CG Times Regular"><STRONG></STRONG></FONT><FONT
      face="CG Times Regular"><STRONG></STRONG></FONT><FONT
      face="CG Times Regular"><STRONG>ITEM 10.</STRONG></FONT></TD>
    <TD><FONT face="CG Times Regular"><STRONG>DIRECTORS AND EXECUTIVE OFFICERS
      OF THE REGISTRANT</STRONG></FONT></TD></TR></TABLE><FONT
face="CG Times Regular">The following table sets forth, as of the date hereof,
information concerning the Directors and Executive Officers of the Company:
</FONT>
<TABLE width="100%">
    <TR vAlign=top>
    <TD><FONT face="CG Times Regular">NAME </FONT></TD>
    <TD align=middle><FONT face="CG Times Regular">AGE</FONT></TD>
    <TD><FONT face="CG Times Regular">POSITION</FONT></TD></TR>
  <TR vAlign=top>
    <TD>
      <HR align=left color=#000080 noShade SIZE=3 width="25%">
    </TD>
    <TD align=middle>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD>
      <HR align=left color=#000080 noShade SIZE=3 width="20%">
    </TD></TR>
  <TR vAlign=top>
    <TD><FONT face="CG Times Regular">Dr. Louis F. Centofanti</FONT></TD>
    <TD align=middle><FONT face="CG Times Regular">58</FONT></TD>
    <TD><FONT face="CG Times Regular">Chairman of the Board, President and
      Chief Executive Officer</FONT></TD></TR>
  <TR vAlign=top>
    <TD><FONT face="CG Times Regular">Mr. Jon Colin</FONT></TD>
    <TD align=middle><FONT face="CG Times Regular">46</FONT></TD>
    <TD><FONT face="CG Times Regular">Director </FONT></TD></TR>
  <TR vAlign=top>
    <TD><FONT face="CG Times Regular">Mr. Thomas P. Sullivan </FONT></TD>
    <TD align=middle><FONT face="CG Times Regular">69</FONT></TD>
    <TD><FONT face="CG Times Regular">Director</FONT></TD></TR>
  <TR vAlign=top>
    <TD><FONT face="CG Times Regular">Mr. Mark A. Zwecker</FONT></TD>
    <TD align=middle><FONT face="CG Times Regular">51</FONT></TD>
    <TD><FONT face="CG Times Regular">Director</FONT></TD></TR>
  <TR vAlign=top>
    <TD><FONT face="CG Times Regular">Mr. Jack Lahav</FONT></TD>
    <TD align=middle><FONT face="CG Times Regular">53</FONT></TD>
    <TD><FONT face="CG Times Regular">Director</FONT></TD></TR>
  <TR vAlign=top>
    <TD><FONT face="CG Times Regular">Mr. Alfred C. Warrington, IV</FONT></TD>
    <TD align=middle><FONT face="CG Times Regular">67</FONT></TD>
    <TD><FONT face="CG Times Regular">Director</FONT></TD></TR>
  <TR vAlign=top>
    <TD><FONT face="CG Times Regular">Mr. Richard T. Kelecy</FONT></TD>
    <TD align=middle><FONT face="CG Times Regular">46</FONT></TD>
    <TD><FONT face="CG Times Regular">Chief Financial Officer, Vice President
      and Secretary</FONT></TD></TR>
  <TR vAlign=top>
    <TD><FONT face="CG Times Regular">Mr. Roger Randall</FONT></TD>
    <TD align=middle><FONT face="CG Times Regular">58</FONT></TD>
    <TD><FONT face="CG Times Regular">President, Industrial
  Services</FONT></TD></TR>
  <TR vAlign=top>
    <TD><FONT face="CG Times Regular">Mr. Larry McNamara</FONT></TD>
    <TD align=middle><FONT face="CG Times Regular">52</FONT></TD>
    <TD><FONT face="CG Times Regular">President, Nuclear
  Services</FONT></TD></TR></TABLE>
<P><FONT face="CG Times Regular">Each director is elected to serve until the
next annual meeting of stockholders.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>DR. LOUIS F. CENTOFANTI<BR></STRONG>The
information set forth under the caption "Executive Officers of the Company" on
page 13 is incorporated by reference.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG></STRONG></FONT><FONT
face="CG Times Regular"><STRONG>MR. JON COLIN<BR></STRONG>Mr. Colin has served
as a Director of the Company since December 1996. Mr. Colin is currently Chief
Operating Officer of Lifestar Response Corporation, a position he has held since
October 2000. Previously Mr. Colin served as a consultant for Lifestar Response
Corporation from September 1997 to October 2000. From 1990 to 1996, Mr. Colin
served as President and Chief Executive Officer for Environmental Services of
America, Inc., a publicly traded environmental services company. Mr. Colin also
currently provides financial consulting services for a variety of
technology-based companies. Mr.&nbsp;Colin has a B.S. degree in Accounting from
the University of Maryland.</FONT></P>
<P><FONT face="CG Times Regular"></FONT><FONT
face="CG Times Regular"><STRONG>MR. THOMAS P. SULLIVAN<BR></STRONG>Mr. Sullivan
has served as a Director of the Company since June 1, 1999, the date of his
election by the Board of Directors to fill a newly created directorship pursuant
to the terms of the Stock Purchase Agreements. From 1976, when Mr. Sullivan
purchased Chem-Met Services, Inc. ("CM"), until June 1, 1999, he served as
Director and President of CM, one of the companies acquired by the Company under
the Stock Purchase Agreements. Mr. Sullivan founded and served as Director and
President of Chemical Conservation Corporation ("CCC"), one of the companies
acquired by the Company under the Stock Purchase Agreements, from its inception
in 1983 until June 1, 1999, when it was acquired by the Company under the Stock
Purchase Agreements. From 1988, when Mr. Sullivan purchased Chemical
Conservation of Georgia, Inc. ("CCG"), until June 1, 1999, he served as Director
and President of CCG. From 1957 to 1973, Mr. Sullivan held various positions
with Crown Zellerbach Corporation and since 1982 has served as a director of
Charter National Bank, located in Detroit, Michigan. Mr. Sullivan has a degree
from John Carroll University.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>MR. MARK A. ZWECKER<BR></STRONG>Mark
Zwecker has served as a Director of the Company since its inception in January
1991. Mr.&nbsp;Zwecker is currently President of ACI Technology, LLC, a position
he has held since 1997. Previously, Mr. Zwecker was Vice President of Finance
and Administration for American Combustion, Inc., a position he held from 1986
until 1998. In 1983, Mr. Zwecker participated as a founder with
Dr.&nbsp;Centofanti in the start up of PPM, Inc. He remained with PPM, Inc.
until its acquisition in 1985 by USPCI. Mr.&nbsp;Zwecker has a B.S. in
Industrial and Systems Engineering from the Georgia Institute of Technology and
an M.B.A. from Harvard University.</FONT></P>
<P>&nbsp;</P>
<P align=center><FONT face="CG Times Regular">-75-</FONT></P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular"><STRONG>MR. JACK LAHAV<BR></STRONG>Jack Lahav
was elected to the Board of Directors of the Company on September 20, 2001 to
fill a newly created directorship. Mr. Lahav is a private investor, specializing
in launching and growing businesses. Previously, Mr. Lahav was founder and
president of Remarkable Products, Inc. from 1980 to 1993; Co-Founder of Lamar
Signal Processing, Inc.; President of Advanced Technologies, Inc., a robotics
company and Director of Vocaltech Communications, Inc.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>MR. ALFRED C. WARRINGTON,
IV<BR></STRONG>Mr. Warrington was elected to the Board of Directors on March 12,
2002, to fill a newly created directorship. </FONT><FONT face="CG Times">Mr.
Warrington was the founding chairman, co-chief executive officer and chief
financial officer of Sanifill, Inc., a solid waste company that was eventually
merged with Waste Management, Inc. and currently serves as vice-chairman of HC
Industries, Inc., a manufacturer of health and beauty aids. He has also been
very active in community affairs and higher education. Mr. Warrington served as
co-chairman of the MARTA referendum that brought rapid transit to the city of
Atlanta and has been a strong supporter of the University of Florida, where he
was instrumental in starting the School of Accounting. In recognition of his
efforts, the University of Florida has renamed the College of Business as the
Warrington College of Business. Most recently Mr. Warrington was appointed to
the newly formed University of Florida Board of Trustees by Governor Jeb Bush.
Prior to joining Sanifill, Mr. Warrington was a practicing CPA and a partner
with Arthur Andersen &amp; Co.</FONT><FONT face="CG Times Regular"> Mr.
Warrington holds a B.S.B.A. from the University of
Florida.<STRONG></STRONG></FONT></P>
<P><FONT face="CG Times Regular"><STRONG>MR. RICHARD T. KELECY<BR></STRONG>The
information set forth under the caption "Executive Officers of the Company" on
page 14 is incorporated by reference.<STRONG></STRONG></FONT></P>
<P><FONT face="CG Times Regular"><STRONG>MR. ROGER RANDALL<BR></STRONG>The
information set forth under the caption "Executive Officers of the Company" on
page 14 is incorporated by reference.<STRONG></STRONG></FONT></P>
<P><FONT face="CG Times Regular"><STRONG>MR. LARRY MCNAMARA<BR></STRONG>The
information set forth under the caption "Executive Officers of the Company" on
page 14 is incorporated by reference.<STRONG></STRONG></FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Certain Relationships<BR></STRONG>There
are no family relationships between any of our existing Directors, executive
officers, or persons nominated or chosen to become a Director or executive
officer. Dr. Centofanti is the only Director who is our
employee.<STRONG></STRONG></FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Section 16(a) Beneficial Ownership
Reporting Compliance<BR></STRONG>Section 16(a) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the regulations promulgated
thereunder require the Company's executive officers and directors and beneficial
owners of more than ten percent (10%) of any equity security of the Company
registered pursuant to Section 12 of the Exchange Act to file reports of
ownership and changes of ownership of the Company's equity securities with the
Securities and Exchange Commission, and to furnish the Company with copies of
all such reports. Based solely on a review of the copies of such reports
furnished to the Company and information provided to the Company, the Company
believes that during 2001 none of the executive officers and directors of the
Company failed to timely file reports under Section 16(a), except that (i) a
Form 4 was not timely filed for</FONT> <FONT face="CG Times Regular">Jon Colin
to report three transactions in<STRONG> </STRONG>May 2001; (ii) a Form 4 was not
timely filed for Richard Kelecy to report one transaction in April 2001; (iii) a
Form 4 was not timely filed for Roger Randall to report one transaction in April
2001; (iv) a Form 4 was not timely filed for Larry McNamara to report one
transaction in April 2001; (v) a Form 4 was not timely filed for Louis
Centofanti to report one transaction in April 2001; and (vi) a Form 5 for Thomas
Sullivan was not timely filed for December 2001.</FONT></P>
<P><FONT face="CG Times Regular">Capital Bank Grawe-Gruppe ("Capital Bank"),
which may have become a beneficial owner (as that term is defined under Rule
13d-3 as promulgated under the Exchange Act) of more than ten percent (10%) of
the </FONT></P>
<P>&nbsp;</P>
<P align=center>-76-</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">Company's Common Stock on February 9, 1996, as
a result of its acquisition of 1,100 shares of Series 1 Preferred (as defined in
"Certain Relationships and Related Transactions") that were convertible into a
maximum of 1,282,798 shares of Common Stock of the Company commencing 45 days
after issuance of the Series 1 Preferred, failed to file a Form 3 to report such
transaction, if required. </FONT></P>
<P><FONT face="CG Times Regular">If Capital Bank became a beneficial owner of
more than ten percent (10%) of the Company's Common Stock on February 9, 1996,
the date of Capital's initial Preferred Stock Agreement, and thereby required to
file reports under Section 16(a) of the Exchange Act, then Capital Bank also
failed to file (i) any Form 4's or 5's for years 1996 through 2000; (ii) a Form
4 for two transactions which occurred in January 2001; (iii) a Form 4 for one
transaction which occurred in February 2001; (iv) a Form 4 for six transactions
which occurred in April 2001; (v) a Form 4 for four transactions which occurred
in July 2001; (vi) a Form 4 for two transactions which occurred in August 2001;
and (vii) a Form 4 for two transactions which occurred in September
2001.</FONT></P>
<P><FONT face="CG Times Regular">As of the date of this report, Capital Bank has
not filed a Schedule 13D or Schedule 13G, pursuant to Section 13(d) of the
Exchange Act and Regulation 13D as promulgated thereunder, reporting Capital
Bank as the beneficial owner of Common Stock of the Company. Capital Bank has
advised the Company that it is a banking institution regulated by the banking
regulations of Austria which holds the Company's shares of stock and Warrants to
acquire shares of stock on behalf of numerous clients, and no one client is the
beneficial owner of more than 4.9% of the Company's outstanding Common Stock.
Capital Bank has further informed the Company that its clients (and not Capital
Bank) maintain full voting and dispositive power over such shares. Consequently,
Capital Bank has advised the Company that it believes it is not the beneficial
owner, as such term is defined in Rule 13d-3 under the Exchange Act ("Rule
13d-3"), of the shares of stock registered in the name of Capital Bank because
it has neither voting nor investment power, as such terms are defined in Rule
13d-3, over such shares. As a result, Capital Bank has informed the Company that
it does not believe that it is required to file reports under Section 16(a)
Schedule 13D or Schedule 13G in connection with the shares of the Company's
Common Stock registered in the name of Capital Bank. See Item 12, "Potential
Change in Control." </FONT></P>
<TABLE width=653>
    <TR vAlign=top>
    <TD width=74><FONT face="CG Times Regular"><STRONG>ITEM
    11.</STRONG></FONT></TD>
    <TD width=565><FONT face="CG Times Regular"><STRONG>EXECUTIVE
      COMPENSATION</STRONG></FONT></TD></TR></TABLE>
<P><FONT face="CG Times Regular"><STRONG>Summary Compensation
Table<BR></STRONG>The following table sets forth the aggregate cash compensation
paid to our Chairman and Chief Executive Officer, Chief Financial Officer, the
President of Industrial Services, and President of Nuclear Services.</FONT></P>
<TABLE width=653>
    <TR vAlign=top>
    <TD align=right colSpan=2 width=247></TD>
    <TD align=middle colSpan=3 width=150><FONT face="CG Times Regular"
      size=2><STRONG>Annual Compensation</STRONG></FONT></TD>
    <TD align=middle width=4></TD>
    <TD align=middle colSpan=2 width=155><STRONG><FONT face="CG Times Regular"
      size=2>Long-Term Compensation</FONT></STRONG></TD>
    <TD align=middle width=65></TD></TR>
  <TR vAlign=top>
    <TD align=right colSpan=2 width=247></TD>
    <TD align=middle colSpan=3 width=150>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=4></TD>
    <TD align=middle colSpan=2 width=155>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=65></TD></TR>
  <TR vAlign=top>
    <TD align=middle width=214><B><FONT size=2><BR WP="BR1"><BR WP="BR2">Name
      and Principal<BR></FONT><FONT face="CG Times Regular"
      size=2>Position</FONT></B></TD>
    <TD align=middle width=27><FONT size=2><B><FONT
      face="CG Times Regular"><BR WP="BR1"><BR WP="BR2"><BR
      WP="BR1"></FONT>Year</B></FONT></TD>
    <TD align=middle width=43><B><FONT size=2><BR WP="BR1"><BR
      WP="BR2">Salary<BR></FONT><FONT face="CG Times Regular"
      size=2>($)</FONT></B></TD>
    <TD align=middle width=39><B><FONT size=2><BR WP="BR1"><BR
      WP="BR2">Bonus<BR></FONT><FONT face="CG Times Regular"
      size=2>($)</FONT></B></TD>
    <TD align=middle width=56><FONT face="CG Times Regular"
      size=2><B>Other<BR>Annual<BR>Compen-<BR>sation ($)</B></FONT></TD>
    <TD align=middle width=4></TD>
    <TD align=middle width=62><FONT face="CG Times Regular"
      size=2><B>Restricted<BR>Stock<BR>Award(s)<BR>($)</B></FONT></TD>
    <TD align=middle width=87><FONT face="CG Times Regular"
      size=2><B>Securities<BR>Underlying<BR>Options/SARs<BR>(#)</B></FONT></TD>
    <TD align=middle width=65><FONT face="CG Times Regular"
      size=2><B>All<BR>Other<BR>Compen-<BR>sation($)<SUP>(5)</SUP></B></FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle width=214>
      <HR color=#000080 noShade SIZE=3 width="60%">
    </TD>
    <TD align=middle width=27>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=43>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=39>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=56>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=4></TD>
    <TD align=middle width=62>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=87>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle width=65>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD align=left width=214><FONT face="CG Times Regular" size=-1>Dr. Louis
      F. Centofanti<SUP>(1)<BR></SUP>Chairman of the Board,<BR>President and
      Chief Executive Officer</FONT></TD>
    <TD align=middle width=27><FONT face="CG Times Regular"
      size=-1>2001<BR>2000<BR>1999</FONT> </TD>
    <TD align=middle width=43><FONT face="CG Times Regular"
      size=-1>138,667<BR>130,000<BR>123,421</FONT></TD>
    <TD align=middle width=39><FONT face="CG Times Regular"
      size=-1>40,000<BR>--<BR>--</FONT></TD>
    <TD align=middle width=56><FONT face="CG Times Regular"
      size=-1>--<BR>--<BR>--</FONT></TD>
    <TD align=middle width=4></TD>
    <TD align=middle width=62><FONT face="CG Times Regular"
      size=-1>--<BR>--<BR>--</FONT></TD>
    <TD align=right width=87><FONT face="CG Times Regular"
      size=-1>100,000&nbsp;&nbsp;&nbsp;<BR>75,000&nbsp;&nbsp;&nbsp;<BR>--&nbsp;&nbsp;&nbsp;
      </FONT></TD>
    <TD align=middle width=65><FONT face="CG Times Regular"
      size=-1>9,000<BR>9,000<BR>4,500</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=left width=214><FONT face="CG Times Regular" size=-1>Richard T.
      Kelecy<SUP>(2)<BR></SUP>Vice President and Chief
      Financial<BR>Officer</FONT></TD>
    <TD align=middle width=27><FONT face="CG Times Regular"
      size=-1>2001<BR>2000<BR>1999</FONT></TD>
    <TD align=middle width=43><FONT face="CG Times Regular"
      size=-1>128,333<BR>120,000<BR>111,373</FONT></TD>
    <TD align=middle width=39>
      <P align=right><FONT face="CG Times Regular"
      size=-1>30,000<BR>--<BR>15,000</FONT></P></TD>
    <TD align=middle width=56><FONT face="CG Times Regular"
      size=-1>--<BR>--<BR>--</FONT></TD>
    <TD align=middle width=4></TD>
    <TD align=middle width=62><FONT face="CG Times Regular"
      size=-1>--<BR>--<BR>--</FONT></TD>
    <TD align=right width=87>
      <P align=right><FONT face="CG Times Regular"
      size=-1>70,000&nbsp;&nbsp;&nbsp;<BR>50,000&nbsp;&nbsp;&nbsp;<BR>--&nbsp;&nbsp;&nbsp;
      </FONT></P></TD>
    <TD align=middle width=65>
      <P><FONT face="CG Times Regular"
    size=-1>9,000<BR>9,000<BR>4,500</FONT></P></TD></TR>
  <TR vAlign=top>
    <TD align=left width=214><FONT face="CG Times Regular" size=-1>Roger
      Randall<SUP>(3)<BR></SUP>President of Industrial Services</FONT></TD>
    <TD align=middle width=27><FONT face="CG Times Regular"
      size=-1>2001<BR>2000<BR>1999</FONT></TD>
    <TD align=middle width=43><FONT face="CG Times Regular"
      size=-1>123,333<BR>115,000<BR>106,231</FONT></TD>
    <TD align=middle width=39><FONT face="CG Times Regular"
      size=-1>25,000<BR>--<BR>15,000</FONT></TD>
    <TD align=middle width=56><FONT face="CG Times Regular"
      size=-1>--<BR>--<BR>--</FONT></TD>
    <TD align=middle width=4></TD>
    <TD align=middle width=62><FONT face="CG Times Regular"
      size=-1>--<BR>--<BR>--</FONT></TD>
    <TD align=right width=87><FONT face="CG Times Regular"
      size=-1>70,000&nbsp;&nbsp;&nbsp;<BR>50,000&nbsp;&nbsp;&nbsp;<BR>--&nbsp;&nbsp;&nbsp;
      </FONT></TD>
    <TD align=middle width=65>
      <P><FONT face="CG Times Regular"
    size=-1>9,000<BR>9,000<BR>9,000</FONT></P></TD></TR>
  <TR vAlign=top>
    <TD align=left width=214><FONT face="CG Times Regular" size=-1>Larry
      McNamara<SUP>(4)<BR></SUP>President of Nuclear Services</FONT></TD>
    <TD align=middle width=27><FONT face="CG Times Regular"
      size=-1>2001<BR>2000<BR>1999</FONT></TD>
    <TD align=middle width=43><FONT face="CG Times Regular"
      size=-1>127,667<BR>116,448<BR>104,191</FONT></TD>
    <TD align=middle width=39><FONT face="CG Times Regular"
      size=-1>30,000<BR>--<BR>--</FONT></TD>
    <TD align=middle width=56><FONT face="CG Times Regular"
      size=-1>--<BR>--<BR>--</FONT></TD>
    <TD align=middle width=4></TD>
    <TD align=middle width=62><FONT face="CG Times Regular"
      size=-1>--<BR>--<BR>--</FONT></TD>
    <TD align=right width=87><FONT face="CG Times Regular"
      size=-1>120,000&nbsp;&nbsp;&nbsp;<BR>50,000&nbsp;&nbsp;&nbsp;<BR>--&nbsp;&nbsp;&nbsp;
      </FONT></TD>
    <TD align=middle width=65>
      <P><FONT face="CG Times Regular"
      size=-1>9,000<BR>3,000<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;--</FONT></P></TD></TR>
  <TR vAlign=top>
    <TD width=214>
      <P></P></TD>
    <TD align=middle width=27>
      <P></P></TD>
    <TD align=right width=43>
      <P></P></TD>
    <TD align=right width=39></TD>
    <TD align=middle width=56>
      <P></P></TD>
    <TD align=middle width=4><FONT face="CG Times Regular" size=-1></FONT></TD>
    <TD align=middle width=62>
      <P></P></TD>
    <TD align=right width=87></TD>
    <TD align=middle width=65></TD></TR></TABLE>
<P>&nbsp;</P>
<P align=center><FONT face="CG Times Regular">-77-</FONT></P>
<P>&nbsp;</P>
<P>&nbsp;</P><FONT face="CG Times Regular"><SUP>(1)</SUP> Dr. Centofanti
previously received compensation pursuant to an employment agreement dated
October 1, 1997, which expired on September 30, 2000. As of the date of this
report, Dr. Centofanti has not entered into a new employment agreement.
Effective September 1, 2001, Dr. Centofanti's annual salary was increased from
$130,000, as established in July 1999, to $156,000.</FONT>
<P><FONT face="CG Times Regular"><SUP>(2)</SUP> Effective September 1, 2001, Mr.
Kelecy's annual salary was increased from $120,000, as established in July 1999,
to $145,000.</FONT></P>
<P><FONT face="CG Times Regular"><SUP>(3)</SUP> Mr. Randall was appointed
President of the Industrial Waste Management Services segment in October 2000,
at an annual salary of $115,000. Effective September 1, 2001, Mr. Randall's
annual salary was increased to $140,000.</FONT></P>
<P><FONT face="CG Times Regular"><SUP>(4) </SUP>Mr. McNamara was appointed
President of the Nuclear Waste Management Services segment in October 2000, at
an annual salary of $120,000. Effective September 1, 2001, Mr. McNamara's annual
salary was increased to $143,000.</FONT></P>
<P><FONT face="CG Times Regular"><SUP>(5) </SUP>Each noted executive is provided
a monthly automobile allowance in the amount of $750. </FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Option Grants in 2001<BR></STRONG>The
following table sets forth certain information relating to individual grants of
stock options made to each of the named executive officers in the above Summary
Compensation Table during the last fiscal year and the potential realizable
value of each grant of options, assuming that the market price of the underlying
Common Stock appreciates in value during the ten-year option term at annualized
rates of 5% and 10%.</FONT></P>
<TABLE width="100%">
    <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular"><STRONG><U>Individual
      Grants </U></STRONG></FONT><FONT
  face="CG Times Regular"></FONT></TD></TR></TABLE>
<TABLE width=660>
    <TR vAlign=top>
    <TD rowSpan=3 width=209><FONT size=2><B><BR WP="BR1"><BR WP="BR2"><BR
      WP="BR1"><BR><BR><BR><BR><BR WP="BR2">Name</B></FONT></TD>
    <TD align=middle rowSpan=3 width=83><FONT size=2><B><BR><BR><BR>Number
      of<BR><FONT face="CG Times Regular">Shares of<BR>Common
      Stock<BR>Underlying<BR>Options Granted</FONT></B></FONT></TD>
    <TD align=middle rowSpan=3 width=63><BR><FONT size=2><B><BR><BR>%
      of<BR><FONT face="CG Times Regular">Total Options<BR>Granted
      to<BR>Employees<BR>in 2001</FONT></B></FONT></TD>
    <TD align=middle rowSpan=3 width=52><FONT size=2><BR
      WP="BR1"><BR><BR><BR><BR><BR WP="BR2"><B>Exercise<BR><FONT
      face="CG Times Regular">Price ($/sh)<SUP>(1)</SUP></FONT></B></FONT></TD>
    <TD align=middle rowSpan=3 width=70><FONT
      size=2><BR><BR><BR><BR><BR><BR><BR WP="BR2"><B>Expiration</B><BR><FONT
      face="CG Times Regular"><STRONG>Date</STRONG></FONT></FONT></TD>
    <TD align=middle colSpan=2 width=145><FONT face="CG Times Regular"
      size=-1><STRONG>Potential Realizable<BR>Value at Assumed Annual<BR>Rates
      of Stock Price<BR>Appreciation<BR>for Option Term<SUP>(2)
      </SUP>&nbsp;</STRONG></FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle colSpan=2 width=145>
      <HR color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD align=middle width=70><FONT face="CG Times Regular"
      size=-1><STRONG>5%($) </STRONG></FONT></TD>
    <TD align=middle width=75><FONT face="CG Times Regular"
      size=-1><STRONG>10%($)</STRONG></FONT></TD></TR>
  <TR vAlign=top>
    <TD width=209>
      <HR align=left color=#000080 noShade SIZE=3 width="20%">
    </TD>
    <TD align=middle width=83>
      <HR color=#000080 noShade SIZE=3 width="90%">
    </TD>
    <TD align=middle width=63>
      <HR color=#000080 noShade SIZE=3 width="90%">
    </TD>
    <TD align=middle width=52>
      <HR color=#000080 noShade SIZE=3 width="90%">
    </TD>
    <TD align=middle width=70>
      <HR color=#000080 noShade SIZE=3 width="90%">
    </TD>
    <TD align=middle width=70>
      <HR color=#000080 noShade SIZE=3 width="90%">
    </TD>
    <TD align=middle width=75>
      <HR color=#000080 noShade SIZE=3 width="90%">
    </TD></TR></TABLE>
<TABLE width="100%">
    <TR vAlign=top>
    <TD><FONT face="CG Times Regular"></FONT><FONT face="CG Times Regular"
      size=-1>Dr. Louis F. Centofanti<SUP>(3)</SUP></FONT></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>100,000</FONT></TD>
    <TD align=middle><FONT face="CG Times Regular" size=-1></FONT></TD>
    <TD align=right></FONT><FONT face="CG Times Regular" size=-1>10.9%
    </FONT></TD>
    <TD align=middle><FONT face="CG Times Regular" size=-1></FONT></TD>
    <TD align=middle><FONT face="CG Times Regular"
    size=-1>&nbsp;$1.75</FONT></TD>
    <TD align=middle><FONT face="CG Times Regular" size=-1>04/03/11 </FONT></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>$110,057 </FONT></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>$278,905
  </FONT></TD></TR>
  <TR vAlign=top>
    <TD><FONT face="CG Times Regular" size=-1>Richard T.
      Kelecy<SUP>(4)</SUP></FONT></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>70,000</FONT></TD>
    <TD align=middle><FONT face="CG Times Regular" size=-1></FONT></TD>
    <TD align=right><FONT face="CG Times Regular"
      size=-1>7.6&nbsp;&nbsp;&nbsp;&nbsp; </FONT></TD>
    <TD align=middle><FONT face="CG Times Regular" size=-1></FONT></TD>
    <TD align=middle><FONT face="CG Times Regular" size=-1>&nbsp; 1.75
    </FONT></TD>
    <TD align=middle><FONT face="CG Times Regular" size=-1>04/03/11 </FONT></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>77,040 </FONT></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>195,233
</FONT></TD></TR>
  <TR vAlign=top>
    <TD><FONT face="CG Times Regular" size=-1>Roger
      Randall<SUP>(5)</SUP></FONT></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>70,000</FONT></TD>
    <TD align=middle><FONT face="CG Times Regular" size=-1></FONT></TD>
    <TD align=right><FONT face="CG Times Regular"
      size=-1>&nbsp;7.6&nbsp;&nbsp;&nbsp; </FONT></TD>
    <TD align=middle><FONT face="CG Times Regular" size=-1></FONT></TD>
    <TD align=middle><FONT face="CG Times Regular" size=-1>&nbsp; 1.75
    </FONT></TD>
    <TD align=middle><FONT face="CG Times Regular" size=-1>04/03/11 </FONT></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>77,040 </FONT></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>195,233
</FONT></TD></TR>
  <TR vAlign=top>
    <TD><FONT face="CG Times Regular" size=-1>Larry
      McNamara<SUP>(6)</SUP></FONT></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>120,000</FONT></TD>
    <TD align=middle><FONT face="CG Times Regular" size=-1></FONT></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>13.1&nbsp;&nbsp;
      </FONT></TD>
    <TD align=middle><FONT face="CG Times Regular" size=-1></FONT></TD>
    <TD align=middle><FONT face="CG Times Regular" size=-1>&nbsp; 1.75
    </FONT></TD>
    <TD align=middle><FONT face="CG Times Regular" size=-1>04/03/11 </FONT></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>132,068 </FONT></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>334,686 </FONT><FONT
      face="CG Times Regular"></FONT></TD></TR></TABLE>
<P><FONT face="CG Times Regular"><SUP>(1)</SUP> All options were granted at or
above market price (the closing bid price of the Common Stock on the NASDAQ
Small Cap Market on the date of grant).</FONT></P>
<P><FONT face="CG Times Regular"><SUP>(2)</SUP> The potential realizable value
of each grant of options assumes that the market price of the Company's Common
Stock appreciates in value from the date of grant to the end of the option term
at the annualized rates shown above each column. The actual value that an
executive may realize, if any, will depend on the amount by which the market
price of the Company's Common Stock at the time of exercise exceeds the exercise
price of the option. As of December 31, 2001, the closing price of a share of
the Company's Common Stock as quoted on NASDAQ was $2.60. There is no assurance
that any executive will receive the amounts estimated in this table.</FONT></P>
<P><FONT face="CG Times Regular"><SUP>(3)</SUP> The Company has adopted a 1993
Non-qualified Stock Option Plan (the "1993 Plan"). Dr. Centofanti was granted
options to purchase 100,000 shares of the Company's Common Stock pursuant to the
1993 Plan. The 1993 Plan provides that the options granted vest at the end of
years one through five in 20% increments.</FONT></P>
<P><FONT face="CG Times Regular"><SUP>(4)</SUP> Mr. Kelecy was granted options
to purchase 70,000 shares of the Company's Common Stock pursuant to the 1993
Plan. The 1993 Plan provides that the options granted vest at the end of years
one through five in 20% increments.</FONT></P>&nbsp;
<P align=center>-78-</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular"><SUP>(5)</SUP> Mr. Randall was granted options
to purchase 70,000 shares of the Company's Common Stock pursuant to the 1993
Plan. The 1993 Plan provides that the options granted vest at the end of years
one through five in 20% increments.</FONT></P>
<P><FONT face="CG Times Regular"><SUP>(6)</SUP> Mr. McNamara was granted options
to purchase 120,000 shares of the Company's Common Stock pursuant to the 1993
Plan. The 1993 Plan provides that the options granted vest at the end of years
one through five in 20% increments.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Aggregated Option Exercised in 2001 and
Fiscal Year-end Option Values<BR></STRONG>The following table sets forth
information concerning each exercise of stock options during the last completed
fiscal year by each of the executive officers named in the Summary Compensation
Table and the fiscal year-end value of unexercised options:</FONT></P>
<TABLE width="100%">
    <TR vAlign=top>
    <TD align=middle rowSpan=3><FONT size=2><BR><BR><BR><BR WP="BR1"><BR
      WP="BR2"><FONT
    face="CG Times Regular"><STRONG>Name</STRONG></FONT></FONT></TD>
    <TD align=middle rowSpan=3><B><FONT
      size=2><BR><BR><BR>Shares<BR></FONT><FONT face="CG Times Regular"
      size=2>Acquired on<BR>Exercise (#)<SUP>(1)</SUP></FONT></B></TD>
    <TD align=middle rowSpan=3><B><FONT
      size=2><BR><BR><BR>Value<BR></FONT><FONT face="CG Times Regular"
      size=2>Realized<BR>($)<SUP>(1)</SUP> </FONT></B></TD>
    <TD align=middle colSpan=2><STRONG><FONT face="CG Times Regular"
      size=2>Number of Unexercised<BR>Options at Fiscal
      year-end<BR>(#)&nbsp;&nbsp;</FONT></STRONG></TD>
    <TD align=middle colSpan=2><STRONG><FONT face="CG Times Regular"
      size=2>Value of Unexercised<BR>in-the-Money Options<BR>at Fiscal Year End
      ($)<SUP>(2)</SUP>&nbsp;&nbsp;</FONT></STRONG></TD></TR>
  <TR vAlign=top>
    <TD align=middle colSpan=2>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle colSpan=2>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD align=middle><STRONG><FONT face="CG Times Regular"
      size=2>Exercisable</FONT></STRONG></TD>
    <TD align=middle><STRONG><FONT face="CG Times Regular"
      size=2>Unexercisable</FONT></STRONG></TD>
    <TD align=middle><STRONG><FONT face="CG Times Regular"
      size=2>Exercisable</FONT></STRONG></TD>
    <TD align=middle><STRONG><FONT face="CG Times Regular"
      size=2>Unexercisable</FONT></STRONG></TD></TR>
  <TR vAlign=top>
    <TD align=middle>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD>
    <TD align=middle>
      <HR align=left color=#000080 noShade SIZE=3>
    </TD></TR>
  <TR vAlign=top>
    <TD><FONT face="CG Times Regular" size=-1>Dr. Louis F.
Centofanti</FONT></TD>
    <TD align=middle><FONT face="CG Times Regular" size=-1>-</FONT></TD>
    <TD align=middle><FONT face="CG Times Regular" size=-1>- </FONT></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>335,000 </FONT></TD>
    <TD align=middle><FONT face="CG Times Regular" size=-1>160,000</FONT></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>62,250 </FONT></TD>
    <TD align=middle><FONT face="CG Times Regular"
size=-1>166,000</FONT></TD></TR>
  <TR vAlign=top>
    <TD><FONT face="CG Times Regular" size=-1>Richard Kelecy</FONT></TD>
    <TD align=middle><FONT face="CG Times Regular" size=-1>-</FONT></TD>
    <TD align=middle><FONT face="CG Times Regular" size=-1>-</FONT></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>150,000 </FONT></TD>
    <TD align=middle><FONT face="CG Times Regular" size=-1>130,000</FONT></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>173,000 </FONT></TD>
    <TD align=middle><FONT face="CG Times Regular"
size=-1>139,500</FONT></TD></TR>
  <TR vAlign=top>
    <TD><FONT face="CG Times Regular" size=-1>Roger Randall</FONT></TD>
    <TD align=middle><FONT face="CG Times Regular" size=-1>-</FONT></TD>
    <TD align=middle><FONT face="CG Times Regular" size=-1>-</FONT></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>130,000 </FONT></TD>
    <TD align=middle><FONT face="CG Times Regular" size=-1>130,000</FONT></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>173,000 </FONT></TD>
    <TD align=middle><FONT face="CG Times Regular"
size=-1>139,500</FONT></TD></TR>
  <TR vAlign=top>
    <TD><FONT face="CG Times Regular" size=-1>Larry McNamara</FONT></TD>
    <TD align=middle><FONT face="CG Times Regular" size=-1>-</FONT></TD>
    <TD align=middle><FONT face="CG Times Regular" size=-1>-</FONT></TD>
    <TD align=middle><FONT face="CG Times Regular" size=-1>
      <P align=right>10,000 </FONT></P></TD>
    <TD align=middle><FONT face="CG Times Regular" size=-1>
      <P align=center>160,000</FONT></P></TD>
    <TD align=right><FONT face="CG Times Regular" size=-1>13,500 </FONT></TD>
    <TD align=middle><FONT face="CG Times Regular" size=-1>156,000</FONT><FONT
      face="CG Times Regular"></FONT></TD></TR></TABLE>
<P><FONT face="CG Times Regular"><SUP>(1)</SUP> No options were exercised during
2001.</FONT></P>
<P><FONT face="CG Times Regular"><SUP>(2)</SUP> Represents the difference
between $2.60 (the closing price of the Company's Common Stock reported on the
National Association of Securities Dealers Automated Quotation ("NASDAQ") Small
Cap Market on December 31, 2001), and the option exercise price. The actual
value realized by a named executive officer on the exercise of these options
depends on the market value of the Company's Common Stock on the date of
exercise.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>401(k) Plan<BR></STRONG>The Company
adopted the Perma-Fix Environmental Services, Inc. 401(k) Plan (the "401(k)
Plan") in 1992, which is intended to comply with Section 401 of the Internal
Revenue Code and the provisions of the Employee Retirement Income Security Act
of 1974. All 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 18% of their compensation, up to a maximum
amount as limited by law. The Company, at its discretion, may make matching
contributions based on the employee's elective contributions. Company
contributions vest over a period of five years. We elected not to provide any
matching contributions for the years ended December 31, 1998 and 1997. However,
beginning January 1, 1999, the Company currently matches up to 25% of our
employee's contributions, not to exceed 3% of a participant's compensation. The
Company contributed $241,000 in matching funds during 2001.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Employee Stock Purchase
Plan<BR></STRONG>The Company has adopted the Perma-Fix Environmental Services,
Inc. 1996 Employee Stock Purchase Plan (the "1996 Plan") which is intended to
comply with Section 423 of the Code. All full-time employees who have completed
at least six (6) months of continuous service, other than those that are deemed,
for the purpose of Section 423(b)(3) of the Code, to own stock possessing five
percent (5%) or more of the total combined voting power or value of all classes
of stock of the Company, are eligible to participate in the 1996 Plan.
Participating employees ("Participants") may authorize for payroll periods
beginning on or after January 1, 1997, payroll deductions from compensation for
the purpose of funding the Participant's stock purchase account ("Stock Purchase
Account"). This deduction shall be not less than one percent (1%) nor more than
five percent (5%) of the Participant's gross amount of compensation. The
purchase price per share of the Common Stock to be sold to Participants pursuant
to the 1996 Plan is the sum of (a) eighty-five percent (85%) of the fair market
value of each share on the offering date on which such Offering commences or on
the Exercise Date (as defined in the 1996 Plan) on which such offering expires,
whichever is the lower, and (b) any transfer, excise or similar tax imposed on
the transaction pursuant to which shares of Common</FONT></P>
<P>&nbsp;</P>
<P align=center>-79-</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">Stock are purchased. The "Offering Date" means
the first day of each January and July during which the 1996 Plan is in effect,
commencing with January 1, 1997. There is no holding period regarding Common
Stock purchased under the 1996 Plan, however, in order for a participant to be
entitled to the tax treatment described in Section 423 of the Code with respect
to the Participant's sale of Common Stock purchased under the 1996 Plan, such
Stock must not be sold for at least one (1) year after acquisition under the
1996 Plan, except in the case of death. Any Participant may voluntarily withdraw
from the 1996 Plan by filing a notice of withdrawal with the Board of Directors
prior to the fifteenth (15th) day of the last month in a Purchase Period (as
defined in the 1996 Plan). Upon such withdrawal, there shall be paid to the
Participant the amount, if any, standing to the Participant's credit in the
Participant's Stock Purchase Account. If a Participant ceases to be an eligible
employee, the entire amount standing to the Participant's credit in the
Participant's Stock Purchase Account on the effective date of such occurrence
shall be paid to the Participant. The first purchase period commenced July 1,
1997. The following table details the resulting employee stock purchase totals,
which includes 33,814 shares for the purchase period July 1 through December 31,
2001, which were issued in February 2002.</FONT></P>
<TABLE width=591>
    <TR vAlign=top>
    <TD align=middle width=72></TD>
    <TD align=middle width=237><BR WP="BR1"><FONT
      face="CG Times Regular">Purchase Period</FONT></TD>
    <TD align=middle width=102><FONT face="CG Times Regular"><BR
      WP="BR1"></FONT>Proceeds</TD>
    <TD align=middle width=10></TD>
    <TD align=middle width=138><FONT
      face="CG Times Regular">Shares<BR>Purchased</FONT> </TD></TR>
  <TR vAlign=top>
    <TD align=middle width=72></TD>
    <TD align=middle width=237>
      <HR color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=middle width=102>
      <HR color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=middle width=10></TD>
    <TD align=middle width=138>
      <HR color=#000080 noShade SIZE=3 width="95%">
    </TD></TR>
  <TR vAlign=top>
    <TD width=72></TD>
    <TD width=237><FONT face="CG Times Regular">July 1 - December 31,
      1997</FONT></TD>
    <TD align=right width=102><FONT face="CG Times Regular">$
      16,000&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </FONT></TD>
    <TD width=10><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=138><FONT
      face="CG Times Regular">8,276&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=72></TD>
    <TD width=237><FONT face="CG Times Regular">January 1 - June 30,
      1998</FONT></TD>
    <TD align=right width=102><FONT
      face="CG Times Regular">17,000&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </FONT></TD>
    <TD width=10><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=138><FONT
      face="CG Times Regular">10,732&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=72></TD>
    <TD width=237><FONT face="CG Times Regular">July 1 - December 31,
      1998</FONT></TD>
    <TD align=right width=102><FONT
      face="CG Times Regular">22,000&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </FONT></TD>
    <TD width=10><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=138><FONT
      face="CG Times Regular">17,517&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=72></TD>
    <TD width=237><FONT face="CG Times Regular">January 1 - June 30,
      1999</FONT></TD>
    <TD align=right width=102><FONT
      face="CG Times Regular">28,000&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </FONT></TD>
    <TD width=10><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=138><FONT
      face="CG Times Regular">21,818&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=72></TD>
    <TD width=237><FONT face="CG Times Regular">July 1 - December 31,
      1999</FONT></TD>
    <TD align=right width=102><FONT
      face="CG Times Regular">49,000&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </FONT></TD>
    <TD width=10><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=138><FONT
      face="CG Times Regular">48,204&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=72></TD>
    <TD width=237><FONT face="CG Times Regular">January 1 - June 30,
      2000</FONT></TD>
    <TD align=right width=102><FONT
      face="CG Times Regular">54,000&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </FONT></TD>
    <TD width=10><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=138><FONT
      face="CG Times Regular">53,493&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=72></TD>
    <TD width=237><FONT face="CG Times Regular">July 1 - December 31,
      2000</FONT></TD>
    <TD align=right width=102><FONT
      face="CG Times Regular">52,000&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </FONT></TD>
    <TD width=10><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=138><FONT
      face="CG Times Regular">46,632&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=72></TD>
    <TD width=237><FONT face="CG Times Regular">January 1 - June 30,
      2001</FONT></TD>
    <TD align=right width=102><FONT
      face="CG Times Regular">48,000&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </FONT></TD>
    <TD width=10><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=138><FONT
      face="CG Times Regular">43,324&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=72></TD>
    <TD width=237><FONT face="CG Times Regular">July 1 - December 31,
      2001</FONT></TD>
    <TD align=right width=102><FONT
      face="CG Times Regular">69,000&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </FONT></TD>
    <TD width=10><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=138><FONT
      face="CG Times Regular">33,814&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD></TR></TABLE>
<P><FONT face="CG Times Regular"><STRONG>Compensation of
Directors<BR></STRONG>In 2001, we paid our outside director's fees based on
monthly payments of $1,000 for each month of service from January through
September 2001, and $1,500 for each month thereafter, resulting in the four
outside directors earning annual director's fees in the total amount of $45,000.
Subject to the election of each director, either sixty-five percent (65%) or one
hundred percent (100%) of each director's fee is payable, in shares of our
Common Stock based on seventy-five percent (75%) of the fair market value of the
Common Stock determined on the business day immediately preceding the date that
the fee is due. The balance of each director fee, if any, is payable in cash.
The aggregate amount of accrued director's fees paid during 2001 to the four
outside directors (Messrs. Colin, Lahav, Sullivan and Zwecker) was $24,000, paid
by the issuance of 22,770 shares of Common Stock and $3,000 in cash payment. The
aggregate amount of accrued director fees at December 31, 2001, to be paid in
2002, totals $18,000. Reimbursement of expenses for attending meetings of the
Board are paid in cash at the time of the applicable Board meeting. The outside
directors do not receive additional compensation for committee participation or
special assignments except for reimbursement of expenses. We do not compensate
the directors that also serve as our officers or employees of our subsidiaries
for their service as directors.</FONT></P>
<P><FONT face="CG Times Regular">We believe that it is important for our
directors to have a personal interest in our success and growth and for their
interests to be aligned with those of our stockholders. Therefore, under the
Company's 1992 Outside Directors Stock Option and Incentive Plan ("Outside
Directors Plan"), each outside director is granted an option to purchase up to
15,000 shares of Common Stock on the date such director is initially elected to
the Board of Directors and receives on each reelection date an option to
purchase up to another 5,000 shares of Common Stock, with the exercise price
being the fair market value of the Common Stock on the date that the option is
granted. No option granted under the Outside Directors Plan is exercisable until
after the expiration of six months from the date the option is granted and no
option shall be exercisable after the expiration of ten (10) years from the date
the option is granted. As of December 31, 2001, options to purchase 255,000
shares of Common Stock had been granted under the Outside Directors Plan.
</FONT></P>
<P>&nbsp;</P>
<P align=center><FONT face="CG Times Regular">-80-</FONT></P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">The Outside Directors Plan also provides that
each eligible director shall receive, at such eligible director's option, either
sixty-five percent (65%) or one hundred percent (100%) of the fee payable to
such director for services rendered as a member of our Board in Common Stock. In
either case, the number of shares of our Common Stock issuable to the eligible
director shall be determined by valuing the Common Stock of the Company at
seventy-five percent (75%) of its fair market value as defined by the Outside
Directors Plan. As of the date of this report, we have issued 193,562 shares of
the Company's Common Stock in payment of director fees, covering the period
January 1, 1995 through December 31, 2001. The number of shares of Common Stock
which may be issued in the aggregate under the Outside Directors Plan, either
under options or stock awards, is 500,000 shares subject to
adjustment.</FONT></P>
<P><FONT face="CG Times Regular">Although Dr. Centofanti is not compensated for
his services provided as a director, Dr. Centofanti is compensated for his
services rendered as an officer of the Company. See "Employment Contracts,
Termination of Employment and Change in Control Arrangements" and "EXECUTIVE
COMPENSATION -- Summary Compensation Table."</FONT></P>
<P><FONT face="CG Times Regular">The Company's 1991 Performance Equity Plan and
the 1993 Non-qualified Stock Option Plan, described under "Report of the
Compensation and Stock Option Committee-(c) Stock Options." (collectively, the
"Plans") provide that in the event of a change in control (as defined in the
Plans) of the Company, each outstanding option and award granted under the Plans
shall immediately become exercisable in full notwithstanding the vesting or
exercise provisions contained in the stock option agreement. As a result, all
outstanding stock options and awards granted under the Plans to our executive
officers shall immediately become exercisable upon such a change in control of
the Company.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Compensation Committee Interlocks and
Insider Participation<BR></STRONG>During the period January - December 2001, the
Compensation and Stock Option Committee for the Company's Board of Directors was
composed of Mark Zwecker and Thomas P. Sullivan. Mr. Zwecker was neither an
officer nor an employee during the year 1999, however, Mr. Zwecker did serve as
our Secretary from June 1995 until June 30, 1996. Mr. Sullivan was neither an
officer nor an employee of the Company during 2001.</FONT></P>
<TABLE width=614>
    <TR vAlign=top>
    <TD width=89><FONT face="CG Times Regular"><STRONG>ITEM
      12.</STRONG></FONT> </TD>
    <TD width=511><FONT face="CG Times Regular"><STRONG>SECURITY OWNERSHIP OF
      CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT</STRONG></FONT></TD></TR></TABLE>
<P><FONT face="CG Times Regular"><STRONG>Security Ownership of Certain
Beneficial Owners<BR></STRONG>The following table sets forth information as to
the shares of voting securities beneficially owned as of March&nbsp;26, 2002, by
each person known by us to be the beneficial owner of more than five percent
(5%) of any class of our voting securities. Beneficial ownership by our
stockholders has been determined in accordance with the rules promulgated under
Section 13(d) of the Securities Exchange Act of 1934, as amended. A person is
deemed to be a beneficial owner of any securities of which that person has the
right to acquire beneficial ownership of such securities within 60 days from
March 26, 2002.</FONT></P>
<TABLE width=619>
    <TR vAlign=top>
    <TD align=middle width=35></TD>
    <TD align=middle width=197><B><BR WP="BR1">Name of<BR><FONT
      face="CG Times Regular">Beneficial Owner</FONT></B></TD>
    <TD align=middle width=122><B><FONT face="CG Times Regular"><BR
      WP="BR1"></FONT>Title<BR><FONT face="CG Times Regular">of
    Class</FONT></B></TD>
    <TD align=middle width=123><FONT face="CG Times Regular"><B>Amount
      and<BR>Nature of<BR>Ownership</B></FONT></TD>
    <TD align=middle width=110><FONT
      face="CG Times Regular"><B>Percent<BR>of<BR>Class<SUP>(1)</SUP></B></FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle width=35></TD>
    <TD align=middle width=197>
      <HR color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=middle width=122>
      <HR color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=middle width=123>
      <HR color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=middle width=110>
      <HR color=#000080 noShade SIZE=3 width="95%">
    </TD></TR>
  <TR vAlign=top>
    <TD width=35></TD>
    <TD width=197><FONT face="CG Times Regular">Capital Bank Grawe
      Gruppe<SUP>(2)</SUP> </FONT></TD>
    <TD align=middle width=122><FONT face="CG Times Regular">Common</FONT></TD>
    <TD align=middle width=123><FONT
      face="CG Times Regular">14,713,067<SUP>(2)</SUP></FONT></TD>
    <TD align=middle width=110><FONT
  face="CG Times Regular">37.47%</FONT></TD></TR></TABLE>
<P><FONT face="CG Times Regular"><SUP></SUP></FONT><FONT
face="CG Times Regular"><SUP>(1) </SUP>In computing the number of shares and the
percentage of outstanding Common Stock "beneficially owned" by a person, the
calculations are based upon 34,087,125 shares of Common Stock issued and
outstanding on March 26, 2002 (excluding 988,000 Treasury Shares), plus the
number of shares of Common Stock which such person has the right to acquire
beneficial ownership of within 60 days. </FONT></P>
<P><FONT face="CG Times Regular"><SUP>(2)</SUP> This amount includes 9,530,745
shares that Capital Bank owns of record and 3,515,655 shares that Capital Bank
has the right to acquire within 60 days under certain Warrants. The Warrants are
exercisable at exercise prices ranging from $1.42 to $1.97 per share of Common
Stock. This amount also includes</FONT></P>
<P>&nbsp;</P>
<P align=center>-81-</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">1,666,667 shares of Common Stock issuable upon
the conversion of 2,500 shares of Series 17 Preferred held by Capital Bank. This
amount does not include the shares of Common Stock which may be issuable for
payment of dividends on the Series 17 Preferred. This amount also does not
include the 842,995 shares which will be issuable upon approval of a proxy
statement for a special meeting of stockholders currently in the process of
being filed and the potential future exercise of the Warrants acquired by
Capital Bank in the Private Offering. If exercise of the Warrants is approved by
the stockholders, then Capital Bank will beneficially own 15,556,062 shares of
Common Stock, representing 38.78% of the then outstanding Common Stock, assuming
that the Company does not issue any shares of Common Stock except to Capital
Bank, and Capital Bank does not sell or otherwise dispose of any shares of
Common Stock. Capital Bank</FONT> <FONT face="CG Times Regular">has also advised
the Company that it is holding these Warrants, including the Warrants acquired
in the Private Offering, and shares on behalf of numerous clients, all of which
are accredited investors. Although Capital Bank is the record holder of the
shares of Common Stock and Warrants described in this note, Capital Bank has
advised the Company that it does not believe it is a beneficial owner of the
Common Stock or that it is required to file reports under Section 16(a) or
Section 13(d) of the Exchange Act. Because Capital Bank (a) has advised the
Company that it holds the Common Stock as a nominee only and that it does not
exercise voting or investment power over the Common Stock held in its name and
that no one investor of Capital Bank for which it holds Company Common Stock
holds more than 4.9% of the issued and outstanding Common Stock of the Company;
(b) has no right to, and is not believed to possess the power to, exercise
control over the Company's management or its policies; (c) has not nominated,
and has not sought to nominate, a director to the Company's board; and (d) has
no representative serving as an executive officer of the Company, the Company
does not believe that Capital Bank is an affiliate of the Company. Capital
Bank's address is Burgring 16, 8010 Graz, Austria. Capital Bank has advised the
Company that it is a banking institution regulated by the banking regulations of
Austria. Capital Bank is a wholly owned subsidiary of Grazer Wechselseitige
Versicherung Aktiengesellschaft ("Grazer"). Capital Bank has advised the Company
that Grazer is wholly owned by GRAWE VERMOGENSVERWALTUNG, a mutual insurance
association ("GRAWE"). Capital Bank has further advised the Company that the
owners of GRAWE are all insurance holders of Grazer with an insurance agreement
for more than one year. See "POTENTIAL CHANGE IN CONTROL."</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Security Ownership of
Management<BR></STRONG>The following table sets forth information as to the
shares of voting securities beneficially owned as of March&nbsp;26, 2002, by
each Director and named executive officers of the Company listed in the Summary
Compensation table and all Directors and executive officers of the Company as a
group. Beneficial ownership by the Company's stockholders has been determined in
accordance with the rules promulgated under Section 13(d) of the Exchange Act. A
person is deemed to be a beneficial owner of any voting securities for which
that person has the right to acquire beneficial ownership within sixty (60)
days. All voting securities are owned both of record and beneficially unless
otherwise indicated.</FONT></P>
<TABLE width=622>

  <TR vAlign=top>
    <TD align=middle width=26></TD>
    <TD align=middle width=249><B><BR WP="BR1">Name of<BR></B><FONT
      face="CG Times Regular"><B>Beneficial Owner</B></FONT></TD>
    <TD align=middle width=143><FONT face="CG Times Regular"><B>Number of
      Shares<BR>of Common Stock<BR>Beneficially Owned</B></FONT></TD>
    <TD align=middle width=10></TD>
    <TD align=middle width=162><B><BR WP="BR1">Percentage of<BR></B><FONT
      face="CG Times Regular"><B>Common Stock<SUP>(1)</SUP></B></FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle width=26></TD>
    <TD align=middle width=249>
      <HR color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=middle width=143>
      <HR color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=middle width=10></TD>
    <TD align=middle width=162>
      <HR color=#000080 noShade SIZE=3 width="95%">
    </TD></TR></TABLE>
<CENTER>
<TABLE align=center width=598>
    <TR vAlign=top>
    <TD width=27></TD>
    <TD width=221><FONT face="CG Times Regular">Dr. Louis F.
      Centofanti<SUP>(2)(3)</SUP></FONT></TD>
    <TD align=right width=97><FONT face="CG Times Regular">1,215,434</FONT></TD>
    <TD width=53><FONT face="CG Times Regular"><SUP>(3)</SUP></FONT></TD>
    <TD align=middle width=168><FONT
face="CG Times Regular">3.53%</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=27></TD>
    <TD width=221><FONT face="CG Times Regular">Mark A.
      Zwecker<SUP>(2)(4)</SUP></FONT></TD>
    <TD align=right width=97><FONT face="CG Times Regular">245,003</FONT></TD>
    <TD width=53><FONT face="CG Times Regular"><SUP>(4)</SUP></FONT></TD>
    <TD align=middle width=168><FONT face="CG Times Regular">*</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=27></TD>
    <TD width=221><FONT face="CG Times Regular">Jon
      Colin<SUP>(2)(5)</SUP></FONT></TD>
    <TD align=right width=97><FONT face="CG Times Regular">53,489</FONT></TD>
    <TD width=53><FONT face="CG Times Regular"><SUP>(5)</SUP></FONT></TD>
    <TD align=middle width=168><FONT face="CG Times Regular">*</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=27></TD>
    <TD width=221><FONT face="CG Times Regular">Thomas P.
      Sullivan<SUP>(2)(6)</SUP></FONT></TD>
    <TD align=right width=97><FONT
      face="CG Times Regular">1,618,802<SUP></SUP></FONT></TD>
    <TD width=53><FONT face="CG Times Regular"><SUP>(6)</SUP></FONT></TD>
    <TD align=middle width=168><FONT
face="CG Times Regular">4.74%</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=27></TD>
    <TD width=221><FONT face="CG Times Regular">Jack
      Lahav<SUP>(2)(7)</SUP></FONT></TD>
    <TD align=right width=97><FONT face="CG Times Regular">586,597</FONT></TD>
    <TD width=53><FONT face="CG Times Regular"><SUP>(7)</SUP></FONT></TD>
    <TD align=middle width=168><FONT
face="CG Times Regular">1.72%</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=27></TD>
    <TD width=221><FONT face="CG Times Regular">Alfred C. Warrington,
      IV<SUP>(2)(8)</SUP></FONT></TD>
    <TD align=right width=97><FONT face="CG Times Regular">142,439</FONT></TD>
    <TD width=53><FONT face="CG Times Regular"><SUP>(8)</SUP></FONT></TD>
    <TD align=middle width=168><FONT face="CG Times Regular">*</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=27></TD>
    <TD width=221><FONT face="CG Times Regular">Richard T.
      Kelecy<SUP>(2)(9)</SUP></FONT></TD>
    <TD align=right width=97><FONT face="CG Times Regular">195,224</FONT></TD>
    <TD width=53><FONT face="CG Times Regular"><SUP>(9)</SUP></FONT></TD>
    <TD align=middle width=168><FONT face="CG Times Regular">*</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=27></TD>
    <TD width=221><FONT face="CG Times Regular">Roger
      Randall<SUP>(2)(10)</SUP></FONT></TD>
    <TD align=right width=97><FONT face="CG Times Regular">162,000</FONT></TD>
    <TD width=53><FONT face="CG Times Regular"><SUP>(10)</SUP></FONT></TD>
    <TD align=middle width=168><FONT face="CG Times Regular">*</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=27></TD>
    <TD width=221><FONT face="CG Times Regular">Larry
      McNamara<SUP>(2)(11)</SUP></FONT></TD>
    <TD align=right width=97><FONT face="CG Times Regular">44,000</FONT></TD>
    <TD width=53><FONT face="CG Times Regular"><SUP>(11)</SUP></FONT></TD>
    <TD align=middle width=168><FONT face="CG Times Regular">*</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=27></TD>
    <TD width=221><FONT face="CG Times Regular">Directors and Executive
      Officers<BR>as a Group (9 persons)</FONT></TD>
    <TD align=right width=97><BR WP="BR2">4,262,988</TD>
    <TD width=53><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle width=168><BR
WP="BR1">12.18%</TD></TR></TABLE></CENTER>
<P><FONT face="CG Times Regular">*Indicates beneficial ownership of less than
one percent (1%).</FONT></P>
<P>&nbsp;</P>
<P align=center><FONT face="CG Times Regular">-82-</FONT></P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular"><SUP>(1)</SUP> See footnote (1) of the table
under "Security Ownership of Certain Beneficial Owners."</FONT></P>
<P><FONT face="CG Times Regular"><SUP>(2)</SUP> The business address of such
person, for the purposes hereof, is c/o Perma-Fix Environmental Services, Inc.,
1940 N.W. 67th Place, Gainesville, Florida 32653.</FONT></P>
<P><FONT face="CG Times Regular"><SUP>(3)</SUP> These shares include (i) 541,434
shares held of record by Dr. Centofanti; (ii) options to purchase 70,000 shares
granted pursuant to the 1991 Performance Equity Plan and the 1993 Non-qualified
Stock Option Plan, which are immediately exercisable; (iii) 300,000 shares
granted pursuant to Dr. Centofanti's employment agreement that expired in 2000,
which are immediately exercisable; and (iv) 304,000 shares held by the wife of
Dr. Centofanti. This amount does not include options to purchase 125,000 shares
granted pursuant to the 1993 Non-qualified Stock Option Plan, which are not
exercisable within sixty (60) days. Dr. Centofanti has sole voting and
investment power of these shares, except for the shares held by Dr. Centofanti's
wife, over which Dr. Centofanti shares voting and investment power.</FONT></P>
<P><FONT face="CG Times Regular"><SUP>(4) </SUP>Mr. Zwecker has sole voting and
investment power over these shares which include: (i) 200,003 shares of Common
Stock held of record by Mr. Zwecker; (ii) 5,000 options to purchase Common Stock
pursuant to the 1993 Non-qualified Stock Option Plan, which are immediately
exercisable; and (iii) options to purchase 40,000 shares granted pursuant to the
1992 Outside Directors Stock Option and Incentive Plan which are immediately
exercisable. </FONT></P>
<P><FONT face="CG Times Regular"><SUP>(5) </SUP>Mr. Colin has sole voting and
investment power over these shares which include: (i) 13,489 shares held of
record by Mr. Colin, and (ii) options to purchase 40,000 shares granted pursuant
to the 1992 Outside Directors Stock Option and Incentive Plan which are
immediately exercisable. </FONT></P>
<P><FONT face="CG Times Regular"><SUP>(6) </SUP>These shares include (i) 32,898
shares held of record by Mr. Sullivan, (ii) options to purchase 30,000 shares
granted pursuant to the 1992 Outside Directors Stock Option and Incentive Plan,
which are immediately exercisable, and (iii) 1,555,904 shares held by the Ann L.
Sullivan Living Trust, dated September 6, 1998 ("ALS Trust"), a trust
established for the benefit of Ann L. Sullivan. Ann L. Sullivan is the wife of
Mr. Sullivan and is the trustee and primary beneficiary of the ALS
Trust.</FONT></P>
<P><FONT face="CG Times Regular"><SUP>(7) </SUP>Mr. Lahav has sole voting and
investment power over these shares which include: (i) 571,597 shares of Common
Stock held of record by Mr. Lahav; and (ii) 15,000 options to purchase Common
Stock pursuant to the 1992 Outside Directors Stock Option and Incentive Plan
which are immediately exercisable. This amount does not include 571,429 Warrants
to purchase Common Stock purchased pursuant to our Private Offering held in 2001
which are exercisable only upon shareholder approval. If shareholder approval is
obtained, Mr. Lahav would beneficially own 1,158,026 shares or 3.34% of the
Company's issued and outstanding Common Stock assuming no other
issuances.</FONT></P>
<P><FONT face="CG Times Regular"><SUP>(8) </SUP>Mr. Warrington has sole voting
and investment power over 142,439 shares which include: (i) 112,439 shares of
Common Stock held of record by Mr. Warrington; (ii) 20,000 options to purchase
Common Stock pursuant to the 1992 Outside Directors Stock Option and Incentive
Plan which are immediately exercisable, and (iii) 10,000 options to purchase
Common Stock granted pursuant to the 1993 Non-qualified Stock Option Plan. Does
not include options to purchase 15,000 shares of Common Stock granted pursuant
to the 1992 Outside Directors Stock Option and Incentive Plan which are not
exercisable within sixty (60) days.</FONT></P>
<P><FONT face="CG Times Regular"><SUP>(9) </SUP>Mr. Kelecy has sole voting and
investment power over 13,224 shares of Common Stock held of record by Mr. Kelecy
and 182,000 options to purchase Common Stock granted pursuant to the 1993
Non-qualified Stock Option Plan. This amount does not include options to
purchase 98,000 shares of Common Stock granted pursuant to the 1993
Non-qualified Stock Option Plan which are not exercisable within sixty (60)
days.</FONT></P>
<P><FONT face="CG Times Regular"><SUP>(10) </SUP>Mr. Randall has sole voting and
investment power over these shares which include: (i) 162,000 options to
purchase Common Stock pursuant to the 1993 Non-qualified Stock Option Plan,
which are immediately exercisable. This amount does not include options to
purchase 98,000 shares of Common Stock granted pursuant to the 1993
Non-qualified Stock Option Plan which are not exercisable within sixty (60)
days.</FONT></P>
<P>&nbsp;</P>
<P align=center><FONT face="CG Times Regular">-83-</FONT></P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular"><SUP>(11) </SUP>Mr. McNamara has sole voting
and investment power over these shares which include: (i) 44,000 options to
purchase Common Stock pursuant to the 1993 Non-qualified Stock Option Plan which
are exercisable within 60 days. This amount does not include Warrants to
purchase 126,000 shares pursuant to the 1993 Non-qualified Stock Option Plan
which are not exercisable within sixty (60) days.</FONT></P>
<P><FONT face="CG Times Regular"><STRONG>Potential Change in
Control<BR></STRONG>As of March 26, 2002, Capital Bank owned of record, as agent
for certain accredited investors, 9,530,745 shares of Common Stock representing
37.47% of the Company's issued and outstanding Common Stock. Capital Bank has
rights to acquire an additional 5,182,322 shares of Common Stock if exercise of
the Warrants pursuant to the Private Offering is not approved at a special
meeting of stockholders for which a proxy statement is currently in the process
of being filed or 6,025,317 shares if the exercise of such Warrants are
approved. The shares which Capital Bank has the right to acquire are the
following: (i) 842,995 shares of Common Stock issuable upon exercise of the
Warrants included in the units purchased in the Private Offering by Capital Bank
as agent for certain investors assuming the stockholders approve the exercise of
the Warrants issued in the Private Offering; (ii)</FONT><FONT face="CG Times">
</FONT><FONT face="CG Times Regular">3,515,655 shares of Common Stock issuable
under various other Warrants held by Capital Bank; and (iii) 1,666,667 shares of
Common Stock issuable to Capital Bank upon the conversion of 2,500 shares of the
Company's Series 17 Preferred held by Capital Bank. The Series 17 Preferred is
not entitled to vote on proposals included in the Company's proxy statements.
</FONT></P>
<P><FONT face="CG Times Regular">If Capital Bank were to acquire all of the
shares of Common Stock issuable upon exercise of the various Warrants held by
Capital Bank and the shares of Common Stock issuable upon conversion of the
Series 17 Preferred, then Capital Bank's record ownership as of March 26, 2002
would be, (a) 14,713,067 shares of Common Stock if the exercise of the Warrants
issued in the Private Offering are not approved, representing 37.47% of the
issued and outstanding Common Stock as of March 26, 2002; or (b)15,556,062
shares of Common Stock, representing 38.78% of the issued and outstanding Common
Stock as of March 26, 2002, if the exercise of the Warrants issued in the
Private Offering were approved by the stockholders.</FONT></P>
<P><FONT face="CG Times Regular">The foregoing estimates assume that no other
shares of Common Stock are issued by the Company, no other Warrants or Options
are exercised, the Company does not acquire additional shares of Common Stock as
treasury stock, and Capital Bank does not dispose of any shares of Common Stock.
</FONT></P>
<P><FONT face="CG Times Regular">If Capital Bank were to acquire the shares of
Common Stock as described above, the Company may not be able to avoid an actual
change in control of the Company if Capital Bank seeks such a change in control.
Moreover, if such conversion and exercise results in Capital Bank acquiring more
than 50% of the then outstanding Common Stock of the Company, the Company would
not be able to avoid a change in control. </FONT></P>
<P><FONT face="CG Times Regular">If Capital Bank acquires the shares of Common
Stock described above, Capital Bank may be able to cause a change in at least
50% of the members of the Company's Board of Directors. Such a change in Board
membership could be an event of default under the Company's $22 million credit
facility (the "Credit Facility") and its $5.6 million outstanding Senior
Subordinated Notes due July 31, 2006 (the "Notes"). In addition, if Capital Bank
were to acquire such shares and cause Dr. Louis Centofanti to be removed from
the Board of Directors or as the Company's president and chief executive
officer, the removal could be an event of default under the Credit Facility and
the Notes.</FONT></P>
<P><FONT face="CG Times Regular">Capital Bank has advised the Company that it is
a banking institution regulated by the banking regulations of Austria which
holds the Company's shares of stock on behalf of numerous investors. Capital
Bank has advised the Company that it is precluded by Austrian law from
disclosing the identities of its investors, but</FONT> <FONT
face="CG Times Regular">that all of its investors are accredited investors under
Rule 501 of Regulation D promulgated under the Act. In addition, Capital Bank
has advised the Company that none of its investors beneficially own more than
4.9% of the Company's Common Stock. Capital Bank has further informed the
Company that its clients (and not Capital Bank) maintain full voting and
dispositive power over such shares. Consequently, Capital Bank has advised the
Company that it believes it is not the beneficial owner, as such term is defined
in Rule 13d-3 under the Exchange Act ("Rule 13d-3"), of the shares of stock
registered in the name of Capital Bank</FONT></P>
<P>&nbsp;</P>
<P align=center>-84-</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular">because it has neither voting nor investment
power, as such terms are defined in Rule 13d-3, over such shares. As a result,
Capital Bank has informed the Company that it does not believe that it is
required to file reports under Section 16(a) of the Exchange Act or to file
either a Schedule 13D or a Schedule 13G, as required by Rule 13d-1 of the
Exchange Act, in connection with the shares of the Company's Common Stock
registered in the name of Capital Bank.</FONT></P>
<TABLE width="100%">
    <TR vAlign=top>
    <TD><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular"><STRONG>ITEM 13.</STRONG></FONT></TD>
    <TD><FONT face="CG Times Regular"><STRONG>CERTAIN RELATIONSHIPS AND
      RELATED TRANSACTIONS</STRONG></FONT></TD></TR></TABLE>
<P><FONT face="CG Times Regular"><STRONG>Capital Bank Grawe
Gruppe<BR></STRONG><EM>Preferred Stock Conversion and Exchange<BR></EM>Effective
as of April 6, 2001, the Company and Capital Bank completed the Conversion and
Exchange Agreement, whereby Capital Bank converted a portion of the Company's
Preferred Stock owned of record by Capital Bank, as agent for certain of its
accredited investors, for shares of the Company's Common Stock and exchanged the
remaining Preferred Stock held by Capital Bank for shares of the Company's newly
designated Series 17 Preferred Stock.</FONT></P>
<P><FONT face="CG Times Regular">Prior to the consummation of the Conversion and
Exchange Agreement, Capital Bank owned of record, as its agent for certain of
its accredited investors, 1,769 shares of the Company's Series 14 Preferred ,
616 shares of the Company's Series 15 Preferred, and 1,797 shares of the
Company's Series 16 Preferred. Capital Bank converted 1,314 shares of Series 14
Preferred and 416 shares of Series 15 Preferred into an aggregate of 1,153,333
shares of the Company's Common Stock on April 6, 2001. Capital Bank then
exchanged the remaining shares of Series 14 Preferred, Series 15 Preferred, and
Series 16 Preferred for a total of 2,500 shares of the Series 17 Preferred. As a
result of the consummation of the Conversion and Exchange Agreement, no shares
of Series 14 Preferred, Series 15 Preferred, or Series 16 Preferred remain
outstanding.</FONT></P>
<P><FONT face="CG Times Regular">The Series 17 Preferred may be converted into
shares of Common Stock at any time at a conversion price of $1.50 per share,
subject to adjustment as set forth in the Certificate of Designations relating
to the Series 17 Preferred. The Series 17 Preferred has a "stated value" of
$1,000 per share. The Company may, at its sole option, redeem, in whole or in
part, at any time, and from time to time the then outstanding Series 17
Preferred at the following cash redemption prices if redeemed during the
following periods: (a)<STRONG> </STRONG>within 12 months from June 1, 2001 -
$1,100 per share, and (b) after June 1, 2002 - $1,200 per share. Upon any notice
of redemption, Capital Bank shall have only five business days to exercise its
conversion rights regarding the redeemed shares.</FONT></P>
<P><FONT face="CG Times Regular">The Company engaged in the series of exchanges
with Capital Bank for various series of Preferred Stock for a newly issued
series of preferred stock in order to provide conversion terms more favorable to
the Company and to improve the Company's capital structure. Prior to the
exchanges, the floating conversion price of the Company's preferred stock
resulted in the holders of the preferred stock realizing decreasing conversion
prices for an increasing number of shares of common stock. By engaging in the
exchanges, the Company has set the conversion price at a fixed price, and the
total number of shares issuable upon conversion of the preferred stock is now
fixed at a specified number. The exchanges have also enabled the Company to
simplify its capital structure. As a result of the series of exchanges and
conversions of a certain number of preferred stock, ending in the exchange for
the currently outstanding Series 17 Preferred, the Company now has only one
series of preferred stock outstanding, and instead of floating conversion rates,
the Series 17 Preferred has a fixed rate. The Company believes that this
simplified capital structure (a) helps</FONT> <FONT
face="CG Times Regular">facilitate the Company's borrowing and capital raising
efforts, and (b) improves the ability of the Company's investors and market
professionals to analyze the Company's financial status.</FONT></P>
<P><FONT face="CG Times Regular">The Series 17 Preferred accrues dividends on a
cumulative basis at a rate of five percent (5%) per annum which dividends are
payable semiannually when and as declared by the Board of Directors. During
2001, accrued dividends on the Series 17 Preferred of approximately $92,000 were
paid in the form of 36,718 shares of the Company's Common Stock, of which 24,217
were issued in March 2002.</FONT></P>
<P>&nbsp;</P>
<P align=center>-85-</P>
<P>&nbsp;</P>
<P><FONT face="CG Times Regular"><EM>Debt for Equity Exchange<BR></EM>On August
29, 2000, the Company entered into a short term bridge loan agreement with
Capital Bank in connection with the Company's acquisition of DSSI. This loan
agreement (the "$3,000,000 Capital Loan Agreement") was between the Company and
Capital Bank, pursuant to which Capital Bank, acting as agent for certain
investors who provided the funds, loaned (the "$3,000,000 Capital Loan") the
Company the aggregate principal amount of $3,000,000, as evidenced by a
Promissory Note (the "$3,000,000 Capital Promissory Note") in the face amount of
$3,000,000, having an initial maturity date of November 29, 2000, and bearing an
annual interest rate of 12%. On December 19, 2000, this agreement was also
amended pursuant to the terms of the PNC Revolving Credit and Term Loan
Agreement, which extended the due date of the principal and interest to July 1,
2001.</FONT></P>
<P><FONT face="CG Times Regular">The Company entered into an agreement (the
"Exchange Agreement") with Capital Bank, to issue to Capital Bank, as agent for
certain of its accredited investors, 1,893,505 shares of the Company's Common
Stock and a Warrant to purchase up to 1,839,405 shares of Common Stock at an
exercise price of $1.75 per share (the "Capital Bank Warrant"), in satisfaction
of all amounts due or to become due under the $3,000,000 Capital Loan Agreement
and the related $3,000,000 Capital Promissory Note, including the Company's
obligations to issue to Capital Bank shares of Common Stock if the $3,000,000
Capital Promissory Note was not paid by certain due dates. The $3,000,000
Capital Promissory Note became due on July 1, 2001. The Exchange Agreement was
completed effective as of July 9, 2001.</FONT></P>
<P><FONT face="CG Times Regular">Upon the closing of the Exchange Agreement, the
Company (a) paid to Capital Bank a closing fee of $325,000, payable $75,000 cash
and by the issuance by the Company of 105,932 shares of the Company's Common
Stock, such number of shares being equal to the quotient of $250,000 divided by
the last closing bid price of the Common Stock as quoted on the NASDAQ on June
26, 2001, and (b) issued certain five year Warrants for the purchase of up to
625,000 shares of Common Stock at a purchase price of $1.75 per
share.</FONT></P>
<P><FONT face="CG Times Regular"></FONT><FONT
face="Times New Roman"><STRONG></STRONG></FONT><FONT
face="CG Times Regular"><STRONG>Private Placement Offering<BR></STRONG>During
July 2001, Jack Lahav, a current member of the Company's Board of Directors,
purchased 571,429 units at $1.75 per unit pursuant to the Company's Private
Offering completed July 2001, and Capital Bank, as agent for certain of its
accredited investors, purchased 842,995 units in the Private Offering. Each unit
consists of one share of Common Stock and a Warrant to purchase one share of
Common Stock at $1.75 per share. Shareholder approval is required prior to any
of the Warrants being exercised. The Company is in the process of filing a proxy
statement for a special meeting of shareholders to vote on the approval of the
exercise of the Warrants.</FONT></P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P align=center><FONT face="CG Times Regular">-86-</FONT></P>
<P>&nbsp;</P>
<P align=center><FONT face="CG Times Regular"><STRONG>PART
IV</STRONG></FONT></P>
<TABLE width=627>
    <TR vAlign=top>
    <TD width=84><FONT face="CG Times Regular"><STRONG>ITEM
    14.</STRONG></FONT></TD>
    <TD width=529><FONT face="CG Times Regular"><STRONG>EXHIBITS, FINANCIAL
      STATEMENT SCHEDULES AND REPORTS ON FORM
8-K</STRONG></FONT></TD></TR></TABLE>&nbsp;
<TABLE width="100%">
    <TR vAlign=top>
    <TD colSpan=3><FONT face="CG Times Regular">The following documents are
      filed as a part of this report:</FONT></TD></TR>
  <TR vAlign=top>
    <TD><FONT face="CG Times Regular"></FONT></TD>
    <TD></FONT><FONT face="CG Times Regular">(a)(1)</FONT></TD>
    <TD><FONT face="CG Times Regular">Consolidated Financial Statements</FONT>

      <P>&nbsp;</P></TD></TR>
  <TR vAlign=top>
    <TD><FONT face="CG Times Regular"></FONT></TD>
    <TD></TD>
    <TD><FONT face="CG Times Regular"></FONT><FONT face="CG Times Regular">See
      Item 8 for the Index to Consolidated Financial Statements.</FONT>
      <P>&nbsp;</P></TD></TR>
  <TR vAlign=top>
    <TD><FONT face="CG Times Regular"></FONT></TD>
    <TD></FONT><FONT face="CG Times Regular">(a)(2)</FONT></TD>
    <TD><FONT face="CG Times Regular">Financial Statement Schedules</FONT>
      <P>&nbsp;</P></TD></TR>
  <TR vAlign=top>
    <TD><FONT face="CG Times Regular"></FONT></TD>
    <TD></TD>
    <TD><FONT face="CG Times Regular"></FONT><FONT face="CG Times Regular">See
      Item 8 for the Index to Consolidated Financial Statements (which includes
      the Index to Financial Statement Schedules)</FONT>
      <P>&nbsp;</P></TD></TR>
  <TR vAlign=top>
    <TD><FONT face="CG Times Regular"></FONT></TD>
    <TD></FONT><FONT face="CG Times Regular">(a)(3)</FONT></TD>
    <TD><FONT face="CG Times Regular">Exhibits</FONT></TD></TR>
  <TR vAlign=top>
    <TD><FONT face="CG Times Regular"></FONT></TD>
    <TD></TD>
    <TD><FONT face="CG Times Regular"></FONT><FONT face="CG Times Regular">The
      Exhibits listed in the Exhibit Index are filed or incorporated by
      reference as a part of this report.</FONT>
      <P>&nbsp;</P></TD></TR>
  <TR vAlign=top>
    <TD><FONT face="CG Times Regular"></FONT></TD>
    <TD></FONT><FONT face="CG Times Regular">(b)</FONT></TD>
    <TD><FONT face="CG Times Regular">Reports on Form 8-K</FONT></TD></TR>
  <TR vAlign=top>
    <TD><FONT face="CG Times Regular"></FONT></TD>
    <TD></TD>
    <TD></FONT><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular">No report on Form 8-K was filed by the Company
      during the fourth quarter of 2001.</FONT></TD></TR></TABLE>&nbsp;
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P align=center>-87-</P>
<P>&nbsp;</P>
<P align=center><FONT face="CG Times Regular">SIGNATURES</FONT></P>
<P><FONT face="CG Times Regular">Pursuant to the requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.</FONT></P>
<P><FONT face="CG Times Regular">Perma-Fix Environmental Services,
Inc.</FONT></P>
<TABLE width=653>
    <TR vAlign=top>
    <TD width=40>
      <P align=right><FONT face="CG Times Regular">By</FONT></P></TD>
    <TD width=303><FONT face="CG Times Regular"><U>/s/ Dr. Louis F.
      Centofanti<BR></U>Dr. Louis F. Centofanti<BR>Chairman of the
      Board<BR>Chief Executive Officer</FONT>
      <P>&nbsp;</P></TD>
    <TD width=15></TD>
    <TD width=269><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular">Date <U>April 12, 2002
</U></FONT></TD></TR></TABLE>
<TABLE width="100%">
    <TR vAlign=top>
    <TD>
      <P align=right><FONT face="CG Times Regular">By</FONT></P></TD>
    <TD><FONT face="CG Times Regular"><U>/s/ Richard T. Kelecy<BR></U>Richard
      T. Kelecy<BR>Chief Financial Officer</FONT></TD>
    <TD></TD>
    <TD><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular">Date <U>April 12, 2002
</U></FONT></TD></TR></TABLE>
<P><FONT face="CG Times Regular">Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the registrant and in capacities and on the dates
indicated.</FONT></P>
<TABLE width="100%">
    <TR vAlign=top>
    <TD align=middle>
      <P align=right><FONT face="CG Times Regular">By</FONT></P></TD>
    <TD><FONT face="CG Times Regular"><U>/s/ Jon Colin<BR></U>Jon Colin,
      Director</FONT>
      <P>&nbsp;</P></TD>
    <TD></TD>
    <TD><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular">Date <U>April 12, 2002 </U></FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">By</FONT></TD>
    <TD><FONT face="CG Times Regular">/<U>s/ Jack Lahav<BR></U>Jack Lahav,
      Director</FONT>
      <P>&nbsp;</P></TD>
    <TD></TD>
    <TD><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular">Date <U>April 12, 2002
</U></FONT></TD></TR></TABLE>
<TABLE width=653>
    <TR vAlign=top>
    <TD align=middle width=44>
      <P align=right><FONT face="CG Times Regular">By</FONT></P></TD>
    <TD width=286><FONT face="CG Times Regular"><U>/s/ Thomas P.
      Sullivan<BR></U>Thomas P. Sullivan, Director</FONT>
      <P>&nbsp;</P></TD>
    <TD width=16></TD>
    <TD width=281><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular">Date <U>April 12, 2002
</U></FONT></TD></TR></TABLE>
<TABLE width=653>
    <TR vAlign=top>
    <TD align=middle width=42>
      <P align=right><FONT face="CG Times Regular">By</FONT></P></TD>
    <TD width=287><FONT face="CG Times Regular"><U>/s/ Alfred C. Warrington,
      IV<BR></U>Alfred C. Warrington, IV, Director</FONT>
      <P>&nbsp;</P></TD>
    <TD width=16></TD>
    <TD width=282><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular">Date <U>April 12, 2002 </U></FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle width=42><FONT face="CG Times Regular">
      <P align=right>By</FONT></P></TD>
    <TD width=287><FONT face="CG Times Regular"><U>/s/ Mark A.
      Zwecker<BR></U>Mark A. Zwecker, Director</FONT>
      <P><BR WP="BR1"><BR WP="BR2"></P></TD>
    <TD width=16></TD>
    <TD width=282><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular">Date <U>April 12, 2002
</U></FONT></TD></TR></TABLE>
<TABLE width=653>
    <TR vAlign=top>
    <TD width=42>
      <P align=right><FONT face="CG Times Regular">By</FONT></P></TD>
    <TD width=287><FONT face="CG Times Regular"><U>/s/ Dr. Louis F.
      Centofanti<BR></U>Dr. Louis F. Centofanti, Director</FONT> </TD>
    <TD width=15></TD>
    <TD width=283><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular">Date <U>April 12, 2002
</U></FONT></TD></TR></TABLE>&nbsp;
<P>&nbsp;</P>
<P align=center>-88-</P>
<P>&nbsp;</P>
<P align=center><FONT face="CG Times Regular">SCHEDULE II</FONT></P>
<P align=center><FONT face="CG Times Regular">PERMA-FIX ENVIRONMENTAL SERVICES,
INC.</FONT></P>
<P align=center><FONT face="CG Times Regular">VALUATION AND QUALIFYING
ACCOUNTS<BR>For the years ended December 31, 2001, 2000, and
1999<BR><EM>(Dollars in thousands)</EM></FONT></P>
<TABLE width=653>
    <TR vAlign=top>
    <TD width=7></TD>
    <TD width=250><BR WP="BR1"><BR WP="BR2"><BR><BR WP="BR2"><FONT
      face="CG Times Regular"></FONT><FONT
      face="CG Times Regular"></FONT>Description</TD>
    <TD width=7><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle width=77><BR WP="BR1"><BR WP="BR2"><FONT
      face="CG Times Regular"></FONT>Balance at<BR><FONT
      face="CG Times Regular">Beginning<BR>of Year</FONT></TD>
    <TD align=middle width=6><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle width=82><FONT
      face="CG Times Regular">Additions<BR>Charged
      to<BR>Costs,<BR>Expenses<BR>and Other</FONT></TD>
    <TD align=middle width=6><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle width=82><BR WP="BR1"><BR WP="BR2"><BR><BR WP="BR2"><FONT
      face="CG Times Regular"></FONT>Deductions</TD>
    <TD align=middle width=10><FONT face="CG Times Regular"></FONT></TD>
    <TD align=middle width=64><BR WP="BR1"><BR WP="BR2">Balance<BR><FONT
      face="CG Times Regular">at End<BR>of Year</FONT></TD></TR>
  <TR vAlign=top>
    <TD width=7></TD>
    <TD width=250>
      <HR align=left color=#000080 noShade SIZE=3 width="30%">
    </TD>
    <TD width=7></TD>
    <TD align=middle width=77>
      <HR color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=middle width=6></TD>
    <TD align=middle width=82>
      <HR color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=middle width=6></TD>
    <TD align=middle width=82>
      <HR color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=middle width=10></TD>
    <TD align=middle width=64>
      <HR color=#000080 noShade SIZE=3 width="95%">
    </TD></TR>
  <TR vAlign=top>
    <TD width=7><FONT face="CG Times Regular"></FONT></TD>
    <TD width=250><FONT face="CG Times Regular">Year ended December 31,
      2001:<BR></FONT>&nbsp;&nbsp;&nbsp;<FONT face="CG Times Regular">Allowance
      for doubtful accounts</FONT></TD>
    <TD width=7><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=77><BR
      WP="BR1">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 894</TD>
    <TD align=right width=6><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=82><BR WP="BR1">$
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;399</TD>
    <TD align=right width=6><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=82><BR
      WP="BR1">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 568</TD>
    <TD align=right width=10><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=64><BR WP="BR1">$ &nbsp;&nbsp;&nbsp;&nbsp;725</TD></TR>
  <TR vAlign=top>
    <TD width=7><FONT face="CG Times Regular"></FONT></TD>
    <TD width=250><FONT face="CG Times Regular">Year ended December 31,
      2000:<BR></FONT>&nbsp;&nbsp;&nbsp;<FONT face="CG Times Regular">Allowance
      for doubtful accounts</FONT> </TD>
    <TD width=7><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=77><BR
      WP="BR1">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 952</TD>
    <TD align=right width=6><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=82><BR
      WP="BR1">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 160</TD>
    <TD align=right width=6><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=82><BR
      WP="BR1">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 218</TD>
    <TD align=right width=10><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=64><FONT face="CG Times Regular"></FONT>
      <P><FONT face="CG Times Regular"><BR>$&nbsp;&nbsp;&nbsp;&nbsp;
      894</FONT></P></TD></TR></TABLE>
<TABLE width=653>
    <TR vAlign=top>
    <TD width=9></TD>
    <TD width=247><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular">Year ended December 31,
      1999:<BR></FONT>&nbsp;&nbsp;&nbsp;<FONT face="CG Times Regular">Allowance
      for doubtful accounts</FONT></TD>
    <TD width=7><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=76><BR
      WP="BR1">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 313</TD>
    <TD align=right width=6><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=88><BR WP="BR1">$
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,039</TD>
    <TD align=right width=6><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=77><BR WP="BR1">$
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;400</TD>
    <TD align=right width=16><FONT face="CG Times Regular"></FONT></TD>
    <TD align=right width=59><BR WP="BR1">$
  &nbsp;&nbsp;&nbsp;&nbsp;952</TD></TR></TABLE>&nbsp;
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P align=center>-89-</P>
<P>&nbsp;</P>
<P align=center><FONT face="CG Times Regular">EXHIBIT INDEX</FONT></P>
<TABLE width="100%">
    <TR vAlign=top>
    <TD align=middle><FONT
      face="CG Times Regular"><STRONG>Exhibit<BR>No.</STRONG></FONT> </TD>
    <TD align=middle>
      <p align="center"><FONT face="CG Times Regular"><STRONG></STRONG></FONT><BR
      WP="BR1"><FONT
    face="CG Times Regular"><STRONG>Description</STRONG></FONT></p>
    </TD></TR>
  <TR vAlign=top>
    <TD align=middle>
      <HR color=#000080 noShade SIZE=3 width="95%">
    </TD>
    <TD align=middle>
      <HR color=#000080 noShade SIZE=3 width="24%">
    </TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">2.1</FONT></TD>
    <TD><FONT face="CG Times Regular">Stock Purchase Agreement dated as of May
      16, 2000, between the Company and Waste Management Holdings, Inc. as
      incorporated by reference from Exhibit 2.1 to the Company's quarterly
      report on Form 10-Q for the quarter ended March 31, 2000.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">2.2</FONT></TD>
    <TD><FONT face="CG Times Regular">Stock Purchase Agreement, dated January
      18, 2001, among the Company, East Tennessee Materials and Energy
      Corporation, Performance Development Corporation, Joe W. Anderson, M. Joy
      Anderson, Russell R. and Cindy F. Anderson, Charitable Remainder Unitrust
      of William Paul Cowell, Kevin Cowell, Trustee, Joe B. and Angela H.
      Fincher, Ken-Ten Partners, Michael W. Light, Management Technologies,
      Incorporated, M&amp;EC 401(k) Plan and Trust, PDC 401(k) Plan and Trust,
      Robert N. Parker, James C. Powers, Richard William Schenk, Trustee of the
      Richard Schenk Trust dated November 5, 1998, Talahi Partners, Hillis
      Enterprises, Inc., Tom Price and Virginia Price, Thomas John Abraham, Jr.
      and Donna Ferguson Abraham as incorporated by reference from Exhibit 2.1
      to the Company's Form 8-K dated January 31, 2001.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">2.3</FONT></TD>
    <TD><FONT face="CG Times Regular">First Amendment to Stock Purchase
      Agreement dated August 31, 2000, between the Company and Waste Management
      Holdings, Inc. as incorporated by reference from Exhibit 2.2 to the
      Company's Form 8-K dated September 15, 2000.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">3(i)</FONT></TD>
    <TD><FONT face="CG Times Regular">Restated Certificate of Incorporation,
      as amended, and all Certificates of Designations are incorporated by
      reference from Exhibit 99.1 to the Company's Form 8-K, dated July 30,
      2001.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">3(ii) </FONT></TD>
    <TD><FONT face="CG Times Regular">Bylaws are incorporated by reference
      from the Company's Registration Statement, No. 33-51874.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">4.1</FONT></TD>
    <TD><FONT face="CG Times Regular">Specimen Common Stock Certificate as
      incorporated by reference from Exhibit 4.3 to the Company's Registration
      Statement, No. 33-51874.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">4.2</FONT></TD>
    <TD><FONT face="CG Times Regular">Loan and Security Agreement by and
      between the Company, subsidiaries of the Company as signatories thereto,
      and PNC Bank, National Association, dated December 22, 2000, as
      incorporated by reference from Exhibit 99.1 to the Company's Form 8-K
      dated December 22, 2000.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">4.3</FONT></TD>
    <TD><FONT face="CG Times Regular">Loan Agreement between the Company and
      RBB Bank Aktiengesellschaft, dated August 29, 2000, as incorporated by
      reference from Exhibit 4.1 to the Company's Form 8-K dated September 15,
      2000</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">4.4</FONT> </TD>
    <TD><FONT face="CG Times Regular">Letter Agreement between the Company and
      RBB Bank Aktiengesellschaft dated July 12, 2000, as incorporated by
      reference from Exhibit 10.1 to the Company's quarterly report on Form 10-Q
      for the quarter ended June 30, 2000.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">4.5</FONT></TD>
    <TD><FONT face="CG Times Regular">First Amendment to Loan Agreement and
      Consent, dated January 30, 2001, between the Company and PNC Bank,
      National Association as incorporated by reference from Exhibit 99.7 to the
      Company's Form 8-K dated January 31, 2001.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">4.6</FONT></TD>
    <TD><FONT face="CG Times Regular">Note and Warrant Purchase Agreement,
      dated July 31, 2001, among the Company, AMI, and BEC is incorporated by
      reference from Exhibit 99.1 to the Company's Form 8-K, dated July 30,
      2001.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">4.7</FONT></TD>
    <TD><FONT face="CG Times Regular">Form of 13.50% Senior Subordinated Note
      Due 2006 is incorporated by reference from Exhibit 99.2 to the Company's
      Form 8-K, dated July 30, 2001.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">4.8</FONT></TD>
    <TD><FONT face="CG Times Regular">Form of Common Stock Purchase Warrant,
      expiring July 31, 2008, issued by the Company to AMI and BEC to purchase
      up to 1,281,731 shares of the Company's Common Stock is incorporated by
      reference from Exhibit 99.3 to the Company's Form 8-K, dated July 30,
      2001.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">4.9</FONT></TD>
    <TD><FONT face="CG Times Regular">Specimen Certificate relating to Series
      17 Preferred as incorporated by reference from Exhibit 4.4 to the
      Company's Form 8-K, dated June 15, 2001.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">4.10</FONT></TD>
    <TD><FONT face="CG Times Regular">Conversion and Exchange Agreement, dated
      May 25, 2001, but effective as of April 6, 2001, between the Company and
      RBB Bank Aktiengesellschaft is incorporated by reference from Exhibit 4.5
      to the Company's Form 8-K, dated June 15, 2001.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">4.11</FONT></TD>
    <TD><FONT face="CG Times Regular">Form of Subscription Agreement
      incorporated by reference from Exhibit 4.2 to Company's Form 8-K dated
      June 15, 2001.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">4.12</FONT>
      <P>&nbsp;</P></TD>
    <TD><FONT face="CG Times Regular">Loan and Security Agreement by and
      between the Company and BHC Interim Funding, L.P., dated January 31, 2001,
      as incorporated by reference from Exhibit 99.1 to the Company's Form 8-K
      dated January 31, 2001.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle colSpan=2>&nbsp;
      <P>-90-</P>
      <P>&nbsp;</P></TD></TR>
  <TR vAlign=top>
    <TD align=middle>
      <P align=left><FONT
      face="CG Times Regular"><STRONG>Exhibit<BR>No.</STRONG></FONT> </P></TD>
    <TD>
      <P align=center><FONT
      face="CG Times Regular"><STRONG><BR>Description</STRONG></FONT></P></TD></TR>
  <TR vAlign=top>
    <TD align=middle>
      <HR color=#000080 noShade SIZE=3>
    </TD>
    <TD>
      <HR color=#000080 noShade SIZE=3 width="24%">
    </TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.1</FONT></TD>
    <TD><FONT face="CG Times Regular">1991 Performance Equity Plan of the
      Company as incorporated herein by reference from Exhibit 10.3 to the
      Company's Registration Statement, No. 33-51874.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.2</FONT></TD>
    <TD><FONT face="CG Times Regular">1992 Outside Directors' Stock Option
      Plan of the Company as incorporated by reference from Exhibit 10.4 to the
      Company's Registration Statement, No. 33-51874.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.3</FONT></TD>
    <TD><FONT face="CG Times Regular">First Amendment to 1992 Outside
      Directors' Stock Option Plan as incorporated by reference from Exhibit
      10.29 to the Company's Form 10-K for the year ended December 31,
      1994.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.4</FONT></TD>
    <TD><FONT face="CG Times Regular">Second Amendment to the Company's 1992
      Outside Directors' Stock Option Plan, as incorporated by reference from
      the Company's Proxy Statement, dated November 4, 1994.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.5</FONT></TD>
    <TD><FONT face="CG Times Regular">Third Amendment to the Company's 1992
      Outside Directors' Stock Option Plan as incorporated by reference from the
      Company's Proxy Statement, dated November 8, 1996.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.6</FONT></TD>
    <TD><FONT face="CG Times Regular">Fourth Amendment to the Company's 1992
      Outside Directors' Stock Option Plan as incorporated by reference from the
      Company's Proxy Statement, dated April 20, 1998.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.7</FONT></TD>
    <TD><FONT face="CG Times Regular">1993 Non-qualified Stock Option Plan as
      incorporated by reference from the Company's Proxy Statement, dated
      October 12, 1993.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.8</FONT></TD>
    <TD><FONT face="CG Times Regular">401(K) Profit Sharing Plan and Trust of
      the Company as incorporated by reference from Exhibit 10.5 to the
      Company's Registration Statement, No. 33-51874.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.9</FONT></TD>
    <TD><FONT face="CG Times Regular">Letter agreement, dated December 19,
      2000, between the Company and RBB Bank Aktiengesellschaft, as incorporated
      by reference from Exhibit 99.2 to the Company's Form 8-K dated December
      22, 2000.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.10</FONT></TD>
    <TD><FONT face="CG Times Regular">Loan Agreement between the Company and
      RBB Bank Aktiengesellschaft, dated August 29, 2000 as incorporated by
      reference from Exhibit 4.1 to the Company's Form 8-K dated September 15,
      2000.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.11</FONT></TD>
    <TD><FONT face="CG Times Regular">Subordination Agreement, dated January
      31, 2001, among the Company, PNC Bank, National Association, and BHC
      Interim Funding, LP as incorporated by reference from Exhibit 99.4 to the
      Company's Form 8-K dated January 31, 2001.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.12</FONT></TD>
    <TD><FONT face="CG Times Regular">Stand-Still Agreement, dated January 31,
      2001, among the Company, Chem-Met Services, Inc., PNC Bank, National
      Association, and RBB Bank Aktiengesellschaft as incorporated by reference
      from Exhibit 99.2 to the Company's Form 8-K dated December 22,
    2000.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.13</FONT></TD>
    <TD><FONT face="CG Times Regular">Warrant dated August 29, 2000, issued by
      the Company to RBB Bank Aktiengesellschaft for the purchase of the
      Company's common stock as incorporated by reference from Exhibit 4.3 to
      the Company's Form 8-K dated September 15, 2000.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.14</FONT></TD>
    <TD><FONT face="CG Times Regular">Warrant, dated November 29, 2000, issued
      to RBB Bank Aktiengesellschaft for the purchase of 300,000 shares of the
      Company's Common Stock as incorporated by reference from Exhibit 99.5 to
      the Company's Form 8-K dated December 22, 2000. A substantially similar
      warrant, dated October 30, 2000, for the purchase of 150,000 shares of the
      Company's common stock issued to RBB Bank, as well as substantially
      similar warrants dated December 29, 2000, January 31, 2001, February 28,
      2001 and March 31, 2001 for the purchase of 105,000 shares of the
      Company's common stock each will be provided to the Commission upon
      request.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.15</FONT></TD>
    <TD><FONT face="CG Times Regular">Warrant, dated December 22, 2000, issued
      by the Registrant to Ryan, Beck &amp; Co., LLC (formerly Ryan, Beck &amp;
      Co., Inc.) ("Ryan Beck") for the purchase of 213,889 shares of the
      Company's common stock, as incorporated by reference from Exhibit 99.6 to
      the Company's Form 8-K dated January 31, 2001. Substantially similar
      warrants for the purchase of an aggregate 191,067 shares of the Company's
      common stock assigned by Ryan Beck to each of Randy F. Rock and Michael J.
      Kollender, along with the remaining 98,768 warrants issued to Ryan Beck
      will be provided to the Commission upon request. Substantially similar
      warrants, dated March 9, 2001 issued to Ryan Beck for the purchase of an
      aggregate 27,344 shares of the Company's common stock will be provided to
      the Commission upon request, along with substantially similar warrants
      dated March 9, 2001, for the purchase of 16,710 shares of the Company's
      common stock assigned by Ryan Beck to each of Randy F. Rock and Michael J.
      Kollender. Substantially similar warrants, dated December 22, 2000 for the
      purchase of an aggregate 694,791 shares of the Company's common stock
      assigned by Larkspur Capital Corporation ("Larkspur") to the Christopher
      T. Goodwin Trust (3,000 shares), the Kelsey A. Goodwin Trust (3,000
      shares), Meera Murdeshwar (36,000 shares), Paul Cronson (219,597 shares),
      Robert C. Mayer, Jr. (219,597 shares) and Robert Goodwin (213,597 shares),
      along with the remaining 60,764 warrants issued to Larkspur on March 9,
      2001 will be provided to the Commission upon request.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle colSpan=2>&nbsp;
      <P>-91-</P>
      <P>&nbsp;</P></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT
      face="CG Times Regular"><STRONG>Exhibit<BR>No.</STRONG></FONT> </TD>
    <TD>
      <P align=center><FONT
      face="CG Times Regular"><STRONG><BR>Description</STRONG></FONT></P></TD></TR>
  <TR vAlign=top>
    <TD align=middle>
      <HR color=#000080 noShade SIZE=3>
    </TD>
    <TD>
      <HR color=#000080 noShade SIZE=3 width="24%">
    </TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.16</FONT></TD>
    <TD><FONT face="CG Times Regular">Warrant, dated January 31, 2001, for the
      purchase of shares of the Company's common stock issued by the Company to
      BHC Interim Funding, L.P. as incorporated by reference from Exhibit 99.5
      to the Company's Form 8-K dated January 31, 2001.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.17</FONT></TD>
    <TD><FONT face="CG Times Regular">Common Stock Purchase Warrant
      Certificate, dated July 19, 1996, granted to RBB Bank Aktiengesellschaft
      as incorporated by reference from Exhibit 10.1 to the Company's Form 10-Q
      for the quarter ended June 30, 1996</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.18</FONT></TD>
    <TD><FONT face="CG Times Regular">Common Stock Purchase Warrant
      Certificate, dated July 19, 1996, granted to RBB Bank Aktiengesellschaft
      as incorporated by reference from Exhibit 10.2 to the Company's Form 10-Q
      for the quarter ended June 30, 1996.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.19</FONT></TD>
    <TD><FONT face="CG Times Regular">Common Stock Purchase Warrant dated June
      9, 1997, between the Company and RBB Bank Aktiengesellschaft as
      incorporated by reference from Exhibit 4.4 to the Company's Form 8-K,
      dated June 11, 1997.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.20</FONT></TD>
    <TD><FONT face="CG Times Regular">Common Stock Purchase Warrant dated June
      9, 1997, between the Company and RBB Bank Aktiengesellschaft as
      incorporated by reference from Exhibit 4.5 to the Company's Form 8-K,
      dated June 11, 1997.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.21</FONT></TD>
    <TD><FONT face="CG Times Regular">Common Stock Purchase Warrant ($1.50)
      dated June 9, 1997, between the Company and J W Charles Securities, Inc.
      as incorporated by reference from Exhibit 4.6 to the Company's Form 8-K,
      dated June 11, 1997.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.22</FONT></TD>
    <TD><FONT face="CG Times Regular">Common Stock Purchase Warrant ($2.00)
      dated June 9, 1997, between the Company and J W Charles Securities, Inc.
      as incorporated by reference from Exhibit 4.7 to the Company's Form 8-K,
      dated June 11, 1997.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.23</FONT></TD>
    <TD><FONT face="CG Times Regular">Stock Purchase Agreement, dated December
      18, 2000, between the Company and Dr. Louis F. Centofanti as incorporated
      by reference from Exhibit 99.8 to the Company's Form 8-K dated December
      22, 2000.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.24</FONT></TD>
    <TD><FONT face="CG Times Regular">Basic Oak Ridge Agreement between East
      Tennessee Materials and Energy Corporation (M&amp;EC) and Bechtel Jacobs
      Company, LLC No. 1GB-99446V dated June 23, 1998, as incorporated by
      reference from Exhibit 10.1 to the Company's Form 10-Q for the quarter
      ended September 30, 1998.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.25</FONT> </TD>
    <TD><FONT face="CG Times Regular">Basic Oak Ridge Agreement between East
      Tennessee Materials and Energy Corporation (M&amp;EC) and Bechtel Jacobs
      Company, LLC No. 1GB-99447V dated June 23, 1998, as incorporated by
      reference from Exhibit 10.2 to the Company's Form 10-Q for the quarter
      ended September 30, 1998.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.26</FONT></TD>
    <TD><FONT face="CG Times Regular">Basic Oak Ridge Agreement between East
      Tennessee Materials and Energy Corporation (M&amp;EC) and Bechtel Jacobs
      Company, LLC No. 1GB-99448V dated June 23, 1998, as incorporated by
      reference from Exhibit 10.3 to the Company's Form 10-Q for the quarter
      ended September 30, 1998.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.27</FONT></TD>
    <TD><FONT face="CG Times Regular">General agreement between East Tennessee
      Materials and Energy Corporation (M&amp;EC) and the Company dated May 27,
      1998, as incorporated by reference from Exhibit 10.4 to the Company's Form
      10-Q for the quarter ended September 30, 1998.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.28</FONT></TD>
    <TD><FONT face="CG Times Regular">Appendix B to general agreement between
      East Tennessee Materials and Energy Corporation (M&amp;EC) and the Company
      dated November 6, 1998, as incorporated by reference from Exhibit 10.5 to
      the Company's Form 10-Q for the quarter ended September 30,
  1998.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.29</FONT></TD>
    <TD><FONT face="CG Times Regular">Stock Purchase Agreement dated as of May
      27, 1999, among the Company, Perma-Fix of Orlando, Inc., Perma-Fix of
      South Georgia, Inc., the Thomas P. Sullivan Living Trust, dated September
      6, 1978, the Ann L. Sullivan Living Trust, dated September 6, 1978, Thomas
      P. Sullivan, and Ann L. Sullivan as incorporated herein by reference from
      Exhibit 2.1 to the Company's Form 8-K dated June 1, 1999.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.30</FONT></TD>
    <TD><FONT face="CG Times Regular">Stock Purchase Agreement dated as of May
      27, 1999, among the Company, Perma-Fix of Michigan, Inc., the Thomas P.
      Sullivan Living Trust, dated September 6, 1978, the Ann L. Sullivan Living
      Trust, dated September 6, 1978, Thomas P. Sullivan, and Ann L. Sullivan as
      incorporated herein by reference from Exhibit 2.2 to the Company's Form
      8-K dated June 1, 1999.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.31</FONT></TD>
    <TD><FONT face="CG Times Regular">Promissory Note for $1,230,000 issued to
      the Ann L. Sullivan Living Trust dated September 6, 1978, as incorporated
      by reference from Exhibit 10.1 to the Company's Form 8-K dated June 1,
      1999.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle></TD>
    <TD>
      <P align=center>
      <P align=center>-92-</P>
      <P align=center>
      <P>&nbsp;</P></TD></TR>
  <TR vAlign=top>
    <TD align=middle></TD>
    <TD></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT
      face="CG Times Regular"><STRONG>Exhibit<BR>No.</STRONG></FONT> </TD>
    <TD>
      <P align=center><FONT
      face="CG Times Regular"><STRONG><BR>Description</STRONG></FONT></P></TD></TR>
  <TR vAlign=top>
    <TD align=middle>
      <HR color=#000080 noShade SIZE=3>
    </TD>
    <TD>
      <HR color=#000080 noShade SIZE=3 width="24%">
    </TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.32</FONT></TD>
    <TD><FONT face="CG Times Regular">Promissory Note for $1,970,000 issued to
      the Ann L. Sullivan Living Trust dated September 6, 1978, as incorporated
      by reference from Exhibit 10.2 to the Company's Form 8-K dated June 1,
      1999.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.33</FONT></TD>
    <TD><FONT face="CG Times Regular">Promissory Note for $1,500,000 issued to
      the Thomas P. Sullivan Living Trust dated September 6, 1978, as
      incorporated by reference from Exhibit 10.3 to the Company's Form 8-K
      dated June 1, 1999.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.34</FONT></TD>
    <TD><FONT face="CG Times Regular">Non-recourse Guaranty dated May 28,
      1999, by and among Perma-Fix of Michigan, Inc., the Thomas P. Sullivan
      Living Trust dated September 6, 1978, and the Ann L. Sullivan Living Trust
      dated September 6, 1978, as incorporated by reference from Exhibit 10.4 to
      the Company's Form 8-K dated June 1, 1999.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.35</FONT></TD>
    <TD><FONT face="CG Times Regular">Mortgage dated May 28, 1999, by
      Perma-Fix of Michigan, Inc. to the Thomas P. Sullivan Living Trust dated
      September 6, 1978 and the Ann L. Sullivan Living Trust dated September 6,
      1978, as incorporated by reference from Exhibit 10.5 to the Company's Form
      8-K dated June 1, 1999.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.36</FONT></TD>
    <TD><FONT face="CG Times Regular">Form of Guaranty Agreement, dated as of
      July 31, 2001, of each of the Company's subsidiaries, Perma-Fix of
      Florida, Inc., Perma-Fix of Fort Lauderdale, Inc., Perma-Fix of Dayton,
      Inc., Perma-Fix Treatment Services, Inc., Perma-Fix of Memphis, Inc.,
      Perma-Fix, Inc., Perma-Fix of New Mexico, Inc., Reclamation Systems, Inc.,
      Industrial Waste Management, Inc., Schreiber, Yonley &amp; Associates,
      Mintech, Inc., Perma-Fix of Orlando, Inc., Perma-Fix of South Georgia,
      Inc., Perma-Fix of Michigan, Inc., Diversified Scientific Services, Inc.,
      and East Tennessee Materials and Energy Corporation, incorporated by
      reference from Exhibit 99.4 to the Company's Form 8-K, dated July 30,
      2001.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.37</FONT></TD>
    <TD><FONT face="CG Times Regular">Registration Rights Agreement, dated
      July 31, 2001, among the Company, AMI, and BEC is incorporated by
      reference from Exhibit 99.5 to the Company's Form 8-K, dated July 30,
      2001.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.38</FONT></TD>
    <TD><FONT face="CG Times Regular">Subordination Agreement, dated July 30,
      2001, among the Company, AMI, and the Sullivan Trusts. The Company and the
      Sullivan Trusts entered into a substantially similar Subordination
      Agreement, dated July 30, 2001, with BEC. A copy of this Subordination
      Agreement will be provided to the Commission upon request is incorporated
      by reference from Exhibit 99.6 to the Company's Form 8-K, dated July 30,
      2001.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.39</FONT></TD>
    <TD><FONT face="CG Times Regular">Senior Subordination Agreement, dated
      July 31, 2001, among the Company, PNC Bank, National Association, AMI, and
      BEC is incorporated by reference from Exhibit 99.7 to the Company's Form
      8-K, dated July 30, 2001.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.40</FONT></TD>
    <TD><FONT face="CG Times Regular">Option Agreement, dated July 31, 2001,
      among the Company, AMI, and BEC is incorporated by reference from Exhibit
      99.8 to the Company's Form 8-K, dated July 30, 2001.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.41</FONT></TD>
    <TD><FONT face="CG Times Regular">Promissory Note, dated June 7, 2001,
      issued by M&amp;EC in favor of Performance Development Corporation is
      incorporated by reference from Exhibit 10.1 to the Company's Form 8-K,
      dated June 15, 2001.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.42</FONT></TD>
    <TD><FONT face="CG Times Regular">Form 433-D Installment Agreement, dated
      June 11, 2001, between M&amp;EC and the Internal Revenue Service is
      incorporated by reference from Exhibit 10.2 to the Company's Form 8-K,
      dated June 15, 2001.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.43</FONT></TD>
    <TD><FONT face="CG Times Regular">Debt-For-Stock Exchange Agreement, dated
      effective July 9, 2001, between the Registrant and Capital Bank-Grawe
      Gruppe AG, as incorporated by reference from Exhibit 10.1 to the
      Registrant's Current Report on Form 8-K dated July 9, 2001, and filed on
      July 20, 2001.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.44</FONT></TD>
    <TD><FONT face="CG Times Regular">Common Stock Purchase Warrant, dated
      July 9, 2001, granted by the Registrant to Capital Bank-Grawe Gruppe AG
      for the right to purchase up to 1,839,405 shares of the Registrant's
      Common Stock at an exercise price of $1.75 per share incorporated by
      reference from Exhibit 10.12 to the Company's Registration Statement, No.
      333-70676.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.45</FONT></TD>
    <TD><FONT face="CG Times Regular">Common Stock Purchase Warrant, dated
      July 9, 2001, granted by the Registrant to Herbert Strauss for the right
      to purchase up to 625,000 shares of the Registrant's Common Stock at an
      exercise price of $1.75 per share, incorporated by reference from Exhibit
      10.13 to the Company's Registration Statement, No. 333-70676.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle></TD>
    <TD></TD></TR>
  <TR vAlign=top>
    <TD align=middle></TD>
    <TD>
      <P align=center>
      <P align=center>-93-</P>
      <P align=center>
      <P>&nbsp;</P></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT
      face="CG Times Regular"><STRONG>Exhibit<BR>No.</STRONG></FONT> </TD>
    <TD>
      <P align=center><FONT
      face="CG Times Regular"><STRONG><BR>Description</STRONG></FONT></P></TD></TR>
  <TR vAlign=top>
    <TD align=middle>
      <HR color=#000080 noShade SIZE=3>
    </TD>
    <TD>
      <HR color=#000080 noShade SIZE=3 width="24%">
    </TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.46</FONT></TD>
    <TD><FONT face="CG Times Regular">Warrant Agreement, dated July 31, 2001,
      granted by the Registrant to Paul Cronson for the right to purchase up to
      43,295 shares of the Registrant's Common Stock at an exercise price of
      $1.44 per share, incorporated by reference from Exhibit 10.20 to the
      Company's Registration Statement, No. 333-70676. Substantially similar
      Warrants, dated July 31, 2001, for the right to purchase up to an
      aggregate 218,752 shares of the Registrant's Common Stock at an exercise
      price of $1.44 per share were granted by the Registrant to Ryan Beck
      (6,836 shares), Ryan Beck (54,688), Michael Kollender (37,598 shares),
      Randy Rock (37,598 shares), Robert Goodwin (43,294 shares), Robert C.
      Mayer, Jr. (43,294 shares), and Meera Murdeshwar (6,837 shares). Copies
      will be provided to the Commission upon request.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.47</FONT></TD>
    <TD><FONT face="CG Times Regular">Warrant to Purchase Common Stock, dated
      July 30, 2001, granted by the Registrant to David Avital for the purchase
      of up to 143,000 shares of the Registrant's Common Stock at an exercise
      price of $1.75 per share, incorporated by reference from Exhibit 10.21 to
      the Company's Registration Statement, No. 333-70676. Substantially similar
      Warrants for the purchase of an aggregate 4,254,566 were issued to Capital
      Bank (842,995 shares), CICI 1999 Qualified Annuity Trust (85,715 shares),
      Gerald D. Cramer (85,715 shares), CRM 1999 Enterprise Fund 3 (200,000
      shares), Craig S. Eckenthal (57,143 shares), Danny Ellis Living Trust
      (250,000 shares), Europa International, Inc. (571,428 shares), Harvey
      Gelfenbein (28,571 shares), A. C. Israel Enterprises (285,715 shares),
      Kuekenhof Partners, L.P. (40,000), Kuekenhof Equity Fund, L.P. (60,000
      shares), Jack Lahav (571,429 shares), Joseph LaMotta (28,571 shares), Jay
      B. Langner (28,571 shares), The F. M. Grandchildren Trust (42,857 shares),
      Mathers Associates (228,571 shares), Peter Melhado (115,000 shares),
      Pamela Equities Corp. (42,857 shares), Josef Paradis (143,000 shares),
      Readington Associates (57,143 shares), Dr. Ralph Richart (225,000 shares),
      Edward J. Rosenthal Profit Sharing Plan (28,571 shares), Yariv Sapir IRA
      (85,714 shares), and Bruce Wrobel (150,000 shares), respectively. Copies
      will be provided to the Commission upon request.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.48</FONT></TD>
    <TD><FONT face="CG Times Regular">Common Stock Purchase Warrant, dated
      July 30, 2001, granted by the Registrant to Kennerman Associates for the
      purchase of 15,750 shares of the Registrant's Common Stock at an exercise
      price of $1.75 per share, incorporated by reference from Exhibit 10.22 to
      the Company's Registration Statement, No. 333-70676. Substantially similar
      Warrants, dated July 30, 2001, for the purchase of an aggregate 108,000
      shares of the Registrant's Common Stock at an exercise price of $1.75 per
      share were issued to Ryan, Beck &amp; Co., L.L.C. (34,000 shares),
      Larkspur Capital Corporation (34,000 shares), and National Securities
      Corporation (40,000 shares). Copies will be provided to the Commission
      upon request.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.49</FONT></TD>
    <TD><FONT face="CG Times Regular">Common Stock Purchase Warrant, dated
      July 31, 2001, granted by the Registrant to Associated Mezzanine
      Investors-PESI (I), L.P. for the purchase of up to 712,073 shares of the
      Registrant's Common Stock at an exercise price of $1.50 per share,
      incorporated by reference from Exhibit 10.23 to the Company's Registration
      Statement, No. 333-70676. A substantially similar Warrant was issued to
      Bridge East Capital L.P. for the right to purchase of up to 569,658 shares
      of the Registrant's Common Stock, and a copy will be provided to the
      Commission upon request.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">10.50</FONT></TD>
    <TD><FONT face="CG Times Regular"></FONT><FONT
      face="CG Times Regular">Subordination Agreement, dated January 31, 2001,
      among the Company, the Ann L. Sullivan Living Trust dated September 6,
      1978, and BHC Interim Funding, L.P. as incorporated by reference from
      Exhibit 99.3 to the Company's Form 8-K dated January 31, 2001</FONT><FONT
      face="CG Times Regular">.</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">21.1 </FONT></TD>
    <TD><FONT face="CG Times Regular">List of Subsidiaries</FONT></TD></TR>
  <TR vAlign=top>
    <TD align=middle><FONT face="CG Times Regular">22.1 </FONT></TD>
    <TD><FONT face="CG Times Regular">Consent of BDO Seidman,
  LLP</FONT></TD></TR></TABLE>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P align=center>-94-</P>
<P>&nbsp;</P>
<p align="center">LIST OF SUBSIDIARIES OF PERMA-FIX ENVIRONMENTAL SERVICES, INC.<br>
(THE &quot;COMPANY&quot;)</p>
<br WP="BR1">
<br WP="BR2">
<strong>Industrial Waste Management Services</strong>
<p>Perma-Fix of Fort Lauderdale, Inc. (&quot;PFFL&quot;), a Florida corporation,
is a 100% owned subsidiary of the Company.</p>
<p>Perma-Fix of Dayton, Inc. (&quot;PFD&quot;), an Ohio corporation, is a 100%
owned subsidiary of the Company.</p>
<p>Perma-Fix Treatment Services, Inc. (&quot;PFTS&quot;), an Oklahoma
corporation, is a 100% owned subsidiary of the Company.</p>
<p>Perma-Fix of Memphis, Inc. (&quot;PFM&quot;), a Tennessee corporation, is a
100% owned subsidiary of the Company.</p>
<p>Perma-Fix of Orlando, Inc. (&quot;PFO&quot;), a Florida Corporation, is a
100% owned subsidiary of the Company.</p>
<p>Perma-Fix of South Georgia, Inc. (&quot;PFSG&quot;), a Georgia Corporation,
is a 100% owned subsidiary of the Company.</p>
<p>Perma-Fix of Michigan, Inc., (&quot;PFMI&quot;) a Michigan Corporation, is a
100% owned subsidiary of the Company.</p>
<strong>Nuclear Waste Management Services</strong>
<p>Perma-Fix of Florida, Inc. (&quot;PFF&quot;), a Florida corporation,. is a
100% owned subsidiary of the Company.</p>
<p>Diversified Scientific Services, Inc., (&quot;DSSI&quot;) a Tennessee
Corporation, is a 100% owned subsidiary of the Company.</p>
<p>East Tennessee Materials and Energy Corporation, (&quot;M&amp;EC&quot;) a
Tennessee Corporation, is a 100% owned subsidiary of the Company.</p>
<p><strong>Consulting Services</strong></p>
<p>Schreiber, Yonley &amp; Associates (&quot;SYA&quot;), a Missouri corporation,
is a 100% owned subsidiary of IWM.</p>
<p>Industrial Waste Management, Inc. (&quot;IWM&quot;), a Missouri corporation,
is a 100% owned subsidiary of the Company.</p>
&nbsp;
<P>&nbsp;</P>
<P>&nbsp;</P>
<P align="center">Photograph of scenic view of mountains and lake</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P><font face="Imprint MT Shadow" size="4" color="#0000FF">CORPORATE INFORMATION</font></P>
<table BORDER="1" WIDTH="651">
  <tr VALIGN="TOP">
    <td width="326"><strong><em><font face="Times New Roman" size="3" color="#0000FF">Executive Offices</font></em></strong>
      <p><font FACE="Times New Roman" SIZE="-2">1940 N.W. 67th Place<br>
      Gainesville, Florida 32653<br>
      Telephone: (352) 373-4200<br>
      Fax: (352) 373-0040</font>
      </p>
      <p><font FACE="Times New Roman" SIZE="-2">6075 Roswell Road, Suite 602<br>
      Atlanta, Georgia 30328<br>
      Telephone: (404) 847-9990<br>
      Fax: (404) 847-9977<br>
      </font></p>
      <p><strong><em><font face="Times New Roman" size="3" color="#0000FF">Transfer Agents and
      Registrars</font></em></strong></p>
      <p><font FACE="Times New Roman" SIZE="-2">Continental Stock Transfer &amp;
      Trust Company<br>
      17 Battery Place<br>
      New York, New York 10004<br>
      </font></p>
      <p><strong><em><font face="Times New Roman" size="3" color="#0000FF">Independent
      Certified Public Accountants</font></em></strong></p>
      <p><font FACE="Times New Roman" SIZE="-2">BDO Seidman, LLP<br>
      233 N. Michigan Avenue<br>
      Suite 2500<br>
      Chicago, Illinois 60601</font></p>
    </td>
    <td width="309"><strong><em><font face="Times New Roman" size="3" color="#0000FF">Annual Meeting</font></em></strong>
      <p><font FACE="Times New Roman" SIZE="-2">The Company has scheduled its
      Annual Meeting for Wednesday, November 6, 2002. The meeting will be held
      at the offices ofPerma-Fix Environmental Services, Inc., 1940 N.W. 67th
      Place,</font> <font FACE="Times New Roman" SIZE="-2">Gainesville, Florida
      32653, at 11:00 a.m. (EDST).</font>
      </p>
      <p><strong><em><font face="Times New Roman" size="3" color="#0000FF">Stock Listing</font></em></strong></p>
      <p><font FACE="Times New Roman" SIZE="-2">The common stock of Perma-Fix
      Environmental Services, Inc. is listed on Nasdaqt where it is traded under
      the ticker symbol PESI.</font></p>
      <p><font FACE="Times New Roman" SIZE="-2">The common stock of Perma-Fix
      Environmental Services, Inc. is listed on the Boston Stock Exchange where
      it is traded under the ticker symbol PES.</font></p>
      <p><font FACE="Times New Roman" SIZE="-2">The common stock of Perma-Fix
      Environmental Services, Inc.</font> <font FACE="Times New Roman" SIZE="-2">is
      listed on the Berlin Stock Exchange where it is traded under</font> <font FACE="Times New Roman" SIZE="-2">the
      ticker symbol PES.BE.</font></p>
      <p><strong><em><font face="Times New Roman" size="3" color="#0000FF">Stockholder
      Inquiries</font></em></strong></p>
      <p><font FACE="Times New Roman" SIZE="-2">Inquiries concerning stockholder
      records should be addressed to the Transfer Agent listed above. Comments
      or questions concerning the operations of the Company should be addressed
      to the Secretary, Perma-Fix Environmental Services, Inc., 1940 N.W. 67th
      Place, Gainesville, Florida 32653.</font></p>
      <p>&nbsp;</p>
    </td>
  </tr>
  <tr VALIGN="TOP">
    <td COLSPAN="2" width="641"><font face="Times New Roman" size="1">Certain statements
      contained in the President's letter may be deemed forward-looking
      statements, including, but not limited to, positioning the Company to be
      one of the leaders in both mixed waste and industrial segments, objective
      to stay at the forefront of technology and to lead the industry in the
      development of proprietary and safe methods to treat waste, expanding
      existing facilities, positioning the Company for continued growth,
      expansion and new opportunities as a result of the 'Bio-Fix' process, and
      expansion of the Company's penetration into the water treatment market.
      See &quot;Special Note Regarding Forward-Looking Statements&quot;
      contained in the Form 10-K that is part of this Annual Report for
      discussion of factors which could cause future outcomes to differ
      materially from those described in the a President's letter.</font></td>
  </tr>
</table>
<p>&nbsp;</p>
<br WP="BR2">
<br WP="BR1">
<br WP="BR2">
<br WP="BR1">
<br WP="BR2">
<br WP="BR2">
<br WP="BR1">
<br WP="BR2">
<br WP="BR1">
<br WP="BR2">
<p ALIGN="CENTER"><font FACE="Times New Roman"><strong><em>Perma-Fix aims to</em></strong></font></p>
<p ALIGN="CENTER"><font FACE="Times New Roman"><strong><em>set the standard</em></strong></font></p>
<p ALIGN="CENTER"><font FACE="Times New Roman"><strong><em>for the development</em></strong></font></p>
<p ALIGN="CENTER"><font FACE="Times New Roman"><strong><em>of safe, effective,
low-cost</em></strong></font></p>
<p ALIGN="CENTER"><font FACE="Times New Roman"><strong><em>technologies for the</em></strong></font></p>
<p ALIGN="CENTER"><font FACE="Times New Roman"><strong><em>treatment of</em></strong></font></p>
<p ALIGN="CENTER"><font FACE="Times New Roman"><strong><em>nuclear mixed waste</em></strong></font></p>
<p ALIGN="CENTER"><font FACE="Times New Roman"><strong><em>and industrial waste</em></strong></font></p>
<p ALIGN="CENTER"><font FACE="Times New Roman"><strong><em>and wastewater.</em></strong></font></p>
<br WP="BR1">
<br WP="BR2">
<br WP="BR1">
<br WP="BR2">
<br WP="BR1">
<br WP="BR2">
<br WP="BR1">
<br WP="BR2">
<br WP="BR1">
<br WP="BR2">
<p align="center"><font face="Imprint MT Shadow" size="6">Perma<b>Fix</b></font><FONT face="CG Times Regular">
<br>
environmental services<br>
</p>
</FONT>
<p ALIGN="CENTER"><font face="Times New Roman" size="2">Perma-Fix Environmental
Services, Inc.<br>
1940 N.W. 67th Place<br>
Gainesville, Florida
32653</font></p>
</HTML>

</TEXT>
</DOCUMENT>
</SUBMISSION>
