<SUBMISSION>
<ACCESSION-NUMBER>0000891092-04-005447
<TYPE>10-Q
<PUBLIC-DOCUMENT-COUNT>6
<PERIOD>20040930
<FILING-DATE>20041108
<DATE-OF-FILING-DATE-CHANGE>20041108
<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>10-Q
<ACT>34
<FILE-NUMBER>001-11596
<FILM-NUMBER>041125473
</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>10-Q
<SEQUENCE>1
<FILENAME>e19653_10q.txt
<DESCRIPTION>FORM 10-Q
<TEXT>
================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                              --------------------

                                    Form 10-Q

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

            For the quarterly period ended September 30, 2004

                                       Or

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

            For the transition period from ________________ to _________________

                           Commission File No. 111596

                     PERMA-FIX ENVIRONMENTAL SERVICES, INC.
             (Exact name of registrant as specified in its charter)

                Delaware                                58-1954497
      (State or other jurisdiction          (IRS Employer Identification Number)
    of incorporation or organization)

  1940 N.W. 67th Place, Gainesville, FL                   32653
(Address of principal executive offices)                (Zip Code)

                                 (352) 373-4200
                         (Registrant's telephone number)

                                       N/A
--------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                          if changed since last report)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  Registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.  Yes [X]  No [_]

Indicate by checkmark whether the registrant is an accelerated filer (as defined
in Rule 12b-2 of the Act).  Yes [X]  No [_]

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

            Class                          Outstanding at November 4, 2004
Common Stock, $.001 Par Value                         41,761,117
                                               (excluding 988,000 shares
                                                held as treasury stock)

================================================================================
<PAGE>

                     PERMA-FIX ENVIRONMENTAL SERVICES, INC.

                                      INDEX

PART I FINANCIAL INFORMATION                                            Page No.
                                                                        --------
       Item 1. Financial Statements

               Consolidated Balance Sheets -
                 September 30, 2004 and December 31, 2003 .................    2

               Consolidated Statements of Operations -
                 Three and Nine Months Ended September 30, 2004
                 and 2003 .................................................    4

               Consolidated Statements of Cash Flows -
                 Nine Months Ended September 30, 2004 and 2003 ............    5

               Consolidated Statement of Stockholders' Equity -
                 Nine Months Ended September 30, 2004 .....................    6

               Notes to Consolidated Financial Statements .................    7

       Item 2. Management's Discussion and Analysis of
                 Financial Condition and Results of Operations ............   18

       Item 3. Quantitative and Qualitative Disclosures
                 About Market Risk ........................................   35

       Item 4. Controls and Procedures ....................................   36

PART II OTHER INFORMATION

       Item 1. Legal Proceedings ..........................................   37

       Item 4. Submission of Matters to a Vote of Security Holders ........   38

       Item 6. Exhibits and Reports on Form 8-K ...........................   39
<PAGE>

                     PERMA-FIX ENVIRONMENTAL SERVICES, INC.
                        CONSOLIDATED FINANCIAL STATEMENTS

                                 PART I, ITEM 1

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

It is  suggested  that  these  consolidated  financial  statements  be  read  in
conjunction  with the  consolidated  financial  statements and the notes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
31, 2003.

The results of operations for the nine months ended  September 30, 2004, are not
necessarily  indicative  of results to be  expected  for the fiscal  year ending
December 31, 2004.


                                       1
<PAGE>

PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED BALANCE SHEETS

                                                     September 30,
                                                         2004       December 31,
(Amounts in Thousands, Except for Share Amounts)      (Unaudited)      2003
--------------------------------------------------------------------------------
ASSETS
Current assets:
     Cash                                             $     458     $     411
     Restricted cash                                         61            30
     Accounts receivable, net of allowance
        for doubtful accounts of $601 and $661           31,391        23,576
     Inventories                                            787           544
     Prepaid expenses                                     3,957         2,274
     Other receivables                                       40            92
     Current assets of discontinued operations              802         1,454
                                                      ---------     ---------
     Total current assets                                37,496        28,381

Property and equipment:
     Buildings and land                                  18,594        17,629
     Equipment                                           30,498        28,513
     Vehicles                                             3,233         2,709
     Leasehold improvements                              11,624        11,082
     Office furniture and equipment                       1,825         1,654
     Construction in progress                             2,363         2,621
                                                      ---------     ---------
                                                         68,137        64,208
     Less accumulated depreciation and
       amortization                                     (20,607)      (16,897)
                                                      ---------     ---------
     Net property and equipment                          47,530        47,311

Property and equipment of discontinued
     operations, net of accumulated
     depreciation of $0 and $2,298                          600         5,758

Intangibles and other assets:
     Permits                                             13,723        16,150
     Goodwill                                             1,330         5,817
     Finite risk sinking fund                             2,225         1,234
     Other assets                                         3,406         4,635
     Long-term assets of discontinued operations             --           929
                                                      ---------     ---------
     Total assets                                     $ 106,310     $ 110,215
                                                      =========     =========

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


                                       2
<PAGE>

PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED BALANCE SHEETS, CONTINUED

                                                      September 30,
                                                          2004      December 31,
(Amounts in Thousands, Except for Share Amounts)       (Unaudited)      2003
--------------------------------------------------------------------------------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
       Accounts payable                                 $   6,111    $   5,518
       Current environmental accrual                          395        1,054
       Accrued expenses                                    11,573       11,138
       Unearned revenue                                     5,207        2,271
       Current liabilities of discontinued
         operations                                         3,214        1,345
       Current portion of long-term debt                    6,074        2,896
                                                        ---------    ---------
              Total current liabilities                    32,574       24,222

Environmental accruals                                      2,434        1,432
Accrued closure costs                                       5,006        4,874
Other long-term liabilities                                 1,705        1,677
Long-term liabilities of discontinued operations            1,804           91
Long-term debt, less current portion                       19,338       26,192
                                                        ---------    ---------
              Total long-term liabilities                  30,287       34,266
                                                        ---------    ---------

              Total liabilities                            62,861       58,488

Commitments and Contingencies (see Note 5)                     --           --

Preferred Stock of subsidiary, $1.00 par
  value; 1,467,396 shares authorized,
  1,284,730 shares issued and
  outstanding, liquidation
  value $1.00 per share                                     1,285        1,285

Stockholders' equity:
    Preferred Stock, $.001 par value;
      2,000,000 shares authorized,
      2,500 shares issued and outstanding                      --           --
    Common Stock, $.001 par value;
      75,000,000 shares authorized,
      42,708,117 and 37,241,881 shares
      issued, including 988,000 shares
      held as treasury stock, respectively                     43           37
    Additional paid-in capital                             80,843       69,640
    Accumulated deficit                                   (36,798)     (17,243)
    Interest rate swap                                        (62)        (130)
                                                        ---------    ---------
                                                           44,026       52,304
    Less Common Stock in treasury at
      cost; 988,000 shares                                 (1,862)      (1,862)
                                                        ---------    ---------

       Total stockholders' equity                          42,164       50,442
                                                        ---------    ---------

       Total liabilities and stockholders' equity       $ 106,310    $ 110,215
                                                        =========    =========

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


                                       3
<PAGE>

PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

<TABLE>
<CAPTION>
                                                                            Three Months Ended                  Nine Months Ended
                                                                               September 30,                      September 30,
                                                                          -------------------------        -------------------------
(Amounts in Thousands, Except for Per Share Amounts)                         2004            2003            2004            2003
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>             <C>             <C>             <C>
Net revenues                                                               $ 24,337        $ 23,781        $ 60,277        $ 60,425
Cost of goods sold                                                           16,808          14,110          43,195          41,725
                                                                           --------        --------        --------        --------
       Gross profit                                                           7,529           9,671          17,082          18,700

Selling, general and administrative expenses                                  4,419           4,610          12,832          13,008
Loss (gain) on disposal or impairment of fixed assets                         1,014             (14)            996             (15)
Impairment loss on intangible assets                                          7,101              --           7,101              --
                                                                           --------        --------        --------        --------
       Income (loss) from operations                                         (5,005)          5,075          (3,847)          5,707
Other income (expense):
       Interest income                                                           --               2               2               7
       Interest expense                                                        (294)           (735)         (1,535)         (2,107)
       Interest expense-financing fees                                       (1,566)           (256)         (2,079)           (814)
       Other                                                                    (92)            (42)           (354)            (82)
                                                                           --------        --------        --------        --------
Income (loss) from continuing operations before Preferred                    (6,957)          4,044          (7,813)          2,711
     stock dividends

Preferred Stock dividends                                                       (48)            (48)           (142)           (142)
                                                                           --------        --------        --------        --------
Income (loss) from continuing operations                                     (7,005)          3,996          (7,955)          2,569

Discontinued operations:
       Income (loss) from discontinued operations                              (740)             29          (1,765)           (226)
       Loss on disposals from discontinued operations                        (9,835)             --          (9,835)             --
                                                                           --------        --------        --------        --------
             Total income (loss) on discontinued operations                 (10,575)             29         (11,600)           (226)
                                                                           --------        --------        --------        --------
Net Income (loss) applicable to Common Stock                               $(17,580)       $  4,025        $(19,555)       $  2,343
                                                                           ========        ========        ========        ========
------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) per common share-basic:
       Continuing operations                                               $   (.17)       $    .12        $   (.20)       $    .08
       Discontinued operations                                                 (.25)             --            (.29)           (.01)
                                                                           --------        --------        --------        --------
       Net income (loss) per common share                                  $   (.42)       $    .12        $   (.49)       $    .07
                                                                           ========        ========        ========        ========
Net income (loss) per common share-diluted:
       Continuing operations                                               $   (.17)       $    .11        $   (.20)       $    .07
       Discontinued operations                                                 (.25)             --            (.29)           (.01)
                                                                           --------        --------        --------        --------
       Net income (loss) per common share                                  $   (.42)       $    .11        $   (.49)       $    .06
                                                                           ========        ========        ========        ========
Number of shares and potential common shares used in net
income (loss) per common share:
     Basic                                                                   41,648          34,885          40,051          34,764
                                                                           ========        ========        ========        ========
     Diluted                                                                 41,648          38,247          40,051          39,089
                                                                           ========        ========        ========        ========
</TABLE>

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


                                       4
<PAGE>

PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

<TABLE>
<CAPTION>
                                                                                                              Nine Months Ended
                                                                                                                 September 30,
                                                                                                         ---------------------------
(Amounts in Thousands)                                                                                      2004             2003
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                      <C>               <C>
Cash flows from operating activities:
Income (loss) from continuing operations before preferred stock dividends                                $ (7,813)         $  2,711
Adjustments to reconcile net income (loss) from continuing operations to cash
provided by (used in) operations:
     Depreciation and amortization                                                                          3,540             3,146
     Debt discount amortization                                                                               838               243
     Provision for bad debt and other reserves                                                                123               192
     Loss (gain) on disposal or impairment of plant, property and equipment                                   996               (15)
     Intangible asset impairment                                                                            7,101                --
     Changes in assets and liabilities:
     Accounts receivable                                                                                   (5,735)           (5,237)
     Prepaid expenses, inventories and other assets                                                           590            (1,421)
     Accounts payable and accrued expenses                                                                  1,852             1,942
                                                                                                         --------          --------
       Net cash provided by continuing operations                                                           1,492             1,561

       Net cash used by discontinued operations                                                            (1,465)             (490)

Cash flows from investing activities:
     Purchases of property and equipment, net                                                              (2,318)           (1,615)
     Proceeds from sale of plant, property and equipment                                                       31                14
     Change in restricted cash, net                                                                            (1)               (2)
     Change in finite risk sinking fund                                                                      (991)           (1,234)
     Funds used for acquisitions (net of cash acquired)                                                    (2,903)               --
     Discontinued operations                                                                                   --               (47)
                                                                                                         --------          --------
       Net cash used in investing activities                                                               (6,182)           (2,884)

Cash flows from financing activities:
     Net borrowings of revolving credit                                                                     3,168             3,221
     Principal repayments of long-term debt                                                                (7,866)           (2,620)
     Proceeds from issuance of stock                                                                       10,900             1,194
                                                                                                         --------          --------
       Net cash provided by financing activities                                                            6,202             1,795
                                                                                                         --------          --------
Increase (decrease) in cash                                                                                    47               (18)
Cash at beginning of period                                                                                   411               212
                                                                                                         --------          --------
     Cash at end of period                                                                               $    458          $    194
                                                                                                         ========          ========
Supplemental disclosure:
     Interest paid                                                                                       $  1,629          $  1,855
Non-cash investing and financing activities:
     Issuance of Common Stock for services                                                                    184                25
     Issuance of Common Stock for payment of dividends                                                        125               125
     Gain on interest rate swap                                                                                68                55
     Long-term debt incurred for purchase of property and equipment                                           184             1,250
</TABLE>

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


                                       5
<PAGE>

PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited, for the nine months ended September 30, 2004)

<TABLE>
<CAPTION>
                                                                                                              Common
                                     Preferred Stock       Common Stock    Additional                         Stock       Total
(Amounts in thousands,               ---------------     -----------------   Paid-In  Accumulated  Interest  Held In   Stockholders'
except for share amounts)            Shares   Amount     Shares     Amount   Capital    Deficit   Rate Swap  Treasury     Equity
------------------------------------------------------------------------------------------------------------------------------------
<S>                                  <C>      <C>      <C>          <C>      <C>       <C>         <C>       <C>        <C>
Balance at December 31, 2003         2,500    $   --   37,241,881   $   37   $69,640   $(17,243)   $ (130)   $(1,862)   $ 50,442
Comprehensive loss:
  Net loss                              --        --           --       --        --    (19,413)       --         --     (19,413)
  Other Comprehensive income:
    Gain on interest rate swap          --        --           --       --        --         --        68         --          68
      Comprehensive loss                                                                                                 (19,345)
Preferred Stock dividends               --        --           --       --        --       (142)       --         --        (142)
Issuance of Common Stock for
  Preferred Stock dividend              --        --       54,581       --       125         --        --         --         125
Issuance of Common Stock
  for cash and services                 --        --      795,542        1     1,213         --        --         --       1,214
Issuance of Common Stock
  in private placement                  --        --    4,616,113        5     9,865         --        --         --       9,870
                                     -----    ------   ----------   ------   -------   --------    ------    -------    --------
Balance at September 30, 2004        2,500    $   --   42,708,117   $   43   $80,843   $(36,798)   $  (62)   $(1,862)   $ 42,164
                                     =====    ======   ==========   ======   =======   ========    ======    =======    ========
</TABLE>

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


                                       6
<PAGE>

                     PERMA-FIX ENVIRONMENTAL SERVICES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               September 30, 2004
                                   (Unaudited)

Reference  is made  herein to the  notes to  consolidated  financial  statements
included in our Annual Report on Form 10-K for the year ended December 31, 2003.

1. Summary of Significant Accounting Policies

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

Reclassifications

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

Stock-Based Compensation

We account for our stock-based employee  compensation plans under the accounting
provisions of APB Opinion 25, Accounting for Stock Issued to Employees, and have
furnished  the pro forma  disclosures  required  under  Statement  of  Financial
Accounting Standards ("SFAS") 123, Accounting for Stock-Based Compensation,  and
SFAS 148, Accounting for Stock-Based Compensation - Transition and Disclosure.

SFAS 123 requires pro forma  information  regarding  net income and earnings per
share as if  compensation  cost for our employee and director  stock options had
been determined in accordance with the fair market value-based method prescribed
in SFAS 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  assumptions
used for grants in 2004 and 2003:  no dividend  yield;  an expected  life of ten
years;  expected volatility between 21.7 and 23.8%; and risk free interest rates
between 2.75% and 3.82%.

Under the  accounting  provisions  of SFAS 123,  our net  income  (loss) and net
income (loss) per share would have been  decreased  (increased) to the pro forma
amounts indicated below (in thousands except for per share amounts):

<TABLE>
<CAPTION>
                                                                            Three Months Ended               Nine Months Ended
                                                                                September 30,                   September 30,
                                                                        ---------------------------      --------------------------
                                                                           2004             2003            2004            2003
                                                                        ----------       ----------      ----------       ---------
<S>                                                                     <C>              <C>             <C>              <C>
Net income (loss) from continuing operations, as reported               $   (7,005)      $    3,996      $   (7,955)      $   2,569
Deduct: Total Stock-based employee compensation
   expense determined under fair value based method for
   all awards, net of related tax effects                                      (98)            (129)           (279)           (328)
                                                                        ----------       ----------      ----------       ---------
Pro forma net income (loss) from continuing operations                  $   (7,103)      $    3,867      $   (8,234)      $   2,241
                                                                        ==========       ==========      ==========       =========
Loss per share:
   Basic - as reported                                                  $     (.17)      $      .12      $     (.20)      $     .08
                                                                        ==========       ==========      ==========       =========
   Basic - pro-forma                                                    $     (.17)      $      .11      $     (.21)      $     .06
                                                                        ==========       ==========      ==========       =========

  Diluted - as reported                                                 $     (.17)      $      .11      $     (.20)      $     .07
                                                                        ==========       ==========      ==========       =========
  Diluted - pro-forma                                                   $     (.17)      $      .10      $     (.21)      $     .06
                                                                        ==========       ==========      ==========       =========
</TABLE>


                                       7
<PAGE>

2. Earnings Per Share

Basic EPS is based on the  weighted  average  number  of shares of Common  Stock
outstanding  during the period.  Diluted EPS  includes  the  dilutive  effect of
potential  common  shares.  Diluted loss per share for the three and nine months
ended September 30, 2004, do not include potential common shares as their effect
would be anti-dilutive.

The  following  is a  reconciliation  of basic net  income  (loss) per share and
diluted  net  income  (loss)  per  share for the  three  and nine  months  ended
September 30, 2004, and 2003.

<TABLE>
<CAPTION>
                                                                               Three Months Ended             Nine Months Ended
                                                                                  September 30,                  September 30,
                                                                             -----------------------       ------------------------
(Amounts in thousands except per share amounts)                                2004           2003           2004            2003
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>             <C>           <C>             <C>
Earnings per share from continuing operations
     Income (loss) -basic                                                    $ (7,005)       $ 3,996       $ (7,955)       $  2,569
                                                                             --------        -------       --------        --------
     Effect of dilutive securities - Preferred
       Stock dividends                                                             --             48             --             142
                                                                             --------        -------       --------        --------
     Income (loss)- diluted                                                  $ (7,005)       $ 4,044       $ (7,955)       $  2,711
                                                                             ========        =======       ========        ========
     Basic income (loss) per share                                           $   (.17)       $   .12       $   (.20)       $    .08
                                                                             ========        =======       ========        ========
     Diluted income (loss) per share                                         $   (.17)       $   .11       $   (.20)       $    .07
                                                                             ========        =======       ========        ========

Earnings per share from discontinued operations
     Income (loss) - basic and diluted                                       $(10,575)       $    29       $(11,600)       $   (226)
                                                                             ========        =======       ========        ========
     Basic income (loss) per share                                           $   (.25)       $    --       $   (.29)       $   (.01)
                                                                             ========        =======       ========        ========
     Diluted income (loss) per share                                         $   (.25)       $    --       $   (.29)       $   (.01)
                                                                             ========        =======       ========        ========

Weighted average shares outstanding - basic                                    41,648         34,885         40,051          34,764
Potential shares exercisable under stock option plans                              --            344             --             450
Potential shares upon exercise of Warrants                                         --          1,351             --           2,208
Potential shares upon conversion of Preferred Stock                                --          1,667             --           1,667
                                                                             --------        -------       --------        --------
Weighted average shares outstanding - diluted                                  41,648         38,247         40,051          39,089
                                                                             ========        =======       ========        ========

Potential shares excluded from above
weighted average share  calculations due
to their anti-dilutive effect include:

Upon exercise of Options                                                        2,932          1,641          2,932           1,551
Upon exercise of Warrants                                                      12,791            625         12,791              95
Upon conversion of Preferred Stock                                              1,667             --          1,667              --
</TABLE>

3. Goodwill and Other Intangible Assets

Statement of Financial  Accounting  Standards  ("SFAS") 142  "Goodwill and Other
Intangible  Assets" requires us to test goodwill and other intangible assets for
impairment on an annual basis,  and upon certain events that indicate a possible
impairment.  In conjunction with our third quarter financial  reporting process,
as a result of a disparity of our Industrial  reporting  unit's actual operating
results to long-term  projections and the  discontinuation  of operations at our
Industrial segment facility in Detroit,  Michigan as of September 30, 2004, (See
Note  8) we  engaged  an  independent  appraisal  firm  to  perform  preliminary
impairment  tests  of  permits  and  goodwill,  separately,  for the  Industrial
reporting unit. The  preliminary  impairment  tests of the Industrial  reporting
unit  resulted  in an  estimated  impairment  to  permits of  $2,215,000  and an
estimated  impairment  to goodwill of  approximately  $4,886,000.  The aggregate
impairment  of  $7,101,000  is our best  estimate  and was recorded in the third
quarter as a component  of Income  (loss) from  operations  in the  Consolidated
Statements of Operations.  The  preliminary  impairment  tests of the Industrial
reporting unit will be finalized, along with the annual impairment tests, during
the fourth  quarter of 2004,  thus our estimated  impairment  loss is subject to


                                       8
<PAGE>

refinement and may be adjusted,  if necessary.  The appraisers estimate the fair
value of our reporting units using a discounted cash flow valuation approach.

4. Long Term Debt

Long-term debt consists of the following at September 30, 2004, and December 31,
2003:

<TABLE>
<CAPTION>
                                                                                            September 30,
                                                                                                2004           December 31,
(Amounts in Thousands)                                                                       (Unaudited)           2003
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                                            <C>                <C>
Revolving  Credit  facility  dated  December  22,  2000,  borrowings  based upon
   eligible accounts receivable,  subject to monthly borrowing base calculation,
   variable  interest paid monthly at prime rate plus 1% (5.75% at September 30,
   2004), balance due in December 2005.                                                        $12,404            $ 9,235

Term Loan dated  December 22, 2000,  payable in equal  monthly  installments  of
   principal  of $83,  balance  due in December  2005,  variable  interest  paid
   monthly at prime rate plus 1 1/2 % (6.25% at September 30, 2004).                             3,333              4,083

Three promissory notes dated May 27, 1999, payable in equal monthly installments
   of principal  and interest of $90 over 60 months,  interest at 7.0%,  paid in
   full in June 2004.

Unsecured  promissory note dated August 31, 2000,  payable in lump sum in August
   2005, interest paid annually at 7.0%.                                                            --                531

Senior subordinated  notes dated July 31, 2001,  payable in lump sum on July 31,
   2006,  interest payable quarterly at an annual interest rate of 13.5%, net of
   unamortized  debt  discount of $838 at  December  31,  2003.  Paid in full in
   August 2004.                                                                                  3,500              3,500

Promissory note dated June 25, 2001, payable in semiannual  installments on June
   30 and December 31 through  December 31, 2008,  variable  interest accrues at
   the  applicable  law rate  determined  under  the IRS Code  Section  (7.0% on
   September 30, 2004) and is payable in one lump sum at the end of  installment
   period.                                                                                          --              4,787

Installment agreement dated June 25, 2001, payable in semiannual installments on
   June 30 and December 31 through December 31, 2008,  variable interest accrues
   at the  applicable  law rate  determined  under the IRS Code Section (7.0% on
   September 30, 2004) and is payable in one lump sum at the end of  installment
   period.                                                                                       3,194              3,354

Various capital lease and  promissory  note  obligations,  payable 2004 to 2009,
   interest at rates ranging from 5.2% to 17.9%.                                                   793                833

Less current portion of long-term debt                                                           2,188              2,765
                                                                                               -------            -------
                                                                                                25,412             29,088
                                                                                                 6,074              2,896
                                                                                               -------            -------
                                                                                               $19,338            $26,192
                                                                                               =======            =======
</TABLE>

Revolving Credit and Term Loan

On December 22, 2000, we 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  provided,  at  inception,  for a term loan ("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. The
Agreement also provided for a revolving line of credit ("Revolving Credit") with
a  maximum  principal  amount  outstanding  at any one time of  $18,000,000,  as
amended.  The Revolving  Credit advances are subject to limitations of an amount
up to the sum of (a) up to 85% of  Commercial  Receivables  aged 90 days or less
from invoice date, (b) up to 85% of Commercial Broker Receivables aged up to 120
days  from  invoice  date,  (c)  up  to  85%  of  acceptable  Government  Agency
Receivables  aged  up to  150  days  from  invoice  date,  and  (d) up to 50% of


                                       9
<PAGE>

acceptable  unbilled  amounts  aged  up to 60  days,  less  (e)  reserves  Agent
reasonably deems proper and necessary. The Revolving Credit advances are due and
payable in full on December 22,  2005.  As of  September  30,  2004,  the excess
availability  under our Revolving  Credit was $10,127,000  based on our eligible
receivables.   However,  during  the  third  quarter  of  2004,  our  borrowings
approached  the  maximum  line  capacity  under the  Revolving  Credit,  thereby
reducing the line availability from which we could borrow to $5,294,000.

Pursuant to the Agreement the Term Loan bears  interest at a floating rate equal
to the prime rate plus 1 1/2%, and the Revolving Credit at a floating rate equal
to the prime rate plus 1%. 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.

Three Promissory Notes

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 were paid in full in June 2004.

Unsecured Promissory Note

On August 31, 2000, as part of the consideration for the purchase of Diversified
Scientific  Services,  Inc. ("DSSI"),  we 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 in one lump sum at the end of the term of the Unsecured Promissory
Note (August 2005).

Senior Subordinated Notes

On July 31,  2001,  we issued  approximately  $5,625,000  of our  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
were  unsecured and were  unconditionally  guaranteed by our  subsidiaries.  The
notes were paid in full in August 2004. We also paid early  termination  fees of
$190,000  and recorded a non-cash  expense of  $1,217,000  for the  write-off of
prepaid financing fees and a debt discount.

Under  the  terms  of the  Purchase  Agreement,  we also  issued  to AMI and BEC
Warrants  to  purchase  up to  1,281,731  shares of our Common  Stock  ("Warrant
Shares")  at an  initial  exercise  price of $1.50 per share  (the  "Warrants"),
subject to adjustment under certain conditions, which were valued at $1,622,000.
The Warrants, as issued, also contain a cashless exercise provision. The Warrant
Shares are  registered  under an S-3  Registration  Statement  that was declared
effective on November 27, 2002.

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 of the  Warrants or 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 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).  We account  for the  changes in
redemption value  immediately as they


                                       10
<PAGE>

occur and adjust the  carrying  value of the  security  to equal the  redemption
value at the end of each reporting period. On September 30, 2004, the Put Option
had no value and no liability was recorded.

Promissory Note

In  conjunction  with our  acquisition  of East  Tennessee  Materials and Energy
Corporation  ("M&EC"),  M&EC issued a promissory note for a principal  amount of
$3,714,000 to PDC, dated June 25, 2001, for monies  advanced to M&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 law rate  ("Applicable  Rate")  pursuant to the provisions of section
6621 of the  Internal  Revenue Code of 1986 as amended,  (7.0% on September  30,
2004) and payable in lump sum at the end of the loan period.  On  September  30,
2004, the  outstanding  balance was  $4,184,000  including  accrued  interest of
approximately  $990,000.  PDC has directed  M&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.

Installment Agreement

Additionally,  M&EC  entered  into an  installment  agreement  with the Internal
Revenue  Service ("IRS") for a principal  amount of $923,000  effective June 25,
2001, for certain  withholding taxes owed by M&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  Rate and is adjusted on a quarterly basis
and payable in lump sum at the end of the installment  period.  On September 30,
2004,  the  Applicable  Rate was 7.0%.  On September 30, 2004,  the  outstanding
balance was $1,033,000 including accrued interest of approximately $240,000.

5. Commitments and Contingencies

Hazardous Waste

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

Legal

In the normal  course of  conducting  our  business,  we are involved in various
litigations.  Except as stated below, there has been no material change in legal
proceedings  from those disclosed  previously in the Company's Form 10-K for the
year ended  December 31, 2003 and the Company's Form 10-Q for the quarters ended
March 31, 2004 and June 30, 2004.

We  previously  disclosed  that  during  January  2004,  the U.S.  Environmental
Protection  Agency  ("EPA")  issued to Perma-Fix of Dayton,  Inc.  ("PFD"),  our
wholly  owned  subsidiary,  a Notice  of  Findings  of  Violations  ("Findings")
alleging that PFD committed numerous violations of the Clean Air Act (the "Act")
or  regulations  thereunder,  and,  although EPA did not assert any penalties or
fines  in the  Findings,  they  did,  however,  specify  that  EPA  had  several
enforcement  options,  including  issuing  an  administrative  penalty  order or
bringing  judicial  action  against PFD. PFD has had numerous  meetings with EPA
regarding  this matter.  On September 28, 2004,  PFD received an  Administrative
Compliance Order ("Order"), dated September 21, 2004, from EPA alleging that PFD
was a "major source" of hazardous air pollutants and, as a major source, PFD was
required  to  have  obtained  a  Title  V air  permit,  and  thereby  was not in
compliance with provisions of the Act and/or regulations  thereunder  applicable
to a major source.  The Order further  provides that PFD has six months from the
effective date of the Order, to develop, submit, obtain and comply with numerous
costly and burdensome compliance  initiatives  applicable to one that is a major
source of hazardous air  pollutants and to submit an application to the State of
Ohio for a Title V Air permit.  The Order does not assert any penalties or fines
but provides that PFD is not absolved of any  liabilities,  including  liability
for penalties,  for the alleged  violations cited in the Order, and that failure
to comply with the Order may subject PFD to  penalties up to $32,500 per day


                                       11
<PAGE>

for each  violation.  PFD had 10 days from the receipt of the Order to request a
conference  with  EPA  regarding  the  Order  and PFD  timely  scheduled  such a
conference  for the first week of  November.  The  conference  was  subsequently
postponed  indefinitely  by  the  EPA,  and  the  EPA  and  PFD  are  exchanging
information in an effort to resolve this matter. We have retained  environmental
consultants  who  have  advised  us that,  based on the  tests  that  they  have
performed,  they do not  believe  that PFD is a major  source of  hazardous  air
pollutants.  We have been further  advised by counsel that if PFD is not a major
source of hazardous air pollutants,  PFD would not be required to obtain a Title
V air permit,  would not have violated the  provisions of the Act alleged in the
Order  and would  not be  required  to comply  with the  costly  and  burdensome
compliance  initiatives  contained  in the  Order.  Also,  we have been  further
advised  that the Order may be in  violation  of certain  constitutional  issues
involving due process  based on a recent  decision by the United States Court of
Appeals,  11th Circuit. A determination that PFD was a major source of hazardous
air pollutants and required to comply with the Order, such could have a material
adverse  effect on us.  We  intend  that PFD will  vigorously  defend  itself in
connection with this matter.

In October  2004,  Perma-Fix of South  Georgia,  Inc.  ("PFSG") and Perma-Fix of
Orlando,  Inc.  ("PFO") were notified  that they are PRPs at the Malone  Service
Company  Superfund site in Texas City,  Texas ("Site").  The EPA designated both
PFSG and PFO as de minimis  parties,  which is  determined  as a generator  that
contributed less than 0.6% of the total hazardous materials at the Site. The EPA
has made a settlement  offer to all de minimis parties,  that requires  response
within 45 days of receipt of the notice.  If we accept the settlement  offer our
liability would be  approximately  $229,000.  We are in the process of reviewing
this claim and our potential exposure in connection with this Site.

During  September  2004, PFMI received a letter alleging that PFMI owed Reliance
Insurance  Company,  in  liquidation,  the  sum  of  $525,000  as  a  result  of
retrospective  premiums  under a  retroactive  premium  agreement.  Our  counsel
responded and advised that PFMI had numerous defenses to the demand,  including,
but not limited to, that the policy  expired  almost eight years ago and failure
to adjust the premiums in a timely  manner  violated the  agreement  between the
Company and  Reliance  and that under  Michigan law it is deemed to be an unfair
and  deceptive  act or practice in the business of  insurance  for an insurer to
fail to complete a final audit within 120 days after  termination of the policy.
The Company and PFMI intend to vigorously defend this matter.  However,  we have
accrued approximately $217,000 for this contingent liability.

See Note 8 for a  discussion  as to certain  contingent  liabilities  due to the
discontinuation of operations at the facility in Detroit, Michigan, owned by our
subsidiary, Perma-Fix of Michigan, Inc.

Insurance

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,  those 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 is 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  $1,000,000 per  occurrence  and $2,000,000 per year in the aggregate.  To
meet the requirements of customers, we have exceeded these coverage amounts.

In June 2003,  we entered into a 25-year  finite risk  insurance  policy,  which
provides  financial  assurance  to  the  applicable  states  for  our  permitted
facilities  in the event of unforeseen  closure.  Prior to obtaining or renewing
operating permits we are required to provide financial  assurance that guarantee
to the states that, in the event of closure,  our permitted  facilities  will be
closed in accordance with the  regulations.  The policy provides  $35,000,000 of
financial  assurance  coverage  and has  available  capacity to allow for annual
inflation and other performance and surety bond requirements.  On the fourth and
subsequent  anniversaries  of the contract  inception,  the Company may elect to
terminate  this  contract.  During the


                                       12
<PAGE>

second  quarter  of 2003 we made an  upfront  payment  of  $4,000,000,  of which
$2,766,000  represents the full premium for the 25-year term of the policy,  and
the remaining $1,234,000, was deposited in a sinking fund account. Additionally,
in  February  2004 we paid the first of nine  required  annual  installments  of
$1,004,000,  of which  $991,000 was deposited in the sinking fund  account,  the
remaining $13,000 represents a terrorism  premium.  As of September 30, 2004, we
have recorded $2,225,000 in our Finite Risk Sinking Fund on the balance sheet.

6. Acquisitions

On March  23,  2004,  our  subsidiary,  Perma-Fix  of  Maryland,  Inc.  ("PFMD")
completed it's acquisition of certain assets of USL Environmental Services, Inc.
d/b/a A&A Environmental  ("A&A"),  primarily located in Baltimore,  Md., and our
subsidiary,  Perma-Fix of Pittsburgh,  Inc. ("PFP") completed its acquisition of
certain assets of US Liquids of Pennsylvania, Inc. d/b/a EMAX ("EMAX"). Both A&A
and EMAX are wholly owned subsidiaries of US Liquids Inc. ("USL"). PFMD is using
the acquired assets of A&A to provide a full line of  environmental,  marine and
industrial maintenance services.  PFMD offers expert environmental services such
as 24-hour  emergency  response,  vacuum services,  hazardous and  non-hazardous
waste disposal,  marine  environmental  and other remediation  services.  PFP is
utilizing  the  acquired  assets of EMAX to provide a variety  of  environmental
services  such as  transportation  of  drums  and  bulk  loads,  tank  cleaning,
industrial maintenance,  dewatering, drum management and chemical packaging. PFP
also has a wastewater  treatment  group,  which  provides  for the  treatment of
non-hazardous  wastewaters such as leachates,  oily waters,  industrial  process
waters and off-spec products.

We paid  $2,915,000  in  cash  for  the  acquired  assets  and  assumed  certain
liabilities  of A&A and EMAX.  The  acquisitions  were  accounted  for using the
purchase method  effective March 23, 2004, and  accordingly,  the estimated fair
values of the assets acquired and liabilities assumed of A&A and EMAX as of this
date,  and the  results  of  operations  since this date,  are  included  in the
accompanying  consolidated  financial  statements.  As of  March  23,  2004,  we
performed   preliminary   purchase  price  allocations  based  upon  information
available as of this date,  and we are in the process of  obtaining  third party
evaluations of certain  assets,  thus, the allocation of the purchase prices are
subject to  refinement.  Accordingly,  the  purchase  prices were  preliminarily
allocated to the net assets and net liabilities so acquired and assumed based on
their  estimated fair values.  Included in these  preliminary  allocations  were
current  assets of  $2,481,000,  property and equipment of  $2,066,000,  current
liabilities of approximately $1,141,000 and long-term environmental liability of
$491,000.  Based on the preliminary  purchase price  allocations no goodwill was
recorded.

7. Private Placement

On March 22,  2004,  we  completed  a private  placement  for gross  proceeds of
approximately  $10,386,000  through the sale of  4,616,113  shares of our Common
Stock at $2.25 per share and Warrants to purchase an additional 1,615,638 shares
of our Common  Stock  exercisable  at $2.92 per share and a term of three years.
The private  placement was sold to fifteen  accredited  investors.  The net cash
proceeds received of $9,946,000, after paying placement agent fees, were used in
connection  with the  acquisitions  of certain  acquired  assets of A&A and EMAX
discussed  above,  and  to  initially  pay  down  the  Revolving  Credit,  while
finalizing  the  prepayment of other higher  interest  debt. We have incurred an
additional  $76,000 for expenses  related to the private  placement.  During the
third quarter of 2004, we used a portion of our availability under our Revolving
Credit,  to repay our Senior  Subordinated  Notes with an interest rate of 13.5%
(See Note 4). We also issued Warrants to purchase an aggregate of 160,000 shares
of our Common Stock,  exercisable at $2.92 per share and with a three year term,
for consulting services related to the private placement.


                                       13
<PAGE>

8. Discontinued Operations

On October 4, 2004,  our Board of  Directors  approved  the  discontinuation  of
operations  at the  facility  in  Detroit,  Michigan,  owned by our  subsidiary,
Perma-Fix of Michigan,  Inc. ("PFMI"). The decision to discontinue operations at
the Detroit facility was principally as a result of two fires that significantly
disrupted  operations at the facility in 2003, and the facility's critical drain
on the financial  resources of our Industrial  segment. We are in the process of
remediating the facility and evaluating our available  options for future use or
sale of the property. The operating activities for the current and prior periods
have been reclassified to discontinued operations in our Consolidated Statements
of Operations.

PFMI recorded  revenues of $1,569,000 and  $4,465,000,  and operating  losses of
$1,765,000  and $226,000 for the nine months ended  September 30, 2004 and 2003,
respectively.  Our estimated loss on disposals from  discontinued  operations of
$9,835,000 for the three and nine months ended September 30, 2004,  consisted of
asset impairments,  pension costs,  environmental remediation and other expenses
as described in the following table:

                                                                         Total
                                                    Noncash             Charges
(Amounts in thousands)                              Charges  Accruals  (Credits)
--------------------------------------------------------------------------------
Pension plan withdrawal liability                    $   --    $1,474    $1,474
Severance liability                                      --        47        47
Environmental closure and remediation accrual            --     2,733     2,733
Tangible asset impairment                             4,591        --     4,591
Goodwill and permit impairment                          929        --       929
Other                                                    --        61        61
--------------------------------------------------------------------------------
Loss on disposal from discontinued operations        $5,520    $4,315    $9,835
===========================================================================+====

The pension  plan  withdrawal  liability  is a result of  terminating  our union
employees at PFMI.  The  liability is an estimate,  and we are in the process of
completing  an actuarial  study of the  withdrawal  liability  under the pension
plan.  The tangible  asset  impairment is our best estimate of the write down of
tangible  assets to fair value.  The goodwill and permit  impairment is our best
estimate of the portion of our goodwill and permits of the Industrial  reporting
unit allocated to PFMI.  Other costs consist of estimated  amounts to be paid to
close the facility and  remediate the property.  The  environmental  closure and
remediation  accrual  is based on our  estimate  at the time of this  report and
could change based on the final remediation costs.

Assets  and  liabilities  related  to  the  discontinued   operation  have  been
reclassified  to separate  categories in the  Consolidated  Balance Sheets as of
September 30, 2004 and December 31, 2003.  As of September 30, 2004,  assets are
recorded at their net  realizable  value,  and consist of land and  buildings of
$600,000,  accounts  receivable of $347,000,  and estimated  insurance  proceeds
receivable of $455,000.  The  insurance  receivable is an estimate of the direct
costs from the first fire at PFMI. We have submitted  insurance  claims for both
fires at PFMI, and are currently  negotiating  settlements for those claims, but
at this time we cannot estimate actual proceeds to be received.  If the proceeds
exceed the  estimated  insurance  receivable  we will  recognize  a gain for the
additional  proceeds.  Liabilities as of September 30, 2004, consist of accounts
payable  and  current  accruals  of  $2,554,000  and  environmental  and closure
accruals of $2,464,000.


                                       14
<PAGE>

9. Operating Segments

Pursuant to FAS 131, we define an operating segment as:

      o     A  business  activity  from  which we may  earn  revenue  and  incur
            expenses;

      o     Whose  operating  results  are  regularly   reviewed  by  the  chief
            operating  decision  maker to make decisions  about  resources to be
            allocated to the segment and assess its performance; and

      o     For which discrete financial information is available.

We have three operating  segments,  which are defined as each business line that
we  operate.  This  however,  excludes  corporate  headquarters,  which does not
generate revenue, and Perma-Fix of Michigan, Inc., a discontinued operation. See
Note 8 for further information on discontinued operations.

Our operating segments are defined as follows:

The Industrial Waste Management Services segment, which provides on-and-off site
treatment,  storage,  processing  and  disposal of hazardous  and  non-hazardous
industrial waste,  commercial waste and wastewater through our seven 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.,
Perma-Fix of Maryland,  Inc. (which acquired  certain assets and assumed certain
liabilities of A&A) and Perma-Fix of Pittsburgh,  Inc. (which  acquired  certain
assets of EMAX).

The  Nuclear  Waste  Management  Services  segment,  which  provides  treatment,
storage,  processing and disposal services for waste which is both hazardous and
low-level   radioactive   ("Mixed   Waste").   Included  in  such  is  research,
development,  on and off-site  waste  remediation of nuclear mixed and low-level
radioactive  waste  through our three  facilities;  Perma-Fix of Florida,  Inc.,
Diversified  Scientific  Services,  Inc. and East Tennessee Materials and Energy
Corporation.

The Consulting Engineering Services segment provides  environmental  engineering
and regulatory compliance services through Schreiber,  Yonley & Associates, Inc.
which includes oversight management of environmental  restoration projects,  air
and  soil  sampling  and  compliance  and  training  activities,   as  well  as,
engineering support as needed by our other segments.


                                       15
<PAGE>

The table below presents certain financial  information in thousands by business
segment for the three and nine months ended September 30, 2004 and 2003.

Segment Reporting for the Quarter Ended September 30, 2004

<TABLE>
<CAPTION>
                                              Industrial       Nuclear
                                                 Waste          Waste                     Segments    Corporate(2)      Consolidated
                                               Services       Services      Engineering     Total      and Other            Total
                                              ----------      --------      -----------   --------    ------------      ------------
<S>                                            <C>            <C>             <C>         <C>            <C>              <C>
Revenue from external customers                $ 10,606       $12,886(3)      $  845      $ 24,337       $    --          $  24,337
Intercompany revenues                               734           917             96         1,747            --              1,747
Interest income                                      --            --             --            --            --                 --
Interest expense                                    199           102             --           301            (7)               294
Interest expense-financing fees                      --           191             --           191         1,375              1,566
Depreciation and amortization                       523           671              7         1,201            10              1,211
Segment profit (loss)                            (9,050)        3,219             43        (5,788)       (1,217)            (7,005)
Segment assets(1)                                29,556        64,760          2,125        96,441         9,869(4)         106,310
Expenditures for segment assets                     189           254             --           443             6                449
</TABLE>

Segment Reporting for the Quarter Ended September 30, 2003

<TABLE>
<CAPTION>
                                              Industrial       Nuclear
                                                 Waste          Waste                     Segments    Corporate(2)      Consolidated
                                               Services       Services      Engineering     Total      and Other            Total
                                              ----------      --------      -----------   --------    ------------      ------------
<S>                                            <C>            <C>             <C>         <C>            <C>              <C>
Revenue from external customers                $ 10,529       $12,487(3)      $  765      $ 23,781       $    --          $  23,781
Intercompany revenues                               836           702            143         1,681            --              1,681
Interest income                                       1            --             --             1             1                  2
Interest expense                                    182           505             (2)          685            50                735
Interest expense-financing fees                      --            --             --            --           256                256
Depreciation and amortization                       420           637              9         1,066            18              1,084
Segment profit                                       71         3,831             94         3,996            --              3,996
Segment assets(1)                                32,441        60,841          2,130        95,412        19,037(4)         114,449
Expenditures for segment assets                     237           425             44           706           143(5)             849
</TABLE>

Segment Reporting for the Nine Months Ended September 30, 2004

<TABLE>
<CAPTION>
                                              Industrial       Nuclear
                                                 Waste          Waste                     Segments    Corporate(2)      Consolidated
                                               Services       Services      Engineering     Total      and Other            Total
                                              ----------      --------      -----------   --------    ------------      ------------
<S>                                            <C>            <C>             <C>         <C>            <C>              <C>
Revenue from external customers                $ 27,005       $30,871(3)      $2,401      $ 60,277       $    --          $  60,277
Intercompany revenues                             1,782         2,766            316         4,864            --              4,864
Interest income                                       2            --             --             2            --                  2
Interest expense                                    544           971             --         1,515            20              1,535
Interest expense-financing fees                      --           192             --           192         1,887              2,079
Depreciation and amortization                     1,516         1,978             21         3,515            25              3,540
Segment profit (loss)                           (11,140)        4,333             69        (6,738)       (1,217)            (7,955)
Segment assets(1)                                29,556        64,760          2,125        96,441         9,869(4)         106,310
Expenditures for segment assets                     644         1,783             17         2,444            58              2,502
</TABLE>

Segment Reporting for the Nine Months Ended September 30, 2003

<TABLE>
<CAPTION>
                                              Industrial       Nuclear
                                                 Waste          Waste                     Segments    Corporate(2)      Consolidated
                                               Services       Services      Engineering     Total      and Other            Total
                                              ----------      --------      -----------   --------    ------------      ------------
<S>                                            <C>            <C>             <C>         <C>            <C>              <C>
Revenue from external customers                $ 29,254       $28,753(3)      $2,418      $ 60,425       $    --          $  60,425
Intercompany revenues                             2,876         2,009            417         5,302            --              5,302
Interest income                                       4            --             --             4             3                  7
Interest expense                                    535         1,448             (8)        1,975           132              2,107
Interest expense-financing fees                      --             3             --             3           811                814
Depreciation and amortization                     1,215         1,848             27         3,090            56              3,146
Segment profit (loss)                            (1,081)        3,400            250         2,569            --              2,569
Segment assets(1)                                32,441        60,841          2,130        95,412        19,037(4)         114,449
Expenditures for segment assets                   1,033         1,493             52         2,578           335(5)           2,913
</TABLE>


                                       16
<PAGE>

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

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

(3)   The  consolidated  revenues  include  revenues  within the  Nuclear  Waste
      Services segment from Bechtel Jacobs for the quarter and nine months ended
      September 30, 2004, which total $2,627,000 or 10.8% and 6,752,000 or 11.2%
      of consolidated  revenues and $5,099,000 or 20.9% and $11,191,000 or 18.6%
      of consolidated revenues for the same periods in 2003.

(4)   Amount  includes  assets of  approximately  $1,416,000 and  $10,224,000 of
      assets from Perma-Fix of Michigan,  Inc. a discontinued operation from the
      Industrial segment as of September 30, 2004 and 2003,  respectively.  (see
      Note 8).

(5)   Amount  includes asset  expenditures  from our  discontinued  operation of
      $8,000 and $48,000 for the three and nine months ended September 30, 2003.


                                       17
<PAGE>

                     PERMA-FIX ENVIRONMENTAL SERVICES, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                 PART I, ITEM 2

Forward-looking Statements

Certain statements  contained within this report may be deemed  "forward-looking
statements"  within the meaning of Section 27A of the Securities Act of 1933, as
amended,  and Section 21E of the  Securities  Exchange  Act of 1934,  as amended
(collectively,  the "Private  Securities  Litigation  Reform Act of 1995").  All
statements  in this  report  other  than a  statement  of  historical  fact  are
forward-looking  statements  that  are  subject  to  known  and  unknown  risks,
uncertainties   and  other  factors,   which  could  cause  actual  results  and
performance of the Company to differ materially from such statements.  The words
"believe,"  "expect,"  "anticipate,"  "intend," "will," and similar  expressions
identify forward-looking statements. Forward-looking statements contained herein
relate to, among other things,

      o     improve our operations and liquidity;

      o     anticipated improvement in our financial performance;

      o     ability to comply with the general working capital requirements;

      o     ability to be able to continue to borrow under the revolving line of
            credit;

      o     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 our facilities in Memphis,  Tennessee;
            Detroit, Michigan; and Valdosta, Georgia;

      o     ability  to  remediate  certain  contaminated  sites  for  projected
            amounts;

      o     ability to fund up to the  additional  $1,100,000 of the  $3,600,000
            revised capital expenditure estimate during 2004;

      o     as  the  M&EC   facility   continues   to  enhance  its   processing
            capabilities and completes certain expansion projects,  we could see
            higher total revenues with Bechtel Jacobs;

      o     increasing other sources of revenue at M&EC;

      o     Growth of our Nuclear segment;

      o     positive results in our Industrial segment from our strategy;

      o     improvement in the fourth quarter;

      o     ability under the joint ventures to win contract  awards and perform
            remedial activities;

      o     completion of the contract  with the Fortune 500 company  during the
            first quarter of next year, and

      o     ability to remediate  and close the Detroit,  Michigan  facility for
            the estimated amount.

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:

      o     general economic conditions;

      o     material reduction in revenues;

      o     inability  to  collect  in a timely  manner  a  material  amount  of
            receivables;

      o     increased competitive pressures;

      o     the ability to maintain and obtain required permits and approvals to
            conduct operations;

      o     the ability to develop new and existing  technologies in the conduct
            of operations;

      o     ability to retain or renew certain required permits;

      o     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;


                                       18
<PAGE>

      o     changes in federal, state and local laws and regulations, especially
            environmental laws and regulations, or in interpretation of such;

      o     potential  increases in equipment,  maintenance,  operating or labor
            costs;

      o     management retention and development;

      o     impairment of intangible assets is substantially more than expected;

      o     termination  of the Oak Ridge  contracts  as a result of our lawsuit
            against Bechtel Jacobs or otherwise;

      o     the  requirement to use internally  generated funds for purposes not
            presently anticipated;

      o     inability to be profitable on an annualized basis;

      o     the  inability  of the Company to maintain the listing of its Common
            Stock on the NASDAQ;

      o     the  determination  that PFMI,  PFSG, or PFO was  responsible  for a
            material amount of remediation at certain superfund sites; and

      o     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.

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

Overview

We provide services through three reportable operating segments.  The Industrial
Waste Management Services segment  ("Industrial  segment") is engaged in on-site
and off-site  treatment,  storage,  disposal and processing of a wide variety of
by-products  and industrial,  hazardous and  non-hazardous  wastes.  The Nuclear
Waste  Management  Services  segment  ("Nuclear  segment")  provides  treatment,
storage,  processing and disposal services of mixed waste (waste containing both
hazardous and low-level radioactive materials) and low-level radioactive wastes,
including research,  development and on-site and off-site waste remediation. Our
Consulting Engineering Services segment provides a wide variety of environmental
related consulting and engineering services to both industry and government.

The  results,  for the third  quarter of 2004  reflect the  continued  growth in
revenue and receipt of further contract awards within the Nuclear segment, which
resulted in increased revenue for both the three and nine months ended September
30, 2004,  as compared to the same  periods of 2003.  We continue to enhance our
processing  capabilities and efficiencies within the Nuclear segment,  which has
led to the  expansion  of our services  within  additional  governmental  sites,
beyond the current  Bechtel Jacobs Company Oak Ridge  contracts,  and from other
large  Fortune 500  companies.  We continue  to work  through the  restructuring
efforts  within  the  Industrial   segment,   which  included  the  discontinued
operations of our Detroit,  Michigan  facility,  the write down of certain fixed
assets and the impairment of certain goodwill and other intangible  assets,  all
of which  resulted in  non-recurring  charges,  which  negatively  impacted  the
quarter. We continue to strengthen our balance sheet and borrowing position, and
reduce our debt,  which should have a positive  effect as we move into the final
quarter of the year.

During the third quarter in 2004 we recorded impairment  estimates to intangible
assets in the aggregate of  $7,101,000,  which is a charge  against  income from
operations. For further disclosure refer to the Results of Operations section of
this  Management's  Discussion and Analysis.  Additionally,  we discontinued our
operations at our facility in Detroit,  Michigan.  This resulted in an aggregate
loss from  discontinued  operations of $10,575,000 and $11,600,000 for the three
and nine months ended September 30, 2004. The discontinued  operation is further
discussed in this Management's Discussion and Analysis.


                                       19
<PAGE>

Results of Operations

The table  below  should  be used when  reviewing  management's  discussion  and
analysis for the three and nine months ended  September  30, 2004 and 2003.  The
results of operations for the discontinued operations have been reclassified for
all reported periods out of their respective  revenue and expense categories and
are  recorded  in the  aggregate  under  Net  income  (loss)  from  discontinued
operations.

<TABLE>
<CAPTION>
                                                          Three Months Ended                            Nine Months Ended
                                                             September 30,                                September 30,
                                                   --------------------------------------    ---------------------------------------
Consolidated (amounts in thousands)                   2004       %        2003        %         2004       %        2003        %
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>         <C>      <C>         <C>      <C>         <C>      <C>         <C>
Net revenues                                       $ 24,337    100.0    $ 23,781    100.0    $ 60,277    100.0    $ 60,425    100.0
Cost of goods sold                                   16,808     69.1      14,110     59.3      43,195     71.7      41,725     69.1
                                                   --------    -----    --------    -----    --------    -----    --------    -----
       Gross profit                                   7,529     30.9       9,671     40.7      17,082     28.3      18,700     30.9

Selling, general and administrative                   4,419     18.2       4,610     19.4      12,832     21.3      13,008     21.5
Loss (gain) on disposal/impairment of
   fixed assets                                       1,014      4.1         (14)     (.1)        996      1.7         (15)      --

Impairment loss on intangible assets                  7,101     29.2          --       --       7,101     11.7          --       --
                                                   --------    -----    --------    -----    --------    -----    --------    -----
       Income (loss) from operations               $ (5,005)   (20.6)   $  5,075     21.4    $ (3,847)    (6.4)   $  5,707      9.4
                                                   ========    =====    ========    =====    ========    =====    ========    =====

Interest expense                                   $   (294)    (1.2)   $   (735)    (3.1)   $ (1,535)    (2.5)   $ (2,107)    (3.5)

Interest expense-financing fees                      (1,566)    (6.4)       (256)    (1.1)     (2,079)    (3.4)       (814)    (1.3)

Preferred Stock dividends                               (48)     (.2)        (48)     (.2)       (142)     (.2)       (142)     (.2)
Net income (loss) from discontinued
   operations                                       (10,575)   (43.5)         29       .1     (11,600)   (19.2)       (226)     (.4)
</TABLE>

Summary - Three and Nine Months Ended September 30, 2004 and 2003

Net Revenue

Consolidated  net  revenues  increased  to  $24,337,000  for the  quarter  ended
September 30, 2004, as compared to $23,781,000 for the same quarter in 2003. The
increase  of $556,000 or 2.3% is  primarily  attributable  to an increase in the
Nuclear segment of approximately  $399,000 or 3.2%, resulting from the continued
expansion  within the mixed waste  market as our  facilities  demonstrate  their
ability to accept and process more  complex  waste  streams,  and we receive new
contracts for additional services.  The third quarter of 2004 has revenue from a
contract awarded by a Fortune 500 company in late June 2004 to treat and dispose
of mixed waste from research and development  activities.  Revenues from Bechtel
Jacobs Company,  which includes the Oak Ridge contracts,  totaled  $2,627,000 or
10.8% of total  consolidated  revenues for the three months ended  September 30,
2004,  compared to $5,099,000 or 20.9% for the three months ended  September 30,
2003.  See "Known  Trends and  Uncertainties  -  Significant  Contracts" of this
Management's  Discussion and Analysis.  Adding to this  increase,  were both the
Consulting  Engineering Service segment with an increase of $80,000 or 10.5% and
the Industrial  segment with an increase of $77,000 or 0.7%. The increase in the
Industrial   segment  resulted   principally  from  the  $2,609,000  of  revenue
contributed  from  the  two  facilities  acquired  as of  March  23,  2004.  See
"Acquisitions"  in  this  Management's   Discussion  and  Analysis  for  further
information on the acquired facilities. Primarily offsetting the increase within
the Industrial segment was $1,870,000 of revenue recognized in the third quarter
of 2003, from the Army's Newport Hydrolysate  project,  which was not duplicated
in the third  quarter of 2004.  The  remaining  decrease  is  attributable  to a
reduction in  government  revenues and to the  continued  restructuring  and the
strategic  decision to eliminate low margin broker  business and replace it with
higher margin generator direct revenue.

Consolidated  net revenues  decreased to $60,277,000  from  $60,425,000  for the
nine-month period ended September 30, 2004. This decrease of $148,000 or 0.2% is
principally attributable to a decrease in the


                                       20
<PAGE>

Industrial  segment of  approximately  $2,249,000  resulting  primarily from the
continued  restructuring of the segment as discussed above. Positively impacting
the first nine months of 2003 was the Army's Newport Hydrolysate  project,  from
which we recognized revenue of $3,055,000, which was not duplicated in 2004. The
decrease for the first nine months of 2004 is also attributable to the reduction
in government  revenues of approximately  $1,478,000.  The remaining decrease of
$3,522,000  was a result of  restructuring  and  strategic  decision to focus on
higher margin generator direct revenue. Partially offsetting the decrease within
the Industrial segment is $5,806,000 of revenue  contributed from two facilities
acquired  as  of  March  23,  2004.  See  "Acquisitions"  in  this  Management's
Discussion and Analysis for further information on the acquired facilities.  The
Consulting   Engineering   Service  segment  also   experienced  a  decrease  of
approximately  $17,000.  Offsetting  these  decreases,  was an  increase  in the
Nuclear  segment  of  approximately  $2,118,000,  resulting  from the  continued
expansion  within the mixed waste  market as our  facilities  demonstrate  their
ability to accept and  process  more  complex  waste  streams and we receive new
contracts for additional services,  including a Fortune 500 company as discussed
above.  Additionally,  the first and  second  quarters  of 2003 were  negatively
effected by the  government's  inability to ship waste to our  facilities due to
the war in Iraq and prolonged  terrorism alerts,  which has not been an obstacle
during 2004.  Consolidated revenues with Bechtel Jacobs Company,  which includes
the Oak Ridge contracts,  totaled  $6,752,000 or 11.2% of total revenues for the
nine months ended  September 30, 2004,  compared to $11,191,000 or 18.6% for the
nine months ended  September  30, 2003.  See "Known Trends and  Uncertainties  -
Significant Contracts" of this Management's Discussion and Analysis. The backlog
of  stored  waste  within  the  Nuclear  segment  at  September  30,  2004,  was
approximately $12,688,000, compared to $5,782,000 at December 31, 2003.

Cost of Goods Sold

Cost of goods sold increased $2,698,000 or 19.1% for the quarter ended September
30, 2004, as compared to the quarter ended  September 30, 2003. This increase in
cost of goods sold predominantly  reflects an increase in the Industrial segment
of  approximately  $1,361,000,  which  principally  relates to additional  costs
related to the revenue generated from the two facilities  acquired,  as of March
23, 2004, and the additional  operating costs incurred as the segment  completes
its restructuring and integration efforts. Partially offsetting this increase is
the reduction in costs from 2003 due to the Army's Newport Hydrolysate  project,
not  repeated  in  2004,  which  carried  significantly  lower  costs  than  the
replacement  revenue from the  acquired  facilities.  Additionally,  the Nuclear
segment  experienced an increase of approximately  $1,171,000 due to an increase
in disposal and treatment  costs  associated  with the particular  waste streams
processed during the third quarter of 2004. The Consulting  Engineering Services
segment  accounted for  approximately  $166,000 of the increase in cost of goods
sold,  which  corresponds  with the increase in revenue and higher materials and
personnel  costs.  Depreciation  expense of $1,143,000  and  $1,016,000  for the
quarters ended September 30, 2004 and 2003, respectively, is included in cost of
goods sold, which reflects an increase of $127,000. The acquisitions contributed
$126,000 to this increase.

Cost of goods sold increased  $1,470,000 or 3.5% for the nine-month period ended
September 30, 2004,  as compared to the  nine-month  period ended  September 30,
2003. This increase in cost of goods sold primarily  reflects an increase in the
Nuclear  segment of $1,078,000,  which  correlates with the increase in revenue.
Additionally,   the  Consulting  Engineering  Services  segment  experienced  an
increase in cost of goods sold of approximately  $223,000,  which relates to the
higher  payroll and other  direct  costs of projects  completed  this year.  The
Industrial  segment  experienced an increase of  approximately  $169,000,  which
primarily  reflects  the  additional  operating  costs  incurred  as the segment
completes its restructuring and integration  efforts and increased costs related
to revenue  generated  from the two facilities  acquired,  as of March 23, 2004.
Partially  offsetting  this increase was the reduction in costs from 2003 due to
the Army's Newport  Hydrolysate  project,  not repeated in 2004. Included within
cost of goods sold is depreciation  expense of $3,349,000 and $2,946,000 for the
nine months  ended  September  30, 2004 and 2003,  respectively,  reflecting  an
increase of $403,000 over 2003,  of which  $282,000 was a result of the acquired
facilities.


                                       21
<PAGE>

Gross Profit

The resulting gross profit for the quarter ended  September 30, 2004,  decreased
$2,142,000 to $7,529,000, which as a percentage of revenue is 30.9%, as compared
to 40.7% for the quarter ended  September 30, 2003. The decrease in gross profit
percentage primarily reflects a decrease in the Industrial segment from 27.1% in
2003 to 14.8% in 2004. This segment's decrease principally reflects the decrease
in gross profit from the elimination of the Army's Newport Hydrolysate  project,
a higher margin  contract,  included in the third quarter of 2003. The remaining
reduction  in gross  margin for the  segment  was the  addition of the March 23,
2004,  acquisitions and the on going  restructuring.  Additionally,  the Nuclear
segment decreased from 52.2% in 2003 to 44.6% in 2004,  reflecting mainly a less
favorable  product  mix during the  quarter and  increased  disposal  costs that
correspond  with  different  contracts.  There was a decrease in the  Consulting
Engineering Services segment from 38.3% in 2003 to 24.4% in 2004, which reflects
the impact of lower margin  projects  being  performed  in the third  quarter of
2004.

The  resulting  gross  profit for the nine  months  ended  September  30,  2004,
decreased $1,618,000 to $17,082,000,  which as a percentage of revenue is 28.3%,
reflecting a decrease  from the 2003  corresponding  nine months  percentage  of
revenue of 30.9%. This decrease in gross profit percentage  principally reflects
a decrease in the Industrial  segment from 22.5% in 2003 to 15.4% in 2004.  This
segment's   decrease  primarily  reflects  the  fixed  costs  of  operating  the
facilities  being  spread  over  reduced  revenues,  relating  in  part  to  the
restructuring.  Additionally,  the  decrease  in  gross  profit  percentage  was
significantly  affected by the  elimination  of the Army's  Newport  Hydrolysate
project  included  in the third  quarter  of 2003,  which had a very high  gross
margin.  Additionally,  there  was a  decrease  in  the  Consulting  Engineering
Services  segment from 36.5% in 2003 to 26.8% in 2004, which reflects the impact
of lower margin  projects being  performed in the first nine months of 2004. The
decrease in gross profit  percentage was partially  offset by an increase in the
Nuclear segment from 39.1% in 2003 to 39.8% in 2004.

Selling, General and Administrative

Selling,  general and administrative expenses decreased $191,000 or 4.1% for the
quarter ended September 30, 2004, as compared to the quarter ended September 30,
2003.  This  decrease  was  realized  by  both  the  Industrial  and  Consulting
Engineering  segments,  and included  reductions in payroll related expenses and
outside  services.  Partially  offsetting  the decrease  from the  restructuring
within the  Industrial  segment was the additional  expenses  related to the two
facilities acquired effective March 23, 2004. Additionally,  the Nuclear segment
had a  slight  increase  in  payroll  and  related  expenses.  Depreciation  and
amortization  expense  of $68,000  was  included  within  selling,  general  and
administrative  expenses  for  both  third  quarters  of  2004  and  2003.  As a
percentage of revenue, selling, general and administrative expenses decreased to
18.2% for the quarter ended  September 30, 2004,  compared to 19.4% for the same
period in 2003.

Selling,  general and administrative expenses decreased $176,000 or 1.4% for the
nine months ended  September  30, 2004,  as compared to the same period in 2003.
This  decrease  relates  to all  segments,  but  the  largest  of  which  is the
Consulting  Engineering  Services and Industrial  segments reductions in payroll
and related expenses,  with the decrease in the Industrial segment primarily due
to the  restructuring of the segment.  Partially  offsetting the decrease within
the Industrial segment are the additional expenses related to the two facilities
acquired,  effective  March 23, 2004.  Offsetting the company's  decrease was an
increase in corporate  administrative expenses and the Nuclear segment's payroll
related expenses,  as stronger  infrastructures  are built as we comply with the
Sarbanes  Oxley Act of 2002.  Included  in selling,  general and  administrative
expenses is depreciation and  amortization  expense of $191,000 and $200,000 for
the nine months ended September 30, 2004 and 2003, respectively. As a percentage
of revenue,  selling, general and administrative expenses decreased to 21.3% for
the nine months ended September 30, 2004,  compared to 21.5% for the same period
in 2003.


                                       22
<PAGE>

Loss (Gain) on Disposal/Impairment of Fixed Assets

The loss on fixed asset  disposal/impairment for the quarter ended September 30,
2004, was  $1,014,000,  as compared to a gain of $14,000 for the same quarter in
2003.  This loss is principally a result of the Industrial  segment writing down
certain fixed assets, totaling $1,026,000, which have been determined to have no
fair value. As part of the restructuring  process,  management abandoned various
projects at certain facilities.

The loss on fixed asset  disposal/impairment for the nine months ended September
30, 2004, was $996,000, as compared to a gain of $15,000 for the same nine-month
period in 2003.  This loss is  principally  a result of the  Industrial  segment
writing  down  certain  fixed  assets,  totaling  $1,026,000,  which  have  been
determined  to have  no  fair  value.  As  part  of the  restructuring  process,
management abandoned various projects at certain facilities.

Impairment on Intangible Assets

In conjunction with our third quarter financial  reporting process,  as a result
of a disparity of our Industrial  reporting unit's actual  operating  results to
long-term  projections and the  discontinuation  of operations at our Industrial
segment  facility  in  Detroit,   Michigan,  as  of  September  30,  2004,  (see
Discontinued  Operations  in this  Management's  Discussion  and  Analysis),  we
engaged an independent appraisal firm to perform preliminary impairment tests of
permits  and  goodwill,  separately  for  the  Industrial  reporting  unit.  The
preliminary  impairment  tests of the  Industrial  reporting unit resulted in an
estimated  impairment  to permits of $2,215,000  and an estimated  impairment to
goodwill of approximately $4,886,000.  The aggregate impairment of $7,101,000 is
our best estimate and was recorded in the third quarter as a component of Income
(loss)  from  operations  in the  Consolidated  Statements  of  Operations.  The
preliminary impairment tests of the Industrial reporting unit will be finalized,
along with the annual impairment tests,  during the fourth quarter of 2004, thus
our estimated  impairment loss is subject to refinement and may be adjusted,  if
necessary.

Interest Expense

Interest expense decreased $441,000 for the quarter ended September 30, 2004, as
compared to the  corresponding  period of 2003.  This  decrease  reflects  lower
borrowing  levels and interest rates on our PNC revolving  credit and term loan,
resulting  in a decrease in  interest  expense of  $92,000.  In March  2004,  we
received  proceeds  from the  private  placement  that were used to  temporarily
reduce  the   revolver   resulting  in  this   decrease  in  interest   expense.
Additionally,  as a result of the prepayment of the senior  subordinated debt in
August 2004,  interest  expense  decreased by $63,000.  In June 2004,  the final
repayment of debt associated with past acquisitions was completed resulting in a
decrease  in interest  expense of  $36,000.  The  remainder  of the  decrease is
primarily due to an adjustment to the interest  payable  associated with the PDC
and IRS notes, which totaled $219,000.

Interest  expense also  decreased by $572,000  for the  nine-month  period ended
September  30,  2004,  as compared  to the  corresponding  period of 2003.  This
decrease  reflects the impact of lower  interest  rates and decreased  borrowing
levels on the  revolving  credit and term loans with PNC,  which  resulted  in a
decrease in interest  expense of $203,000  when compared to prior year. In March
2004, we received  proceeds  related to the private  placement  that was used to
temporarily  reduce the  revolver,  which  resulted  in a decrease  in  interest
expense.  Additionally,  the  final  repayment  of  debt  associated  with  past
acquisitions   resulted  in  a  decrease   in   interest   expense  of  $76,000.
Additionally,  as a result of the prepayment of the senior  subordinated debt in
August  2004,  interest  expense  decreased  by $63,000.  The  remainder  of the
decrease is primarily due to an adjustment  to the interest  payable  associated
with the PDC and IRS notes, which totaled $219,000.


                                       23
<PAGE>

Interest Expense - Financing Fees

Interest  expense-financing fees increased by $1,310,000 during the three months
ended  September 30, 2004, as compared to the same period in 2003. This increase
is primarily a result of the write-off of $1,217,000 of prepaid  financing  fees
and debt discount  associated with the early termination of senior  subordinated
notes,  which were paid in full in August  2004.  Additionally,  we  expensed an
early  termination fee of $190,000,  paid as a result of the pre-payment.  These
financing fees are principally associated with the credit facility and term loan
with PNC and the senior  subordinated  notes,  and are amortized to expense over
the term of the loan agreements.

Interest  expense-financing  fees  increased by  $1,265,000  for the nine months
ended September 30, 2004, as compared to the corresponding  period of 2003. This
increase  was  primarily  due to a  one-time  write-off  of fees in March  2004,
associated  with other short term  financing  and the write-off of $1,217,000 of
prepaid  financing fees and debt discount  associated with the early termination
of  senior  subordinated  notes,  which  were  paid  in  full  in  August  2004.
Additionally,  we expensed an early termination fee of $190,000 paid as a result
of the pre-payment.

Preferred Stock Dividends

Preferred  Stock  dividends  remained  relatively  constant  at $48,000  for the
quarters ended  September 30, 2004 and 2003. The Preferred  Stock  dividends are
comprised  of  approximately  $31,000  accrued  dividends  from  our  Series  17
Preferred  Stock,  and $17,000  from the accrual of  preferred  dividends on the
Preferred Stock of our subsidiary, M&EC. Preferred dividends for the nine months
remained constant at $142,000 for 2004 and 2003.

Discontinued Operation

On October 4, 2004,  our Board of  Directors  approved  the  discontinuation  of
operations at the facility in Detroit,  Michigan ("Detroit facility"),  owned by
our  subsidiary,   Perma-Fix  of  Michigan,   Inc.  ("PFMI").  The  decision  to
discontinue  operations at the Detroit  facility was  principally as a result of
two fires that significantly  disrupted  operations at the facility in 2003, and
the  facility's  critical  drain on the  financial  resources of our  Industrial
segment.  We are in the process of  remediating  the facility and evaluating our
available  options  for  future  use or  sale  of the  property.  The  operating
activities  for  the  current  and  prior  periods  have  been  reclassified  to
discontinued operations in our Consolidated Statements of Operations.

PFMI recorded  revenues of $1,569,000 and  $4,465,000,  and operating  losses of
$1,765,000  and $226,000 for the nine months ended  September 30, 2004 and 2003,
respectively.  Our estimated loss on disposals from  discontinued  operations of
$9,835,000 for the three and nine months ended September 30, 2004,  consisted of
asset impairments, pension costs, environmental remediation and other expenses.

We recorded  $1,474,000 for a pension plan  withdrawal  liability as a result of
terminating  our union  employees at PFMI. The liability is an estimate,  and we
are in the process of completing an actuarial study of the withdrawal  liability
under the pension plan.  Additionally,  we recorded  accruals for  environmental
closure and  remediation,  costs of $2,733,000,  severance  costs of $47,000 and
miscellaneous costs of $61,000. We recorded a non-cash tangible asset impairment
of $4,591,000 and  impairment to goodwill and permits of $929,000.  The tangible
asset  impairment  is our best  estimate  write down of tangible  assets to fair
value. The goodwill and permit  impairment is our estimate of the portion of our
goodwill and permits for the Industrial  segment  allocated to PFMI. Other costs
consist of amounts to be paid to close the facility and  remediate the property.
The  environmental  closure and remediation  accrual is based on our estimate at
the time of this report and could change based on the final remediation costs.


                                       24
<PAGE>

Assets  and  liabilities  related  to  the  discontinued   operation  have  been
reclassified  to separate  categories in the  Consolidated  Balance Sheets as of
September 30, 2004 and December 31, 2003.  As of September 30, 2004,  assets are
recorded at their net  realizable  value,  and consist of land and  buildings of
$600,000,  accounts  receivable of $347,000,  and estimated  insurance  proceeds
receivable of $455,000.  The  insurance  receivable is an estimate of the direct
costs from the first fire at PFMI. We have submitted  insurance  claims for both
fires at PFMI, and are currently  negotiating  settlements for those claims, but
at this time we cannot estimate actual proceeds to be received.  If the proceeds
exceed the  estimated  insurance  receivable  we will  recognize  a gain for the
additional  proceeds.  Liabilities as of September 30, 2004, consist of accounts
payable  and  current  accruals  of  $2,554,000  and  environmental  and closure
accruals of $2,464,000.

Liquidity and Capital Resources of the Company

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

At September  30, 2004,  we had cash of  $458,000.  This cash total  reflects an
increase of $47,000 from  December 31, 2003, as a result of net cash provided by
operations  of $27,000 and cash  provided by financing  activities of $6,202,000
(principally  proceeds  from the  issuance of Common  Stock in  connection  with
Warrant and option  exercises,  issuances under our employee stock purchase plan
and the private  placement  completed in the first quarter,  partially offset by
net repayments of our revolving  credit  facility and long-term  debt) offset by
cash used in investing  activities  of  $6,182,000  (principally  funds used for
acquisitions,  net  purchases  of  equipment,  and a deposit to the finite  risk
sinking fund). We are in a net borrowing  position and therefore attempt to move
all excess cash balances immediately to the revolving credit facility,  so as to
reduce debt and  interest  expense.  We utilize a  centralized  cash  management
system,  which  includes  remittance  lock boxes and is structured to accelerate
collection  activities and reduce cash  balances,  as idle cash is moved without
delay to the revolving credit facility.  The cash balance at September 30, 2004,
represents  payroll  account  fundings,  which were not  withdrawn  until  after
quarter-end.

Operating Activities

Accounts   receivable,   net  of  allowance  for  doubtful   accounts,   totaled
$31,391,000,  an increase of  $7,815,000  from the  December 31, 2003 balance of
$23,576,000. This increase reflects the impact of additional accounts receivable
of $2,226,000 as a result of the assets purchased in the acquisitions  discussed
below in this Management's  Discussion and Analysis.  Additionally,  the Nuclear
segment  experienced  an  increase  of  $5,633,000  as a result of the  seasonal
increase  in revenue  that  comes from  DOE/DOD  contractors.  Offsetting  these
increases,  were slight  decreases in the Industrial  segment of $35,000 and the
Consulting Engineering segment of $9,000.

As of September 30, 2004, total consolidated accounts payable was $6,111,000, an
increase of $593,000  from the December 31, 2003,  balance of  $5,518,000.  This
increase in accounts  payable  reflects  the impact of the  acquisitions,  which
resulted in an increase of $864,000.  Additionally,  accounts payable  increased
due to un-financed capital  expenditures,  offset by decreases in trade accounts
payable, which was achieved by improved cash flow.

Working  capital at September 30, 2004, was  $4,922,000,  as compared to working
capital of $4,159,000 at December 31, 2003,  reflecting an increase of $763,000.
This working capital increase reflects the increased accounts receivable balance
primarily due to the acquisitions, which contributed $1,514,000 of


                                       25
<PAGE>

this increase,  net of the increased  accounts payable balance at the end of the
period.  Negatively  impacting this September 30, 2004 working capital  position
was the reclass of $3.5 million from long term debt to current portion,  for the
unsecured  promissory  note due in full in August  2005,  and the  recording  of
certain current liabilities of the discontinued operations.

Investing Activities

Our purchases of capital equipment for the nine-month period ended September 30,
2004,  totaled  approximately   $2,502,000,   including  financed  purchases  of
$184,000.  These  expenditures  were  for  expansion  and  improvements  to  the
operations  principally within our Industrial and Nuclear segments.  The capital
expenditures  were funded by cash provided by operations  and from proceeds from
the issuance of stock, upon exercise of Warrants,  options and private placement
funds. We had budgeted capital  expenditures of up to  approximately  $5,600,000
for 2004, which includes an estimated  $1,675,000 for completion of certain 2003
projects in  process,  as well as other  identified  capital  purchases  for the
expansion and improvement to the operations and for certain  compliance  related
enhancements.  We have revised our capital expenditures  estimate for 2004, down
to approximately  $3,600,000.  Our purchases  during 2004 include  approximately
$994,000 to complete  certain of the 2003  projects  in process.  We  anticipate
funding  capital  expenditures by a combination of lease  financing,  internally
generated funds, and/or the proceeds received from Option and Warrant exercises.

Financing Activities

On December 22, 2000, we 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  provided,  at  inception,  for a term loan ("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. The
Agreement also provided for a revolving line of credit ("Revolving Credit") with
a  maximum  principal  amount  outstanding  at any one time of  $18,000,000,  as
amended.  The Revolving  Credit advances are subject to limitations of an amount
up to the sum of (a) up to 85% of  Commercial  Receivables  aged 90 days or less
from invoice date, (b) up to 85% of Commercial Broker Receivables aged up to 120
days  from  invoice  date,  (c)  up  to  85%  of  acceptable  Government  Agency
Receivables  aged  up to  150  days  from  invoice  date,  and  (d) up to 50% of
acceptable  unbilled  amounts  aged  up to 60  days,  less  (e)  reserves  Agent
reasonably deems proper and necessary. The Revolving Credit advances are due and
payable in full on December 22,  2005.  As of  September  30,  2004,  the excess
availability  under our Revolving  Credit was $10,127,000  based on our eligible
receivables.   However,  during  the  third  quarter  of  2004,  our  borrowings
approached  the  maximum  line  capacity  under the  Revolving  Credit,  thereby
reducing the line  availability  from which we could borrow to  $5,294,000 as of
September 30, 2004.

Pursuant to the Agreement the Term Loan bears  interest at a floating rate equal
to the prime rate plus 1 1/2%, and the Revolving Credit at a floating rate equal
to the prime rate plus 1%. 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.

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 were paid in full in June 2004.

On August 31, 2000, as part of the consideration for the purchase of Diversified
Scientific  Services,  Inc. ("DSSI"),  we issued to Waste Management  Holdings a
long-term unsecured promissory note (the


                                       26
<PAGE>

"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 in one lump sum at the end of the
term of the Unsecured Promissory Note (August 2005).

On July 31,  2001,  we issued  approximately  $5,625,000  of our  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
were  paid in full in  August  2004.  We also  paid  early  termination  fees of
$190,000  and recorded a non-cash  expense of  $1,217,000  for the  write-off of
prepaid financing fees and a debt discount.

Under  the  terms  of the  Purchase  Agreement,  we also  issued  to AMI and BEC
Warrants  to  purchase  up to  1,281,731  shares of our Common  Stock  ("Warrant
Shares")  at an  initial  exercise  price of $1.50 per share  (the  "Warrants"),
subject to adjustment under certain conditions, which were valued at $1,622,000.
The Warrants, as issued, also contain a cashless exercise provision. The Warrant
Shares are  registered  under an S-3  Registration  Statement  that was declared
effective on November 27, 2002.

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 of the  Warrants or 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 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).  We account  for the  changes in
redemption value  immediately as they occur and adjust the carrying value of the
security to equal the redemption value at the end of each reporting  period.  On
September 30, 2004, the Put Option had no value and no liability was recorded.

In  conjunction  with our  acquisition  of East  Tennessee  Materials and Energy
Corporation  ("M&EC"),  M&EC issued a promissory note for a principal  amount of
$3,714,000 to PDC, dated June 25, 2001, for monies  advanced to M&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 law rate  ("Applicable  Rate")  pursuant to the provisions of section
6621 of the  Internal  Revenue Code of 1986 as amended,  (7.0% on September  30,
2004) and payable in lump sum at the end of the loan period.  On  September  30,
2004, the  outstanding  balance was  $4,184,000  including  accrued  interest of
approximately  $990,000.  PDC has directed  M&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.

Additionally,  M&EC  entered  into an  installment  agreement  with the Internal
Revenue  Service ("IRS") for a principal  amount of $923,000  effective June 25,
2001, for certain  withholding taxes owed by M&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  Rate and is adjusted on a quarterly basis
and payable in lump sum at the end of the installment  period.  On September 30,
2004,  the  Applicable  Rate was 7.0%.  On September 30, 2004,  the  outstanding
balance was $1,033,000 including accrued interest of approximately $240,000.


                                       27
<PAGE>

The accrued dividends on the outstanding  Preferred Stock for the period July 1,
2003,  through  December 31, 2003, in the amount of  approximately  $63,000 were
paid in  February  2004 in the form of 19,643  shares of our Common  Stock.  The
dividends for the period January 1, 2004,  through June 30, 2004, total $62,000,
and were paid in August  2004,  through  the  issuance  of 34,938  shares of our
Common  Stock.  The  accrued  dividends  for the  period  July 1,  2004  through
September 30, 2004,  total  $32,000 and will be paid in January 2005.  Under our
loan agreements, we are prohibited from paying cash dividends on our outstanding
capital stock.

In  summary,  we have  continued  to take steps to improve  our  operations  and
liquidity as discussed above. However, we continue to invest our working capital
back into our facilities to fund capital additions for expansion within both the
Nuclear and Industrial  segments.  We have  experienced  the positive  impact of
increased  accounts  receivable and increased  availability  under our Revolving
Credit.  Additionally,  accounts payable have remained relatively steady through
our typically strong third quarter.  Offsetting these positives was the negative
impact  of  current  reserves  recorded  on  discontinued   operations  and  the
reclassification  of  long-term  debt  to  current.  The  reserves  recorded  on
discontinued  operations  could be reduced or paid over a longer  period of time
than  initially  anticipated.  If we are unable to improve  our  operations  and
become profitable in the foreseeable  future, such would have a material adverse
effect on our liquidity position.

Acquisitions

On March 23, 2004, our  subsidiary,  PFMD  completed its  acquisition of certain
assets of A&A and our  subsidiary,  PFP  completed  its  acquisition  of certain
assets of EMAX. We paid  $2,915,000 in cash for the acquired  assets and assumed
liabilities of A&A and EMAX, using funds received in connection with the private
placement  discussed  below.  A&A and EMAX had  unaudited  combined  revenues of
approximately  $15.0  million  in 2003  and a  combined  loss  of  approximately
$299,000.

Private Placement

On March 22,  2004,  we  completed  a private  placement  for gross  proceeds of
approximately  $10,386,000  through the sale of  4,616,113  shares of our Common
Stock at $2.25 per share and Warrants to purchase an additional 1,615,638 shares
of our Common  Stock  exercisable  at $2.92 per share and a term of three years.
The private  placement was sold to fifteen  accredited  investors.  The net cash
proceeds received of $9,946,000, after paying placement agent fees, were used in
connection  with the  acquisitions  of certain  acquired  assets of A&A and EMAX
discussed  above,  and  to  initially  pay  down  the  Revolving  Credit,  while
finalizing  the  prepayment of other higher  interest  debt. We have incurred an
additional  $76,000 for expenses  related to the private  placement.  During the
third quarter of 2004, we used a portion of our availability under our Revolving
Credit, to repay our Senior  Subordinated  Notes with an interest rate of 13.5%.
We also issued Warrants to purchase an aggregate of 160,000 shares of our Common
Stock, exercisable at $2.92 per share and with a three year term, for consulting
services related to the private placement.


                                       28
<PAGE>

Contractual Obligations

The following  table  summarizes  our  contractual  obligations at September 30,
2004, and the effect such  obligations are expected to have on our liquidity and
cash flow in future periods, (in thousands):

<TABLE>
<CAPTION>
                                                                                      Payments due by period
                                                                      -------------------------------------------------------
                                                                                                                       After
Contractual Obligations                                Total            2004         2005-2007      2008-2009           2009
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>             <C>             <C>             <C>             <C>
Long-term debt                                        $25,412         $ 1,444         $22,929         $ 1,039         $    --
Interest on long-term debt                              1,230              --              --           1,230              --
Operating leases                                        3,282             338           2,828             116              --
Finite risk policy                                      8,030              --           3,011           2,008           3,011
Pension withdrawal liability                            1,474              --           1,474              --              --
Purchase obligations (1)                                   --              --              --              --              --
                                                      -------         -------         -------         -------         -------
    Total contractual obligations                     $39,428         $ 1,782         $30,242         $ 4,393         $ 3,011
                                                      =======         =======         =======         =======         =======
</TABLE>

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

In June 2003,  we entered into a 25-year  finite risk  insurance  policy,  which
provides  financial  assurance  to  the  applicable  states  for  our  permitted
facilities  in the event of unforeseen  closure.  Prior to obtaining or renewing
operating permits we are required to provide financial assurance that guarantees
to the states  that in the event of closure  our  permitted  facilities  will be
closed in accordance with the  regulations.  The policy provides  $35,000,000 of
financial  assurance  coverage  and has  available  capacity to allow for annual
inflation and other performance and surety bond  requirements.  This finite risk
insurance policy required an upfront payment of $4,000,000,  of which $2,766,000
represents  the  full  premium  for  the  25-year  term of the  policy,  and the
remaining $1,234,000, was deposited in a sinking fund account.  Additionally, in
February  2004  we paid  the  first  of nine  required  annual  installments  of
$1,004,000,  of which  $991,000 was deposited in the sinking fund  account,  the
remaining $13,000 represents a terrorism  premium.  As of September 30, 2004, we
have recorded $2,225,000 in our sinking fund on the balance sheet. On the fourth
and  subsequent  anniversaries  of  the  contract  inception,  we may  elect  to
terminate this contract. If we so elect, the insurer will pay us an amount equal
to 100% of the sinking fund account  balance in return for complete  releases of
liability from both us and any applicable regulatory agency using this policy as
an instrument to comply with financial assurance requirements.

Critical Accounting Policies

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

Revenue  Recognition  Estimates.  Effective  September  1, 2003,  we refined our
percentage of completion  methodology for purposes of revenue recognition in our
Nuclear  segment.  As we accept more complex waste streams in this segment,  the
treatment  of those  waste  streams  becomes  more  complicated  and  more  time
consuming.  We have  continued to enhance our waste  tracking  capabilities  and
systems,  which  has  enabled  us to  better  match  the  revenue  earned to the
processing   milestones   achieved.    The   major   milestones   are   receipt,
treatment/processing, and shipment/final disposition. Upon receiving mixed waste
we  generally  recognize  33% of revenue as we incur  costs for  transportation,
analytical and labor


                                       29
<PAGE>

associated with the receipt of mixed wastes. As the waste is processed,  shipped
and  disposed of we generally  recognize  the  remaining  67% of revenue and all
associated costs. We continually review these revenue recognition percentages by
evaluating the processing milestones and specific contracts,  to insure the most
accurate percentage of completion.  We are also reviewing the Industrial segment
revenue recognition methodology to determine if any refinement is necessary.

Allowance for Doubtful Accounts.  The carrying amount of accounts  receivable is
reduced by an allowance for doubtful  accounts,  which is a valuation  allowance
that reflects  management's best estimate of the amounts that are uncollectable.
We regularly review all accounts  receivable balances and based on an assessment
of current credit worthiness,  estimate the portion, if any, of the balance that
is  uncollectable.  This allowance was  approximately  0.8%, of revenue for both
2003 and 2002, and approximately  2.9%, and 3.3% of accounts  receivable for the
nine-month periods ended September 30, 2004 and 2003, respectively.

Intangible  Assets.  Intangible assets relating to acquired  businesses  consist
primarily of the cost of purchased  businesses in excess of the  estimated  fair
value of net assets acquired ("goodwill") and the recognized permit value of the
business.  We  continually  reevaluate  the propriety of the carrying  amount of
permits and  goodwill to  determine  whether  current  events and  circumstances
warrant adjustments to the carrying value. Effective January 1, 2002, we adopted
SFAS 142.  We  utilized  an  independent  appraisal  firm to test  goodwill  and
permits,  separately,  for  impairment.  The  initial  report  provided  by  the
appraiser  indicated that no impairment existed as of January 1, 2002.  Goodwill
and permits  were again  tested as of October 1, 2002 and  October 1, 2003,  and
each of these tests also indicated no impairment.  Effective January 1, 2002, we
discontinued amortizing indefinite life intangible assets (goodwill and permits)
as  required  by SFAS  142.  The  appraisers  estimated  the  fair  value of our
operating  segments  using a  discounted  cash  flow  valuation  approach.  This
approach  is  dependent  on  estimates  for  future  sales,   operating  income,
depreciation   and   amortization,   working   capital   changes,   and  capital
expenditures,  as well as,  expected  growth rates for cash flows and  long-term
interest rates, all of which are impacted by economic  conditions related to our
industry as well as conditions in the U.S. capital markets.  As discussed in the
Results of Operations section of this Management's  Discussion and Analysis,  we
had a preliminary  impairment  test performed on our Industrial  segment,  which
resulted in an estimated  impairment  to permits of  $2,215,000  and goodwill of
$4,886,000.

Accrued   Closure   Costs.   Accrued   closure  costs   represent  a  contingent
environmental  liability to clean up a facility in the event we cease operations
in an  existing  facility.  The accrued  closure  costs are  estimates  based on
guidelines developed by federal and/or state regulatory  authorities under 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 2004 and 2003, have been  approximately  1.6% and 1.1% respectively,
and based on the historical  information,  we do not expect future  inflationary
changes to differ  materially.  Increases or decreases in accrued  closure costs
resulting from changes or expansions at the  facilities are determined  based on
specific RCRA  guidelines  applied to the  requested  change.  This  calculation
includes certain estimates, such as disposal pricing, external labor, analytical
costs and processing  costs,  which are based on current market  conditions.  We
have no  intention,  at this time,  to close any of our  facilities,  however as
discussed above, we are currently evaluating our options regarding the continued
operations of the Michigan facility.

Accrued Environmental  Liabilities.  We have four remediation projects currently
in progress.  The current and long-term accrual amounts for the projects are our
best  estimates  based on proposed  or  approved  processes  for  clean-up.  The
circumstances that could affect the outcome range from new technologies that are
being   developed   every  day  to  reduce  our  overall  costs,   to  increased
contamination  levels that could arise as we  complete  remediation  which could
increase our costs,  neither of which we  anticipate  at this time. In addition,
significant changes in regulations could adversely or favorably affect our costs
to


                                       30
<PAGE>

remediate  existing sites or potential future sites,  which cannot be reasonably
quantified.  We have also accrued  long-term  environmental  liabilities for our
recently acquired  facilities,  however as these are not permitted facilities we
are currently under no obligation to clean up the contamination.

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

Known Trends and Uncertainties

Seasonality. Historically we have experienced reduced revenues, operating losses
or  decreased  operating  profits  during the first and fourth  quarters  of our
fiscal  years  due to a  seasonal  slowdown  in  operations  from  poor  weather
conditions and overall reduced  activities during the holiday season and through
January and  February of the first  quarter.  During our second and third fiscal
quarters  there has  historically  been an increase in  revenues  and  operating
profits. Management expects this trend to continue in future years. As discussed
above,  this trend  continued in 2004, but the reduction in revenues and the net
loss  for  the  first  quarter  2004  was  greater  than  we  have  historically
experienced in prior first quarter periods as previously discussed.  The DOE and
DOD represent major customers for the Nuclear  segment.  In conjunction with the
federal  government's   September  30  fiscal  year-end,   the  Nuclear  segment
experiences  seasonably large shipments during the third quarter,  leading up to
this  government  fiscal  year-end,  as a result of  incentives  and other quota
requirements.  Correspondingly  for  a  period  of  approximately  three  months
following September 30, the Nuclear segment is generally seasonably slow, as the
governmental  budgets are still being  finalized,  planning  for the new year is
occurring and we enter the holiday season.

Economic Conditions. Economic downturns or recessionary conditions can adversely
affect the demand for our services,  principally within the Industrial  segment.
Reductions in industrial  production  generally follow such economic conditions,
resulting  in  reduced  levels  of waste  being  generated  and/or  sent off for
treatment.  We believe that our revenues  and profits were  negatively  affected
within this segment by the recessionary  conditions in 2003, and that this trend
continued into 2004.

Significant  contracts.  Our revenues are principally  derived from numerous and
varied customers.  However,  our Nuclear segment has a significant  relationship
with Bechtel Jacobs.  Bechtel Jacobs is the government  appointed manager of the
environmental  program to perform certain treatment and disposal services in Oak
Ridge,   Tennessee.  In  this  capacity  Bechtel  Jacobs  entered  into  certain
subcontracts with our Oak Ridge,  Tennessee  subsidiary  ("M&EC").  Our revenues
from Bechtel Jacobs contributed 11.2% of total consolidated revenues in the nine
months ended September 30, 2004 and 18.6% of total consolidated  revenues during
the same  period  in  2003.  As the  M&EC  facility  continues  to  enhance  its
processing  capabilities and completes certain  expansion  projects and with the
amended  pricing  structure under the Oak Ridge  contracts,  we could see higher
total  revenue with Bechtel  Jacobs and under the Oak Ridge  contracts.  The Oak
Ridge contracts have been extended for a period of two years, through June 2005,
with several pricing modifications, but, as with most contracts with the federal
government,  may be terminated or renegotiated  at any time at the  government's
election.  In February 2003,  M&EC commenced legal  proceedings  against Bechtel
Jacobs,  the general  contractor under the Oak Ridge contracts,  seeking payment
from Bechtel  Jacobs of  approximately  $4.3 million in  surcharges  relating to
certain  wastes  that were  treated by M&EC in 2001 and 2002 under the Oak Ridge
contracts.  We have  recognized  approximately  $381,000  in  revenue  for these
surcharges, which represented an initial offer for settlement by Bechtel Jacobs.
Bechtel  Jacobs  continues  to  deliver  waste to M&EC for  treatment, and


                                       31
<PAGE>

M&EC  continues to accept such waste.  In addition,  subsequent to the filing of
the lawsuit,  M&EC has entered into a new contract with Bechtel  Jacobs to treat
DOE  waste.  There is no  guarantee  of  future  business  under  the Oak  Ridge
contracts,  and either party may terminate the Oak Ridge  contracts at any time.
Termination of these  contracts  could have a material  adverse effect on us. We
are working towards  increasing  other sources of revenues at M&EC to reduce the
risk of reliance on one major source of revenues.

During the second  quarter of 2004,  the Nuclear  segment was awarded a contract
from a Fortune  500  company  valued at  approximately  $6,218,000  to treat and
dispose of mixed waste generated from research and development activities.  This
contract requires innovative treatment  processing  technologies we developed to
accommodate the complex nature of these wastes. The contract should be completed
during the first quarter of 2005. We recognized $2,422,000 in revenues from this
contract  for the  three  months  ended  September  30,  2004  or 9.9% of  total
consolidated  revenues  for the  quarter.  Revenues  from the  contract  for the
nine-month period were $2,652,000 or 4.4% of total consolidated revenues.

During  October  2004,  the Nuclear  segment was awarded a  three-year  contract
valued at approximately  $23,000,000 for the treatment of mixed low-level wastes
generated at the Department of Energy's ("DOE") Hanford Site.  Fluor Hanford,  a
prime contractor  supporting DOE's cleanup mission at Hanford,  has awarded this
contract to us to provide  specialized  thermal treatment for a variety of mixed
low-level  radioactive  wastes  generated  at  Hanford.  As  with  contracts  or
subcontracts  with or involving  the federal  government,  this  contract may be
terminated or renegotiated at anytime at the government's option.

During the first quarter of 2004, we finalized negotiations on two joint venture
agreements  with other remedial  waste  companies for the purposes of bidding on
certain  contracts  and,  if such  contracts  are  awarded,  to perform  various
remedial activities.  If the joint ventures are awarded the contracts,  we would
be  required  to make an initial  contribution  of working  capital to the newly
formed  joint  venture   companies.   The  potential   initial  working  capital
contribution  for the two joint ventures in the aggregate would be approximately
$500,000.

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

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

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.  Compared to certain of our competitors,  we dispose of significantly less
hazardous  or  industrial  by-products  from  our  operations  due to  rendering
material  non-hazardous,   discharging  treated  wastewaters  to  publicly-owned
treatment works and/or  processing wastes into saleable  products.  In the past,
numerous  third  party  disposal  sites  have  improperly  managed  wastes  that
subsequently required remedial action;  consequently,  any party utilizing these
sites


                                       32
<PAGE>

may be liable for some or all of the  remedial  costs.  Despite  our  aggressive
compliance and auditing  procedures for disposal of wastes,  we have in the past
and may in the future,  be notified that we are a PRP at a remedial action site,
which could have a material adverse effect on us.

We have budgeted for 2004 approximately $1,143,000 in environmental expenditures
to  comply  with  federal,  state  and  local  regulations  in  connection  with
remediation of certain contaminates at four locations.  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 2004 to be
approximately  $592,000 at the EPS site, $216,000 at the PFM location,  $246,000
at the  PFSG  site and  $89,000  at the PFMI  site of  which  $25,000;  $40,000;
$83,000; and $82,000,  respectively,  were spent during the first nine months of
2004.  Additional  funds will be  required  for the next seven years to properly
remediate  these sites.  We expect to fund the 2004 expenses to remediate  these
four sites from funds generated  internally,  our revolving  credit facility and
from the exercise of Warrants and Options,  however,  no assurances  can be made
that we will be able to do so.

Our Tulsa, Oklahoma subsidiary,  which has a permit to treat and store hazardous
waste in  certain  areas of its  facility,  had been  improperly  accepting  and
storing a substantial  amount of hazardous and non-hazardous  waste in violation
of certain  environmental  laws in areas not permitted to accept and/or to store
hazardous and  non-hazardous  waste. We voluntarily  reported this matter to the
appropriate  Oklahoma  authorities  and have  removed  this  waste to  permitted
treated,  storage  and/or  disposal  facilities.  We have  received  a notice of
violation  ("NOV") and are currently  working with the Oklahoma  authorities  to
provide the  information  they  requested  and resolve this matter.  Although no
fines or penalties were assessed under the NOV, our Oklahoma  subsidiary will be
required to make modifications to the existing facility.

In October  2004,  Perma-Fix of South  Georgia,  Inc.  ("PFSG") and Perma-Fix of
Orlando,  Inc.  ("PFO") were notified  that they are PRPs at the Malone  Service
Company  Superfund site in Texas City,  Texas ("Site").  The EPA designated both
PFSG and PFO as de minimis  parties,  which is  determined  as a generator  that
contributed less than 0.6% of the total hazardous materials at the Site. The EPA
has made a settlement  offer to all de minimis parties,  that requires  response
within 45 days of receipt of the notice.  If we accept the settlement  offer our
liability  could be $229,000.  We are in the process of reviewing this claim and
our potential exposure in connection with this Site.

In connection with our acquisitions  discussed above, we have accrued  long-term
environmental liabilities of $391,000 and $100,000, respectively. As part of our
acquisition due diligence process we completed environmental assessments of each
facility and  determined a best  estimate of the cost to remediate the hazardous
and/or  non-hazardous  contamination  on certain of the properties owned by PFMD
and a property leased by PFP. These facilities are currently under no obligation
to clean up the  contamination,  and we do not intend in the immediate future to
begin remediation.  If environmental  regulations  change, we could be forced to
clean up the contamination.

At  September  30,  2004,  we had  accrued  environmental  liabilities  totaling
$3,489,000,  which  reflects an increase of $914,000 from the December 31, 2003,
balance of $2,575,000.  The increase  represents  the  additional  environmental
liability  accrued  for  PFMD  and  PFP of  $491,000,  additional  environmental
liability for our discontinued operation, PFMI, of $653,000, partially offset by
payments made on  remediation  projects.  The  September  30, 2004,  current and
long-term accrued environmental balance is recorded as follows:


                                       33
<PAGE>

<TABLE>
<CAPTION>
                                    PFD         PFM          PFSG         PFMI         PFMD         PFP         Total
                                ----------   ----------   ----------   ----------   ----------   ----------   ----------
<S>                             <C>          <C>          <C>          <C>          <C>          <C>          <C>
Current Accrual                 $   50,000   $  150,000   $  195,000   $  660,000   $       --   $       --   $1,055,000

Long-term accrual                  680,000      629,000      634,000           --      391,000      100,000    2,434,000
                                ----------   ----------   ----------   ----------   ----------   ----------   ----------
      Total                     $  730,000   $  779,000   $  829,000   $  660,000   $  391,000   $  100,000   $3,489,000
                                ==========   ==========   ==========   ==========   ==========   ==========   ==========
</TABLE>

Interest Rate Swap

We entered into an interest rate swap agreement  effective December 22, 2000, to
modify the  interest  characteristics  of our  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.  At
September  30,  2004,  the  market  value of the  interest  rate  swap was in an
unfavorable  value  position of $62,000 and was recorded as a liability.  During
the nine months ended  September  30,  2004,  we recorded a gain on the interest
rate swap of $68,000 that offset other  comprehensive  loss in the  Statement of
Stockholders' Equity.


                                       34
<PAGE>

                     PERMA-FIX ENVIRONMENTAL SERVICES, INC.
            QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

                                 PART I, ITEM 3

We are exposed to certain market risks arising from adverse  changes in interest
rates,  primarily  due to the  potential  effect of such changes on our variable
rate loan arrangements with PNC. We entered into an interest rate swap agreement
to modify the interest characteristics of $3,500,000 of its $7,000,000 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.


                                       35
<PAGE>

                     PERMA-FIX ENVIRONMENTAL SERVICES, INC.
                             CONTROLS AND PROCEDURES

                                 PART 1, ITEM 4

We maintain  disclosure controls and procedures that are designed to ensure that
information  required to be disclosed in the periodic  reports  filed by us with
the  Securities  and Exchange  Commission  (the "SEC") is  recorded,  processed,
summarized and reported within the time periods specified in the rules and forms
of the SEC and that such  information is  accumulated  and  communicated  to our
management.  Based on the most recent evaluation,  which was completed as of the
end of the period  covered  by this  Quarterly  Report on Form  10-Q,  our Chief
Executive  Officer  and Chief  Financial  Officer  believe  that our  disclosure
controls and procedures (as defined in Rules 13a-14 and 15d-14 of the Securities
Exchange  Act of 1934,  as amended)  are  effective.  There were no  significant
changes in our internal  controls or in other  factors that could  significantly
affect  these  internal  controls  subsequent  to the  date of the  most  recent
evaluation.


                                       36
<PAGE>

                     PERMA-FIX ENVIRONMENTAL SERVICES, INC.

                           PART II - Other Information

Item 1.       Legal Proceedings

              There are no additional material legal proceedings pending against
              us and/or our subsidiaries not previously reported by us in Item 3
              of our Form 10-K for the year ended December 31, 2003 and the Form
              10-Q for the  quarters  ended  March 31,  2004 and June 30,  2004,
              which are incorporated herein by reference, except as follows:

              We  previously  disclosed  that  during  January  2004,  the  U.S.
              Environmental  Protection  Agency  ("EPA")  issued to Perma-Fix of
              Dayton,  Inc.  ("PFD"),  our wholly owned subsidiary,  a Notice of
              Findings of  Violations  ("Findings")  alleging that PFD committed
              numerous   violations   of  the  Clean  Air  Act  (the  "Act")  or
              regulations  thereunder,  and,  although  EPA did not  assert  any
              penalties or fines in the  Findings,  they did,  however,  specify
              that EPA had several  enforcement  options,  including  issuing an
              administrative  penalty order or bringing  judicial action against
              PFD. PFD has had numerous meetings with EPA regarding this matter.
              On September 28, 2004, PFD received an  Administrative  Compliance
              Order ("Order"),  dated September 21, 2004, from EPA alleging that
              PFD was a "major  source" of hazardous  air  pollutants  and, as a
              major  source,  PFD was  required  to have  obtained a Title V air
              permit,  and thereby was not in compliance  with provisions of the
              Act and/or  regulations  thereunder  applicable to a major source.
              The  Order  further  provides  that  PFD has six  months  from the
              effective date of the Order, to develop, submit, obtain and comply
              with  numerous  costly  and  burdensome   compliance   initiatives
              applicable  to  one  that  is a  major  source  of  hazardous  air
              pollutants and to submit an application to the State of Ohio for a
              Title V Air  permit.  The Order does not assert any  penalties  or
              fines but provides  that PFD is not  absolved of any  liabilities,
              including  liability  for  penalties,  for the alleged  violations
              cited in the Order,  and that failure to comply with the Order may
              subject PFD to penalties up to $32,500 per day for each violation.
              PFD had 10 days  from  the  receipt  of the  Order  to  request  a
              conference  with EPA regarding the Order and PFD timely  scheduled
              such a conference  for the first week of November.  The conference
              was  subsequently  postponed  indefinitely by the EPA, and the EPA
              and PFD are  exchanging  information  in an effort to resolve this
              matter.  We  have  retained  environmental  consultants  who  have
              advised us that, based on the tests that they have performed,  the
              environmental  consultants  do not  believe  that  PFD is a  major
              source of hazardous air  pollutants.  We have been further advised
              by  counsel  that if PFD is not a major  source of  hazardous  air
              pollutants,  PFD  would  not be  required  to obtain a Title V air
              permit,  would not have violated the provisions of the Act alleged
              in the Order and would not be  required  to comply with the costly
              and  burdensome  compliance  initiatives  contained  in the Order.
              Also,  we have  been  further  advised  that the  Order  may be in
              violation of certain  constitutional  issues involving due process
              based on a recent  decision by the United States Court of Appeals,
              11th  Circuit.  A  determination  that PFD was a major  source  of
              hazardous  air  pollutants  and required to comply with the Order,
              such could have a material  adverse  effect on us. We intend  that
              PFD will vigorously defend itself in connection with this matter.

              In October 2004,  Perma-Fix of South  Georgia,  Inc.  ("PFSG") and
              Perma-Fix of Orlando,  Inc.  ("PFO") were  notified  that they are
              PRPs at the Malone Service  Company  Superfund site in Texas City,
              Texas ("Site"). The EPA designated both PFSG and PFO as de minimis
              parties,  which is determined as a generator that contributed less
              than 0.6% of the total  hazardous  materials at the Site.  The EPA
              has  made a  settlement  offer  to all de  minimis  parties,  that
              requires  response within 45 days of receipt of the notice.  If we
              accept the settlement  offer our


                                       37
<PAGE>

              liability  could be  $229,000.  We are in the process of reviewing
              this claim and our  potential  exposure  in  connection  with this
              Site.

              During  September  2004, PFMI received a letter alleging that PFMI
              owed  Reliance  Insurance  Company,  in  liquidation,  the  sum of
              $525,000 as a result of retrospective premiums under a retroactive
              premium agreement. Our counsel responded and advised that PFMI had
              numerous  defenses to the demand,  including,  but not limited to,
              that the policy  expired  almost  eight  years ago and  failure to
              adjust the  premiums in a timely  manner  violated  the  agreement
              between the Company and Reliance and that under Michigan law it is
              deemed  to be an  unfair  and  deceptive  act or  practice  in the
              business of  insurance  for an insurer to fail to complete a final
              audit within 120 days after termination of the policy. The Company
              and PFMI intend to vigorously defend this matter. However, we have
              accrued approximately $217,000 for this contingent liability.

Item 4.       Submission of Matters to a Vote of Security Holders

              The Company's  annual meeting of stockholders  ("Annual  Meeting")
              was held on July 28, 2004.  At the Annual  Meeting,  the following
              matters were voted on and approved by the stockholders.

                  1.    The election of seven  directors to serve until the next
                        annual meeting of stockholders or until their respective
                        successors are duly elected and qualified.

                  2.    Approval of the Company's 2004 Stock Option Plan.

                  3.    Ratification of the  appointment of BDO Seidman,  LLP as
                        the independent auditors of the Company for fiscal 2004.

              The Directors elected at the Annual Meeting and the votes cast for
              and withheld authority for each director are as follows:

              Directors                           For         Withhold Authority
              ------------------------         ----------     ------------------
              Dr. Louis F. Centofanti          27,562,366           381,710
              Jon Colin                        27,523,734           420,342
              Jack Lahav                       27,518,583           425,493
              Joe R. Reeder                    27,517,634           426,442
              Alfred C. Warrington, IV         27,555,686           388,390
              Dr. Charles E. Young             26,981,348           962,728
              Mark A. Zwecker                  27,511,483           432,593

              Also,  at the Annual  Meeting the  stockholders  approved the 2004
              Stock Option Plan and ratified the appointment of BDO Seidman, LLP
              as the  independent  auditors of the Company for fiscal 2004.  The
              votes  for,  against,  abstentions  and  broker  non-votes  are as
              follows:

                                                                     Abstentions
                                                                     And Broker
                                              For         Against     Non-votes
                                          ----------     ---------   -----------
Approval of 2004
Stock Option Plan                         12,310,084     2,565,505    13,068,487

Ratification of the
Appointment  of BDO  Seidman,
LLP as the Independent Auditors           27,830,518        99,695        13,863


                                       38
<PAGE>

Item 6. Exhibits and Reports on Form 8-K

      (a)   Exhibits

            10.1  Agreement between Perma-Fix  Environmental  Services, Inc. and
                  Fluor  Hanford,  dated October 11, 2004.  Certain  information
                  within this exhibit has been omitted as it is the subject of a
                  request  by the  Company  for  confidential  treatment  by the
                  Securities  and  Exchange  Commission  under  the  Freedom  of
                  Information  Act.  The  omitted  information  has  been  filed
                  separately  with the Secretary of the  Securities and Exchange
                  Commission for purpose of such request.

            31.1  Certification  by Dr.  Louis F.  Centofanti,  Chief  Executive
                  Officer  of  the  Company   pursuant  to  Rule   13a-14(a)  or
                  15d-14(a).

            31.2  Certification by Richard T. Kelecy, Chief Financial Officer of
                  the Company pursuant to Rule 13a-14(a) or 15d-14(a).

            32.1  Certification  by Dr.  Louis F.  Centofanti,  Chief  Executive
                  Officer of the Company furnished pursuant to 18 U.S.C. Section
                  1350.

            32.2  Certification by Richard T. Kelecy, Chief Financial Officer of
                  the Company furnished pursuant to 18 U.S.C. Section 1350.

            Reports on Form 8-K

                  A current  report on Form 8-K (Item 5 - Other  Events and Item
                  12 - Results of Operations and Financial  Condition) was filed
                  by the Company on August 2, 2004,  to announce  the  financial
                  results and conference call for the three and six months ended
                  June 30, 2004.

                  A current  report on Form 8-K (Item  1.02 -  Termination  of a
                  Material  Definitive  Agreement  and  Item  2.04 -  Triggering
                  Events  That   Accelerate  or  Increase  a  Direct   Financial
                  Obligation  or  an  Obligation  under  an  Off-Balance   Sheet
                  Arrangement)  was filed by the Company on August 26, 2004,  to
                  report the prepayment of the 13.5% Senior Subordinated Notes.


                                       39
<PAGE>

                                   SIGNATURES

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

                                          PERMA-FIX ENVIRONMENTAL SERVICES, INC.

Date:  November 8, 2004                   By: /s/ Dr. Louis F. Centofanti
                                              ----------------------------------
                                              Dr. Louis F. Centofanti
                                              Chairman of the Board
                                              Chief Executive Officer

Date:  November 8, 2004                   By: /s/ Richard T. Kelecy
                                              ----------------------------------
                                              Richard T. Kelecy
                                              Chief Financial Officer


                                       40

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>e19653ex10_1.txt
<DESCRIPTION>AGREEMENT BTWN PERMA-FIX AND FLOUR HANFORD
<TEXT>
                                                                    Exhibit 10.1

Fluor Hanford
P.O. Box 1000

Richland, Washington 99352

                                                                           FLUOR

                               CONTRACT COVER PAGE

Contract Number:        25003

Contractor:             Perma-Fix Environmental Services, Inc.

                        663 Emory Valley Road

                        Oak Ridge, Tennessee 37830

Title:                  TREATMENT OF HANFORD'S MLLW-03 MIXED LOW-LEVEL WASTE

Period of Performance:  October 11, 2004 - September 30, 2006

Option Period:          October 1, 2006 - September 30, 2007

Contract Value:         $23,389,000.00 (Not to Exceed)

Description:            The Contractor shall perform the services described in
                        Contract Attachment A, Statement of Work. Pages 1
                        through 9 and Attachments B and C are part of this
                        contract.

Signatures:


/s/ C. Renee Echols                    /s/ Jane R. Kirkendall
------------------------------------   -----------------------------------------
Contractor Authorized Signature        Fluor Hanford Authorized Signature


C. Renee Echols / Vice President       Jane R. Kirkendall, Director, Procurement
------------------------------------   -----------------------------------------
Printed Name/Title                     Print Name/Title


10/11/04                               10/6/04
------------------------------------   -----------------------------------------
Date                                   Date


<PAGE>

Fluor Hanford
--------------------------------------------------------------------------------

CONTINUATION PAGE                                             CONTRACT NO: 25003



                                    CONTENTS

1.0      Statement of Work (SOW)...........................................   3
2.0      Award.............................................................   3
         2.1      Estimated Cost of Contract...............................   3
         2.2      Waste Quantity and Schedule..............................   3
         2.3      Return of Waste..........................................   4
         2.4      Award Notification.......................................   4
3.0      Delivery/Performance..............................................   4
         3.1      Term of Contract.........................................   4
         3.2      Terms and Conditions.....................................   4
         3.3      Authorized Personnel.....................................   4
4.0      Contract Administration...........................................   5
         4.1      Buyer's Mailing Address..................................   5
         4.2      Estimated Billing........................................   5
         4.3      Payment Terms............................................   6
         4.4      Electronic Mail Capability...............................   7
         4.5      Closeout Certification, Fixed Price Contracts............   7
         4.6      Contractor Submittals - Contract.........................   7
5.0      Designation of Technical Representative...........................   8
6.0      Electronic Funds Transfer of Invoice Payments.....................   8
7.0      Special Provisions................................................   8
8.0      List of Attachments...............................................   9
         Attachment A - Statement of Work..................................   9
         Attachment B - Integrated Contractor Procurement Team (ICPT)
            Blanket Ordering Agreement.....................................   9
         Attachment C - Perma-Fix Price Schedule 2005-2007.................   9


                                     2 of 9

<PAGE>

Fluor Hanford
--------------------------------------------------------------------------------

CONTINUATION PAGE                                             CONTRACT NO: 25003

1.0   Statement of Work (SOW)

The attached Statement of Work "Treatment of Hanford's Mixed Low-Level Waste
-03, Dated: August 26, 2004, Revision: 1", identifies the scope and performance
expectations of the contract. The SOW is incorporated into and made a part of
this contract in Attachment A along with all of the other clauses and terms
identified herein.

2.0   Award

2.1   Estimated Cost of Contract

The estimated value for this Contract is $23,389,000.00. The Contractor shall
not exceed this amount without specific written authorization from the Buyer.
The Contractor shall notify the cognizant Buyer in writing when the Contractor
reaches 85% of the current estimated value.

2.2   Waste Quantity and Schedule.

 The Contract is comprised of a Base Contract with an Option to extend the
 contract in 1-year increments. Below specifies the waste quantity applicable to
 each Contract performance period:

      o     Base Contract (October 11, 2004 to September 30, 2006): The Buyer
            commits to shipping the listed Minimum Quantity and the Contractor
            is required to treat the Minimum Quantity of waste specified below
            over the term of the Base Contract. The Buyer may ship additional
            quantities of waste up to the Maximum Quantities specified.

      Treatability Group                 Minimum Quantity   Maximum Quantity
      ----------------------------------------------------------------------
      MLLW-03 (Organic Non-Debris):           60 m3              200 m3
      LLW/MLLW-Oils (On-Spec/Off-spec):        0 m3              100 m3

      o     Contract Option (October 1, 2006 to September 30, 2007): The Buyer
            may ship waste quantities up to the Maximum Quantity specified.

      Treatability Group                 Minimum Quantity   Maximum Quantity
      ----------------------------------------------------------------------
      MLLW-03 (Organic Non-Debris):           0 m3             400 m3
      LLW/MLLW-Oils (On-Spec/Off-spec):       0 m3             100 m3


                                     3 of 9
<PAGE>

Fluor Hanford
--------------------------------------------------------------------------------

CONTINUATION PAGE                                             CONTRACT NO: 25003

2.3   Return of Waste

The Buyer understands and acknowledges that Perma-Fix must, in accordance with
its Radioactive Materials License, retain the right to return Radioactive Waste,
whether processed or unprocessed, to the generator; provided, however, that a)
any such return of the Buyer's waste that otherwise meets the Perma-Fix waste
acceptance guidelines will occur only in the event the State (Tennessee)
exercises its regulatory authority under the Perma-Fix Radioactive Material
License requiring such return, or b) any such return of Non-Conforming waste
from the Buyer may be accomplished without regard to any such exercise of
regulatory authority. Therefore, the Buyer hereby represents, warrants, and
promises that it has the legal right and ability to accept, and will accept, the
return of radioactive waste ,whether processed or unprocessed, to the generating
facility, in the event the exercise of regulatory authority by the State
requires such return or in the event Perma-Fix exercises its right to return
non-conforming waste.

2.4   Award Notification

The Contractor is hereby notified that effective on October 11, 2004, the
Contractor is awarded a firm fixed unit price type Contract for the
delivery/performance of the item(s) above in accordance with all the
requirements and conditions set forth or by reference attached herein.

3.0   Delivery/Performance

3.1   Term of Contract

The term of this Contract shall commence on the date of award and shall end on
September 30, 2007, unless extended by the parties or unless terminated by other
provisions of this Contract.

3.2   Terms and Conditions

The terms and conditions set forth in the Integrated Contractor Procurement Team
(ICPT), Blanket Ordering Agreement, in Attachment B together with Special
Provisions contained herein apply.

3.3   Authorized Personnel

Only the following named Contract individuals are authorized to make changes to
this document:

Contract Specialist, Arthur T. Broady
Contracts Manager, Michael Brubaker


                                     4 of 9
<PAGE>

Fluor Hanford
--------------------------------------------------------------------------------

CONTINUATION PAGE                                             CONTRACT NO: 25003


4.0   Contract Administration

4.1   Buyer's Mailing Address

           Address all correspondence to:

           Attn:  Arthur T. Broady   Mail Stop H7-10
           Fluor Hanford
           P.0. Box 1000 Richland, Washington 99352

4.2   Estimated Billing

It is mandatory for continued acceptable performance that the Contractor provide
monthly, to Fluor Hanford Accounts Payable, the best estimate of the total
billable cost (invoiced plus invoiceable) from inception of the contract through
the current calendar month end. This information must be provided in writing by
email (preferred), fax, or mail by the 15th of each month. This data must be
provided for each contract release until all payments are received and the
contract is complete.

Email: ap_accruals@rl.gov

Fax: (509) 373-6264

Mailing Address:

Fluor Hanford Inc.
2430 Stevens Drive
PO Box 1000
Richland, WA 99352
Attn:  Accruals MSIN G1-80

Monthly Contract-to-Date Cost Estimate Form can be obtained at the following
Internet Address:

http://www.hanford.gov/pmm/downloads/download.htm

The following process shall be used on Invoices submitted to Fluor Hanford.
Failure to do so may result in Delayed Payment or Returned Invoices.

General Requirements (Contracts)

o     Submittal of an invoice constitutes Contractor's certification that
      materials, work and/or services have been provided, and invoiced amounts
      are, in accordance with the contract provisions and as provided in
      Attachment C.


                                     5 of 9
<PAGE>

Fluor Hanford
--------------------------------------------------------------------------------

CONTINUATION PAGE                                             CONTRACT NO: 25003

o     Invoices may be submitted electronically in a format acceptable to Buyer
      (this is preferred).

      NOTE  when electronic invoices are to be used, contact the Contract
            Specialist for the proper format and submittal information
            (reference clause H098)

o     The invoice must clearly & legibly identify the Contractor's Name and
      Invoice Number as well as the Contract Number (#25003) and Release Number
      when assigned.

o     Each invoice should include the name and telephone number of a company
      representative available to respond to invoice questions.

o     Remittance will only be made to the remittance address on file for the
      contractor. Invoices from third parties or with different remittance
      instructions or addresses will not be processed.

o     Questions or requests for exceptions should be addressed to the Contract
      Specialist.

o     The Contractor shall submit an original invoice and supporting
      documentation to the Buyer's Accounts Payable organization at the address
      below (unless otherwise directed in the contract):

      Fluor Hanford
      Accounts Payable  Mail Stop: G1-80
      P.O. Box 1000
      Richland, WA  99352

4.3   Payment Terms

The Contractor may submit requests for milestone progress payments of 50% of the
fixed unit price for each unit of waste for which the Contractor has completed
acceptance into the Contractor's facility. Documentation required by the
Contractor for validation that subject milestone has been completed is returned
of the Uniform Hazardous Waste Manifest (UHWM) signed by the waste receiver, and
a letter depicting that the subject waste has been formally accepted for
treatment at the Contractor's facility.

The Contractor may submit request for milestone progress payments of 40% of the
fixed unit price for each unit of waste for which the Contractor has
successfully treated to meet disposal requirements at Hanford's Mixed Waste
Disposal Unit. Documentation required by the Contractor for validation that
subject milestone has been completed is Buyer approval of the


                                     6 of 9
<PAGE>

Fluor Hanford
--------------------------------------------------------------------------------

CONTINUATION PAGE                                             CONTRACT NO: 25003

treated waste acceptance documentation and issuance of the Buyer's R356 to the
Contractor for each shipment of treated waste.

      Exception: For waste treated through the Contractor's DSSI unit, the
      Contractor may submit request for final milestone progress payments of 50%
      of the fixed unit price for each unit of waste for which the Contractor
      has successfully treated through the unit. Documentation required by the
      Contractor for validation that subject milestone has been completed is the
      submittal of the Certificate of Destruction (CD) for the waste to the
      Buyer.

The Contractor may submit request for milestone progress payments of 10% of the
fixed unit price for each unit of waste for which the Contractor has shipped and
accepted for disposal at the disposal facility.

4.4   Electronic Mail Capability

The Contractor shall provide and maintain Internet and electronic mail
capability for the duration of the Contract. The Contractor email account shall
be able to send and receive attached documents of up to 1/2 megabyte in size.
Correspondence and Administrative messages concerning this contract will be
conducted via email in current versions of Microsoft Office applications, ASCII
text, RTF, PDF, ZIP and other commonly used file formats. In addition,
information, data and forms may be posted on the Buyer's Internet web site for
downloading by the contractor.

4.5   Closeout Certification, Fixed Price Contracts

Contractor shall properly execute and mail to the Buyer, the attached Final
Release, within five working days from the last date services are provided
hereunder and/or the date of the last shipment made hereunder. Final payment
will not be made until this form is properly executed and received by the Buyer.

4.6   Contractor Submittals - Contract

The Contractor submittals identified herein on the Submittal Register shall be
submitted by the Contractor using the Supplier Document Submittal Form (SDSF)
(available at www.hanford.gov/pmm/downloads/download.htm). Instructions for
completion of the SDSF are included with the form. The quantity, frequency and
type of submittal shall agree with the requirements set forth on the Submittal
Register. A Submittal Number, entered on the SDSF by the Contractor in
accordance with the submittal register, shall be used to identify each
submittal. Engineering controlled Vendor Information (VI) content shall be
identified on the SDSF when indicated on the Submittal Register. SDSF forms may
be copied for submittals with different


                                     7 of 9
<PAGE>

Fluor Hanford
--------------------------------------------------------------------------------

CONTINUATION PAGE                                             CONTRACT NO: 25003

submittal dates. When any submission is returned to the Contractor with a
request for resubmission (i.e., marked as: "B" and "Resubmit - Yes"; or "C"
Revise and Resubmit) the Contractor shall resubmit all corrected documents
within the time specified on the resubmission notice or if no time is specified
therein within ten (10) working days from the disposition date. New submittals
shall require the Contractor to contact the Buyer if additional Submittal
Numbers are required.

Changes to a Contractor's deliverables, that have not been accepted by FH as
complete shall be re-submitted using the SDSF form and in accordance with a
Contractor's FH approved Quality Assurance and/or Engineering Program.

5.0   Designation of Technical Representative

The Buyer hereby designates the following as the Buyer's Technical
Representative, (BTR) for this Contract: Name/phone/mail stop: Dean Nester (509)
373-4155/T4-05.

The BTR is responsible for monitoring and providing technical guidance for this
Contract and should be contacted regarding questions or problems of a technical
nature. The BTR is also responsible for appropriate surveillance of the
Contractors representative while on site. In no event, however, will an
understanding or agreement, modification, change order, or any deviation from
the terms of this Contract be effective or binding upon the Buyer unless
formalized by proper Contract documents executed by the Contract Specialist
prior to completion of this Contract. On all matters that pertain to Contract
terms, the Contractor shall contact the Contract Specialist specified within
this Contract. When in the opinion of the Contractor, the BTR requests or
directs efforts outside the existing scope of the Contract, the Contractor shall
promptly notify the Contract Specialist in writing. The BTR does not possess any
explicit, apparent or implied authority to modify the contract. No action should
be taken until the Contract Specialist makes a determination and/or modifies the
contract.

6.0   Electronic Funds Transfer of Invoice Payments

Electronic funds transfer of invoice payments is an available optional method of
invoice payment by the Buyer. An "Authorization for Electronic Funds Transfer of
Invoice Payments" form must be completed and returned before payments can be
made. A copy of the form is available for downloading from the Buyer's
Acquisition Internet Web page or from the Buyer.

7.0   Special Provisions

The provisions and attachments listed below are hereby incorporated into and
made a part of this contract.


                                     8 of 9
<PAGE>

Fluor Hanford
--------------------------------------------------------------------------------

CONTINUATION PAGE                                             CONTRACT NO: 25003

Where appropriate, hyperlinks are provided for downloading the referenced
document. Software for reading PDF files is available from a link provided on
the Download page. [Download Provisions and Forms:
http://www.hanford.gov/pmm/downloads/download.htm]

Special Provisions - The Service Contract Act of 1965
                           SP-6 Rev. 1,  1/29/2003
http://www.hanford.gov/pmm/downloads/Provisions/sp-6.pdf

8.0   List of Attachments

Attachment A - Statement of Work
Attachment B - Integrated Contractor Procurement Team (ICPT) Blanket Ordering
Agreement
Attachment C - Perma-Fix Price Schedule 2005-2007


                                     9 of 9
<PAGE>

                                  ATTACHMENT A

                     PERMA-FIX ENVIRONMENTAL SERVICES, INC.

                                STATEMENT OF WORK
                                       FOR
                         TREATMENT OF HANFORD'S MLLW-03
                              MIXED LOW LEVEL WASTE

                                       FOR
                                 CONTRACT 25003


<PAGE>

                                                                    Attachment A
                                                                 August 26, 2004
                                                       Statement of Work. Rev. 1
================================================================================

                                                           Statement of Work for
                            Treatment of Hanford's MLLW-03 Mixed Low-Level Waste

================================================================================

                                                              Contract No. 25003


--------------------------------------------------------------------------------
      APPROVALS                 PRINT NAME                 SIGNATURE
--------------------------------------------------------------------------------
Writer:                       Dean Nester               Signature on file
--------------------------------------------------------------------------------
Contract Specialist:          Art Broady                Signature on file
--------------------------------------------------------------------------------



<PAGE>

                                                                    Attachment A
                                                       Statement of Work. Rev. 1

                                STATEMENT OF WORK
                                     Rev. 1

1.0   OBJECTIVE

      The purpose of this contract between Fluor Hanford (FH) [the Buyer] and
      the Contractor is to provide for the treatment of mixed low-level waste
      (MLLW) contaminated with various amounts and types of Resource
      Conservation and Recovery Act (RCRA) and/or Toxic Substance Control Act
      (TSCA) regulated waste constituents and radioactive isotopes. The
      Contractor shall treat MLLW at the Contractor's facility using treatment
      technologies capable of making the waste compliant for disposal. The
      Contractor may choose the treatment method based on the physical and
      chemical constituents of the waste, applied waste codes, and as specified
      in the Land Disposal Restriction (LDR) notifications. The Contractor shall
      assure that the treated waste meets LDR standards and is acceptable for
      land disposal at the appropriate disposal site.

2.0   INTRODUCTION

      MLLW has been generated at the Hanford Site and from some offsite
      facilities since the early 1980s. This waste inventory resides in RCRA
      and/or Toxic Substance Control Act (TSCA) compliant storage units at the
      Hanford Site. Additionally, MLLW will be routinely generated at Hanford as
      a result of the on-going cleanup mission. Various Hanford Site generators
      are forecasted to generate additional waste that will be shipped to a
      Hanford storage unit or will be sent directly to the Contractor's
      treatment unit.

3.0   SCOPE

      3.1   Waste Description

      Waste to be treated under this contract is designated as MLLW as
      determined by the Hanford Site Solid Waste Acceptance Criteria (HSSWAC)
      (Ref: HNF-EP-0063 Latest Revision). The MLLW is regulated primarily by
      RCRA, TSCA, Washington Dangerous Waste and/or CERCLA regulations. The
      Hanford Site identifier for the specific waste Treatability Group being
      offered under this contract is MLLW-03 (Organic Non-Debris) and is
      described in the Hanford Site Mixed Waste Land Disposal Restriction Report
      (ref: DOE/RL-2004-07, Rev-0). The common attribute for this Treatability
      Group is that the waste contains organic constituents that require
      destruction before the waste can be disposed. The waste may also contain
      non-organic constituents in with the organic constituents that may require
      treatment.

      Additionally, on-specification and/or off-specification LLW oils meeting
      40-CFR Part 279 are offered as waste to be treated under this contract.


      The following is a basic summary of the waste to be treated:

            3.1.1 Chemical/Ha:zardous Waste Characteristics

            The constituents in the waste are regulated by RCRA (Title 40 CFR),
            TSCA (Title 40 CFR), and the Washington Dangerous Waste regulations
            (WAC 173-303). The waste can contain many different waste
            constituents. The waste constituent types and the concentration of
            the constituents vary greatly between individual waste packages.
            Waste shipped for treatment under this Contract will have one or
            more of the following waste codes:

            RCRA Waste Code Groups:
                     D001-D043
                     F001-F012, F039
                     P### & U### Coded Waste
                     F020-F023 and F026-F028 (optional)*

            TSCA:
                     PCBs (various concentrations and sources) Washington
            State Waste Codes:
                     W001 (changing to WPCB)


                                                                               2
<PAGE>

                                                                    Attachment A
                                                       Statement of Work. Rev. 1


              WP01-03
              WT01-02
              WSC2

            * Some of Hanford's stored MLLW is designated with F020-F023 and
            F026-F028 listed waste codes. Because of the treatment restrictions
            for this type of waste, treatment of waste containing these codes
            are optional in this Contract.

            3.1.2 Physical Waste Characteristics

            The physical characteristics of the waste to be provided under this
            contract consist of non-bulk liquids (i.e., labpacks), particulates,
            absorbed liquids, sludges, resins and soil matrices. The waste may
            also include debris waste items (e.g., plastic sheeting, gloves,
            metal, wood, etc.) packaged in with the non-debris waste; however,
            the quantity of debris waste items will be less than 50% by volume.
            Most of the waste packages will have some adsorbent materials (e.g.,
            particulate, conweb-pads, pigs, etc) placed in with the waste. It is
            expected that some of the adsorbent material will have been in
            direct contact with the waste.

            Since the packages of non-bulk liquids (labpacks) have been residing
            in non-climate controlled storage, it is probable that some of the
            inner waste receptacles have leaked and/or lost integrity. In these
            cases, the liquids would have come into contact with the absorbents
            or other waste items in the package.. In these cases the absorbents
            or other waste items will need to be managed appropriately.
            Additionally, the majority of the non-bulk liquid packages do not
            have specific inventory sheets (package slips) depicting inner
            container ID numbers; or if there are inventory sheets, it is
            probable that the ID numbers on the inner containers are illegible
            do to being in storage in some cases over ten years.

            3.1.3 Radiological Waste Characteristics

            The DOE, as authorized by the Atomic Energy Act (AEA), manages the
            radioactive constituents in the waste. Some or all of the
            radiological constituents tabulated in the HSSWAC Appendix A may be
            present in the waste, including alpha emitting radionuclides.

            The activity concentration in individual waste packages will not
            exceed Category 3 limits as defined in the HSSWAC. Transuranic
            radionuclides in the waste matrix will not exceed 100 nCi/g (i.e.,
            no "TRU" waste is in the scope of this Contract) as defined in the
            HSSWAC.

            Radiological dose rates: for waste packages shipped under this
            Contract, the maximum exterior surface dose rate will not exceed 100
            mrem/hr. However, the dose rate of the waste inside some of these
            waste packages may exceed 100 mrem/hr after the waste is removed
            from the containers. The Contractor shall have the capability to
            accept and handle these wastes. If waste in a container is suspected
            of exceeding 200 mrem/hr, the Buyer will notify the Contractor in
            advance of the actual waste shipment. :For waste packages that
            exceed 100 mrem/hr exterior surface dose rate, the Buyer will submit
            a request to the Contractor for approval to ship such waste.

            3.1.4 Waste Packaging

            The waste is packaged in various sized drums ranging from 5-gal to
            110-gal with 55-gal being predominate, and a few boxes up to 9.5'(0
            x 5.5'(w) x 5.5'(h) in size. The waste has been packaged for storage
            in Hanford's Central Waste Complex (CWC). Some of the waste packages
            will be overpacked into larger containers due to either inner
            container integrity issues or to meet DOT packaging requirements.
            Package gross weights for drums will normally not exceed 1,000 Ibs
            but a few may exceed this weight. Boxes can weight up to 12,000 Ibs.

            3.1.5 LLW/MLLW Oils (On-Spec/Off-spec)

            Hanford has generated various types of oils (engine oils, hydraulic
            fluids, turbine oils, etc.) that either have measurable
            radioactivity or were generated in a radioactive contamination area
            and cannot be free released (i.e., no measurable radioactivity but
            due to a DOE moratorium the waste cannot be managed as
            non-radioactive). These oils will meet on-specification or
            off-specification used oil requirements per 40-CFR Part 279, and can
            be burned for energy recovery.


                                                                               3
<PAGE>

                                                                    Attachment A
                                                       Statement of Work. Rev. 1


      3.2   Contractor Responsibilities

      The Contractor shall provide all treatment services (e.g., personnel,
      facilities, equipment, permits and licenses) necessary for proper
      treatment of the waste specified in Section 3.1 above.

            3.2.1 General Requirements
            The Contractor has specified the M&EC Facility located in Oak Ridge,
            Tennessee as being the primary receiving/treatment facility for the
            waste to be received under this contract. Subject facility shall be
            RCRA permitted by the EPA or an appropriately authorized state
            agency (or be operating under interim status). In addition, the
            Contractor's facility shall possess the necessary permits and/or
            authorizations to receive and treat TSCA-PCB wastes, and they shall
            have a Radioactive Material License from the Nuclear Regulatory
            Commission (or from an authorized state agency). The Contractor's
            facility shall be approved by the EPA to receive Comprehensive
            Environmental Response, Compensation and Liability Act (CERCLA)
            waste which has been authorized to be managed off-unit by a CERCLA
            determination from the Buyer. The receiving/treatment facility shall
            be owned or operated by the Contractor, and the facility shall be
            located within the United States borders. The Contractor's treatment
            services shall be operated in accordance with all applicable local,
            state, and federal laws and regulations.

            All facilities (other than the one designated receiving/treatment
            facility) used during the management of the Buyer's waste will be
            considered a subcontractor to the Contractor (even if it is a
            subdivision of the primary contractor).

            o     The Contractor is responsible for ensuring that subcontractors
                  meet all requirements of this Contract.

            o     The Contractor shall be responsible for manifesting and
                  dispersing the waste to the final disposal facilities (if
                  necessary).

            o     The Contractor or their subcontractors shall sign as the
                  generator on the new manifest.

            o     The Contractor shall ensure that CERCLA waste is shipped to
                  EPA approved CERCLA facilities.

            o     Subcontractors utilized under the performance of this Contract
                  shall meet all applicable Terms and Conditions and the
                  limitations of this Statement of Work.

            If the Contractor revises their RCRA Treatment and Storage
            permit(s), Radioactive Material License(s), and/or TSCA
            authorizations; the Contractor shall submit these revisions to the
            Buyer within 15 days after the revisions occurred.

            Along with the treatment equipment and facility, the Contractor
            shall provide technical expertise and processes needed to
            successfully perform waste treatment. Required technical expertise
            and processes include, but are not limited to: pre-treatment waste
            batching, waste sorting and aggregation, size reduction, treated
            waste form testing, immobilization agent formulations (as
            applicable), sampling protocols, and process control parameters to
            meet treatment requirements of this contract. The Buyer will not
            perform pre-treatment activities to make the waste more amenable for
            acceptance into the Contractor's facility.

            The Contractor shall utilize treatment technologies recognized as
            applicable to meeting the treatment requirements/standards as
            specified in 40 CFR 268.40 (RCRA), 40 CFR 761 (TSCA), and WAC
            173-303-140 (for waste to be disposed of in the State of
            Washington). Alternative and/or equivalent treatment technologies
            such as alternative treatment standards for hazardous debris (40 CFR
            268.45), alternative LDR treatment standards for contaminated soil
            (40 CFR 268.49), or alternative treatment methods approved by the
            applicable state per RCRA 40 CFR 268.42(b) may be utilized where
            authorized.

            The Contractor shall receive the MLLW on an "as needed" schedule to
            be determined by the Buyer's Technical Representative (BTR).

            After accepting the Buyer's waste for treatment, the Contractor
            shall provide a final treated waste to the Buyer and/or approved
            disposal unit that meets the requirements of this contract.


                                                                               4
<PAGE>

                                                                    Attachment A
                                                       Statement of Work. Rev. 1

            o     The Contractor shall control, document and evaluate all
                  treated waste that does not meet the requirements of this
                  contract and provide proper corrective action at no additional
                  cost to the Buyer.

            o     The Contractor is responsible to obtain additional waste
                  characterization information that is specific/unique to
                  acceptance and treatment of the waste at the Contractor's
                  facility.

            Secondary waste generated by the Contractor from the treatment of
            the Buyer's waste can be managed either as the Contractor's waste
            (Contractor responsible for disposal), processed appropriately and
            incorporated in with the Buyer's treated waste, or processed and
            packaged as its own waste stream for acceptance back at the Buyer's
            disposal units provided it meets the HSSWAC disposal requirements.
            Secondary waste that is authorized for inclusion shall be limited to
            step-off-pad waste, contaminated sampling equipment, treatment
            consumables, and radioactively contaminated packaging materials that
            cannot be reused/recycled. Facility generated waste such as HEPA
            filters, bag-house residues/equipment, mixing and size-reducing
            equipment, sump wastes, or other equipment which has inventories of
            chemical and/or radiological constituents from other then the
            Buyer's waste is not acceptable for disposal back at the Buyer's
            facilities. Other secondary waste may be included upon approval by
            the Buyer.


            Empty waste packages from the treatment of the Buyer's waste under
            this Contract shall be managed appropriately.

            o     If the containers are in good condition and meet DOT
                  transportation requirements, the Contractor may render
                  containers RCRA "empty," and then reuse the containers for
                  disposal of Hanford Site treated waste residues. At a minimum,
                  all packages shall be made "empty" per RCRA 40- CFR 261.7, WAC
                  173-303-160 and/or 40 CFR 761.79(c) as applicable.

            o     If the containers are not reused for Hanford Site treated
                  waste residues, they can be managed either as the Contractor's
                  waste (Contractor responsible for disposal), processed
                  appropriately and incorporated in with the Buyer's treated
                  waste, or processed and packaged as its own waste stream for
                  acceptance back at the Buyer's disposal units provided it
                  meets the HSSWAC disposal requirements.

            The Contractor shall notify the Buyer immediately if the Contractor
            discovers any significant manifest or shipping discrepancies upon
            receipt of the waste. The Contractor and Buyer must attempt to
            reconcile the discrepancy within ten (10) calendar days after the
            Contractor receives the waste. If the discrepancy cannot be resolved
            within this period, the Contractor shall return the waste to the
            Hanford Site without delay.

            The Contractor shall be responsible for all spills or leaks of waste
            during the performance of this Contract that occurs as a result of
            negligence on the part of the Contractor or the Contractor's
            representative. The Contractor shall notify the Buyer of all spills
            or leaks of the Buyer's waste to the BTR within eight (8) hours of
            their discovery. A written follow-up report shall be submitted to
            the BTR not later than seven (7) days after the initial report. The
            written report shall be in narrative form and, as a minimum, shall
            include the following:

            o     Cause of spill

            o     Description of item spilled (including identity, chemical and
                  radiological composition, profile sheet number, manifest
                  number, etc).

            o     Quantity spilled (indicate whether or not it was a Reportable
                  Quantity Spill)

            o     Exact time and location of spill, including a description of
                  the area involved.

            o     Description of containment and cleanup procedures

            o     Level of decontamination achieved in the clean-up

            o     Description of any reports made to regulatory/emergency
                  response agencies (identify agency, contact, time of report,
                  and content of report)

            o     Description of any reports/information given to news media
                  organizations

            o     Discussion of possible long-term cleanup actions or
                  environmental effects

            o     Certification of clean-up per 40 CFR 761 (for PCB waste)


                                                                               5
<PAGE>

                                                                    Attachment A
                                                       Statement of Work. Rev. 1

            3.2.2 Hanford Site Treated Waste Acceptance and Disposal
                  Requirements

            For treated waste that will be disposed at the Hanford Site, the
            Contractor shall produce treated waste meeting the Hanford Site
            disposal acceptance requirements for MLLW and/or LLW; this includes
            meeting the radiological stabilization and burial ground subsidence
            requirements. The Hanford Site disposal acceptance requirements are
            specified in the Hanford Site Solid Waste Acceptance Criteria
            (HSSWAC). This document can be found at
            http://ww\v.hanford.govAvastemgt/wac/.

            The Contractor shall characterize treated waste with sufficient
            accuracy to permit proper handling, storage, and disposal at the
            Buyer's site. The Contractor shall ensure that the characterization
            accurately documents the actual physical and chemical
            characteristics and radionuclide content of the treated waste during
            all stages of the waste management process.

            The Contractor shall have a documented methodology for meeting the
            applicable treatment requirements specified in this Contract. This
            methodology can be specified in the Contractor's RCRA treatment
            Permit, or by documented acknowledgement from the Washington
            Department of Ecology (for waste to be disposed of at Hanford),
            and/or the EPA; that the Contractor's treatment methodology meets
            the intended treatment and performance objectives. This methodology
            can be communicated to the Buyer in the Waste Profile submittals to
            the Buyer for each treated waste stream being returned to the Buyer.
            Radiological Disposal Requirements

            o     The Contractor shall maintain the integrity of the Hanford
                  Site's radionuclide inventory during all phases of waste
                  shipment, storage, treatment, analysis, and treated waste
                  return. At a minimum, the Contractor shall segregate subject
                  waste from other clients' waste, and decontaminate treatment
                  equipment prior to and after treating subject waste.

            o     If treatment of waste by the Contractor could result in the
                  concentration of radionuclides because the waste contains
                  radionuclides including transuranic constituents, the
                  Contractor shall administratively control the waste feed so
                  that no TRU waste (i.e., greater than 100 nCi/g of .
                  transuranic) is generated.

            o     Treated waste to be disposed of at Hanford shall meet the
                  Hanford Site radiological disposal requirements. At a minimum,
                  Category 3 (CAT3) waste and waste exceeding mobile
                  radionuclide trigger limits shall qualify as a stabilized
                  waste form per HSSWAC Section 3.4.1 prior to being received by
                  the Buyer. Greater Than Category 3 (GTC3) shall require a
                  special analysis by the Buyer to demonstrate that the LLBG
                  performance criteria are met.

            o     Waste package dose rates shall be maintained ALARA. For
                  treated waste packages being returned for disposal,
                  radiological "hot spots" on the external surfaces of the waste
                  packages shall not exceed 1000 mrem/hr on contact.

            o     The concentration of radionuclides in the treated waste may be
                  determined by either direct methods (waste analysis,
                  non-destructive analysis) or by radionuclide material
                  accountability (mass balance).

                  Waste Sampling & Analysis

            o     The Contractor shall perform waste analysis for treated waste
                  being certified as meeting LDR concentration-based standards.
                  The Contractor shall perform the analysis on samples of the
                  actual treated waste being disposed. The Contractor shall
                  specify the sampling methodology and frequency that is used
                  when sampling and analysis is used to determine if a waste
                  meets LDR requirements. The sampling criteria shall meet the
                  Contractor's Waste Analysis Plan (WAP) for waste treatment and
                  the disposal facility's WAP for waste disposal.

            o     The Contractor shall perform sampling and analysis activities
                  in compliance with the Contractor's permits and licenses, 40
                  CFR 268.7 (RCRA), 40 CFR 761 Subparts M through R (TSCA), WAC
                  173-303 and test methods defined in EPA SW-846, Test Methods
                  for the Evaluation of Solid Waste, Physical/Chemical Methods.

            o     The Contractor shall have established a "chain of custody"
                  procedure for laboratory analysis samples in accordance with
                  SW-846 methods. Sample analysis reports shall be clearly
                  traceable back to specific waste packages, shipments and
                  manifests. An authorized representative of the Contractor
                  shall sign and certify reports documenting laboratory
                  analyses.


                                                                               6
<PAGE>

                                                                    Attachment A
                                                       Statement of Work. Rev. 1

            o     The Buyer reserves the right to be present during sampling and
                  analysis activities. Arrangements for having the Buyer present
                  during sampling and analysis activities shall be determined
                  during the Contractor's treatment planning stage.

            o     For waste that has been treated to one of the Technology Based
                  treatment standards specified in 40 CFR 268.40 or Alternative
                  Treatment Standards for Hazardous Debris specified in 40 CFR
                  268.45, analysis of the treated waste is not required.
                  However, the Contractor shall provide supportive evidence that
                  the performance and/or design and operating standards have
                  been met as a basis for LDR certification.

            Waste Verifications

            o     As part of the treated waste acceptance process for waste
                  being disposed at the Hanford Site, a percentage of the
                  Contractor's treated waste will be physically verified prior
                  to acceptance back for disposal. The verification rate is
                  based on the treatment Contractor's waste acceptance
                  performance. The initial verification rate will be established
                  upon the Contractor's submittal of each treated waste Profile.
                  This rate can decrease or increase depending on the
                  Contractor's evaluated performance.

            o     The Contractor shall provide assistance to the Buyer with
                  verification of container contents prior to processing the
                  waste in an "unverifiable waste form" (e.g., grouting,
                  packaging into shield containers...etc). TheTh Contractor
                  shall provide a one (1) month notice prior to verification
                  activities to ensure availability of verification personnel.
                  Notification less than one (1) month may result in a delay of
                  work due to scheduling conflicts.

            o     The Buyer's personnel will strictly comply with all applicable
                  Contractor safety requirements while performing work at the
                  Contractor's facility. The Buyer and the Contractor shall both
                  have the authority to "stop work" whenever a significant
                  safety concern is identified. Should this occur, a job hazard
                  analysis shall be performed to identify and mitigate hazards
                  specific to the verification work activity. A copy of the job
                  hazard analysis report shall be provided to the BTR before
                  waste verification work begins.

            Final Treated Waste Certification

            o     The Contractor shall certify that each batch or lot of treated
                  waste meets the requirements set-forth in this Contract. The
                  Contractor shall submit to the Buyer a treated waste
                  certification shipment package for each shipment of treated.
                  At a minimum, the shipment package shall include the Container
                  Data Sheets (CDSs), LDR Notification/Certification, waste
                  designation sheets/rationale, analysis data (as applicable),
                  and acceptable knowledge information supporting LDR
                  Certifications. The Buyer will accept or reject the waste
                  certification shipment package within fifteen (15) working
                  days from the time the waste documentation package is received
                  by the Buyer. Upon approval of the waste certification
                  shipment package, the Buyer will issue the Contractor a
                  shipment authorization (referred to as the R356 Form).

            Treated Waste Transportation

            o     The Contractor is responsible for the transportation of the
                  treated waste. This includes waste packaging, preparing
                  shipping documentation, arraigning for a shipping transporter,
                  loading the waste, and authorizing the shipment.

            o     Shipments shall be in full compliance with DOT requirements.

            o     Shipping containers shall be in good condition free of scaling
                  rust, dents, creases, loose lid fastener components, and meet
                  radiological acceptance requirements for the Hanford Site.

            o     Every waste package shall be at least 90% full and be properly
                  closed. Treated waste packages shall be of size, shape and
                  weight that can be readily/safely lifted and moved by means of
                  conventional forklift type vehicles. The maximum gross weight
                  of a package shall not exceed 16,000 pounds.

            o     The Buyer requires a minimum thirty (30) days notice from the
                  Contractor to schedule the shipment into the Buyer's
                  facilities. Shipments cannot be scheduled into Hanford until
                  the Buyer has approved the Contractor's shipment
                  documentation. The Buyer's facilities are open to ship and
                  receive waste between the hours of 8:00 am to 3:00 pm Monday
                  through Thursday and on


                                                                               7
<PAGE>

                  Fridays on a limited basis. To allow for enough time to
                  offload inbound waste shipments, the latest time that a
                  shipment will be allowed to enter the Hanford Site is 2:00 pm.
                  The Contractor may request to make treated waste shipments at
                  other times upon Buyer approval.

            o     The Buyer will notify the Contractor immediately if upon
                  receipt inspection of the treated waste the Buyer discovers
                  any significant manifest or shipping paper discrepancy. The
                  Contractor and Buyer must attempt to reconcile the discrepancy
                  within ten (10) calendar days after receiving the treated
                  waste. If the discrepancy cannot be resolved within this
                  period, the Buyer has the right to return the waste back to
                  the Contractor.

      3.3   Buyer (FH) Responsibilities

            The Buyer will furnish or cause to be furnished to the Contractor,
            without cost, the following services:

            o     The Buyer will prepare shipment documentation for each
                  shipment of waste sent to the Contractor. The Contractor may
                  review and approve shipment documentation prepared by the
                  Buyer as necessary with in one week of submittal to the
                  Contractor, and prior to the waste leaving the Hanford Site.

            o     The Buyer will arrange the transportation for waste being
                  shipped to the Contractor's treatment unit(s). Loading and
                  securing the waste will be done at the Hanford Site utilizing
                  Site personnel (Operators, Radiation Control Technicians,
                  craft, Shipper, etc.) in accordance with all local, state, and
                  federal transportation regulations. The Contractor shall
                  identify to the Buyer all-applicable transportation permits
                  for receipt of the waste into the Contractor's treatment
                  unit(s).

            o     The Buyer will review the waste designation/characterization
                  information of each waste package prior to shipping the waste
                  to the Contractor. The Buyer is responsible for providing
                  waste characterization information needed to meet Department
                  of Transportation (DOT), RCRA, TSCA, and Washington State
                  Dangerous Waste Regulation requirements.

            o     The Buyer may ship waste to the Contractor from various
                  locations at the Hanford Site. Shipments would be full
                  tractor-trailer loads to the extent possible. The Contractor
                  shall be capable of receiving all the various waste types
                  specified in this contract on a regular basis in order to
                  accommodate waste that needs to be shipped from
                  less-than-90-day accumulation areas at the Hanford Site. The
                  Buyer will ship waste with the same or similar treatment
                  requirements together when it is possible to do so. The Buyer
                  will use waste shipment campaigns for larger waste streams
                  that originate from the Hanford Site TSDs. The Contractor and
                  the Buyer will jointly establish and maintain the treatment
                  schedules.

            o     The Buyer will provide LDR Notifications/Certifications,
                  Uniform Hazardous Waste Manifest and Radioactive Waste
                  Manifest (NRC 540/541) for each waste shipment. The Buyer may
                  also provide additional shipment documentation required for
                  unit specific acceptance requirements in the Contractor's
                  RCRA/TSCA Permit(s) and/or Radioactive Material License (RML).
                  The Buyer will submit an electronic copy of the NRC 541, and
                  electronic data files covering basic physical, chemical,
                  radiological and packaging attributes of the waste on a
                  shipment. The electronic data files will be in Microsoft Excel
                  and be submitted via internet email.

            o     The Buyer will provide the Contractor with the estimated
                  invoicable pre-treatment waste volume (m3) of each waste
                  package offered for treatment. For this Contract, waste
                  volumes to be treated will be based on the nominal capacity of
                  the primary waste containers at the time waste is consigned to
                  the treatment Contractor. Volumes will be specified on the
                  applicable shipping or pre-notification paperwork. Overpacked
                  containers used solely to meet shipping requirements are not
                  considered to be the primary container. See the following
                  examples for typical container waste volumes (not all
                  inclusive):

                  55-Gal Drum: ...........................   0.208 cubic meters

                  85-Gal Drum: ...........................   0.322 cubic meters


                                                                               8
<PAGE>

                                                                    Attachment A
                                                       Statement of Work. Rev. 1

                  4'x4'x8' Metal Box: ......................  3.40 cubic meters

                  B-25 Box (nominally 4'x4'x6') ............  2.55 cubic meters
                  55-Gal Drum packaged into a 85-gal
                  salvage overpack ......................... 0.208 cubic meters

            o     If waste in a container is suspected of exceeding 200 mrem/hr,
                  the Buyer will notify the Contractor in advance of the actual
                  waste shipment. For waste packages that exceed 100 mrem/hr
                  exterior surface dose rate, the Buyer will submit a request to
                  the Contractor for approval to ship such waste.

            o     The Buyer will properly package, mark, and label all wastes
                  covered by the Contract prior to waste pickup by the
                  Contractor. DOT compliance is rigidly enforced and is expected
                  of the Contractor and all transporters.

            o     The Buyer's Transportation Department will inspect and
                  validate all waste shipments and sign the manifest.

      3.4   Buyer Provided Equipment or Materials

            None

      3.5   Critical Assumptions

            The tasks and deliverables described in this Statement of Work are
            based on the following assumptions:

            o     The Contractor shall provide all treatment services necessary
                  for the proper treatment of the waste as described in Sections
                  3.1.

            o     The Buyer will not perform pre-treatment or additional waste
                  analysis activities to make the waste more amenable for
                  acceptance into Contractor's facility.

            o     Non-bulk liquid packages may not have specific inner container
                  inventory sheets; however, overall waste package inventory
                  summaries will be provided to the Contractor.

            o     The Buyer will provide the Contractor with a very broad mix of
                  physical and chemical waste types for treatment.

            o     The treated waste will be returned to the Buyer in accordance
                  with Section 3.2.2 (exception: treatment residues from the
                  Contractor's DSSI unit will be disposed of per the
                  Contractor's commercial disposal contracts.

            o     Transportation of the waste to the Contractor's facility is
                  the responsibility of the Buyer.

            o     Transportation of the treated waste to the disposal unit is
                  the responsibility of the Contractor.

      3.6   DOE Requirements, National Consensus Codes and Standards

            o     10 CFR 830.122, Nuclear Safety Management, Subpart A, General
                  Provisions, Section 830.122, Quality Assurance Criteria.

            o     10 CFR 1021 Department of Energy, National Environmental
                  Policy Act Implementing Procedures.

            o     40 CFR, U.S. Environmental Protection Agency Regulations.

            o     49 CFR Subchapter C, Sections 171-180, U.S. Department of
                  Transportation, Hazardous Materials Regulation.

            o     AEA, Atomic Energy Act of 1954, as amended, 42 USC 2011, et
                  seq.

            o     EPA, SW-846 Test Methods for the Evaluation of Solid Waste,
                  Physical/Chemical Methods, U.S. Environmental Protection
                  Agency, Most Current Version.

            o     RCRA, Resource Conservation and Recovery Act of 1976, 42 USC
                  6901 et seq.

            o     WAC 173-303, State of Washington Administrative Code
                  "Dangerous Waste Regulations," as amended.

            o     CERCLA, Comprehensive Environmental Response, Compensation and
                  Liability Act. (40 CFR 300).

            o     TSCA, Toxic Substance Control Act. (40 CFR 761)


                                                                               9
<PAGE>

                                                                    Attachment A
                                                       Statement of Work. Rev. 1

            o     RCRA, Resource Conservation and Recovery Act of 1976, 42 USC
                  6901 et seq.

            o     WAC 173-303, State of Washington Administrative Code
                  "Dangerous Waste Regulations," as amended.

            o     CERCLA, Comprehensive Environmental Response, Compensation and
                  Liability Act. (40 CFR 300).

            o     TSCA, Toxic Substance Control Act. (40 CFR 761)

      3.1   Fluor Hanford Documents and Project Specific Specifications

            Fluor Hanford, HNF-EP-0063, Revision 10, Hanford Site Solid Waste
            Acceptance Criteria, Fluor Hanford, Richland, Washington, February
            2004, or most recent revision applies (available on the Internet at
            http://www.hanford.gov/wastemgt/wac).

      3.2   Configuration Management Requirements

            Changes and/or modifications to this SOW are controlled through
            Fluor Procurement Department and internal procedures.

      3.3   Work Control Requirements

            N/A - Offsite work activity. Onsite interfaces are controlled by
            existing internal FH Procedures.

      3.4   Site Requirements

            If the Contractor needs to visit the Hanford Site, the Buyer will
            provide Hanford Site specific training (e.g., HGET, FEHIC) to
            representatives of the Contractor to allow access to the Hanford
            Site and specific Buyer's facilities that are utilized in Contract
            performance. Access to the Hanford Site requires a Site access
            badge. The Buyer will arrange for temporary access badges for
            Contractor representatives when required.

      3.5   Contractor Personnel Requirements

            The Contractor shall provide technical expertise and processes
            needed to successfully perform waste treatment. Technical expertise
            and processes include, but are not limited to:

            o     Pre-treatment waste batching,

            o     Treated waste form testing,

            o     Immobilization agent formulations (as applicable),

            o     Sampling protocols, and

            o     Process control parameters.

            The Contractor's transportation personnel shall be trained in proper
            waste handling procedures, personal protection, regulatory
            compliance, and spill emergency response. The Contractor personnel
            shall be responsible for properly securing and transporting the
            waste in accordance with all State and Federal transportation
            regulations.

            The Contractor shall develop, implement, and maintain a written
            Training Plan that complies with 40 CFR 260-279 and the Contractor's
            governing permits and license. The Contractor shall maintain
            adequate staff that is trained to the requirements of the training
            plan to accomplish the requirements of this Contract.

            The Contractor shall provide facility specific training to
            representatives of the Buyer to allow access to the Contractor's
            facility where the treatment services are being performed (on an as
            needed basis, e.g., Waste Verifiers).


                                                                              10
<PAGE>

                                                                    Attachment A
                                                       Statement of Work. Rev. 1

            3.12.3 Radiological Requirements

            Radiological controls for the Onsite interfaces are implemented by
            existing internal procedures. The Contractor shall implement their
            radiological controls through their Radioactive Material License and
            internal procedures.

            3.12.4 Quality Requirements

            The Contractor shall develop, implement, and maintain a written
            Quality Assurance Program (QAP) that complies with 10 CFR 830.122,
            Quality Assurance Criteria. The Contractor shall submit a copy of
            their Quality Assurance Program Plan (QAPP) to the Buyer upon
            proposal submittal to the Buyer.

            o     The Contractor shall require sub-tier contractors, if any, to
                  meet Quality Assurance Program requirements specified above
                  that are applicable to the scope of subcontracted work. This
                  "flow down" of requirements shall be documented in procurement
                  documents between the Contractor and sub-tier contractor.

            o     Laboratories utilized by the Contractor for waste analysis
                  under this Contract shall have a fully documented and
                  implemented Quality Assurance Program Plan (QAPP) as specified
                  under the requirements of SW-846. The Buyer may request a copy
                  of the laboratory's QAPP from the Contractor for review.

            o     For treated waste disposed at Hanford, the laboratory(ies)
                  utilized for treated waste analysis under this Contract shall
                  be Washington State certified. The Contractor shall submit a
                  copy of the laboratory(ies) Washington State certification to
                  the Buyer when submitting laboratory analysis data for treated
                  waste shipments (as applicable).

            o     Non-Conformance Reports shall be developed that details the
                  control, evaluation, and corrective action for treated waste
                  that is found to not meet the requirements of this Contract
                  after initial treatment. The Contractor shall generate a
                  non-conformance report within fifteen (15) working days for
                  each container, lot or batch that is determined to not comply
                  with the requirements of the Contract. The Contractor shall
                  describe methods to disposition the non-conforming material
                  and prevent repeated incidents of non-conformance in the
                  report. A copy of the non-conformance reports, and the results
                  of the follow-up actions, will be transmitted to the Buyer
                  within five (5) working days of the completion of the report.
                  The Buyer's concurrence with the disposition of the
                  non-conforming material is required prior to shipment of the
                  treated waste to the Buyer.

4.0   DELIVERABLES, REPORTING REQUIREMENTS, and COORDINATION MEETINGS

      4.1   Deliverables and Acceptance Requirements

      The treated waste residues shall be returned back to the Buyer in full
      compliance with the Hanford Site waste acceptance disposal and/or storage
      requirements (as applicable). As an alternative, if the agreed upon
      disposal facility for the treated waste is another DOE-approved facility,
      the Contractor shall meet the waste acceptance criteria for the
      alternative disposal facility.

      4.2   Coordination Meetings and Reporting Requirements

      The Buyer and Contractor shall meet (in person or via telecom) at a
      minimum once a month to discuss technical and contractual issues. During
      subject meeting, the Contractor shall update the Buyer on the treatment
      schedule and when they anticipate needing Buyer verifications to be
      performed and the submittal of treated waste shipment documentation to the
      Buyer for approval. Other data submission may be required which are
      mutually agreed upon between the Buyer and Contractor as the performance
      of the work is progressing.

5.0   SCHEDULE

      The performance periods for this Contract are as follows:

      o     Base Contract: October 1, 2004 through September 30, 2006.


                                                                              11
<PAGE>

                                                                    Attachment A
                                                       Statement of Work. Rev. 1

      o     FY2007 Option Year: October 2006 through September 30, 2007.

      The Contractor shall treat and return the treated waste residues back to
      the Buyer within nine (9) months of initial receipt of the waste at the
      Contractor's facility. For waste treated at the Contractor's DSSI unit,
      the Contractor shall have treated and submitted the corresponding
      Certificate of Destruction to the Buyer within nine (9) months of initial
      receipt of the waste at the Contractor's facility.

6.0   ADMINISTRATIVE

      The Contractor shall work with the Buyer to establish and maintain a
      monthly treatment schedule that accommodates the Buyer's waste treatment
      requirements for the Contract performing periods. The treatment schedule
      shall depict, at a minimum, when treatment of the Buyer's waste is
      expected to take place, when treated waste verifications by the Buyer will
      be needed, and when treated waste shipment documentation submittals will
      take place. The Contractor shall submit an updated schedule to the Buyer
      during the first week of each month.

      The Buyer participates in the Department of Energy's Consolidated Audit
      Program (DOECAP) audit process and relies on DOECAP audits to establish
      approved TSDFs for the DOE Complex to utilize. Currently, the Contractor
      is qualified as a treatment provider under DOECAP. However, the Buyer
      reserves the right to inspect and/or audit the Contractor's and
      subcontractor's facilities should a safety or regulatory incident(s) occur
      that affects the Buyer's waste. The Contractor shall allow the Buyer
      access to their facilities and personnel to support the inspection and/or
      audit. Resulting inspection and audit reports may be shared with the DOE.
      Depending on the nature of the safety or regulatory incident(s), the
      inspection and/or audit may invoke corrective actions which could force a
      work stoppage on the Buyer's waste. The Contractor could be required to
      perform corrective actions before additional waste from the Buyer is
      treated or returned back to the Hanford Site for disposal. Should the
      safety or regulatory incident(s) be of a significant level or severity,
      the Buyer reserves the right to terminate this Contract, in whole or in
      part, for convenience or default pursuant to the Termination provisions in
      the Contract.

      Records and Reports

      o     The Contractor shall maintain all records associated with the
            Buyer's wastes (including but not limited to Contractor's sample
            analysis results) using a method compliant with the requirements
            specified in 40 CFR 260-279, and all other applicable federal,
            state, or local regulations. All documents, procedures, and
            applicable requirements for record keeping are subject to audit by
            the Buyer.

      o     The Contractor shall establish and maintain a historical record of
            waste received, generated, treated, stored, and shipped at the
            facilities under its cognizance. The data maintained shall include
            all data necessary to show that the waste was properly classified,
            treated, stored, and shipped. The data maintained in the system
            shall be based on the data recorded on waste manifests. At a
            minimum, the following data will be included for each container of
            waste:

            >     Waste physical and chemical characteristics;

            >     Weight of the waste (total of waste and any solidification or
                  absorbent media);

            >     Other data necessary to demonstrate compliance with waste
                  acceptance criteria;

            >     Major radionuclides and their concentrations;

            >     Packaging date, package gross weight, and nominal package
                  volume;

            >     All analytical and test data needed to verify treated waste
                  performance for certification and disposal.

      o     The Contractor shall maintain waste manifest records for waste
            received by the Contractor and for treated waste returned back to
            the Buyer and/or approved disposal unit. The Contractor shall keep
            waste manifests as permanent records.


                                                                              12
<PAGE>

Submittal Register: Treatment of Hanford's MLL W-03 Mixed Low-Level Waste, FH
Contract #25003

The Contractor shall meet the required schedule and provide the documents
specified in accordance with the following submittals.

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<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
<C>          <C>        <C>        <C>        <C>          <C>
1.           2.         3.         4.         5.           6.
Submittal    No. of     Submittal  Format     Document      Description / Document Title
No.          Copies*    Type                  Family(ies)

------------------------------------------------------------------------------------------------------------------------------------
1            E          ACC        Gen        PROJ         The Contractor shall notify the Buyer immediately if the Contractor
                                                           discovers any significant manifest or shipping discrepancies upon
                                                           receipt of the waste.
------------------------------------------------------------------------------------------------------------------------------------
2            E          ACC        Gen        PROJ         The Contractor shall notify the Buyer of all spills or leaks of the
                                                           Buyer's waste within eight (8) hours of discovery. A written follow-up
                                                           report shall be submitted to the BTR not later than seven (7) days after
                                                           the initial report.
------------------------------------------------------------------------------------------------------------------------------------
3            E          APP        PDF        PROJ         The Contractor shall certify that each batch or lot of treated waste
                                                           meets the requirements set forth in this Contract. The Contractor shall
                                                           submit to the Buyer a treated waste certification shipment package for
                                                           each shipment of treated waste. At a minimum, the shipment package shall
                                                           include the Container Data Sheets (CDSs), LDR
                                                           Notification/Certification, waste designation sheets/rationale, analysis
                                                           data (as applicable), and acceptable knowledge information supporting
                                                           LDR Certifications.
------------------------------------------------------------------------------------------------------------------------------------
4            E          APP        Gen        PROJ         Within fifteen (15) days after the treated waste has been disposed, the
                                                           Contractor shall submit to the Buyer a Certificate of Treatment,
                                                           Disposal, or Destruction (CT/D) signed by an authorized officer of the
                                                           company.
------------------------------------------------------------------------------------------------------------------------------------
5            1          ACC        Gen        QAC          The Contractor shall submit a copy of the laboratory(ies) Washington
                                                           State certification to the Buyer when submitting laboratory analysis
                                                           data for treated waste shipments (as applicable).

------------------------------------------------------------------------------------------------------------------------------------
6            E          APP        Gen        QAC          The Contractor shall generate a non-conformance report within fifteen
                                                           (15) working days for each container, lot or batch that is determined to
                                                           not comply with the requirements of the Contract. The Contractor shall
                                                           describe methods to disposition the non-conforming material and prevent
                                                           repeated incidents of non-conformance in the report. A copy of the
                                                           non-conformance report, and the results of the follow-up actions, will
                                                           be transmitted to the Buyer within five (5) working days of the
                                                           completion of the report. The Buyer's concurrence with the disposition
                                                           of the non-conforming material is required prior to shipment of the
                                                           treated waste to the Buyer.
------------------------------------------------------------------------------------------------------------------------------------
7            E          ACC        PDF        PROJ         The Contractor shall submit a monthly treatment schedule to the Buyer.




------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
--------------------------------------------
<S>           <C>             <C>
 7.           8.              9.
 Submittal     Buyer Review   SOW
 Date         Time (Work      Paragraph or
 (Calendar    Days)           Req.
 Days)                        Reference
--------------------------------------------
 As Required  10 days         3.3.1
 Per incident

--------------------------------------------
 As           10 days         3.3.1
 Specified
 in the SOW

--------------------------------------------
 For each     15 days         3.3.2
 treated
 waste
 shipment




--------------------------------------------
 1 5 days     n/a             3.3.3
 after waste
 has been
 disposed
--------------------------------------------
 For each     15 days         3.14.4
 treated
 waste
 shipment
--------------------------------------------
 For each     5 days          3.14.4
 treated
 waste-non-conformance







--------------------------------------------
 Monthly      5 days          6.0
 during the
 Contract
 performance
 periods.
--------------------------------------------
</TABLE>


<PAGE>

                                  ATTACHMENT B

                     PERMA-FIX ENVIRONMENTAL SERVICES, INC.

                     INTEGRATED CONTRACTOR PROCUREMENT TEAM
                               (ICPT) PROVISIONS

                                      FOR
                                 CONTRACT 25003



<PAGE>

Contract No. 25003                        Perma-Fix Environmental Services, Inc.
                                                                 August 24, 2004

                                  ATTACHMENT B

                            BASIC ORDERING AGREEMENT
         GENERAL TERMS AND CONDITIONS FOR COMMERCIAL ITEMS AND SERVICES
                             DOE CONTRACTORS (05/01)

1. DEFINITIONS

      The following terms shall have the meanings below:

      (a) Government means the United States of America and includes the U.S.
      Department of Energy (DOE) or any duly authorized representative thereof.

      (b) Seller means the person or organization that has entered into this
      Basic Ordering Agreement (BOA).

      (c) Company means any DOE Contractor and authorized Subcontractor
      utilizing the BOA.

      (d) Item means "commercial items or services" and "commercial component",
      as defined in FAR 52.202-1.

      (e) Order means individual requests for Items or Services (hereinafter
      referred to as "Item") issued under this BOA.

      (f) Authorized Subcontractor means a subcontractor holding an active
      subcontract issued by a DOE Contractor.

      (g) BOA Procurement Representative means the person responsible for
      negotiating and administrating the BOA

      (h) Order Procurement Representative means the person responsible for
      negotiating and administration of the respective Order.

      (i) Site Specific Terms and Conditions means those unique requirements of
      the Company issuing Orders under this BOA which will supplement these
      general terms and conditions.

 2. ORDER OF PRECEDENCE

      Any inconsistencies shall be resolved in accordance with the following
      descending order of precedence: (1) item description, (2) face of the
      Order, (3) Site Specific Terms and Conditions, (4) face of the BOA, and
      (5) the BOA general terms and conditions.

 3. TITLE AND ADMINISTRATION

      All property rights and interests resulting from this BOA and Orders shall
      pass directly from Seller to the Government. Company shall make payments
      under Orders from funds advanced by the Government and agreed to be
      advanced by DOE, and not from its own assets. The Company may assign the
      BOA and Orders to DOE or its designee, and in case of such transfer and
      notice thereof to Seller, Company shall have no further responsibilities
      hereunder.

4. ACCEPTANCE OF TERMS AND CONDITIONS

      Seller, by signing the BOA or Orders or delivering the items identified
      therein, agrees to comply with all the terms and conditions, all
      specifications and all other documents that this BOA or Order incorporates
      by reference or attachment. Company hereby objects to any terms and
      conditions contained in any acknowledgment of the BOA or Order that are
      different from or in addition to those


<PAGE>

Contract No. 25003                        Perma-Fix Environmental Services, Inc.
                                                                 August 24, 2004

      mentioned in this document. Failure of Company to enforce any of the
      provisions of the BOA or Order shall not be construed as evidence to
      interpret the requirements of the BOA or Order, nor a waiver of any
      requirement, nor of the right of Company to enforce each and every
      provision. All rights and obligations shall survive final performance of
      the BOA or any Order thereunder.

 5. WARRANTY

      Seller expressly warrants that items delivered under the Orders shall be
      in accordance with Seller's affirmation, description, sample, or model and
      compliant with all requirements of the BOA and Order. The warranty shall
      begin upon acceptance and extend for a period of (1) the manufacturer's
      warranty period or six months, whichever is longer, if Seller is not the
      manufacturer and has not modified the item or (2) one year or the
      manufacturer's warranty period, whichever is longer, if Seller is the
      manufacturer, of the item or has modified it. If any nonconformity with
      the item appears within that time, Seller shall promptly repair or replace
      such items or reperform services. Transportation of replacement items and
      return of nonconforming items and repeat performance of services shall be
      at Seller's expense. If repair or replacement or reperformance of services
      is not timely, Company may elect to return the nonconforming items or
      repair or replace them or reprocure the services at Seller's expense. Any
      implied warranty of merchantability or fitness for a particular purpose is
      hereby disclaimed.

 6. ASSIGNMENT

      Seller shall not assign rights or obligations to third parties without the
      prior written consent of Company. However, Seller may assign rights to be
      paid amounts due or to become due to a financing institution if Company is
      promptly furnished written notice and a signed copy of such assignment.
      Payments to an assignee shall be subject to set off or recoupment for any
      present or future claims of Company against Seller.

 7. NEW MATERIALS

      Unless otherwise specified in the BOA or Order, all items delivered shall
      consist of new materials. New is defined as previously unused which may
      include residual inventory or unused former Government surplus property.
      This does not include the use of recycled or recovered material as defined
      by the Environmental Protection Agency in 40 CFR 247.

 8. TRANSPORTATION

      Transportation shall be "FOB Origin" unless specified otherwise in the
      Order and no insurance cost shall be allowed unless authorized in writing
      on the specific Order. The bill of lading shall indicate that the
      transportation is for the Government and is subject to the standard
      Government bill of lading terms and any special rates or charges.

9. RISK OF LOSS

      Where Company is liable to Seller for loss of conforming items occurring
      after the risk of loss has passed to Company, Company shall pay Seller the
      lesser of (1) the agreed price of such items, or (2) Seller's cost of
      replacing such items. Such loss shall entitle Seller to an equitable
      extension in delivery schedule obligations.

10. PAYMENT

      Unless otherwise provided, terms of payment shall be Net 30 days from the
      latter of (1) receipt of Seller's proper invoice, if required, or (2)
      delivery (and acceptance, if required by the Order) of items/completion of
      work. Any offered discount shall be taken if payment is made within the
      discount period that Seller indicates. Payments may be made either by
      check, purchase card or electronic funds transfer, at the option of
      Company. Payment shall be deemed to have been made as of the date of
      mailing or the date on which an electronic funds transfer was made. Not
      withstanding anything


<PAGE>

Contract No. 25003                        Perma-Fix Environmental Services, Inc.
                                                                 August 24, 2004

      therein, the Company shall be entitled at any and all times to set off
      against any amounts payable by the Company hereunder any amount owing from
      Seller to the Company under Orders or any subcontracts with Seller.

 11. COMPLIANCE WITH LAWS

      (a) Seller shall comply with all applicable federal, state, and local laws
      and ordinances and all pertinent orders, DOE directives, rules, and
      regulations (including DOE regulations) and such compliance shall be a
      material requirement of this BOA and resulting Orders. Seller warrants
      that each chemical substance constituting or contained in items furnished
      under this BOA is on the list of substances published by the Administrator
      of the Environmental Protection Agency pursuant to the Emergency
      Preparedness and Community Right-to-Know Act and Toxic Substances Control
      Act as amended. With each delivery Seller shall provide Company any
      applicable Material Safety Data Sheet as required by the Occupational
      Safety and Health Act and applicable regulations including, without
      exception, 29 CFR 1910.1200.

      (b) Seller shall include this clause in all subcontracts, at any tier,
      involving the performance of this BOA.

12. TERMINATION FOR CAUSE

      (a) Only the Company issuing the BOA may terminate the BOA for cause, in
      whole or in part, if the Seller fails to comply with any of the terms of
      the BOA, or fails to provide adequate assurance of future performance.
      Only the Company issuing any Order may terminate the Order for cause, in
      whole or in part, if Seller fails to comply with any of the terms of the
      Order or fails to provide adequate assurance of future performance. In
      either event, the Company shall not be liable for any amount for items not
      accepted.

      (b) If the BOA or any Order is terminated for cause, the Company may
      require Seller to deliver to the Company any supplies and materials,
      manufacturing materials, and manufacturing drawings that Seller has
      specifically produced or acquired for the terminated portion of the BOA or
      Order. The Company shall pay the agreed-upon price for completed items
      delivered and accepted. The Company and Seller shall agree on the amount
      of payment for all other deliverables.

      (c) Seller shall not be liable to Company for delays in performance
      occasioned by causes beyond Seller's reasonable control and without its
      fault or negligence.

      (d) The rights and remedies of the Company in this clause are in addition
      to any other rights and remedies provided by law or under the BOA or
      resulting Order.

 13. BANKRUPTCY

      If Seller enters into any proceeding relating to bankruptcy, it shall give
      written notice via certified mail to the BOA Procurement Representative
      within five days of initiation of the proceedings. The notification shall
      include the date on which the proceeding was filed, the identity and
      location of the court and a listing of the BOA and Order numbers for which
      final payment has not been made.

 14. TAXES

      Taxes shall be collected and paid in accordance with the Site Specific
      Terms and Conditions of the respective Order.

15. CHANGES

      (a) The Company issuing the BOA reserves the right to make changes within
      the general scope of the BOA by issuance of a unilateral change order, or
      by a bilateral modification to the BOA. The Company issuing the Order
      reserves the right to make changes within the general scope of the Order
      by issuance of a unilateral change order or by a bilateral modification to
      the Order. Such changes may


<PAGE>

Contract No. 25003                        Perma-Fix Environmental Services, Inc.
                                                                 August 24, 2004

      include, without limitation, changes in (1) the description of the item,
      (2) the quantities of items ordered, (3) the method of shipment or
      packaging, and (4) the time or place of delivery, inspection, or
      acceptance. The Seller shall promptly comply with any such change made by
      the Company. If any change affects the cost of or the time required for
      performance, an equitable adjustment to the price and/or delivery
      requirements and other affected provisions of the BOA or any Order shall
      be made by the parties in a bilateral modification. Any claim for
      adjustment by Seller must be made within 30 days from the date of receipt
      of Company's change notice, although Company in its sole discretion may
      receive and act upon any claim for adjustment at any time before final
      payment.

      (b) Only the BOA Procurement Representative is authorized on behalf of
      Company to issue changes whether formal or informal to the BOA. Only the
      Order Procurement Representative is authorized on behalf of Company to
      issue changes whether formal or informal to the respective Order. If
      Seller considers that any direction or instruction by Company personnel
      constitutes such a change Seller shall not rely upon such instruction or
      direction without written confirmation from the BOA Procurement
      Representative or the Order Procurement Representative, as the case may
      be. Nothing in this clause, including any disagreement with Company about
      the equitable adjustment, shall excuse Seller from proceeding with the
      agreement as changed.

 16. TERMINATION FOR CONVENIENCE

      The Company issuing the BOA may, in its sole discretion, terminate the
      BOA, or may terminate the fabrication of all or any portion of the items
      not then completed, at any time, by giving the Seller a written notice of
      termination. The Company issuing the Order may, in its sole discretion,
      terminate the order, or may terminate the fabrication of all or any
      portion of the items not then completed, at any time, by giving the Seller
      written notice of termination. Upon receipt of a notice of termination,
      the Seller shall, unless the notice requires otherwise, discontinue all
      performance on the date and to the extent specified in the notice, and
      shall otherwise minimize costs to the Company. Payment for items already
      completed or in the process of completion, shall be adjusted between the
      Seller and the Company in a fair and reasonable manner, but such payment
      shall exclude any allowance for the uncompleted portion of the items, or
      any anticipated profits thereon. Such payment for items already completed
      or in the process of completion shall be the total compensation due to the
      Seller for termination at will by the Company.

 17. SUSPENSION

      The Company issuing the BOA may, for any reason, direct the Seller to
      suspend performance of any part of or all of the performance of the BOA
      for an indefinite period of time. The Company issuing the Order may, for
      any reason, direct the Seller to suspend performance of any part of or all
      of the performance of the Order. If any such suspension significantly
      delays the progress of or causes the Seller additional direct expenses in
      the performance of the BOA or any Order, not due to the fault or
      negligence of the Seller, the compensation to the Seller shall be adjusted
      by a modification to the BOA or any Order and the time of performance
      shall be extended by the actual duration of the suspension. Any claim by
      the Seller for compensation of a schedule extension must be supported by
      an appropriate document asserted within ten (10) days from the date an
      order is given to the Seller to resume the performance of the BOA or any
      Order.

18. INCORPORATION BY REFERENCE

      The BOA incorporates certain clauses by reference. These clauses apply as
      if they were incorporated in their entirety. For Federal Acquisition
      Regulation (FAR) provisions incorporated by reference, "Contractor" means
      Seller and "Contracting Officer" means the Company BOA Procurement
      Representative. The FAR clauses may be obtained from the Company upon
      request.


<PAGE>

Contract No. 25003                        Perma-Fix Environmental Services, Inc.
                                                                 August 24, 2004


The following clauses are incorporated by reference:


      FAR 52.219-8 Utilization of Small Business Concerns (OCT 200)


      FAR 52.222-26 Equal Opportunity (Feb 1999), (The required poster is
      available at:
      http://vwvw.dol.gov/dol/esa/public/regs/compliance/posters/eeo.htm)


      FAR 52.222-35 Affirmative Action for Disabled Veterans and Veterans of the
      Vietnam Era (APR 1998), and

      FAR 52.222-36 Affirmative Action for Workers with Disabilities (June 1998)


      FAR 52.227-3 Patent Indemnity FAR 52.227-9 Commercial Computer Software


      FAR 52.222-21 Prohibition of Segregated Facilities (Feb 1999)


                                 END OF DOCUMENT


<PAGE>

                                  ATTACHMENT C

                     PERMA-FIX ENVIRONMENTAL SERVICES, INC.
                          PRICE SCHEDULE FOR 2005-2007
                                       FOR
                                 CONTRACT 25003


<PAGE>

<TABLE>
<CAPTION>
                                                   Attachment C
                                               Fluor Contract 25003
-------------------------------------------------------------------------------------------------------------------------------
                                             Base Period Pricing Sheet
-------------------------------------------------------------------------------------------------------------------------------
MLLW-03 Mixed Low-Level Waste
-------------------------------------------------------------------------------------------------------------------------------
                       Base Price                             Surcharge     Total Unit Cost
  Physical State        ($/m3)             Sub-Type           ($/m3)            ($/m3)        Waste Vol (m3)    Total Cost ($)
------------------- ---------------- -------------------- ---------------- ----------------- ---------------- -----------------
<S>                      <C>          <C>                 <C>               <C>               <C>                  <C>
 Non-Bulk Liquids         ***               None                ***              ***
                                     -------------------- ---------------- ----------------- ---------------- -----------------
                                            TSCA                ***              ***
                                     -------------------- ---------------- ----------------- ---------------- -----------------
                                          Oxidizers             ***              ***
                                     -------------------- ---------------- ----------------- ---------------- -----------------
                                          Reactives             ***              ***
                                     -------------------- ---------------- ----------------- ---------------- -----------------
                                           TSCA-Ox              ***              ***
                                     -------------------- ---------------- ----------------- ---------------- -----------------
                                           TSCA-Re              ***              ***
                                     -------------------- ---------------- ----------------- ---------------- -----------------
                                            Ox-Re               ***              ***
                                     -------------------- ---------------- ----------------- ---------------- -----------------
                                         TSCA-Ox-Re             ***              ***
------------------- ---------------- -------------------- ---------------- ----------------- ---------------- -----------------
      Solids              ***               None                ***              ***
                                     -------------------- ---------------- ----------------- ---------------- -----------------
                                            TSCA                ***              ***
                                     -------------------- ---------------- ----------------- ---------------- -----------------
                                          Osidizers             ***              ***
                                     -------------------- ---------------- ----------------- ---------------- -----------------
                                          Reactives             ***              ***
                                     -------------------- ---------------- ----------------- ---------------- -----------------
                                           TSCA-Ox              ***              ***
                                     -------------------- ---------------- ----------------- ---------------- -----------------
                                           TSCA-Re              ***              ***
                                     -------------------- ---------------- ----------------- ---------------- -----------------
                                            Ox-Re               ***              ***
                                     -------------------- ---------------- ----------------- ---------------- -----------------
                                         TSCA-Ox-Re             ***              ***
-------------------------------------------------------------------------------------------------------------------------------

MLLW/LLW Oils
-------------------------------------------------------------------------------------------------------------------------------
                       Base Price                             Surcharge     Total Unit Cost
  Physical State        ($/m3)             Sub-Type           ($/m3)            ($/m3)        Waste Vol (m3)    Total Cost ($)
------------------- ---------------- -------------------- ---------------- ----------------- ---------------- -----------------
Bulk and Non-Bulk         ***               None                ***              ***
     Liquids
-------------------------------------------------------------------------------------------------------------------------------

Other Waste Treatment Category
-------------------------------------------------------------------------------------------------------------------------------
                       Base Price                            Surcharge      Total Unit Cost    Waste Weight
   Physical State        ($/Kg)           Sub-Type             ($/Kg)            ($/Kg)            (Kg)         Total Cost ($)
------------------- ---------------- -------------------- ---------------- ----------------- ---------------- -----------------
Elemental Mercury         ***               None                ***              ***
-------------------------------------------------------------------------------------------------------------------------------

Surcharges
-------------------------------------------------------------------------------------------------------------------------------
                                                           Activity Tier                          Isotope
    Radioactivity Surcharges[1]            Isotope              (Ci)       Surcharge ($/m3)    Activity (Ci)    Total Cost ($)
                                     -------------------- ---------------- ----------------- ---------------- -----------------
                                      Tritium (S/Ci per         <1               ***
                                          package)
                                                          ---------------- ----------------- ---------------- -----------------
                                                              1 to 10            ***
                                                          ---------------- ----------------- ---------------- -----------------
                                                             11 to 54            ***
                                                          ---------------- ----------------- ---------------- -----------------
                                                                >54              ***
                                     -------------------- ---------------- ----------------- ---------------- -----------------
                                       Carbon-14 ($/Ci          <1               ***
                                        per package)
                                                          ---------------- ----------------- ---------------- -----------------
                                                             1 to 10             ***
                                                          ---------------- ----------------- ---------------- -----------------
                                                             11 to 54            ***
                                                          ---------------- ----------------- ---------------- -----------------
                                                                >54              ***
--------------------------------------------------------- ---------------- ----------------- ---------------- -----------------
              High Mercury (Hg) Surcharges                      Hg         Surcharge ($/kg)   Waste Weight     Total Cost ($)
                                                           Concentration                          (Kg)
                                                           Tier (mg/kg)
                                                          ---------------- ----------------- ---------------- -----------------
                                                             260 - 2000          ***
                                                          ---------------- ----------------- ---------------- -----------------
                                                            2001 - 4000          ***
                                                          ---------------- ----------------- ---------------- -----------------
                                                            4001 - 6000          ***
                                                          ---------------- ----------------- ---------------- -----------------
                                                            6001 - 8000          ***
                                                          ---------------- ----------------- ---------------- -----------------
                                                            8001 - 10000         ***
                                                          ---------------- ----------------- ---------------- -----------------
                                                           10001 - 15000         ***
                                                          ---------------- ----------------- ---------------- -----------------
                                                           15001 - 20000         ***
                                                          ---------------- ----------------- ---------------- -----------------
                                                           20001 - 25000         ***
                                                          ---------------- ----------------- ---------------- -----------------
                                                           25001 - 35000         ***
                                                          ---------------- ----------------- ---------------- -----------------
                                                           35001 - 50000         ***
                                                          ---------------- ----------------- ---------------- -----------------
                                                           50001 - 65000         ***
                                                          ---------------- ----------------- ---------------- -----------------
                                                           65001 - 80000         ***
                                                          ---------------- ----------------- ---------------- -----------------
                                                           80001 - 100000        ***
                                                          ---------------- ----------------- ---------------- -----------------
                                                          100001 - 150000        ***
                                                          ---------------- ----------------- ---------------- -----------------
                                                          150001 - 200000        ***
------------------------------------ -------------------- ---------------------------------- ---------------- -----------------

Empty Container Handling Surcharges    Container Size         Surcharge (per container)          No. of        Total Cost ($)
                                     -------------------- ---------------------------------- ---------------- -----------------
                                        <=55 Gal Drum                    ***
                                     -------------------- ---------------------------------- ---------------- -----------------
                                         85-Gal Drum                     ***
                                     -------------------- ---------------------------------- ---------------- -----------------
                                        110-Gal Drum                     ***
                                     -------------------- ---------------------------------- ---------------- -----------------
                                      B-25 Box (4x4x6)                   ***
                                     -------------------- ---------------------------------- ---------------- -----------------
                                      B-25 Box (4x4x8)                   ***
                                     -------------------- ---------------------------------- ---------------- -----------------
                                          Metal Box                      ***
                                         (9x5.5x5.5)
                                     -------------------- ---------------------------------- ---------------- -----------------
                                         >12,500 lbs                     ***
------------------------------------ -------------------- ---------------------------------- ---------------- -----------------

   Transportation Surcharges[2]           Activity                    Surcharge                 Quantity       Total Cost ($)
                                     -------------------- ---------------- ----------------- ---------------- -----------------
                                       Transportation                    ***
                                           ($/m3)
                                     -------------------- ---------------- ----------------- ---------------- -----------------
                                        Brokerage Fee                    ***
                                          ($/Trip)
                                     -------------------- ---------------- ----------------- ---------------- -----------------
                                       Detention, 3hrs                   ***
                                       unloading free
                                           ($/hr)
-------------------------------------------------------------------------------------------------------------------------------
[1]   For waste packages with a curie content above 1Ci, round to the nearest whole integer (e.g., 1.46CIi round to 1Ci, 1.56 Ci
      round to 2Ci, 10.60 Ci round to 11Ci, etc.)
-------------------------------------------------------------------------------------------------------------------------------
[2]   The Buyer will provide the transportation of the waste to the Contractor's treatment facility, and the Contractor will
      provide the transportation of the treated waste back to the Buyer and will be compensated at the rate specified in the
      Pricing Table based on the actual treated waste volume on the shipment. The Brokerage Fee only applies to waste shipments
      originating from the Buyer's facilities where the Contractor provides the Tennessee Radioactive Waste License-for-Delivery
      brokerage service. The Detention charges only apply to the treated waste shipments being returned back to Hanford for
      disposal and if actual demurrage charges are incurred by the Contractor.
-------------------------------------------------------------------------------------------------------------------------------
***   DENOTES INFORMATION IN THIS DOCUMENT THAT HAS BEEN OMITTED FROM THIS PUBLIC FILING PURSUANT TO A REQUEST BY THE COMPANY FOR
      CONFIDENTIAL TREATMENT BY THE SECURITIES AND EXCHANGE COMMISSION. THE OMITTED INFORMATION HAS BEEN FILED SEPARATELY WITH THE
      SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION FOR PURPOSES OF SUCH REQUEST.
</TABLE>



<PAGE>

<TABLE>
<CAPTION>
                                                   Attachment C
                                               Fluor Contract 25003
-------------------------------------------------------------------------------------------------------------------------------
                                         FY2007 Option Period Pricing Sheet
-------------------------------------------------------------------------------------------------------------------------------
MLLW-03 Mixed Low-Level Waste
-------------------------------------------------------------------------------------------------------------------------------
                       Base Price                             Surcharge     Total Unit Cost
  Physical State        ($/m3)             Sub-Type           ($/m3)            ($/m3)        Waste Vol (m3)    Total Cost ($)
------------------- ---------------- -------------------- ---------------- ----------------- ---------------- -----------------
<S>                      <C>          <C>                 <C>               <C>               <C>                  <C>
 Non-Bulk Liquids         ***               None                ***              ***
                                     -------------------- ---------------- ----------------- ---------------- -----------------
                                            TSCA                ***              ***
                                     -------------------- ---------------- ----------------- ---------------- -----------------
                                          Oxidizers             ***              ***
                                     -------------------- ---------------- ----------------- ---------------- -----------------
                                          Reactives             ***              ***
                                     -------------------- ---------------- ----------------- ---------------- -----------------
                                           TSCA-Ox              ***              ***
                                     -------------------- ---------------- ----------------- ---------------- -----------------
                                           TSCA-Re              ***              ***
                                     -------------------- ---------------- ----------------- ---------------- -----------------
                                            Ox-Re               ***              ***
                                     -------------------- ---------------- ----------------- ---------------- -----------------
                                         TSCA-Ox-Re             ***              ***
------------------- ---------------- -------------------- ---------------- ----------------- ---------------- -----------------
      Solids              ***               None                ***              ***
                                     -------------------- ---------------- ----------------- ---------------- -----------------
                                            TSCA                ***              ***
                                     -------------------- ---------------- ----------------- ---------------- -----------------
                                          Osidizers             ***              ***
                                     -------------------- ---------------- ----------------- ---------------- -----------------
                                          Reactives             ***              ***
                                     -------------------- ---------------- ----------------- ---------------- -----------------
                                           TSCA-Ox              ***              ***
                                     -------------------- ---------------- ----------------- ---------------- -----------------
                                           TSCA-Re              ***              ***
                                     -------------------- ---------------- ----------------- ---------------- -----------------
                                            Ox-Re               ***              ***
                                     -------------------- ---------------- ----------------- ---------------- -----------------
                                         TSCA-Ox-Re             ***              ***
-------------------------------------------------------------------------------------------------------------------------------

MLLW/LLW Oils
-------------------------------------------------------------------------------------------------------------------------------
                       Base Price                             Surcharge     Total Unit Cost
  Physical State        ($/m3)             Sub-Type           ($/m3)            ($/m3)        Waste Vol (m3)    Total Cost ($)
------------------- ---------------- -------------------- ---------------- ----------------- ---------------- -----------------
Bulk and Non-Bulk         ***               None                ***              ***
     Liquids
-------------------------------------------------------------------------------------------------------------------------------

Other Waste Treatment Category
-------------------------------------------------------------------------------------------------------------------------------
                       Base Price                            Surcharge      Total Unit Cost    Waste Weight
   Physical State        ($/Kg)           Sub-Type             ($/Kg)            ($/Kg)            (Kg)         Total Cost ($)
------------------- ---------------- -------------------- ---------------- ----------------- ---------------- -----------------
Elemental Mercury         ***               None                ***              ***
-------------------------------------------------------------------------------------------------------------------------------

Surcharges
-------------------------------------------------------------------------------------------------------------------------------
                                                           Activity Tier                          Isotope
    Radioactivity Surcharges[1]            Isotope              (Ci)       Surcharge ($/m3)    Activity (Ci)    Total Cost ($)
                                     -------------------- ---------------- ----------------- ---------------- -----------------
                                      Tritium (S/Ci per         <1               ***
                                          package)
                                                          ---------------- ----------------- ---------------- -----------------
                                                              1 to 10            ***
                                                          ---------------- ----------------- ---------------- -----------------
                                                             11 to 54            ***
                                                          ---------------- ----------------- ---------------- -----------------
                                                                >54              ***
                                     -------------------- ---------------- ----------------- ---------------- -----------------
                                       Carbon-14 ($/Ci          <1               ***
                                        per package)
                                                          ---------------- ----------------- ---------------- -----------------
                                                             1 to 10             ***
                                                          ---------------- ----------------- ---------------- -----------------
                                                             11 to 54            ***
                                                          ---------------- ----------------- ---------------- -----------------
                                                                >54              ***
--------------------------------------------------------- ---------------- ----------------- ---------------- -----------------
              High Mercury (Hg) Surcharges                      Hg         Surcharge ($/kg)   Waste Weight     Total Cost ($)
                                                           Concentration                          (Kg)
                                                           Tier (mg/kg)
                                                          ---------------- ----------------- ---------------- -----------------
                                                             260 - 2000          ***
                                                          ---------------- ----------------- ---------------- -----------------
                                                            2001 - 4000          ***
                                                          ---------------- ----------------- ---------------- -----------------
                                                            4001 - 6000          ***
                                                          ---------------- ----------------- ---------------- -----------------
                                                            6001 - 8000          ***
                                                          ---------------- ----------------- ---------------- -----------------
                                                            8001 - 10000         ***
                                                          ---------------- ----------------- ---------------- -----------------
                                                           10001 - 15000         ***
                                                          ---------------- ----------------- ---------------- -----------------
                                                           15001 - 20000         ***
                                                          ---------------- ----------------- ---------------- -----------------
                                                           20001 - 25000         ***
                                                          ---------------- ----------------- ---------------- -----------------
                                                           25001 - 35000         ***
                                                          ---------------- ----------------- ---------------- -----------------
                                                           35001 - 50000         ***
                                                          ---------------- ----------------- ---------------- -----------------
                                                           50001 - 65000         ***
                                                          ---------------- ----------------- ---------------- -----------------
                                                           65001 - 80000         ***
                                                          ---------------- ----------------- ---------------- -----------------
                                                           80001 - 100000        ***
                                                          ---------------- ----------------- ---------------- -----------------
                                                          100001 - 150000        ***
                                                          ---------------- ----------------- ---------------- -----------------
                                                          150001 - 200000        ***
------------------------------------ -------------------- ---------------------------------- ---------------- -----------------

Empty Container Handling Surcharges    Container Size         Surcharge (per container)          No. of        Total Cost ($)
                                     -------------------- ---------------------------------- ---------------- -----------------
                                        <=55 Gal Drum                    ***
                                     -------------------- ---------------------------------- ---------------- -----------------
                                         85-Gal Drum                     ***
                                     -------------------- ---------------------------------- ---------------- -----------------
                                        110-Gal Drum                     ***
                                     -------------------- ---------------------------------- ---------------- -----------------
                                      B-25 Box (4x4x6)                   ***
                                     -------------------- ---------------------------------- ---------------- -----------------
                                      B-25 Box (4x4x8)                   ***
                                     -------------------- ---------------------------------- ---------------- -----------------
                                          Metal Box                      ***
                                         (9x5.5x5.5)
                                     -------------------- ---------------------------------- ---------------- -----------------
                                         >12,500 lbs                     ***
------------------------------------ -------------------- ---------------------------------- ---------------- -----------------

   Transportation Surcharges[2]           Activity                    Surcharge                 Quantity       Total Cost ($)
                                     -------------------- ---------------- ----------------- ---------------- -----------------
                                       Transportation                    ***
                                           ($/m3)
                                     -------------------- ---------------- ----------------- ---------------- -----------------
                                        Brokerage Fee                    ***
                                          ($/Trip)
                                     -------------------- ---------------- ----------------- ---------------- -----------------
                                       Detention, 3hrs                   ***
                                       unloading free
                                           ($/hr)
-------------------------------------------------------------------------------------------------------------------------------
[1]   For waste packages with a curie content above 1Ci, round to the nearest whole integer (e.g., 1.46CIi round to 1Ci, 1.56 Ci
      round to 2Ci, 10.60 Ci round to 11Ci, etc.)
-------------------------------------------------------------------------------------------------------------------------------
[2]   The Buyer will provide the transportation of the waste to the Contractor's treatment facility, and the Contractor will
      provide the transportation of the treated waste back to the Buyer and will be compensated at the rate specified in the
      Pricing Table based on the actual treated waste volume on the shipment. The Brokerage Fee only applies to waste shipments
      originating from the Buyer's facilities where the Contractor provides the Tennessee Radioactive Waste License-for-Delivery
      brokerage service. The Detention charges only apply to the treated waste shipments being returned back to Hanford for
      disposal and if actual demurrage charges are incurred by the Contractor.
-------------------------------------------------------------------------------------------------------------------------------
***   DENOTES INFORMATION IN THIS DOCUMENT THAT HAS BEEN OMITTED FROM THIS PUBLIC FILING PURSUANT TO A REQUEST BY THE COMPANY FOR
      CONFIDENTIAL TREATMENT BY THE SECURITIES AND EXCHANGE COMMISSION. THE OMITTED INFORMATION HAS BEEN FILED SEPARATELY WITH THE
      SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION FOR PURPOSES OF SUCH REQUEST.
</TABLE>


<PAGE>

<TABLE>
<CAPTION>
                                                   Attachment C
                                               Fluor Contract 25003
--------------------------------------------------------------------------------------------------------------------------------
                         These examples serve as a guide to utilizing the Base Period pricing tables
                                Note: Pricing in examples utilize the "Base Period" pricing
---------------- ---------------------------------------------------------------------------------------------------------------
   Example 1      85-gal drum containing 320Kg of MLLW-03 soils (solid) designated with the F001-5, D001 (oxidizer), D009
                  (mercury concentration 6020ppm), TSCA-PCBs (>50ppm), and containing 0.8Ci of Tritium. Fluor transports
                  the waste to PermaFix utilizing their own "Brokerage" license, and PermaFix transports the treated waste
                  back to Hanford assuming a 1:1 treated waste volume reduction.
---------------- ---------------------------------------------------------------------------------------------------------------
                                                                                              Number         Waste Package
                           Pricing Attribute                                 Unit Price      of Units     Treatment Cost ($)
------------------------------------------------------------------------- ----------------- ---------- -------------------------
<S>                                                                                    <C>    <C>                    <C>
Physical State (Solids), Sub-Type (TSCA-Ox): ($/m3)                                    ***    0.322                       ***
------------------------------------------------------------------------- ----------------- ---------- -------------------------
Radioactivity Surcharge ($/Ci), <1 Tier                                                ***     0.8                        ***
------------------------------------------------------------------------- ----------------- ---------- -------------------------
High Mercury (Hg) Surcharge ($/Kg), 6001 to 8000 ppm Tier                              ***     320                        ***
------------------------------------------------------------------------- ----------------- ---------- -------------------------
Empty Container Handling Surcharge ($/Container), 85-gal drum                          ***      1                         ***
------------------------------------------------------------------------- ----------------- ---------- -------------------------
Transportation Surcharges ($/m3)                                                       ***    0.322                       ***
------------------------------------------------------------------------- ----------------- ---------- -------------------------
Brokerage ($/Trip)                                                                     ***      0                         ***
------------------------------------------------------------------------- ----------------- ---------- -------------------------
                                                              Total treatment cost for waste package=                     ***

---------------- ---------------------------------------------------------------------------------------------------------------
   Example 2      85-gal overpacking containing a 55-gal drum with 44Kg of MLLW-03 non-bulk liquids (aka: Labpack) designated
                  with the D003 (reactive), D004 through D011 mercury concentration 620ppm), D030, and containing 1.7Ci of C-14.
                  Fluor transports the waste to PermaFix utilizing their own "Brokerage" license, and PermaFix transports the
                  treated waste back to Hanford assuming a 1:0.5 treated waste volume reduction. Note: the overpack was utilized
                  to meet DOT transportation requirements.
---------------- ---------------------------------------------------------------------------------------------------------------
                                                                                              Number         Waste Package
                           Pricing Attribute                                 Unit Price      of Units     Treatment Cost ($)
------------------------------------------------------------------------- ----------------- ---------- -------------------------
Physical State (Non-Bulk Liquids), Sub-Type (Reactive): ($/m3)                         ***    0.208                       ***
------------------------------------------------------------------------- ----------------- ---------- -------------------------
Radioactivity Surcharge ($/Ci), 1-10 Curie Tier                                        ***      2                         ***
------------------------------------------------------------------------- ----------------- ---------- -------------------------
High Mercury (Hg) Surcharge ($/Kg), 260 to 2000 ppm Tier                               ***     44                         ***
------------------------------------------------------------------------- ----------------- ---------- -------------------------
Empty Container Handling Surcharge ($/Container), 55-gal drum                          ***      1                         ***
------------------------------------------------------------------------- ----------------- ---------- -------------------------
Empty Container Handing Surcharge ($/Container), 85-gal drum                           ***      1                         ***
------------------------------------------------------------------------- ----------------- ---------- -------------------------
Transportation Surcharges ($/m3)                                                       ***    0.104                       ***
------------------------------------------------------------------------- ----------------- ---------- -------------------------
Brokerage Fee ($/Trip)                                                                 ***      0                         ***
------------------------------------------------------------------------- ----------------- ---------- -------------------------
                                                              Total treatment cost for waste package=                     ***

---------------- ---------------------------------------------------------------------------------------------------------------
   Example 3      55-gal drum containing 120Kg of LLW non-bulk oils, and containing 0.23Ci of C-14. Fluor transports the waste
                  to PermaFix utilizing their own "Brokerage" license, and PermaFix transports the treated waste back to Hanford
                  assuming a 1:0.5 treated waste volume reduction.
---------------- ---------------------------------------------------------------------------------------------------------------
                                                                                              Number         Waste Package
                           Pricing Attribute                                 Unit Price      of Units     Treatment Cost ($)
------------------------------------------------------------------------- ----------------- ---------- -------------------------
Physical State (Bulk & Non-Bulk Liquids), Sub-Type (none): ($/m3)                      ***    0.208                       ***
------------------------------------------------------------------------- ----------------- ---------- -------------------------
Radioactivity Surcharge ($/Ci), <1 Tier                                                ***    0.23                        ***
------------------------------------------------------------------------- ----------------- ---------- -------------------------
High Mercury (Hg) Surcharge ($/Kg), <260ppm                                            ***      0                         ***
------------------------------------------------------------------------- ----------------- ---------- -------------------------
Empty Container Handling Surcharge ($/Container), 55-gal drum                          ***      1                         ***
------------------------------------------------------------------------- ----------------- ---------- -------------------------
Transportation Surcharges ($/m3)                                                       ***    0.104                       ***
------------------------------------------------------------------------- ----------------- ---------- -------------------------
Brokerage Fee ($/Trip)                                                                 ***      0                         ***
------------------------------------------------------------------------- ----------------- ---------- -------------------------
                                                              Total treatment cost for waste package=                     ***

---------------- ---------------------------------------------------------------------------------------------------------------
   Example 4      55-gal drum containing 75Kg of Elemental Mercury, and containing 0.1Ci of Tritium. Fluor transports the waste
                  to PermaFix utilizing their own "Brokerage" license, and PermaFix transports the treated waste back to Hanford
                  assuming a 1:1 treated waste volume reduction.
---------------- ---------------------------------------------------------------------------------------------------------------
                                                                                              Number         Waste Package
                           Pricing Attribute                                 Unit Price      of Units     Treatment Cost ($)
------------------------------------------------------------------------- ----------------- ---------- -------------------------
Physical State (Elemental Mercury), Sub-Type (none): ($/Kg)                            ***     75                         ***
------------------------------------------------------------------------- ----------------- ---------- -------------------------
Radioactivity Surcharge ($/Ci), <1 Tier                                                ***     0.1                        ***
------------------------------------------------------------------------- ----------------- ---------- -------------------------
High Mercury (Hg) Surcharge ($/Kg), <260ppm                                            ***     n/a                        ***
------------------------------------------------------------------------- ----------------- ---------- -------------------------
Empty Container Handling Surcharge ($/Container), 55-gal drum                          ***      1                         ***
------------------------------------------------------------------------- ----------------- ---------- -------------------------
Transportation Surcharges ($/m3)                                                       ***    0.208                       ***
------------------------------------------------------------------------- ----------------- ---------- -------------------------
Brokerage Fee ($/Trip)                                                                 ***      0                         ***
------------------------------------------------------------------------- ----------------- ---------- -------------------------
                                                              Total treatment cost for waste package=                     ***

------------------------------------------------------------------------------------------------------ -------------------------
***   DENOTES INFORMATION IN THIS DOCUMENT THAT HAS BEEN OMITTED FROM THIS PUBLIC FILING PURSUANT TO A REQUEST BY THE COMPANY FOR
      CONFIDENTIAL TREATMENT BY THE SECURITIES AND EXCHANGE COMMISSION. THE OMITTED INFORMATION HAS BEEN FILED SEPARATELY WITH THE
      SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION FOR PURPOSES OF SUCH REQUEST.
</TABLE>


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>3
<FILENAME>e19653ex31_1.txt
<DESCRIPTION>CERTIFICATIONS
<TEXT>

                                  EXHIBIT 31.1

                                 CERTIFICATIONS
                                 --------------

I, Louis F. Centofanti, certify that:

1.    I  have  reviewed  this  quarterly   report  on  Form  10-Q  of  Perma-Fix
      Environmental Services, Inc.;

2.    Based on my knowledge,  this report does not contain any untrue  statement
      of a material fact or omit to state a material fact  necessary to make the
      statements made, in light of the circumstances under which such statements
      were made,  not  misleading  with  respect  to the period  covered by this
      report;

3.    Based on my  knowledge,  the  financial  statements,  and other  financial
      information  included  in this  report,  fairly  present  in all  material
      respects the financial condition,  results of operations and cash flows of
      the registrant as of, and for, the periods presented in this report;

4.    The  registrant's  other  certifying  officer  and I are  responsible  for
      establishing  and  maintaining  disclosure  controls  and  procedures  (as
      defined in Exchange Act Rules  13a-15(e) and 15d-15(e)) for the registrant
      and have:

      a)    Designed such  disclosure  controls and  procedures,  or caused such
            disclosure   controls  and  procedures  to  be  designed  under  our
            supervision,  to ensure that  material  information  relating to the
            registrant,  including its consolidated subsidiaries,  is made known
            to us by others  within  those  entities,  particularly  during  the
            period in which this report is being prepared;

      b)    (Intentionally omitted);

      c)    Evaluated the effectiveness of the registrant's  disclosure controls
            and  procedures and presented in this report our  conclusions  about
            the effectiveness of the disclosure  controls and procedures,  as of
            the  end  of the  period  covered  by  this  report  based  on  such
            evaluation; and

      d)    Disclosed  in this  report any change in the  registrant's  internal
            control  over   financial   reporting   that  occurred   during  the
            registrant's  most recent fiscal  quarter (the  registrant's  fourth
            fiscal  quarter in the case of an annual report) that has materially
            affected,   or  is  reasonably  likely  to  materially  affect,  the
            registrant's internal control over financial reporting; and

5.    The registrant's other certifying  officer and I have disclosed,  based on
      our  most  recent  evaluation  of  the  internal  control  over  financial
      reporting,  to the  registrant's  auditors  and  the  audit  committee  of
      registrant's  board of directors  (or persons  performing  the  equivalent
      functions):

      a)    All significant  deficiencies and material  weaknesses in the design
            or operation of internal control over financial  reporting which are
            reasonably  likely to adversely affect the  registrant's  ability to
            record, process, summarize and report financial information; and

      b)    Any fraud,  whether or not  material,  that  involves  management or
            other  employees  who have a  significant  role in the  registrant's
            internal control over financial reporting.

    Date:  November 8, 2004

    /s/ Dr. Louis F. Centofanti
    ---------------------------
    Dr. Louis F. Centofanti
    Chairman of the Board
    Chief Executive Officer

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>4
<FILENAME>e19653ex31_2.txt
<DESCRIPTION>CERTIFICATIONS
<TEXT>
                                  EXHIBIT 31.2

                                 CERTIFICATIONS
                                 --------------

I, Richard T. Kelecy, certify that:

1.    I  have  reviewed  this  quarterly   report  on  Form  10-Q  of  Perma-Fix
      Environmental Services, Inc.;

2.    Based on my knowledge,  this report does not contain any untrue  statement
      of a material fact or omit to state a material fact  necessary to make the
      statements made, in light of the circumstances under which such statements
      were made,  not  misleading  with  respect  to the period  covered by this
      report;

3.    Based on my  knowledge,  the  financial  statements,  and other  financial
      information  included  in this  report,  fairly  present  in all  material
      respects the financial condition,  results of operations and cash flows of
      the registrant as of, and for, the periods presented in this report;

4.    The  registrant's  other  certifying  officer  and I are  responsible  for
      establishing  and  maintaining  disclosure  controls  and  procedures  (as
      defined in Exchange Act Rules  13a-15(e) and 15d-15(e)) for the registrant
      and have:

      a)    Designed such  disclosure  controls and  procedures,  or caused such
            disclosure   controls  and  procedures  to  be  designed  under  our
            supervision,  to ensure that  material  information  relating to the
            registrant,  including its consolidated subsidiaries,  is made known
            to us by others  within  those  entities,  particularly  during  the
            period in which this report is being prepared;

      b)    (Intentionally omitted);

      c)    Evaluated the effectiveness of the registrant's  disclosure controls
            and  procedures and presented in this report our  conclusions  about
            the effectiveness of the disclosure  controls and procedures,  as of
            the  end  of the  period  covered  by  this  report  based  on  such
            evaluation; and

      d)    Disclosed  in this  report any change in the  registrant's  internal
            control  over   financial   reporting   that  occurred   during  the
            registrant's  most recent fiscal  quarter (the  registrant's  fourth
            fiscal  quarter in the case of an annual report) that has materially
            affected,   or  is  reasonably  likely  to  materially  affect,  the
            registrant's internal control over financial reporting; and

5.    The registrant's other certifying  officer and I have disclosed,  based on
      our  most  recent  evaluation  of  the  internal  control  over  financial
      reporting,  to the  registrant's  auditors  and  the  audit  committee  of
      registrant's  board of directors  (or persons  performing  the  equivalent
      functions):

      a)    All significant  deficiencies and material  weaknesses in the design
            or operation of internal control over financial  reporting which are
            reasonably  likely to adversely affect the  registrant's  ability to
            record, process, summarize and report financial information; and

      b)    Any fraud,  whether or not  material,  that  involves  management or
            other  employees  who have a  significant  role in the  registrant's
            internal control over financial reporting.

    Date:  November 8, 2004

    /s/ Richard T. Kelecy
    ---------------------
    Richard T. Kelecy
    Chief Financial Officer

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>5
<FILENAME>e19653ex32_1.txt
<DESCRIPTION>CERTIFICATION
<TEXT>
                                  EXHIBIT 32.1

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                       AS ADOPTED PURSUANT TO SECTION 906
                        OF THE SARBANES-OXLEY ACT OF 2002

      In  connection  with  the  Quarterly  Report  of  Perma-Fix  Environmental
Services,  Inc. ("PESI") on Form 10-Q for the period ended September 30, 2004 as
filed with the Securities and Exchange  Commission on the date hereof (the "Form
10-Q"),  I Dr.  Louis F.  Centofanti,  Chief  Executive  Officer of the Company,
certify,  pursuant to 18 U.S.C.  ss.1350,  as adopted  pursuant to ss.906 of the
Sarbanes-Oxley Act of 2002, that:

      (1) The Form 10-Q fully complies with the requirements of Section 13(a) or
      15(d)  of the  Securities  Exchange  Act of  1934  (15  U.S.C.  ss.78m  or
      ss.78o(d)); and

      (2) The  information  contained in the Form 10-Q fairly  presents,  in all
      material  respects,  the financial  condition and results of operations of
      the Company.

Dated: November 8, 2004

/s/ Dr. Louis F. Centofanti
---------------------------
Dr. Louis F. Centofanti
President and
Chief Executive Officer

This certification is furnished to the Securities and Exchange Commission solely
for purpose of 18 U.S.C.  ss.1350  subject to the knowledge  standard  contained
therein, and not for any other purpose.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.2
<SEQUENCE>6
<FILENAME>e19653ex32_2.txt
<DESCRIPTION>CERTIFICATION
<TEXT>
                                  EXHIBIT 32.2

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                       AS ADOPTED PURSUANT TO SECTION 906
                        OF THE SARBANES-OXLEY ACT OF 2002

      In  connection  with  the  Quarterly  Report  of  Perma-Fix  Environmental
Services,  Inc. ("PESI") on Form 10-Q for the period ended September 30, 2004 as
filed with the Securities and Exchange  Commission on the date hereof (the "Form
10-Q"), I Richard T. Kelecy,  Chief Financial  Officer of the Company,  certify,
pursuant  to  18  U.S.C.   ss.1350,   as  adopted  pursuant  to  ss.906  of  the
Sarbanes-Oxley Act of 2002, that:

      (1) The Form 10-Q fully complies with the requirements of Section 13(a) or
      15(d)  of the  Securities  Exchange  Act of  1934  (15  U.S.C.  ss.78m  or
      ss.78o(d)); and

      (2) The  information  contained in the Form 10-Q fairly  presents,  in all
      material  respects,  the financial  condition and results of operations of
      the Company.

Dated: November 8, 2004

/s/ Richard T. Kelecy
---------------------
Richard T. Kelecy
Chief Financial Officer

This certification is furnished to the Securities and Exchange Commission solely
for purpose of 18 U.S.C.  ss.1350  subject to the knowledge  standard  contained
therein, and not for any other purpose.

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