UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

Form 10-Q

 

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

 

For the quarterly period endedMarch 31,June 30, 2023

 

Or

 

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

 

For the transition period from _______________to______________________________to ___________

 

Commission File No. 1-11596001-11596

 

PERMA-FIX ENVIRONMENTAL SERVICES, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

58-1954497

(State or other jurisdiction

of incorporation or organization)

(IRS Employer

Identification Number)

  

8302 Dunwoody Place, Suite 250, Atlanta, GA

30350

(Address of principal executive offices)(Zip Code)

 

(770) 587-9898

(Registrant’s telephone number)

 

N/A

 

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

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each classTrading SymbolName of each exchange on which registered
Common Stock, $.001 Par ValuePESINASDAQ Capital Markets

 

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 ☒ No ☐

 

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

Yes ☒ No ☐

 

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

 

Large accelerated filer ☐ Accelerated Filer ☐ Non-accelerated Filer ☒ Smaller reporting company Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial standards provided pursuant to Section 13(a) of the Exchange Act ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ 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 May 2,July 28, 2023
Common Stock, $.001 Par Value 13,419,16513,565,813 shares

 

 

 

 

 

PERMA-FIX ENVIRONMENTAL SERVICES, INC.

 

INDEX

 

Page No.
PART IFINANCIAL INFORMATIONPage No.
    
 

Item 1.

Condensed Consolidated Financial Statements

3

Condensed Consolidated Balance Sheets - June 30, 2023 and December 31, 2022

1
    
  

Condensed Consolidated Balance SheetsStatements of Operations - March 31,Three and Six Months Ended June 30, 2023 and December 31, 2022

3
    
  

Condensed Consolidated Statements of Comprehensive Income (Loss) - Three and Six Months Ended June 30, 2023 and 2022

4

Condensed Consolidated Statements of OperationsStockholders’ Equity - ThreeSix Months Ended March 31,June 30, 2023 and 2022

5
    
  

Condensed Consolidated Statements of Comprehensive LossCash Flows - ThreeSix Months Ended March 31,June 30, 2023 and 2022

6
    
  

Notes to Condensed Consolidated Financial Statements of Stockholders’ Equity - Three Months Ended March 31, 2023 and 2022

7
 
Condensed Consolidated Statements of Cash Flows - Three Months Ended March 31, 2023 and 20228
Notes to Condensed Consolidated Financial Statements9
    
 Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

2322
    
 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

3233
    
 Item 4.Controls and Procedures33

PART II

OTHER INFORMATION 

Item 1.

Legal Proceedings

33
    
 

Item 1.1A.

Risk Factors

Legal Proceedings3334
    
 

Item 1A.6.

Risk FactorsExhibits

33

 
Item 6.Exhibits34

 

2

 

PART I - FINANCIAL INFORMATION

Item 1. – Financial Statements

 

PERMA-FIX ENVIRONMENTAL SERVICES, INC.

Condensed Consolidated Balance Sheets

 

 March 31, December 31, 
 2023 2022      
(Amounts in Thousands, Except for Share and Per Share Amounts) (Unaudited)   

June 30, 2023

(Unaudited)
 December 31, 2022 
          
ASSETS                
Current assets:                
Cash $2,411  $1,866  $4,750  $1,866 
Accounts receivable, net of allowance for credit losses of $7 and $57, respectively  10,881   9,364 
Accounts receivable, net of allowance for credit losses of $13 and $57, respectively  11,930   9,364 
Unbilled receivables  6,701   6,062   7,121   6,062 
Inventories  1,104   814   1,032   814 
Prepaid and other assets  3,800   5,405   2,735   5,405 
Current assets related to discontinued operations  19   15   17   15 
Total current assets  24,916   23,526   27,585   23,526 
                
Property and equipment:                
Buildings and land  24,045   24,021   24,069   24,021 
Equipment  21,704   21,242   21,922   21,242 
Vehicles  442   442   442   442 
Leasehold improvements  23   23   23   23 
Office furniture and equipment  1,133   1,299   1,129   1,299 
Construction-in-progress  1,016   727   1,143   727 
Total property and equipment  48,363   47,754   48,728   47,754 
Less accumulated depreciation  (29,299)  (28,797)  (29,896)  (28,797)
Net property and equipment  19,064   18,957   18,832   18,957 
                
Property and equipment related to discontinued operations  81   81   81   81 
                
Operating lease right-of-use assets  1,852   1,971   1,732   1,971 
                
Intangibles and other long term assets:                
Permits  9,615   9,610   9,629   9,610 
Other intangible assets - net  567   629   529   629 
Finite risk sinking fund (restricted cash)  11,637   11,570   11,780   11,570 
Deferred tax assets  4,350   4,116   4,007   4,116 
Other assets  421   438   405   438 
Total assets $72,503  $70,898  $74,580  $70,898 

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

 

1

PERMA-FIX ENVIRONMENTAL SERVICES, INC.

Condensed Consolidated Balance Sheets, Continued

(Amounts in Thousands, Except for Share and per Share Amounts) 

June 30, 2023

(Unaudited)
  December 31, 2022 
       
LIABILITIES AND STOCKHOLDERS’ EQUITY        
Current liabilities:        
Accounts payable $13,896  $10,325 
Accrued expenses  4,086   4,593 
Disposal/transportation accrual  1,179   887 
Deferred revenue  4,852   4,813 
Accrued closure costs - current  548   682 
Current portion of long - term debt  456   476 
Current portion of operating lease liabilities  385   416 
Current portion of finance lease liabilities  199   154 
Current liabilities related to discontinued operations  280   362 
Total current liabilities  25,881   22,708 
         
Accrued closure costs  7,491   7,284 
Long-term debt, less current portion  316   563 
Long-term operating lease liabilities, less current portion  1,399   1,584 
Long-term finance lease liabilities, less current portion  350   318 
Long-term liabilities related to discontinued operations  913   908 
Total long-term liabilities  10,469   10,657 
         
Total liabilities  36,350   33,365 
         
Commitments and Contingencies (Note 9 )  -      
         
Stockholders’ Equity:        
Preferred Stock, $.001 par value; 2,000,000 shares authorized, no shares issued and outstanding      

Common Stock, $.001 par value; 30,000,000 shares authorized; 13,562,743 and 13,332,398 shares issued, respectively; 13,555,101 and 13,324,756 shares outstanding, respectively

  14   13 
Additional paid-in capital  115,789   115,209 
Accumulated deficit  (77,373)  (77,436)
Accumulated other comprehensive loss  (112)  (165)
Less Common Stock in treasury, at cost; 7,642 shares  (88)  (88)
Total stockholders’ equity  38,230   37,533 
         
Total liabilities and stockholders’ equity $74,580  $70,898 

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

2

PERMA-FIX ENVIRONMENTAL SERVICES, INC.

Condensed Consolidated Statements of Operations

(Unaudited)

                 
  Three Months Ended  Six Months Ended 
  June 30,  June 30, 
(Amounts in Thousands, Except for Per Share Amounts) 2023  2022  2023  2022 
             
Net revenues $25,032  $19,455  $45,139  $35,370 
Cost of goods sold  20,516   16,571   37,614   30,850 
Gross profit  4,516   2,884   7,525   4,520 
                 
Selling, general and administrative expenses  3,551   3,684   7,036   7,106 
Research and development  121   80   220   176 
Loss on disposal of property and equipment           1 
Income (loss) from operations  844   (880)  269   (2,763)
                 
Other income (expense):                
Interest income  172   29   298   40 
Interest expense  (47)  (41)  (100)  (76)
Interest expense-financing fees  (24)  (15)  (44)  (28)
Other  6   (3)  7   (5)
Income (loss) from continuing operations before taxes  951   (910)  430   (2,832)
Income tax expense (benefit)  432   347   228   (326)
Income (loss) from continuing operations, net of taxes  519   (1,257)  202   (2,506)
                 
Loss from discontinued operations, net of taxes (Note 10)  (45)  (188)  (139)  (282)
Net income (loss) $474  $(1,445) $63  $(2,788)
                 
Net income (loss) per common share - basic:                
Continuing operations $.04  $(.10) $.01  $(.19)
Discontinued operations     (.01)  (.01)  (.02)
Net income (loss) per common share $.04  $(.11) $  $(.21)
                 
Net income (loss) per common share - diluted:                
Continuing operations $.03  $(.10) $.01  $(.19)
Discontinued operations     (.01)  (.01)  (.02)
Net income (loss) per common share $.03  $(.11) $  $(.21)
                 
Number of common shares used in computing net income (loss) per share:                
Basic  13,474   13,264   13,417   13,249 
Diluted  13,848   13,264   13,657   13,249 

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

 

3

 

 

PERMA-FIX ENVIRONMENTAL SERVICES, INC.

Condensed Consolidated Balance Sheets, ContinuedStatements of Comprehensive Income (Loss)

(Unaudited)

 

  March 31,  December 31, 
  2023  2022 
(Amounts in Thousands, Except for Share and per Share Amounts) (Unaudited)   
       
LIABILITIES AND STOCKHOLDERS’ EQUITY        
Current liabilities:        
Accounts payable $11,812  $10,325 
Accrued expenses  4,725   4,593 
Disposal/transportation accrual  1,130   887 
Deferred revenue  5,003   4,813 
Accrued closure costs - current  610   682 
Current portion of long-term debt  446   476 
Current portion of operating lease liabilities  401   416 
Current portion of finance lease liabilities  161   154 
Current liabilities related to discontinued operations  289   362 
Total current liabilities  24,577   22,708 
         
Accrued closure costs  7,387   7,284 
Long-term debt, less current portion  443   563 
Long-term operating lease liabilities, less current portion  1,493   1,584 
Long-term finance lease liabilities, less current portion  320   318 
Long-term liabilities related to discontinued operations  911   908 
Total long-term liabilities  10,554   10,657 
         
Total liabilities  35,131   33,365 
         
Commitments and Contingencies (Note 9 )  -   - 
         
Stockholders’ Equity:        
Preferred Stock, $.001 par value; 2,000,000 shares authorized, no shares issued and outstanding      
Common Stock, $.001 par value; 30,000,000 shares authorized; 13,397,436 and 13,332,398 shares issued, respectively; 13,389,794 and 13,324,756 shares outstanding, respectively  13   13 
Additional paid-in capital  115,452   115,209 
Accumulated deficit  (77,847)  (77,436)
Accumulated other comprehensive loss  (158)  (165)
Less Common Stock in treasury, at cost; 7,642 shares  (88)  (88)
Total stockholders’ equity  37,372   37,533 
         
Total liabilities and stockholders’ equity $72,503  $70,898 
                 
  Three Months Ended  Six Months Ended 
  June 30,  June 30, 
(Amounts in Thousands) 2023  2022  2023  2022 
             
Net income (loss) $474  $(1,445) $63  $(2,788)
Other comprehensive income (loss):                
Foreign currency translation gain (loss)  46   (67)  53   (41)
Total other comprehensive income (loss)  46   (67)  53   (41)
                 
Comprehensive income (loss) $520  $(1,512) $116  $(2,829)

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

 

4

 

 

PERMA-FIX ENVIRONMENTAL SERVICES, INC.

Condensed Consolidated Statements of Operations

(Unaudited)

(Amounts in Thousands, Except for Per Share Amounts) 2023  2022 
  Three Months Ended March 31, 
(Amounts in Thousands, Except for Per Share Amounts) 2023  2022 
       
Revenues $20,107  $15,915 
Cost of goods sold  17,098   14,279 
Gross profit  3,009   1,636 
         
Selling, general and administrative expenses  3,486   3,422 
Research and development  99   96 
Loss on disposal of property and equipment     1 
Loss from operations  (576)  (1,883)
         
Other income (expense):        
Interest income  127   11 
Interest expense  (53)  (35)
Interest expense-financing fees  (20)  (13)
Other     (2)
Loss from continuing operations before taxes  (522)  (1,922)
Income tax benefit  (204)  (673)
Loss from continuing operations, net of taxes  (318)  (1,249)
         
Loss from discontinued operations (net of taxes) (Note 10)  (93)  (94)
Net loss $(411) $(1,343)
         
Net loss per common share - basic and diluted:        
         
Continuing operations $(.02) $(.09)
Discontinued operations  (.01)  (.01)
Net loss per common share $(.03) $(.10)
         
         
Number of common shares used in computing net loss per share:        
Basic  13,358   13,234 
Diluted  13,358   13,234 

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

5

PERMA-FIX ENVIRONMENTAL SERVICES, INC.

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited)

(Amounts in Thousands) 2023  2022 
  Three Months Ended March 31, 
(Amounts in Thousands) 2023  2022 
       
Net loss $(411) $(1,343)
Other comprehensive income:        
Foreign currency translation gain  7   26 
Total other comprehensive income  7   26 
         
Comprehensive loss $(404)  (1,317)

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

6

PERMA-FIX ENVIRONMENTAL SERVICES, INC

Condensed Consolidated Statement of Stockholders’ Equity

(Unaudited)

(Amounts in thousands, except for share amounts)

  Shares  Amount  Capital  Treasury  Loss  Deficit  Equity 
  Common Stock  Additional Paid-In  Common Stock Held In  Accumulated Other Comprehensive  Accumulated  Total Stockholders’ 
  Shares  Amount  Capital  Treasury  Loss  Deficit  Equity 
                      
Balance at December 31, 2022  13,332,398  $13  $115,209  $(88) $(165) $(77,436) $37,533 
Net loss                 (411)  (411)
Foreign currency translation              7      7 
Issuance of Common Stock for services  33,319      118            118 
Issuance of Common Stock upon exercise                            
of options  31,719       7            7 
Issuance of Common Stock upon exercise of options  31,719       7            7 
Stock-Based Compensation        118            118 
Balance at March 31, 2023  13,397,436  $13  $115,452  $(88) $(158) $(77,847) $37,372 
                             
Balance at December 31, 2021  13,222,552  $13  $114,307  $(88) $(28) $(73,620) $40,584 
Balance  13,222,552  $13  $114,307  $(88) $(28) $(73,620) $40,584 
Net loss                 (1,343)  (1,343)
Foreign currency translation              26      26 
Issuance of Common Stock for services  19,520      123            123 
Stock-Based Compensation        102            102 
Balance at March 31, 2022  13,242,072  $13  $114,532  $(88) $(2) $(74,963) $39,492 
Balance  13,242,072  $13  $114,532  $(88) $(2) $(74,963) $39,492 

                             
  Common Stock  

Additional

Paid-In

  

Common

Stock

Held In

  

Accumulated

Other

Comprehensive

  Accumulated  

Total

Stockholders’

 
  Shares  Amount  Capital  Treasury  Loss  Deficit  Equity 
                      
Balance at December 31, 2022  13,332,398  $    13  $115,209  $(88) $        (165) $(77,436) $  37,533 
Net loss                 (411)  (411)
Foreign currency translation              7      7 
Issuance of Common Stock for services  33,319      118            118 
Issuance of Common Stock upon exercise of options  31,719      7            7 
Stock-Based Compensation        118            118 
Balance at March 31, 2023  13,397,436  $13  $115,452  $(88) $(158) $(77,847) $37,372 
Net income                 474   474 
Foreign currency translation              46      46 
Issuance of Common Stock for services  10,171      119            119 
Issuance of Common Stock upon exercise of options  155,136   1   93            94 
Stock-Based Compensation        125            125 
Balance at June 30, 2023  13,562,743  $14  $115,789  $(88) $(112) $(77,373) $38,230 
Balance at December 31, 2021  13,222,552  $13  $114,307  $(88) $(28) $(73,620) $40,584 
Net loss                 (1,343)  (1,343)
Foreign currency translation              26      26 
Issuance of Common Stock for services  19,520      123            123 
Stock-Based Compensation        102            102 
Balance at March 31, 2022  13,242,072  $13  $114,532  $(88) $(2) $(74,963) $39,492 
Balance  13,242,072  $13  $114,532  $(88) $(2) $(74,963) $39,492 
Net loss                 (1,445)  (1,445)
Net income loss                 (1,445)  (1,445)
Foreign currency translation              (67)     (67)
Issuance of Common Stock upon exercise of options (cashless)  16,526                   
Issuance of Common Stock for services  21,667      120            120 
Stock-Based Compensation        103            103 
Balance at June 30, 2022  13,280,265  $13  $114,755  $(88) $(69) $(76,408) $38,203 
Balance  13,280,265  $13  $114,755  $(88) $(69) $(76,408) $38,203 

 

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

75

 

 

PERMA-FIX ENVIRONMENTAL SERVICES, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

(Amounts in Thousands) 2023 2022 
     
 Three Months Ended  Six Months Ended 
 March 31,  June 30, 
(Amounts in Thousands) 2023 2022  2023 2022 
Cash flows from operating activities:                
Net loss $(411) $(1,343)
Net income (loss) $63  $(2,788)
Less: loss from discontinued operations, net of taxes (Note 10)  (93)  (94)  (139)  (282)
                
Loss from continuing operations, net of taxes  (318)  (1,249)
Adjustments to reconcile loss from continuing operations to cash provided by operating activities :        
Income (loss) from continuing operations, net of taxes  202   (2,506)
Adjustments to reconcile income (loss) from continuing operations to cash provided by (used in) operating activities:        
Depreciation and amortization  747   456   1,439   936 
Amortization of debt issuance costs  20   13   43   28 
Deferred tax benefit  (204)  (673)
Recovery of credit losses on accounts receivable  (6)  (55)
Loss on disposal of plant, property, and equipment     1 
Deferred tax expense (benefit)  228   (326)
Provision for (recovery of) credit losses on accounts receivable  24   (50)
Loss on disposal of property and equipment     1 
Issuance of common stock for services  118   123   237   243 
Stock-based compensation  118   102   243   205 
Changes in operating assets and liabilities of continuing operations:        
Changes in operating assets and liabilities of continuing operations        
Accounts receivable  (1,511)  1,105   (2,590)  (1,534)
Unbilled receivables  (639)  3,720   (1,059)  2,647 
Prepaid expenses, inventories and other assets  1,876   1,097   3,160   1,988 
Accounts payable, accrued expenses and unearned revenue  1,561   (4,492)  2,835   (4,322)
Cash provided by continuing operations  1,762   148 
Cash provided by (used in) continuing operations  4,762   (2,690)
Cash used in discontinued operations  (198)  (142)  (336)  (367)
Cash provided by operating activities  1,564   6 
Cash provided by (used in) operating activities  4,426   (3,057)
                
Cash flows from investing activities:                
Purchases of property and equipment  (748)  (345)  (1,047)  (758)
Proceeds from sale of plant, property, and equipment     24 
Proceeds from sale of property and equipment     25 
Cash used in investing activities of continuing operations  (748)  (321)  (1,047)  (733)
                
Cash flows from financing activities:                
Repayments of revolving credit borrowings  (20,257)  (17,494)  (44,130)  (33,545)
Borrowing on revolving credit  20,257   17,494   44,130   33,545 
Proceeds from issuance of Common Stock upon exercise of options  7      101    
Proceeds from capital line     524 
Principal repayments of finance lease liabilities  (41)  (58)  (81)  (718)
Principal repayments of long term debt  (137)  (110)  (273)  (229)
Payment of debt issuance costs  (33)  (21)  (37)  (21)
Cash used in financing activities  (204)  (189)
Cash used in financing activities of continuing operations  (290)  (444)
        
Effect of exchange rate changes on cash  5   (3)
                
Increase (decrease) in cash and finite risk sinking fund (restricted cash)  612   (504)  3,094   (4,237)
Cash and finite risk sinking fund (restricted cash) at beginning of period  13,436   15,911   13,436   15,911 
Cash and finite risk sinking fund (restricted cash) at end of period $14,048  $15,407  $16,530  $11,674 
                
Supplemental disclosure:                
Interest paid $55  $34  $103  $79 
Income taxes paid     6      6 
Non-cash investing and financing activities:        
Non-cash financing activities:        
Equipment purchase subject to finance lease  50   114   157   114 

 

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

86

 

 

PERMA-FIX ENVIRONMENTAL SERVICES, INC.

Notes to Condensed Consolidated Financial Statements

March 31,June 30, 2023

(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, 2022.

1. Basis of Presentation

 

The condensed 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 (“the Commission”). Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) 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 condensed consolidated financial statements reflect, in the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position and results of operations as of and for the periods indicated. The results of operations for the threesix months ended March 31,June 30, 2023, are not necessarily indicative of results to be expected for the fiscal year ending December 31, 2023.

 

The Company suggests that these condensed 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, 2022.

 

The condensed consolidated financial statements include the accounts of our wholly-owned subsidiaries. The Company’s continuing operations also consisted of Perma-Fix ERRG, a variable interest entity (“VIE”) for which we were the primary beneficiary. During the fourth quarter of 2022, project work under the JVjoint venture was completed.

 

2. Summary of Significant Accounting Policies

 

Our accounting policies are as set forth in the notes to the December 31, 2022 consolidated financial statements referred to above.

Recently Issued Accounting Standards – Not Yet Adopted

In August 2020, the FASB issued ASU No. 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity.” ASU 2020-06 simplifies the accounting for convertible instruments by removing major separation models and removing certain settlement condition qualifiers for the derivatives scope exception for contracts in an entity’s own equity, and simplifies the related diluted net income per share calculation for both Subtopics. ASU 2020-06 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023, for the Company as a smaller reporting company. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently evaluating the impact of this ASU on its financial statements and disclosures.

9

 

3. Revenue

 

Disaggregation of Revenue

 

In general, the Company’s business segmentation is aligned according to the nature and economic characteristics of our services and provides meaningful disaggregation of each business segment’s results of operations. The nature of the Company’s performance obligations within our Treatment and Services Segments resultsresult in the recognition of our revenue primarily over time. The following tables present further disaggregation of our revenues by different categories for our Services and Treatment Segments:

Schedule of Disaggregation of Revenue 

           \ 
Revenue by Contract Type              Three Months Ended Three Months Ended 
(In thousands) Three Months Ended Three Months Ended  June 30, 2023 June 30, 2022 
 March 31, 2023 March 31, 2022 
 Treatment Services Total Treatment Services Total  Treatment Services Total Treatment Services Total 
Fixed price $9,594  $8,647  $18,241  $7,479  $5,761  $13,240  $12,834  $11,161  $23,995  $8,393  $7,916  $16,309 
Time and materials     1,866   1,866      2,675   2,675      1,037   1,037      3,146   3,146 
Total $9,594  $10,513  $20,107  $7,479  $8,436  $15,915  $12,834  $12,198  $25,032  $8,393  $11,062  $19,455 
Revenue $9,594  $10,513  $20,107  $7,479  $8,436  $15,915 

 

Revenue by generator                  
(In thousands) Three Months Ended  Three Months Ended 
  March 31, 2023  March 31, 2022 
  Treatment  Services  Total  Treatment  Services  Total 
Domestic government $7,257  $9,718  $16,975  $5,815  $8,245  $14,060 
Domestic commercial  2,206   597   2,803   1,436   162   1,598 
Foreign government  95   177   272   92   6   98 
Foreign commercial  36   21   57   136   23   159 
Total $9,594  $10,513  $20,107  $7,479  $8,436  $15,915 
Revenue $9,594  $10,513  $20,107  $7,479  $8,436  $15,915 
7

 

                         
Revenue by Contract Type Six Months Ended  Six Months Ended 
(In thousands) June 30, 2023  June 30, 2022 
  Treatment  Services  Total  Treatment  Services  Total 
Fixed price $22,428  $19,808  $42,236  $15,872  $13,677  $29,549 
Time and materials     2,903   2,903      5,821   5,821 
Total $22,428  $22,711  $45,139  $15,872  $19,498  $35,370 
Revenue $22,428  $22,711  $45,139  $15,872  $19,498  $35,370 

                         
 Revenue by generatorThree Months Ended  Three Months Ended 
 (In thousands)June 30, 2023  June 30, 2022 
  Treatment  Services  Total  Treatment  Services  Total 
Domestic government $9,808  $11,441  $21,249  $6,243  $10,649  $16,892 
Domestic commercial  2,269   742   3,011   1,803   384   2,187 
Foreign government  657   (7)  650   153   8   161 
Foreign commercial  100   22   122   194   21   215 
Total $12,834  $12,198  $25,032  $8,393  $11,062  $19,455 

                         
Revenue by generator Six Months Ended  Six Months Ended 
 (In thousands) June 30, 2023  June 30, 2022 
  Treatment  Services  Total  Treatment  Services  Total 
Domestic government $17,065  $21,159  $38,224  $12,058  $18,894  $30,952 
Domestic commercial  4,475   1,339   5,814   3,239   546   3,785 
Foreign government  752   170   922   245   14   259 
Foreign commercial  136   43   179   330   44   374 
Total $22,428  $22,711  $45,139  $15,872  $19,498  $35,370 
Revenue $22,428  $22,711  $45,139  $15,872  $19,498  $35,370 

Contract Balances

 

The timing of revenue recognition and billings results in unbilled receivables (contract assets). The Company’s contract liabilities consist of deferred revenues which represent advance payment from customers in advance of the completion of our performance obligation. The following table represents changes in our contract asset and contract liabilities balances:

Schedule of Contract Liabilities 

     Year-to-date Year-to-date      Year-to-date Year-to-date 
(In thousands) March 31, 2023 December 31, 2022 Change ($) Change (%)  June 30, 2023 December 31, 2022 Change ($) Change (%) 
Contract assets                                
Unbilled receivables - current $6,701  $6,062  $639   10.5% $7,121  $6,062  $1,059   17.5%
                                
Contract liabilities                                
Deferred revenue $5,003  $4,813  $190   3.9% $4,852  $4,813  $39   0.8%

 

During the three and six months ended March 31,June 30, 2023, the Company recognized revenue of $1,098,000and $4,593,000, respectively, related to untreated waste that was in the Company’s control as of the beginning of each respective year. During the three and six months ended June 30, 2022, the Company recognized revenue of $3,494,0002,123,000 and $3,521,0005,644,000, respectively, related to untreated waste that was in the Company’s control as of the beginning of each respective year. Revenue recognized in each period related to performance obligations satisfied within the respective period.

 

Remaining Performance Obligations

 

The Company applies the practical expedient in Accounting Standards Codification (“ASC”) 606-10-50-14 and does not disclose information about remaining performance obligations that have original expected durations of one year or less.

 

Within our Services Segment, there are service contracts which provide that the Company has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of our performance completed to date. For those contracts, the Company has utilized the practical expedient in ASC 606-10-55-18, which allows the Company to recognize revenue in the amount for which we have the right to invoice; accordingly, the Company does not disclose the value of remaining performance obligations for those contracts.

 

8

The Company’s contracts and subcontracts relating to activities at governmental sites generally allow for termination for convenience at any time at the government’s option without payment of a substantial penalty. The Company does not disclose remaining performance obligations on these contracts.

10

 

4. Leases

 

At the inception of an arrangement, the Company determines if an arrangement is, or contains, a lease based on facts and circumstances present in that arrangement. Lease classifications, recognition, and measurement are then determined at the lease commencement date.

 

The Company’s operating lease right-of-use (“ROU”) assets and operating lease liabilities include primarily leases for office and warehouse spaces used to conduct our business. The Company’s operating leases also include a building with land utilized for our waste treatment operations which includes a purchase option. Finance leases consist primarily of processing and transport equipment used by our facilities’ operations.

 

The components of lease cost for the Company’s leases for the three and six months ended June 30, 2023 and 2022 were as follows (in thousands):

Schedule of Components of Lease Cost 

 2023 2022                 
 Three Months Ended March 31,  Three Months Ended Six Months Ended 
 2023 2022  June 30, June 30, 
Operating Lease:        
 2023 2022 2023 2022 
         
Operating Leases:                
Lease cost $156  $157  $156  $157  $313  $314 
                        
Finance Leases:                        
Amortization of ROU assets  38   47   38   44   76   91 
Interst on lease liablity  6   11 
Interest on lease liability  7   10   13   21 
Finance leases  44   58   45   54   89   112 
                        
Short-term lease rent expense     3   1   3   1   7 
                        
Total lease cost $200  $218   202   214   403   433 

 

The weighted average remaining lease term and the weighted average discount rate for operating and finance leases at March 31,June 30, 2023 were:

Schedule of Weighted Average Lease 

 Operating Leases Finance Leases  Operating Leases Finance Leases 
Weighted average remaining lease terms (years)  6.1   3.0   6.0   2.2 
                
Weighted average discount rate  7.8%  5.5%  7.9%  6.0%

 

The weighted average remaining lease term and the weighted average discount rate for operating and finance leases at March 31,June 30, 2022 were:

 

 Operating Leases Finance Leases  Operating Leases Finance Leases 
Weighted average remaining lease terms (years)  6.7   4.0   6.5   3.1 
                
Weighted average discount rate  7.6%  6.1%  7.7%  6.0%

 

119

 

The following table reconciles the undiscounted cash flows for the operating and finance leases at March 31,June 30, 2023 to the operating and finance lease liabilities recorded on the balance sheet (in thousands):

Schedule of Operating And Finance Lease Liability Maturity 

 Operating Leases Finance Leases  Operating Leases Finance Leases 
2023 $412  $138  $267  $115 
2024  416   182   416   222 
2025  324   160   324   200 
2026  301   30   301   47 
2027  286   12   286   12 
2028 and thereafter  656   2   656   2 
Total undiscounted lease payments  2,395   524   2,250   598 
Less: Imputed interest  (501)  (43)  (466)  (49)
Present value of lease payments $1,894  $481  $1,784  $549 
                
Current portion of operating lease obligations $401  $  $385  $ 
Long-term operating lease obligations, less current portion $1,493  $  $1,399  $ 
Current portion of finance lease obligations $  $161  $  $199 
Long-term finance lease obligations, less current portion $  $320  $  $350 

 

Supplemental cash flow and other information related to our leases were as follows for the three and six months ended June 30, 2023 and 2022 (in thousands):

Schedule of Supplemental Cash Flow And Other Information Related To Leases 

         
 2023 2022  Three Months Ended Six Months Ended 
 Three Months Ended March 31,  June 30, June 30, 
 2023 2022  2023 2022 2023 2022 
Cash paid for amounts included in the measurement of lease liabilities:                        
Operating cash flow from operating leases $144  $143 
Operating cash flow from finance leases $6  $11 
Financing cash flow from finance leases $41  $58 
        
Operating cash flow used in operating leases $146  $143  $290  $286 
Operating cash flow used in finance leases $7  $10  $13  $21 
Financing cash flow used in finance leases $40  $661  $81  $718 
ROU assets obtained in exchange for lease obligations for:                        
Finance liabilities $50  $147  $107  $  $157  $147 

 

5. Intangible Assets

 

The following table summarizes information relating to the Company’s definite-lived intangible assets:

Schedule of Definite Lived Intangible Assets 

   March 31, 2023 December 31, 2022 
 

Weighted Average

Amortization

 Gross   Net Gross   Net 
 Period Carrying Accumulated Carrying Carrying Accumulated Carrying    June 30, 2023 December 31, 2022 
 (Years) Amount Amortization Amount Amount Amortization Amount  

Weighted

Average

 Amortization

 Gross  Net Gross  Net 
Other Intangibles (amount in thousands)                

Period

(Years)

 

Carrying

Amount

 

Accumulated

Amortization

 

Carrying

Amount

 

Carrying

Amount

 

Accumulated

Amortization

 

Carrying

Amount

 
               
Patent  8.3  $697  $(377) $320  $711  $(374) $337  8.3  $700  $(380) $320  $711  $(374) $337 
Software  3   647   (484)  163   640   (468)  172  3   661   (500)  161   640   (468)  172 
Customer relationships  10   3,370   (3,286)  84   3,370   (3,250)  120  10   3,370   (3,322)  48   3,370   (3,250)  120 
Total     $4,714  $(4,147) $567  $4,721  $(4,092) $629     $4,731  $(4,202) $529  $4,721  $(4,092) $629 

 

The intangible assets noted above are amortized on a straight-line basis over their useful lives with the exception of customer relationships which are being amortized using an accelerated method.

 

1210

 

 

The following table summarizes the expected amortization over the next five years for our definite-lived intangible assets:

Schedule of Finite Lived Intangible Assets, Future Amortization Expense

   
 Amount  Amount 
Year (In thousands)  (In thousands) 
      
2023 (Remaining) $140  $85 
2024  62  62 
2025  26  26 
2026  25  25 
2027  22  22 

 

Amortization expenses relating to the definite-lived intangible assets as discussed above were $55,000 and $56,000110,000 for the three and six months ended March 31,June 30, 2023, respectively, and $55,000 and $111,000 for the three and six months ended June 30, 2022, respectively.

 

6.Capital Stock, Stock Plans Warrants and Stock Based Compensation

 

The Company has certain stock option plans under which it may award incentive stock options (“ISOs”) and/or non-qualified stock options (“NQSOs”) to employees, officers, outside directors, and outside consultants.

 

On January 19, 2023, the Company granted ISOs to certain employees for the purchase, under the Company’s 2017 Stock Option Plan (the “2017 Plan”), of up to an aggregate 295,000 shares of the Company’s Common Stock. The total ISOs granted included an ISO for each of the Company’s executive officers for the purchase set forth in his respective ISO Agreement, as follows: 70,000 shares for the Chief Executive Officer (“CEO”); 40,000 shares for the Chief Financial Officer (“CFO”); 30,000 shares for the Executive Vice President (“EVP”) of Strategic Initiatives; 30,000 shares for the EVP of Waste Treatment Operations; and 30,000 shares for the EVP of Nuclear and Technical Services. Each of the ISOs granted has a contractual term of six years with one-fifth yearly vesting over a five-year periodperiod.. The exercise price of the ISO is $3.95 per share, which was equal to the fair market value of the Company’s Common Stock on the date of grant.

 

The Company granted a NQSO to Robert Ferguson on July 27, 2017, from the Company’s 2017 Plan for the purchase of up to 100,000 shares of the Company’s Common Stock (“Ferguson Stock Option”) in connection with his work as a consultant to the Company’s Test Bed Initiative (“TBI”) at our Perma-Fix of Northwest Richland, Inc. facility at an exercise price of $3.65 per share, which was the fair market value of the Company’s Common Stock on the date of grant. The term of the Ferguson Stock Option is seven years from the grant date. The vesting of the Ferguson Stock Option is subject to the achievement of three separate milestones by certain dates. The first milestone was met and the 10,000 shares under the first milestone were issued to Robert Ferguson in May 2018. The Company had previously entered into amendments whereby the vesting dates for the second and third milestones for the purchase of up to 30,000 and 60,000 shares of the Company’s Common Stock were extended to December 31, 2022, and December 31, 2023, respectively. The 30,000 shares under the second milestone failed to vest by December 31, 2022, and therefore were forfeited. TheDue to Mr. Ferguson’s death, resulting in Mr. Ferguson no longer being a consultant to the Company hasand the third milestone not recognized compensation costs (fair value of approximately $502,000 at March 31, 2023) for the remaining 60,000 Ferguson Stock Option under the remaining final milestone since achievement of the performance obligation under the remaining final milestone is uncertain at December 31, 2023. Uponbeing achieved prior to or after Mr. Ferguson’s death, the remaining Ferguson Stock Option as to the 60,000 shares is now held by Mr. Ferguson’s personal representative and/or beneficiary.effectively cancelled pursuant to the terms of the Ferguson Stock Option.

11

 

The following table summarizes stock-based compensation recognized for the three and six months ended March 31,June 30, 2023 and 2022 for our employee and director stock options.

Schedule of Share-based Compensation, Allocation of Recognized Period Costs 

  2023  2022 
Stock Options Three Months Ended March 31, 
  2023  2022 
Employee Stock Options $86,000  $86,000 
Director Stock Options  32,000   16,000 
Total $118,000  $102,000 

13

                 
  Three Months Ended  Six Months Ended 
Stock Options June 30,  June 30, 
  2023  2022  2023  2022 
Employee Stock Options $93,000  $86,000  $179,000  $172,000 
Director Stock Options  32,000   17,000   64,000   33,000 
Total $125,000  $103,000  $243,000  $205,000 

 

At March 31,June 30, 2023, the Company has approximately $1,769,0001,644,000 of total unrecognized compensation costs related to unvested options for employee and directors. The weighted average period over which the unrecognized compensation costs are expected to be recognized is approximately 3.83.6 years.

 

The summary of the Company’s total Stock Option Plans as of March 31,June 30, 2023, and March 31,June 30, 2022, and changes during the periods then ended, are presented below. The Company’s Plans consist of the 2017 Plan and the 2003 Outside Directors Stock Plan (the “2003 Plan”):

Schedule of Stock Options Roll Forward 

 Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (years) 

Aggregate Intrinsic

Value (2)

  Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (years) 

Aggregate Intrinsic

Value (2)

 
Options outstanding January 1, 2023  1,018,400  $5.02       -   1,018,400  $5.02       -  
Granted  295,000  $3.95           295,000  $3.95         
Exercised  (44,400) $3.56      $370,196   (265,600) $3.70      $2,002,502 
Forfeited/expired  (4,500) $3.90         
Forfeited/expired/cancelled  (64,500) $3.67         
Options outstanding end of period (1)  1,264,500  $4.83   4.2  $8,791,279   983,300  $5.15   4.9  $5,734,647 
Options exercisable at March 31, 2023(1)  499,500  $4.30   2.3  $6,047,029 
Options exercisable at June 30, 2023(1)  278,300  $4.75   3.4  $1,732,347 

 

  Shares  Weighted Average Exercise Price  Weighted Average Remaining Contractual Term (years)  

Aggregate Intrinsic

Value (2)

 
Options outstanding January 1, 2022  1,019,400  $4.91       - 
Granted              
Exercised           $ 
Forfeited/expired              
Options outstanding end of period (1)  1,019,400  $4.91   3.8  $1,150,167 
Options exercisable at March 31, 2022(1)  455,900  $3.92   2.5  $779,362 

  Shares  Weighted Average Exercise Price  

Weighted Average Remaining Contractual Term (years)

  

Aggregate Intrinsic

Value (2)

 
Options outstanding January 1, 2022  1,019,400  $4.91       -  
Granted    $         
Exercised  (50,000) $3.97      $98,000 
Forfeited/expired/cancelled    $         
Options outstanding end of period (1)  969,400  $4.96   3.7  $883,991 
Options exercisable at June 30, 2022(1)  405,900  $3.91   2.5  $577,276 

 

(1)Options with exercise prices ranging from $2.79to $7.50
(2)The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the option.price.

 

During the threesix months ended March 31,June 30, 2023, the Company issued a total of 33,31943,490 shares of its Common Stock under the 2003 Plan to its outside directors as compensation for serving on our Board of Directors (the “Board”). The Company recorded approximately $120,000237,000 in compensation expenses (included in selling, general and administration (“SG&A”) expenses) in connection with the issuance of shares of its Common Stock to outside directors.

 

During the threesix months ended March 31,June 30, 2023, the Company issued an aggregate 29,319163,255 shares of its Common Stock from cashless exercises of options for the purchasepurchases of 42,000242,000 shares of the Company’s Common Stock atranging from $3.60 per share to $3.65 per share. Additionally, the Company issued 2,40023,600 shares of its Common Stock from the exercise of an optionoptions for the purchase of 2,40023,600 shares of the Company’s Common Stock ranging from at $2.785 per share to $7.005 per share resulting in proceeds of approximately $6,700101,000.

12

 

In connection with a $2,500,000 loan that the Company entered into with Mr. Robert Ferguson (the “Ferguson Loan”) on April 1, 2019, the Company issued a warrant to Mr. Ferguson for the purchase of up to 60,000 shares of our Common Stock at an exercise price of $3.51 per share. The warrant expires on April 1, 2024 and remains outstanding at March 31,June 30, 2023. Upon Mr. Ferguson’s death, the warrant is now held by Mr. Ferguson’s personal representative and/or beneficiary. The Ferguson Loan was paid-in-full in December 20202020..

14

 

7.LossIncome (Loss) Per Share

 

Basic lossincome (loss) per share is calculated based on the weighted-average number of outstanding common shares during the applicable period. Diluted lossincome (loss) per share is based on the weighted-average number of outstanding common shares plus the weighted-average number of potential outstanding common shares. In periods where they are anti-dilutive, such amounts are excluded from the calculations of dilutive loss earnings per shares.share. The following table reconciles the lossincome (loss) and average share amounts used to compute both basic and diluted lossincome (loss) per share:

Schedule of Earning Per Share 

(Amounts in Thousands, Except for Per Share Amounts) 2023  2022 
  Three Months Ended 
  (Unaudited) 
  March 31, 
(Amounts in Thousands, Except for Per Share Amounts) 2023  2022 
Loss per common share from continuing operations        
Loss from continuing operations, net of taxes $(318) $(1,249)
Basic and diluted loss per share $(.02) $(.09)
         
Loss per common share from discontinued operations, net of taxes        
Loss from discontinued operations, net of taxes $(93) $(94)
Basic and diluted loss per share $(.01) $(.01)
         
Net loss per common share        
Net loss $(411) $(1,343)
Basic and diluted loss per share $(.03) $(.10)
         
Weighted average shares outstanding:        
Basic weighted average shares outstanding  13,358   13,234 
Add: dilutive effect of stock options      
Add: dilutive effect of warrants      
Diluted weighted average shares outstanding  13,358   13,234 
         
Potential shares excluded from above weighted average share calculations due to their anti-dilutive effect include:        
Stock options  335   405 
Warrant      
Antidilutive Securities      

                 
  Three Months Ended  Six Months Ended 
  June 30,  June 30, 
(Amounts in Thousands, Except for Per Share Amounts) (Unaudited)  (Unaudited) 
  2023  2022  2023  2022 
Income (loss) per common share from continuing operations                
Income (Loss) from continuing operations, net of taxes $519  $(1,257) $202  $(2,506)
Basic income (loss) per share $.04  $(.10) $.01  $(.19)
Diluted income (loss) per share $.03  $(.10) $.01  $(.19)
                 
Loss per common share from discontinued operations, net of taxes                
Loss from discontinued operations, net of taxes $(45) $(188) $(139) $(282)
Basic loss per share $  $(.01) $(.01) $(.02)
Diluted loss per share $  $(.01) $(.01) $(.02)
                 
Net income (loss) per common share                
Net income (loss) $474  $(1,445) $63  $(2,788)
Basic income (loss) per share $.04  $(.11) $  $(.21)
Diluted income (loss) per share $.03  $(.11) $  $(.21)
                 
Weighted average shares outstanding:                
Basic weighted average shares outstanding  13,474   13,264   13,417   13,249 
Add: dilutive effect of stock options  334      205    
Add: dilutive effect of warrants  40      35    
Diluted weighted average shares outstanding  13,848   13,264   13,657   13,249 
                 
Potential shares excluded from above weighted average share calculations due to their anti-dilutive effect include:                
Stock options     405      405 
Warrant            
Antidilutive Securities  -   -   -   - 

 

13

8. Long Term Debt

Long-term debt consists of the following:

Schedule of Long Term Debt 

(Amounts in Thousands) March 31, 2023 December 31, 2022  June 30, 2023  December 31, 2022 
Revolving Credit facility dated May 8, 2020, borrowings based upon eligible accounts receivable, subject to monthly borrowing base calculation, balance due on May 15, 2024. Effective interest rate for first quarter of 2023 was 9.7% (1) $  $ 
Revolving Credit facility dated May 8, 2020, borrowings based upon eligible accounts receivable, subject to monthly borrowing base calculation, balance due on May 15, 2024. Effective interest rate for first quarter of 2023 was 9.7% (1) $  $ 
Term Loan dated May 8, 2020, payable in equal monthly installments of principal, balance due on May 15, 2024. Effective interest rate for first quarter of 2023 Effective interest rate for the first quarter of 2023 was 8.0% (1)  432(2)  552(2)
Capital Line dated May 4, 2021, payable in equal monthly installments of principal, balance due on May 15, 2024. Effective interest rate for first quarter of 2023 Effective interest rate for the first quarter of 2023 was 8.0% (1)  437   463 
Notes Payable to 2023 and 2025, annual interest rate of 5.6% and 9.1%.  20   24 
Revolving Credit facility dated May 8, 2020, borrowings based upon eligible accounts receivable, subject to monthly borrowing base calculation, balance due on May 15, 2024. Effective interest rate for first six months of 2023 was 9.7%. (1) $-(3) $- 
Revolving Credit facility dated May 8, 2020, borrowings based upon eligible accounts receivable, subject to monthly borrowing base calculation, balance due on May 15, 2024. Effective interest rate for first six months of 2023 was 9.7%. (1) $(3) $ 
Term Loan dated May 8, 2020, payable in equal monthly installments of principal, balance due on May 15, 2024. Effective interest rate for first six months of 2023 was 9.2% (1)  345(2) (3)  552(2)
Capital Line dated May 4, 2021, payable in equal monthly installments of principal,        
balance due on May 15, 2024. Effective interest rate for first six months of 2023        
was 8.3% (1)  410(3)  463 
Notes Payable to 2023 and 2025, annual interest rate of 5.6% and 9.1%.  17   24 
Total debt  889   1,039   772   1,039 
Less current portion of long-term debt  446   476   456   476 
Long-term debt $443  $563  $316  $563 

 

(1)Our revolving credit facility is collateralized by our accounts receivable, and our term loan and capital line are collateralized by our property, plant, and equipment.

 

(2)Net of debt issuance costs of ($101,00082,000) and ($88,000) at March 31,June 30, 2023 and December 31, 2022, respectively.

 

(3)As discussed in “Note 15 – Subsequent Events – Credit Facility,” on July 31, 2023, the Company entered into an amendment to the Loan Agreement dated May 8, 2020, as amended, which extended the existing credit facility with a maturity date of May 15, 2024 to May 15, 2027. In accordance with ASC 470, “Debt,” this post balance-sheet date agreement demonstrated the Company’s ability to refinance its short-term obligations under its credit facility on a long-term basis; therefore, the Company has reclassified the current portion of the outstanding debt under the credit facility to long-term except for approximately $105,000 in principal payments under the Capital Line that will be due by June 30, 2024. The remaining principal balance of the Term Loan balance is classified as current as the balance will be paid-in-full by June 30, 2024 (see “Note 15 - Subsequent Events – Credit Facility” for further details of this amendment dated July 31, 2023).

Revolving Credit and Term Loan Agreement

 

The Company entered into a Second Amended and Restated Revolving Credit, Term Loan and Security Agreement, dated May 8, 2020 (“Loan Agreement”), with PNC National Association (“PNC”), acting as agent and lender. The Loan Agreement, as amended, provides the Company with the following credit facility with a maturity date of May 15, 2024 (see “Note 15 - Subsequent Event – Credit Facility” for a discussion of an amendment that the Company entered into with PNC which extended the maturity date to May 15, 2027, and provided a new term loan of $2,500,000 to the Company, among other things): (a) up to $12,500,000 revolving credit (“revolving credit”) (see a discussion of an amendment that the Company entered into with its lender on March 21, 2023 below, which reduced the maximum revolving credit to $12,500,000 from the previous amount of $18,000,000). The maximum that the Company can borrow under the revolving credit iswas based on a percentage of eligible receivables (as defined) at any one time reduced by outstanding standby letters of credit and borrowing reductions that the Company’s lender may impose from time to time; (b) a term loan (“term loan”) of approximately $1,742,000, requiring monthly installments of $35,547; and (c) a capital expenditure line (“capital loan”) of up to $1,000,000 with advances on the line, subject to certain limitations, permitted for up to twelve months starting May 4, 2021 (the “Borrowing Period”). Only interest was payable on advances during the Borrowing Period. Amount advanced under the capital line at the end of the Borrowing Period totaled approximately $524,000 which requires monthly installments in principal of approximately $8,700 plus interest, starting June 1, 2022. At the maturity date of the Loan Agreement, as amended, any unpaid principal balance plus interest, if any, will become due.

14

 

On March 21, 2023, the Company entered into an amendment to its Loan Agreement, as amended, with its lender which provides, among other things, the following:

 

 removed the quarterly fixed charge coverage ratio (“FCCR”) testing requirement for the fourth quarter of 2022 and removes the FCCR testing requirement the first quarter of 2023;
 reduced the maximum revolving credit line under the credit facility from $18,000,000 to $12,500,000;
 reinstates the quarterly FCCR testing requirement starting in the second quarter of 2023 using a trailing twelve-month period (with no change to the minimum 1.15:1 ratio requirement for each quarter);and
 requires maintenance of a minimum of $3,000,000 in borrowing availability under the revolving credit until the minimum FCCR requirement for the quarter ended June 30, 2023 has been met and certified to the lender.

 

In connection with the amendment, the Company paid its lender a fee of $25,000 which is being amortized over the remaining term of the Loan Agreement, as amended, as interest expense-financing fees.

 

Pursuant to the Loan Agreement, as amended, payment of annual rate of interest due on the revolving credit is at prime (8.00%(8.25% at March 31,June 30, 2023) plus 2% or Term Secured Overnight Finance Rate (“SOFR”) (as defined in the Loan Agreement, as amended) plus 3.00% plus an SOFR Adjustment applicable for an interest period selected by the Company and payment of annual rate of interest due on the term loan and the capital loan is at prime plus 2.50% or Term SOFR Rate plus 3.50% plus an SOFR Adjustment applicable for an interest period selected by the Company. A SOFR Adjustment rates of 0.10% and 0.15% are applicable for a one-month interest period and three-month period, respectively, that may be selected by the CompanyCompany..

 

After May 7, 2022, the Company may terminate its Loan Agreement, as amended upon 90 days’ prior written notice upon payment in full of our obligations under the Loan Agreement, as amended, with no early termination fees.

16

At March 31,June 30, 2023, the borrowing availability under the Company’s revolving credit was approximately $7,133,00010,368,000 which included our cash and was based on our eligible receivables and is net of approximately $3,016,0003,200,000 in outstanding standby letters of credit. The Company’s borrowing availability of $7,133,00010,368,000 at March 31,June 30, 2023 included a requirement from our lender that we maintain a minimum of $3,000,000 in borrowing availability as discussed above.

 

The Company’s credit facility under its Loan Agreement, as amended, with PNC contains certain financial covenants, along with customary representations and warranties. A breach of any of these financial covenants, unless waived by PNC, could result in a default under our credit facility allowing our lender to immediately require the repayment of all outstanding debt under our credit facility and terminate all commitments to extend further credit. The Company was not required to perform testing of the FCCR requirement in the first quarter of 2023 pursuant to the March 21, 2023 amendment as discussed above,above. otherwise, it met all of its other financial covenant requirements. The Company met all of its covenant requirements in the second quarter of 2023. See “Note 15 - Subsequent Event – Credit Facility” for a discussion of an amendment that the Company entered into with its lender on July 31, 2023, that provided, among other things, a new term loan to the Company.

 

9.Commitments and Contingencies

 

Hazardous Waste

 

In connection with our waste management services, the Company processes hazardous, non-hazardous, low-level radioactive and mixed (containing both hazardous and low-level radioactive) waste, which the Company transports to its own, or other, facilities for destruction or disposal. As a result of disposing of hazardous substances, in the event any cleanup is required at the disposal site, the Company could be a potentially responsible party for the costs of the cleanup notwithstanding any absence of fault on our part.

 

Legal Matters

 

In the normal course of conducting our business, the Company may be involved in various litigation. The Company is not a party to any litigation or governmental proceeding which our management believes could result in any judgments or fines against us that would have a material adverse effect on our financial position, liquidity or results of future operations.

 

15

Tetra Tech EC, Inc. (“Tetra Tech”)

 

During July 2020, Tetra Tech EC, Inc. (“Tetra Tech”) filed a complaint in the United States District Court for the Northern District of California (the “Court”) against CH2M Hill, Inc. (“CH2M”) and four subcontractors of CH2M, including the Company (“Defendants”). The complaint alleges various claims, including a claim for negligence, negligent misrepresentation, equitable indemnification and related business claims against all defendants related to alleged damages suffered by Tetra Tech in respect of certain draft reports prepared by defendants at the request of the U.S. Navy as part of an investigation and review of certain whistleblower complaints about Tetra Tech’s environmental restoration at the Hunter’s Point Naval Shipyard in San Francisco.

 

CH2M was hired by the Navy in 2016 to review Tetra Tech’s work. CH2M subcontracted with environmental consulting and cleanup firms Battelle Memorial Institute, Cabrera Services, Inc., SC&A, Inc. and the Company to assist with the review, according to the complaint.

 

The Company’s insurance carrier is providing a defense on our behalf in connection with this lawsuit, subject to a $100,000 self-insured retention and the terms and limitations contained in the insurance policy.

 

The majority of Tetra Tech’s claims have been dismissed by the Court. Remaining claims include: (1) Intentional Interference with Contractual Relations; and (2) Inducing a Breach of Contract. The Company continues to believe it has no liability exposure to Tetra Tech.

 

17

Perma-Fix of Canada, Inc. (“PF Canada”)

 

During the fourth quarter of 2021, PF Canada received a Notice of Termination (“NOT”) from Canadian Nuclear Laboratories, LTD. (“CNL”) on a Task Order Agreement (“TOA”) that PF Canada entered into with CNL in May 2019 for remediation work within Ontario, Canada (“Agreement”). The NOT was received after work under the TOA was substantially completed and work under the TOA has since been completed. CNL may terminate the TOA at any time for convenience. As of March 31,June 30, 2023, PF Canada has approximately $1,855,0001,895,000 in unpaid receivables due from CNL as a result of work performed under the TOA. Additionally, CNL has approximately $1,061,0001,084,000 in contractual holdback under the TOA that is payable to PF Canada. CNL also established a bond securing approximately $1,900,000 (CAD) to cover certain issues raised in connection with the TOA. Under the TOA, CNL may be entitled to set off certain costs and expenses incurred by CNL in connection with the termination of the TOA, including the bond as discussed above, against amounts owed to PF Canada for work performed by PF Canada or its subcontractors. PF Canada continues to be in discussions with CNL to finalize the amounts due to PF Canada under the TOA and continues to believe these amounts are due and payable to PF Canada.

 

Insurance

 

The Company has a 25-year finite risk insurance policy entered into in June 2003 (“2003 Closure Policy”) with AIG Specialty Insurance Company (“AIG”), which provides financial assurance to the applicable states for our permitted facilities in the event of unforeseen closure. The 2003 Closure Policy, as amended, provides for a maximum allowable coverage of $28,177,000 which includes available capacity to allow for annual inflation and other performance and surety bond requirements. Total coverage under the 2003 Closure Policy, as amended, was $22,454,00022,461,000 at March 31,June 30, 2023. At March 31,June 30, 2023 and December 31, 2022, finite risk sinking funds contributed by the Company related to the 2003 Closure Policy which is included in other long term assets on the accompanying Condensed Consolidated Balance Sheets totaled $11,637,00011,780,000 and $11,570,000, respectively, which included interest earned of $2,166,0002,309,000 and $2,099,000 on the finite risk sinking funds as of March 31,June 30, 2023, and December 31, 2022, respectively. Interest income for the three and six months ended March 31,June 30, 2023, was approximately $143,000and $210,000, respectively. Interest income for the three and six months ended June 30, 2022, was approximately $67,00029,000 and $11,00040,000, respectively. If we so elect, AIG is obligated to pay usthe Company an amount equal to 100100%% of the finite risk sinking fund account balance in return for complete release of liability from both usthe Company and any applicable regulatory agency using this policy as an instrument to comply with financial assurance requirements.

16

Letter of Credits and Bonding Requirements

 

From time to time, the Company is required to post standby letters of credit and various bonds to support contractual obligations to customers and other obligations, including facility closures. At March 31,June 30, 2023, the total amount of standby letters of credit outstanding was approximately $3,016,0003,200,000 and the total amount of bonds outstanding was approximately $27,321,00031,870,000.

 

10. Discontinued Operations

 

The Company’s discontinued operations consist of all our subsidiaries included in our previous Industrial Segment which encompasses subsidiaries divested in 2011 and prior and three previously closed locations.

 

The Company’s discontinued operations had net losses of $93,00045,000 (net of tax benefit of $30,00089,000) and $94,000188,000 (net of tax benefit of $63,00018,000) for the three months ended March 31,June 30, 2023 and 2022.2022, respectively and net losses of $139,000 (net of tax benefit of $119,000) and $282,000 (net of tax benefit of $80,000) for the six months ended June 30, 2023 and 2022, respectively. The losses were primarily due to costs incurred in the administration and continued monitoring of our discontinued operations. The Company’s discontinued operations had no revenues for each of the periods noted above.

18

The following table presents the major class of assets of discontinued operations as of March 31,June 30, 2023, and December 31, 2022. No assets and liabilities were held for sale at each of the periods noted.

Schedule of Disposal Groups, Including Discontinued Operation Balance Sheet 

        
 March 31, December 31,  June 30, December 31, 
(Amounts in Thousands) 2023 2022  2023 2022 
Current assets                
Other assets $19  $15  $17  $15 
Total current assets  19   15   17   15 
Long-term assets                
Property, plant and equipment, net (1)  81   81   81   81 
Total long-term assets  81   81   81   81 
Total assets $100  $96  $98  $96 
Current liabilities                
Accounts payable $39  $104  $23  $104 
Accrued expenses and other liabilities  138   146   145   146 
Environmental liabilities  112   112   112   112 
Total current liabilities  289   362   280   362 
Long-term liabilities                
Closure liabilities  162   159   164   159 
Environmental liabilities  749   749   749   749 
Total long-term liabilities  911   908   913   908 
Total liabilities $1,200  $1,270  $1,193  $1,270 

 

(1)net of accumulated depreciation of $10,000 for each period presented.

 

11. Operating Segments

 

In accordance with ASC 280, “Segment Reporting”, the Company defines an operating segment as a business activity: (1) from which we may earn revenue and incur expenses; (2) whose operating results are regularly reviewed by the chief operating decision maker (“CODM”) to make decisions about resources to be allocated to the segment and assess its performance; and (3) for which discrete financial information is available.

 

Our reporting segments are defined below:

 

TREATMENT SEGMENT, which includes:

 

-nuclear, low-level radioactive, mixed waste (containing both hazardous and low-level radioactive constituents), hazardous and non-hazardous waste treatment, processing and disposal services primarily through four uniquely licensed and permitted treatment and storage facilities; and
-Research and Development (“R&D&D”) activities to identify, develop and implement innovative waste processing techniques for problematic waste streams.

 

17

SERVICES SEGMENT, which includes:

 

-Technical services, which include:

 

professional radiological measurement and site survey of large government and commercial installations using advanced methods, technology and engineering;
integrated Occupational Safety and Health services including industrial hygiene (“IH”) assessments; hazardous materials surveys, e.g., exposure monitoring; lead and asbestos management/abatement oversight; indoor air quality evaluations; health risk and exposure assessments; health & safety plan/program development, compliance auditing and training services; and Occupational Safety and Health Administration (“OSHA”) citation assistance;
global technical services providing consulting, engineering, project management, waste management, environmental, and decontamination and decommissioning field, technical, and management personnel and services to commercial and government customers; and
on-site waste management services to commercial and governmental customers.

19

 

-Nuclear services, which include:

 

technology-based services including engineering, decontamination and decommissioning (“D&D”), specialty services and construction, logistics, transportation, processing and disposal;
remediation of nuclear licensed and federal facilities and the remediation cleanup of nuclear legacy sites. Such services capability includes: project investigation; radiological engineering; partial and total plant D&D; facility decontamination, dismantling, demolition, and planning; site restoration; logistics; transportation; and emergency response; and

 

-A company owned equipment calibration and maintenance laboratory that services, maintains, calibrates, and sources (i.e., rental) health physics, IH and customized nuclear, environmental, and occupational safety and health (“NEOSH”) instrumentation.

 

Our reporting segments exclude our corporate headquarters and our discontinued operations (see “Note 10 – Discontinued Operations”) which do not generate revenues.

 

18

The table below presents certain financial information of our operating segments for the three and six months ended March 31,June 30, 2023 and 2022 (in thousands):

Schedule of Segment Reporting Information 

  Treatment  Services  Segments Total  Corporate(1)  Consolidated Total 
Segment Reporting for the Quarter Ended March 31, 2023         
  Treatment  Services  Segments Total  Corporate(1)  Consolidated Total 
Revenue from external customers $9,594  $10,513  $20,107  $  $20,107 
Intercompany revenues  204   19   223       
Gross profit  1,252   1,757   3,009      3,009 
Research and development  67   3   70   29   99 
Interest income           127   127 
Interest expense  (22)  (1)  (23)  (30)  (53)
Interest expense-financing fees           (20)  (20)
Depreciation and amortization  573   160   733   14   747 
Segment income (loss) before income taxes  157   943   1,100   (1,622)  (522)
Income tax benefit  (174)  (30)  (204)     (204)
Segment income (loss)  331   973   1,304   (1,622)  (318)
Expenditures for segment assets  748      748      748(2)

Segment Reporting for the Quarter Ended June 30, 2023

 

 Treatment Services Segments Total Corporate(1) Consolidated Total               (1)     
Segment Reporting for the Quarter Ended March 31, 2022       
 Treatment Services Segments Total Corporate(1) Consolidated Total  Treatment Services Segments Total Corporate (1) Consolidated Total 
Revenue from external customers $7,479  $8,436  $15,915  $  $15,915  $12,834  $12,198  $25,032  $  $25,032 
Intercompany revenues                 26   17   43       
Gross profit  638   998   1,636      1,636   2,491   2,025   4,516      4,516 
Research and development  65   14   79   17   96   91   7   98   23   121 
Interest income           11   11            172   172 
Interest expense  (14)  (1)  (15)  (20)  (35)  (23)     (23)  (24)  (47)
Interest expense-financing fees           (13)  (13)           (24)  (24)
Depreciation and amortization  371   71   442   14   456   589   89   678   14   692 
Segment (loss) income before income taxes  (481)  285   (196)  (1,726)  (1,922)
Income tax benefit  (559)  (114)  (673)     (673)
Segment income (loss) before income taxes  1,356   1,189   2,545   (1,594)  951 
Income tax expense  83   349   432      432 
Segment income (loss)  78   399   477   (1,726)  (1,249)  1,273   840   2,113   (1,594)  519 
Expenditures for segment assets  296   49   345      345(2)  293   5   298      298(2)

Segment Reporting for the Six Months Ended June 30, 2023

               (1)     
  Treatment  Services  Segments Total  Corporate (1)  Consolidated Total 
Revenue from external customers $22,428  $22,711  $45,139  $  $45,139 
Intercompany revenues  230   36   266       
Gross profit  3,743   3,782   7,525      7,525 
Research and development  158   10   168   52   220 
Interest income           298   298 
Interest expense  (45)  (1)  (46)  (54)  (100)
Interest expense-financing fees           (44)  (44)
Depreciation and amortization  1,162   249   1,411   28   1,439 
Segment income (loss) before income taxes  1,514   2,132   3,646   (3,216)  430 
Income tax (benefit) expense  (91)  319   228      228 
Segment income (loss)  1,605   1,813   3,418   (3,216)  202 
Expenditures for segment assets  1,043   4   1,047      1,047(2)

Segment Reporting for the Quarter Ended June 30, 2022

               (1)     
  Treatment  Services  Segments Total  Corporate (1)  Consolidated Total 
Revenue from external customers $8,393  $11,062  $19,455  $  $19,455 
Intercompany revenues     17   17       
Gross profit  1,563   1,321   2,884      2,884 
Research and development  59   8   67   13   80 
Interest income           29   29 
Interest expense  (19)  3   (16)  (25)  (41)
Interest expense-financing fees           (15)  (15)
Depreciation and amortization  381   86   467   13   480 
Segment income (loss) before income taxes  364   515   879   (1,789)  (910)
Income tax expense  304   43   347      347 
Segment income (loss)  60   472   532   (1,789)  (1,257)
Expenditures for segment assets  373   39   412      412(3)

Segment Reporting for the Six Months Ended June 30, 2022

               (1)     
  Treatment  Services  Segments Total  Corporate (1)  Consolidated Total 
Revenue from external customers $15,872  $19,498  $35,370  $  $35,370 
Intercompany revenues     27   27       
Gross profit  2,201   2,319   4,520      4,520 
Research and development  124   23   147   29   176 
Interest income           40   40 
Interest expense  (33)  2   (31)  (45)  (76)
Interest expense-financing fees           (28)  (28)
Depreciation and amortization  752   157   909   27   936 
Segment (loss) income before income taxes  (117)  799   682   (3,514)  (2,832)
Income tax benefit  (254)  (72)  (326)     (326)
Segment income (loss)  137   871   1,008   (3,514)  (2,506)
Expenditures for segment assets  670   88   758      758(3)

 

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

(2)Net of financed amount of $50,000107,000 and $1$14,000157,000 for the three and six months ended March 31,June 30, 2023, respectively.

(3)Net of financed amount of $0and $114,000 for the three and six months ended June 30, 2022, respectively.

 

2019

 

 

12. Income Taxes

 

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

 

The Company had income tax benefitsexpenses of approximately $204,000432,000 and $673,000347,000 for continuing operations for the three months ended March 31,June 30, 2023 and 2022, respectively, and income tax expense and income tax benefit of $228,000 and ($326,000) for continuing operations for the six months ended June 30, 2023 and 2022, respectively. The Company’s effective tax rate wasrates were approximately 39.145.4% and (35.038.1%) for the three months ended March 31,June 30, 2023 and June 30, 2022, respectively, and 53.0% and 11.5% for the corresponding period ofsix months ended June 30, 2023 and June 30, 2022, respectively. The Company’s effective tax rates for the three and six months ended March 31,June 30, 2023 and 2022 were impacted by non-deductible expenses and state taxes. The tax expense for the three months ended June 30, 2023 were primarily driven by the change in forecasted income for the year which resulted in an increase in the estimated annual effective tax rate and an increase in the year to date tax expense for the six months ended June 30, 2023.

 

13. Employee Retention Credit (“ERC”)

 

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was enacted on March 27, 2020, provides an ERC for qualifying businesses keeping employees on their payroll during the COVID-19 pandemic. The ERC was subsequently amended by the Taxpayer Certainty and Disaster Tax Relief Act of 2020, the Consolidated Appropriation Act of 2021, and the American Rescue Plan Act of 2021, all of which amended and extended the ERC availability and guidelines under the CARES Act. Following these amendments, the Company determined that it was eligible for the ERC, and as a result of the foregoing legislations, was eligible to claim a refundable tax credit against the Company’s share of certain payroll taxes equal to 70% of the qualified wages paid to employees between July 1, 2021 and September 30, 2021. Qualified wages were limited to $10,000 per employee per calendar quarter in 2021 for a maximum allowable ERC per employee of $7,000 per calendar quarter in 2021. For purposes of the amended ERC, an eligible employer is defined as having experienced a significant (20% or more) decline in gross receipts during one or more of the first three 2021 calendar quarters when compared to 20192019..

 

During the third quarter of 2022, the Company determined it was eligible for the ERC and amended its third quarter 2021 employer payroll tax filings claiming a refund from the U.S. Treasury in the amount of approximately $1,975,000. As there is no authoritative guidance under U.S. GAAP on accounting for government assistance to for-profit business entities, the Company accounted for the ERC by analogy to International Accounting Standard (“IAS”) 20, Accounting for Government Grants and Disclosure of Government Assistance. In accordance with IAS 20, management determined it had reasonable assurance for receipt of the ERC and recorded the expected refund as other income (within “Other income (expense)”) on the Company’s Condensed Consolidated Statements of Operations and other receivables (within “Prepaid and other assets”) on the Company’s Condensed Consolidated Balance Sheets. On March 30, 2023, the Company received the ERC refund of $1,975,000including approximately $60,000in interest, (recorded within “Interest Income” on the Company’s Condensed Consolidated Statements of Operations for the three months ended March 31, 2023),Operations) totaling approximately $2,035,000.

20

 

14. Executive Compensation

 

Management Incentive Plans (“MIPs”)

On January 19, 2023, the Company’s Board and the Compensation and Stock Option Committee (the “Compensation Committee”) approved individual MIP for the calendar year 2023 for each of the Company’s executive officers. Each MIP is effective January 1, 2023 and applicable for year 2023. Each MIP provides guidelines for the calculation of annual cash incentive-based compensation, subject to Compensation Committee oversight and modification. The performance compensation under each of the MIPs is based upon meeting certain of the Company’s separate target objectives during 2023. Assuming each target objective is achieved under the same performance threshold range under each MIP, the total potential target performance compensation payable ranges from 25% to 150% of the 2023 base salary for the CEO ($93,717 to $562,305), 25% to 100% of the 2023 base salary for the CFO ($76,193 to $304,772), 25% to 100% of the 2023 base salary for the EVP of Strategic Initiatives ($63,495 to $253,980), 25% to 100% of the 2023 base salary for the EVP of Nuclear and Technical Services ($76,193 to $304,772) and 25% to 100% ($65,308 to $261,233) of the 2023 base salary for the EVP of Waste Treatment Operations.

15. Subsequent Events

Management evaluated events occurring subsequent to March 31,June 30, 2023 through May 10,August 3, 2023, the date these condensed consolidated financial statements were available for issuance, and other than as noted below determined that no material recognizable subsequent events occurred.

 

Employment AgreementsCredit Facility

On April 20,July 31, 2023, the Company’s Board and the Compensation Committee approved and the Company entered into an employment agreementamendment (the “July 31, 2023 Amendment”) with eachPNC to its Second Amended and Restated Revolving Credit, Term Loan and Security Agreement dated May 8, 2020, as amended (the “Amended Loan Agreement”). The July 31, 2023 Amendment provided the following, among other things:

extended the maturity date of the Amended Loan Agreement to May 15, 2027, from May 15, 2024;
an additional term loan (“Additional Term Loan”) to the Company in the amount of $2,500,000, requiring monthly installments of approximately $41,667. Payment of annual rate of interest due on the Additional Term Loan is at prime plus 3.00% or SOFR (as defined in the Amended Loan Agreement) plus 4.00% plus an SOFR Adjustment applicable for an interest period selected by the Company. A SOFR Adjustment rate of 0.10% and 0.15% is applicable for a one-month interest period and three-month period, respectively, that may be selected by the Company;
removed the minimum Tangible Adjusted Net Worth (as defined in the agreement) covenant requirement;
placed an indefinite reduction in borrowing availability of $750,000; and
allows for up to $2,500,000 in capital expenditure made in fiscal year 2023 and thereafter to be treated as financed capital expenditure in the Company’s quarterly fixed charge coverage ratio covenant calculation requirement.

At maturity of Mark Duff, CEO (the “CEO Employment Agreement”), Ben Naccarato, CFO (the “CFO Employment Agreement”), Dr. Louis Centofanti, EVPthe Amended Loan Agreement, any unpaid principal balance plus interest, if any, will become due.

Pursuant to the July 31, 2023 Amendment, the Company has agreed to pay PNC 1.0% of Strategic Initiatives (the “EVPthe total financing under the Amended Loan Agreement in the event the Company pays off its obligations on or before July 31, 2024, and 0.5% of Strategic Initiatives Employment Agreement”), Andrew Lombardo, EVP of Nuclearthe total financing if the Company pays off its obligations after July 31, 2024, to and Technical Services (the “EVP of Nuclear and Technical Services Employment Agreement”), and Richard Grondin, EVP of Waste Treatment Operations (the “EVP of Waste Treatment Operations Employment Agreement”), collectivelyincluding July 31, 2025. No early termination fee shall apply if the Company pays off its obligations under the Amended Loan Agreement after July 31, 2025.

In connection with the CEO Employment Agreement,July 31, 2023 Amendment, the CFO Employment Agreement, the EVPCompany paid its lender a fee of Strategic Initiative Employment Agreement, the EVP of Nuclear and Technical Services Employment Agreement and the EVP of Waste Treatment Operations Employment Agreement, the “New Employment Agreements” and each individually the “New Employment Agreement.” The Company had previously entered into an employment agreement dated July 20, 2020, with each of Mark Duff, Ben Naccarato, Dr. Louis Centofanti, Andrew Lombardo and Richard Grondin, with each$100,000.

All other terms of the five employment agreements due to expire on July 22, 2023. These five employment agreements dated July 22, 2020 were terminated effective April 20, 2023.Amended Loan Agreement remain principally unchanged.

 

21

 

The New Employment Agreements, which are substantially identical, except for compensation, are effective April 20, 2023. Pursuant to the New Employment Agreements, each of these executive officers is provided an annual salary, which annual salary may be increased from time to time, but not reduced, as determined by the Compensation Committee. In addition, each of these executive officers is entitled to participate in the Company’s broad-based benefit plans and certain performance compensation payable under separate MIP as approved by the Company’s Compensation Committee and the Company’s Board (see “Note 14 – Executive Compensation – Management Incentive Plans (“MIPs”)” for a discussion of the individual 2023 MIPs approved for the Company’s executive officers).

Each of the New Employment Agreements is effective for three years from April 20, 2023 (the “Initial Term”) unless earlier terminated by the Company or by the executive officer. At the end of the Initial Term of each New Employment Agreement, each New Employment Agreement will automatically be extended for one additional year, unless at least six months prior to the expiration of the Initial Term, the Company or the executive officer provides written notice not to extend the terms of the New Employment Agreement.

Pursuant to the New Employment Agreements, if the executive officer’s employment is terminated due to death, disability or for cause (as defined in the agreements), the Company will pay to the executive officer or to his estate an amount equal to the sum of any unpaid base salary and accrued unused vacation time through the date of termination and any benefits due to the executive officer under any employee benefit plan (the “Accrued Amounts”) plus any performance compensation payable pursuant to the MIP with respect to the fiscal year immediately preceding the date of termination. In the event that an executive officer’s employment is terminated due to death, the Company will also pay a lump-sum payment (the “Cash Medical Continuation Benefit”) equal to eighteen times the monthly premium that would be required to be paid, pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) to continue group health coverage for the executive officer’s eligible covered dependents in effect on the date of the executive officer’s termination of employment, based on the premium for the first month of COBRA coverage. Such cash payment will be taxable and will be made regardless of whether the executive officer’s eligible covered dependents elect COBRA continuation coverage.

If the executive officer terminates his employment for “good reason” (as defined in the agreements) or is terminated by the Company without cause (including any such termination for “good reason” or without cause within 24 months after a Change in Control (as defined in the agreements), the Company will pay the executive officer Accrued Amounts, (a) two years of full base salary, plus (b) (i) two times the performance compensation (under the executive officer’s MIP) earned with respect to the fiscal year immediately preceding the date of termination provided the performance compensation earned with respect to the fiscal year immediately preceding the date of termination has not yet been paid, or (ii) if performance compensation earned with respect to the fiscal year immediately preceding the date of termination has already been paid to the executive officer, the executive officer will be paid an additional year of the performance compensation earned with respect to the fiscal year immediately preceding the date of termination, and (c) the Cash Medical Continuation Benefit. If the executive officer terminates his employment for a reason other than for good reason, the Company will pay to the executive officer an amount equal to the Accrued Amounts plus any performance compensation payable pursuant to the MIP applicable to such executive officer.

Additionally, in the event of a Change in Control (as defined in the agreements), all outstanding stock options to purchase the common stock held by the executive officer will immediately become exercisable in full commencing on the date of termination through the original term of the options. In the event of the death of an executive officer, all outstanding stock options to purchase common stock held by the executive officer will immediately become exercisable in full commencing on the date of death, with such options exercisable for the lesser of the original option term or twelve months from the date of the executive officer’s death. In the event an executive officer terminates his employment for “good reason” (as defined in the agreements) or is terminated by the Company without cause, all outstanding stock options to purchase common stock held by the officer will immediately become exercisable in full commencing on the date of termination, with such options exercisable for the lesser of the original option term or within 60 days from the date of the executive officer’s date of termination. Severance benefits payable with respect to a termination (other than Accrued Amounts) shall not be payable until the termination constitutes a “separation from service” (as defined under Treasury Regulation Section 1.409A-1(h)).

22

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Forward-looking Statements

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

 

demand for our services;
reductions in the level of government funding in future years;
reducing operating costs and non-essential expenditures;
ability to meet loan agreement quarterly covenant requirements;
cash flow requirements;
maintain satisfactory margins;
Canadian receivable;
sufficient liquidity to fund operations for the next twelve months;
future results of operations and liquidity;
effect of macroeconomic concerns, such as inflation and higher interest rates, on our business;
manner in which the applicable government will be required to spend funding to remediate various sites;
finalization of partnership agreement with Springfields Fuels Limited;
continued increases in operating costs;
fund capital expenditures from cash from operations and/or financing;
steady improvement in waste shipments and work under projects during balance of 2023;
fund remediation expenditures for sites from funds generated internally;
compliance with environmental regulations;
potential effect of being a PRP;
potential sites for violations of environmental laws and remediation of our facilities; and
increase our sales price.

23

While the Company believes the expectations reflected in such forward-looking statements are reasonable, it can give no assurance such expectations will prove to be correct. There are a variety of factors, which could cause future outcomes to differ materially from those described in this report, including, but not limited to:

 

general economic conditions;
contract bids, including international markets;
material reduction in revenues;
inability to meet PNC covenant requirements;
inability to collect in a timely manner a material amount of receivables;
increased competitive pressures;
inability to maintain and obtain required permits and approvals to conduct operations;
public not accepting our new technology;
inability to develop new and existing technologies in the conduct of operations;
inability to maintain and obtain closure and operating insurance requirements;
inability to retain or renew certain required permits;

22

discovery of additional contamination or expanded contamination at any of the sites or facilities leased or owned by us or our subsidiaries which would result in a material increase in remediation expenditures;
delays at our third-party disposal site can extend collection of our receivables greater than twelve months;
refusal of third-party disposal sites to accept our waste;
changes in federal, state and local laws and regulations, especially environmental laws and regulations, or in interpretation of such;
requirements to obtain permits for TSD activities or licensing requirements to handle low level radioactive materials are limited or lessened;
management retention and development;
financial valuation of intangible assets is substantially more/less than expected;
the requirement to use internally generated funds for purposes not presently anticipated;
inability of the Company to maintain the listing of its Common Stock on the NASDAQ;
terminations of contracts with government agencies or subcontracts involving government agencies or reduction in amount of waste delivered to the Company under the contracts or subcontracts;
renegotiation of contracts involving government agencies;
disposal expense accrual could prove to be inadequate in the event the waste requires re-treatment;
inability to raise capital on commercially reasonable terms;
inability to increase profitable revenue;
impact of COVID-19 and economic uncertainties;
new governmental regulations; and
risk factors and other factors set forth in “Special Note Regarding Forward-Looking Statements” contained in the Company’s 2022 Form 10-K and the “Forward-Looking Statements” contained in the Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”) offor the first quarter 2023 10-Q and this firstsecond quarter 2023 10-Q.

 

2423

 

Overview

Revenue increased by $4,192,000$5,577,000 or 26.3%28.7% to $20,107,000$25,032,000 for the three months ended March 31,June 30, 2023, from $15,915,000$19,455,000 for the corresponding period of 2022. We saw increases in both segments where Treatment Segment revenue increased by $2,115,000$4,441,000 to $9,594,000$12,834,000 or 28.3%52.9% from $7,479,000$8,393,000 and Services Segment revenue increased by $2,077,000$1,136,000 or 24.6%10.3% to $10,513,000$12,198,000 from $8,436,000.$11,062,000. The increase in revenue in the Treatment Segment was primarily due to overall higher waste volume which was offset by lower averaged price waste due to revenue mix. The increase in revenue in the Services Segment was due to achievement ofcontinuing full operational status on certain projects which had been curtailed/delayed primarily in the early part of 2022 due, in part, from the lingering effects of the COVID-19 pandemic. As previously disclosed, the lingering effects of COVID-19 impacted our revenue in 2022 as work under projects and waste shipments continued to be delayed by certain customers into the first half of 2022. Additionally, in 2022, procurement and planning on behalf of our government clients continued to be delayed which did not ease until the second half of 2022. Total gross profit for the firstsecond quarter of 2023 increased $1,373,000$1,632,000 or 83.9%56.6% due to increased revenue generated in both segments. Selling, General, and Administrative (“SG&A”) expenses increased $64,000decreased $133,000 or 1.9%3.6% for the three months ended March 31,June 30, 2023 as compared to the corresponding period of 2022.

Revenue increased by $9,769,000 or 27.6% to $45,139,000 for the six months ended June 30, 2023, from $35,370,000 for the corresponding period of 2022. As with the second quarter, we saw increases in both segments where Treatment Segment revenue increased by $6,556,000 to $22,428,000 or 41.3% from $15,872,000 and Services Segment revenue increased by $3,213,000 or 16.5% to $22,711,000 from $19,498,000. The increases in revenue in both the Treatment and Services Segments were due to the same reasons as discussed above for the second quarter. Total gross profit for the six months ended 2023 increased $3,005,000 or 66.5% due to increased revenue generated in both segments. SG&A expenses decreased $70,000 or 1.0% for the six months ended June 30, 2023, as compared to the corresponding period of 2022.

 

We expect to see continued steady improvements in waste receipts and increase in project work from existing contracts, contracts recently won in the first half of 2023, and bids submitted in both segments that are awaiting awards. We expect this positive trend to continue during the balance of 2023 as the lingering effects of the COVID-19 pandemic continue to subside.2023.

 

In March 2023, we received the Employee Retention Credit (“ERC”) of $1,975,000 that we applied for during the third quarter of 2022 as permitted under the CARES Act. In addition to the $1,975,000, we also received approximately $60,000 in interest (recorded within “Interest Income” on our Condensed Consolidated Statements of Operations).

Business Environment

Our Treatment and Services Segments’ business continues to be heavily dependent on services that we provide to governmental clients, primarily as subcontractors for others who are prime contractors to government entities or directly as the prime contractor. We believe demand for our services will continue to be subject to fluctuations due to a variety of factors beyond our control, including, without limitation, the economic conditions and the manner in which the applicable government will be required to spend funding to remediate various sites, and/or potential further impact from COVID-19.sites. In addition, our governmental contracts and subcontracts relating to activities at governmental sites in the United States are generally subject to termination for convenience at any time at the government’s option, and our governmental contracts/TOAs with the Canadian government authorities also allow the authorities to terminate the contract/task orders at any time for convenience. Work under all of our contracts/TOAs with Canadian government authorities has substantially been completed. A significant account receivable due to PF Canada is subject to continuing negotiations. See “Known Trends and Uncertainties – Perma-Fix Canada, Inc. (“PF Canada”)” within this MD&A for additional discussion as to a terminated Canadian TOA. Significant reductions in the level of governmental funding or specifically mandated levels for different programs that are important to our business could have a material adverse impact on our business, financial position, results of operations, and cash flows.

 

We are continually reviewing methods to raise additional capital to supplement our liquidity requirements, when needed (see “Liquidity and Capital Resources” below for a discussion of our liquidity). We continue to aggressively bid on various contracts, including potential contracts within the international markets.

 

24

Results of Operations

The reporting of financial results and pertinent discussions are tailored to our two reportable segments: The Treatment and Services.

 

25

Summary – Three and Six Months Ended March 31,June 30, 2023 and 2022

 Three Months Ended 
 March 31,  Three Months Ended
June 30,
 Six Months Ended
June 30,
 
Consolidated (amounts in thousands) 2023 % 2022 %  2023 % 2022 % 2023 % 2022 % 
Revenues $20,107   100.0  $15,915   100.0 
Cost of good sold  17,098   85.0   14,279   89.7 
Net revenues $25,032   100.0  $19,455   100.0  $45,139   100.0  $35,370   100.0 
Cost of goods sold  20,516   82.0   16,571   85.2   37,614   83.3   30,850   87.2 
Gross profit  3,009   15.0   1,636   10.3   4,516   18.0   2,884   14.8   7,525   16.7   4,520   12.8 
Selling, general and administrative  3,486   17.3   3,422   21.5   3,551   14.2   3,684   18.9   7,036   15.6   7,106   20.1 
Research and development  99   .5   96   .6   121   .4   80   .4   220   .5   176   .5 
Loss on disposal of property and equipment        1                        1    
Loss from operations $(576)  (2.8) $(1,883)  (11.8)
Income (loss) from operations  844   3.4   (880)  (4.5)  269   .6   (2,763)  (7.8)
Interest income  127   .6   11      172   .7   29      298   .7   40   .1 
Interest expense  (53)  (.3)  (35)  (.2)  (47)  (.2)  (41)  (.2)  (100)  (.2)  (76)  (.2)
Interest expense-financing fees  (20)  (.1)  (13)  (.1)  (24)  (.1)  (15)     (44)  (.1)  (28)  (.1)
Other        (2)     6      (3)     7      (5)   
Loss from continuing operations before taxes  (522)  (2.6)  (1,922)  (12.1)
Income tax benefit  (204)  (1.0)  (673)  (4.3)
Loss from continuing operations $(318)  (1.6) $(1,249)  (7.8)
Income (loss) from continuing operations before taxes  951   3.8   (910)  (4.7)  430   1.0   (2,832)  (8.0)
Income tax expense (benefit)  432   1.7   347   1.8   228   .5   (326)  (.9)
Income (loss) income from continuing operations $519   2.1  $(1,257)  (6.5) $202   .5  $(2,506)  (7.1)

Revenues

Consolidated revenues increased $4,192,000$5,577,000 for the three months ended March 31,June 30, 2023, compared to the three months ended March 31,June 30, 2022, as follows:

 

(In thousands) 2023 % Revenue 2022 % Revenue Change % Change  2023 %
Revenue
 2022 %
Revenue
 Change % Change 
Treatment                                     
Government waste $6,642   33.0  $5,437   34.2  $1,205   22.2  $9,702   38.8  $5,755   29.6  $3,947   68.6 
Hazardous/non-hazardous (1)  1,511   7.5   1,001   6.3   510   50.9   1,622   6.5   1,363   7.0   259   19.0 
Other nuclear waste  1,441   7.2   1,041   6.5   400   38.4   1,510   6.0   1,275   6.5   235   18.4 
Total  9,594   47.7   7,479   47.0   2,115   28.3   12,834   51.3   8,393   43.1   4,441   52.9 
                                                
Services                                                
Nuclear services  10,082   50.2   8,281   52.0   1,801   21.7   11,840   47.3   10,679   54.9   1,161   10.9 
Technical services  431   2.1   155   1.0   276   178.1   358   1.4   383   2.0   (25)  (6.5)
Total  10,513   52.3   8,436   53.0   2,077   24.6   12,198   48.7   11,062   56.9   1,136   10.3 
                                                
Total $20,107   100.0  $15,915   100.0  $4,192   26.3  $25,032   100.0  $19,455   100.0  $5,577   28.7 

(1) Includes wastes generated by government clients of $710,000$763,000 and $470,000$641,000 for the three months ended March 31,June 30, 2023, and the corresponding period of 2022, respectively.

 

Treatment Segment revenue increased by $2,115,000$4,441,000 or 28.3%52.9% for the three months ended March 31,June 30, 2023 over the same period in 2022. The overall increase was primarily due to higher waste volume offset by lower averaged price waste from revenue mix. As previously disclosed, starting in the latter part of the second quarter of 2022, our Treatment Segment began to see steady improvements in waste receipts from certain customers who had previously delayed waste shipments due, in part, from the lingering effects of COVID-19 which continue to subside.COVID-19. Services Segment revenue increased by approximately $2,077,000$1,136,000 or 24.6%10.3%. The increase in revenue in the Services Segment was primarily due to continuing full operational status on certain projects which had been curtailed/delayed in the early part of 2022 due, in part, from the lingering effects of the COVID-19 pandemic. Our Services Segment revenues are project based; as such, the scope, duration, and completion of each project vary. As a result, our Services Segment revenues are subject to differences relating to timing and project value. Revenue from both of our Segments were also positively impacted from contracts won in the first half of 2023 as procurement and planning on behalf of our government clients continue to progress as the lingering effects of COVID-19 pandemic subsided.

25

Consolidated revenues increased $9,769,000 for the six months ended June 30, 2023, as compared to the six months ended June 30, 2022, as follows:

     %     %     % 
(In thousands) 2023  Revenue  2022  Revenue  Change  Change 
Treatment                        
Government waste $16,344   36.2  $11,192   31.6  $5,152   46.0 
Hazardous/non-hazardous (1)  3,133   7.0   2,365   6.7   768   32.5 
Other nuclear waste  2,951   6.5   2,315   6.6   636   27.5 
Total  22,428   49.7   15,872   44.9   6,556   41.3 
                         
Services                        
Nuclear services  21,922   48.6   18,960   53.6   2,962   15.6 
Technical services  789   1.7   538   1.5   251   46.7 
Total  22,711   50.3   19,498   55.1   3,213   16.5 
                         
Total $45,139   100.0  $35,370   100.0  $9,769   27.6 

(1) Includes wastes generated by government clients of $1,473,000 and $1,111,000 for the six months ended June 30, 2023, and the corresponding period of 2022, respectively.

Treatment Segment revenue increased by $6,556,000 or 41.3% for the six months ended June 30, 2023 over the same period in 2022. The overall increase was primarily due to higher waste volume offset by lower averaged price waste from revenue mix. As previously disclosed, starting in the latter part of the second quarter of 2022, our Treatment Segment began to see steady improvements in waste receipts from certain customers who had previously delayed waste shipments due, in part, from the lingering effects of COVID-19. Services Segment revenue increased by approximately $3,213,000 or 16.5%. The increase in revenue in the Services Segment was primarily due to achievement of full operational status on certain projects which had been curtailed/delayed in the early part of 2022 due, in part, from the lingering effects of the COVID-19 pandemic. Our Services Segment revenues are project based; as such, the scope, duration, and completion of each project vary. As a result, our Services Segment revenues are subject to differences relating to timing and project value. Revenue from both of our Segments were also positively impacted from contracts recently won in the first half of 2023 as procurement and planning on behalf of our government clients continue to progress as the lingering effects of COVID-19 pandemic continue to subside.subsided.

 

26

Cost of Goods Sold

 

Cost of goods sold increased $2,819,000$3,945,000 for the quarter ended March 31,June 30, 2023, as compared to the quarter ended March 31,June 30, 2022, as follows:

 

   %   %      %   %   
(In thousands) 2023 Revenue 2022 Revenue Change  2023 Revenue 2022 Revenue Change 
Treatment $8,342   87.0  $6,841   91.5  $1,501  $10,343   80.6  $6,830   81.4  $3,513 
Services  8,756   83.3   7,438   88.2   1,318   10,173   83.4   9,741   88.1   432 
Total $17,098   85.0  $14,279   89.7  $2,819  $20,516   82.0  $16,571   85.2  $3,945 

 

Cost of goods sold for the Treatment Segment increased by approximately $1,501,000$3,513,000 or 21.9%.51.4% primarily due to higher revenue. Treatment Segment’s variable costs increased by approximately $816,000$2,459,000 primarily due to higher material and supplies, disposal, transportation, lab and laboutside services costs. Treatment Segment’s overall fixed costs were higher by approximately $685,000$1,054,000 resulting from the following: general expenses were higher by $266,000 primarily due to higher utility costs; depreciation expenses were higher by approximately $198,000 due to depreciation for asset retirement obligations in connection with our EWOC facility; regulatory expenses were higher by approximately $63,000; maintenance costs were higher by approximately $60,000; and$102,000; salaries and payroll related expenses were higher by $98,000.approximately $522,000 due to higher headcount; depreciation expenses were higher by approximately $205,000 due to depreciation for asset retirement obligations (“ARO”) in connection with our Oak Ridge Environmental Waste Operations Center (“EWOC”) facility; maintenance costs were higher by approximately $191,000; and travel expenses were higher by approximately $34,000. Services Segment cost of goods sold increased $1,318,000$432,000 or 17.7%4.4% primarily due to higher revenue. The overall increase in cost of goods sold was primarily due to the following: higher salaries/payroll related, outside services, and travel costs totaling approximately $1,193,000; higher$1,019,000; lower material and supplies, lab, and regulatorydisposal expenses totaling approximately $24,000; higher depreciation expense totaling approximately $89,000 from additional equipment;$452,000; and slightly higherlower general expenses by approximately $12,000$135,000 in various categories. Included within cost of goods sold is depreciation and amortization expense of $726,000$672,000 and $439,000$464,000 for the three months ended March 31,June 30, 2023, and 2022, respectively.

26

Cost of goods sold increased $6,764,000 for the six months ended June 30, 2023, as compared to the six months ended June 30, 2022, as follows:

(In thousands) 2023  %
Revenue
  2022  %
Revenue
  Change 
Treatment $18,685   83.3  $13,671   86.1  $5,014 
Services  18,929   83.3   17,179   88.1   1,750 
Total $37,614   83.3  $30,850   87.2  $6,764 

Cost of goods sold for the Treatment Segment increased by approximately $5,014,000 or 36.7%. Treatment Segment’s variable costs increased by approximately $3,274,000 primarily due to higher material and supplies, disposal, transportation, lab and outside services costs. Treatment Segment’s overall fixed costs were higher by approximately $1,740,000 resulting from the following: salaries and payroll related expenses were higher by approximately $622,000 due to higher headcount; general expenses were higher by approximately $263,000 primarily due to higher utility costs; depreciation expenses were higher by approximately $403,000 due to depreciation for ARO in connection with our EWOC facility; maintenance costs were higher by approximately $255,000; regulatory expenses were higher by approximately $165,000; and travel expenses were higher by approximately $32,000. Services Segment cost of goods sold increased $1,750,000 or 10.2% primarily due to higher revenue. The overall increase in cost of goods sold was primarily due to the following: higher salaries/payroll related, outside services, and travel costs totaling approximately $2,212,000; higher depreciation expenses of $92,000; lower material and supplies, lab, and disposal expenses totaling approximately $435,000; and lower general expenses by approximately $119,000 in various categories. Included within cost of goods sold is depreciation and amortization expense of $1,398,000 and $902,000 for the six months ended June 30, 2023, and 2022, respectively.

 

Gross Profit

Gross profit for the quarter ended March 31,June 30, 2023 increased $1,373,000$1,632,000 over the correspondingsame period ofin 2022, as follows:

 

   %   %   
(In thousands) 2023 Revenue 2022 Revenue Change  2023 %
Revenue
 2022 %
Revenue
 Change 
Treatment $1,252   13.0  $638   8.5  $614  $2,491   19.4  $1,563   18.6  $928 
Nuclear Services                    
Services  1,757   16.7   998   11.8   759   2,025   16.6   1,321   11.9   704 
Total $3,009   15.0  $1,636   10.3  $1,373  $4,516   18.0  $2,884   14.8  $1,632 

 

Treatment Segment gross profit increased by $614,000$928,000 or approximately 96.2%59.4% and gross margin increased to 13.0%19.4% from 8.5%18.6% primarily due to higher revenue from higher waste volume. Services Segment gross profit increased by $759,000$704,000 or 76.1%53.3% and gross margin increased to 16.6% from 11.9% primarily due to higher revenue and higher margin projects. Our overall Services Segment gross margin is impacted by our current projects which are competitively bid on and will therefore, have varying margin structures.

Gross profit for the six months ended June 30, 2023 increased $3,005,000 over 2022, as follows:

(In thousands) 2023  %
Revenue
  2022  %
Revenue
  Change 
Treatment $3,743   16.7  $2,201   13.9  $1,542 
Services  3,782   16.7   2,319   11.9   1,463 
Total $7,525   16.7  $4,520   12.8  $3,005 

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Treatment Segment gross profit increased by $1,542,000 or 70.1% and gross margin increased to 16.7% from 11.8%13.9% primarily due to higher revenue from higher waste volume. Services Segment gross profit increased by $1,463,000 or 63.1% and gross margin increased from 11.9% to 16.7% primarily due to higher revenue and more higher margin projects. Our overall Services Segment gross margin is impacted by our current projects which are competitively bid on and will therefore, have varying margin structures.

 

SG&A

 

SG&A expenses increased $64,000decreased $133,000 for the three months ended March 31,June 30, 2023, as compared to the corresponding period for 2022, as follows:

 

(In thousands) 2023  % Revenue  2022  % Revenue  Change 
Administrative $1,670     $1,687     $(17)
Treatment  1,006   10.5   1,040   13.9   (34)
Services  810   7.7   695   8.2   115 
Total $3,486   17.3  $3,422   21.5  $64 

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(In thousands) 2023  %
Revenue
  2022  %
Revenue
  Change 
Administrative $1,695     $1,764     $(69)
Treatment  1,027   8.0   1,119   13.3   (92)
Services  829   6.8   801   7.2   28 
Total $3,551   14.2  $3,684   18.9  $(133)

 

Administrative SG&A expenses were lower primarily due to lower outside services expenses by approximately $71,000$31,000 resulting from fewer consulting/audit/outside services matters. This overallconsulting matters; lower expense was offset primarily by highersalaries and payroll related expenses.expense of approximately $15,000; lower travel expense by approximately $8,000; and lower general expense of approximately $15,000 in various categories. Treatment Segment SG&A expenses were lower primarily due to the following: outside services expenses were lower by approximately $59,000 resulting from fewer consulting matters; salaries and payroll related expenses were lower by approximately $62,000 which was offset$62,000; travel expenses were lower by overallapproximately $13,000; general expense were higher general expenses in various categories.by approximately $21,000 primarily due to higher tradeshow expenses; and credit losses on accounts receivable were higher by approximately $21,000. The small increase in Services Segment SG&A was primarily due to higher payroll related and travel expenses totaling approximately $39,000 which was offset by lower outside services and general expenses totaling approximately $11,000. Included in SG&A expenses is depreciation and amortization expense of $20,000 and $16,000 for the three months ended June 30, 2023, and 2022, respectively.

SG&A expenses decreased $70,000 for the six months ended June 30, 2023, as compared to the corresponding period for 2022, as follows:

(In thousands) 2023  %
Revenue
  2022  %
Revenue
  Change 
Administrative $3,365     $3,451     $(86)
Treatment  2,033   9.1   2,159   13.6   (126)
Services  1,638   7.2   1,496   7.7   142 
Total $7,036   15.6  $7,106   20.1  $(70)

Administrative SG&A expenses were lower primarily due to the following: overall outside services expenses were lower by approximately $102,000 primarily due to fewer audit/consulting matters; travel expenses were lower by approximately $7,000; general expenses were lower by approximately $13,000 in various categories; and salaries and payroll related expenses were higher by approximately $36,000. Treatment Segment SG&A expenses were lower primarily due to the following: outside services expenses were lower by approximately $63,000 resulting from fewer consulting matters; salaries and payroll related expenses were lower by approximately $124,000; travel expenses were lower by approximately $12,000; general expense were higher by approximately $47,000 primarily due to higher tradeshow expenses; and credit losses on accounts receivable were higher by approximately $44,000,$26,000. The increase in SG&A expenses within our Services Segment was primarily due to the following: salaries/payroll related were higher by approximately $86,000 due to more administrative support functions resulting from higher revenue; travel expenses were higher by approximately $17,000; credit losses on accounts receivable were higher by approximately $48,000 as in the first quarter of 2022, our Services Segment collected on certain accounts that were previously deemed to be uncollectible; traveland general expenses were higherlower by approximately $10,000; outside services expense were slightly higher by approximately $6,000; and salaries and payroll related expenses were higher by approximately $55,000 due to more administrative support functions resulting from higher revenue.$9,000 in various categories. Included in SG&A expenses is depreciation and amortization expense of $21,000$41,000 and $17,000$34,000 for the threesix months ended March 31,June 30, 2023 and 2022, respectively.

 

Interest Income

Interest income increased by approximately $116,000 in$143,000 and $258,000 for the first quarter ofthree and six months ended June 30, 2023, as compared to the corresponding period of 2022 due to higher interest earned from our finite risk sinking fund and interest received in connection with the refund that we received in March 2023 from the ERC program under the CARES Act (see a discussion of this refund, along with interest in “Overview” within this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”).

Interest Expense

Interest expense increased approximately $18,000 in the first quarter of 2023respectively, as compared to the corresponding period of 2022 primarily due to higher interest rates on our term loan balanceearned from lower finite risk sinking fund. Interest income for the six months ended June 30, 2023 also included approximately $60,000 received in March of 2023 under the Employee Retention Credit (“ERC”) program under the CARES Act.

Interest Expense

Interest expense increased by approximately $6,000 and revolver under our credit facility. Also, we$24,000 for the three and six months ended June 30, 2023, respectively, as compared to the corresponding period of 2022 primarily due interest incurred interest from advances made in May of 2022 from the capital line under our credit facility. Interest was also higher in both periods from higher interest rate on our term loan which was offset by the declining term loan balance.

 

Income Taxes

We had income tax benefitsexpenses of approximately $204,000$432,000 and $673,000$347,000 for continuing operations for the three months ended March 31,June 30, 2023 and 2022, respectively, and income tax expense and income tax benefit of $228,000 and ($326,000) for continuing operations for the six months ended June 30, 2023 and 2022, respectively. Our effective tax rate wasrates were approximately 39.1%45.4% and 35.0%(38.1%) for the three months ended March 31,June 30, 2023 and June 30, 2022, respectively, and 53.0% and 11.5% for the corresponding period ofsix months ended June 30, 2023 and June 30, 2022, respectively. Our effective tax rates for the three and six months ended March 31,June 30, 2023 and 2022 were impacted by non-deductible expenses and state taxes. The tax expense for the three months ended June 30, 2023 were primarily driven by the change in forecasted income for the year which resulted in an increase in the estimated annual effective tax rate and an increase in the year to date tax expense for the six months ended June 30, 2023.

 

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Liquidity and Capital Resources

Our cash flow requirements during the threesix months ended March 31,June 30, 2023, were primarily financed by our operations, cash on hand (which included the ERC, along with interest, that we received in March 2023), and credit facility availability. Our cash flow requirements for the next twelve months will consist primarily of general working capital needs, scheduled principal payments on our debt obligations, remediation projects, and planned capital expenditures. We plan to fund these requirements from our operations, credit facility availability, our new term loan, and cash on hand.hand ( See “Financing Activities” below for a discussion of an amendment to our credit facility that we entered into with our lender on July 31, 2023, which extended the maturity date of our credit facility and provided a new term loan to us in the amount of $2,500,000, among other things). We are continually reviewing operating costs and reviewing the possibility of further reducing operating costs and non-essential expenditures to bring them in line with revenue levels, when necessary. At March 31,June 30, 2023, we had borrowing availability under our revolving credit facility of approximately $7,133,000$10,368,000 which included our cash and was based on a percentage of eligible receivables and subject to certain reserves. Our borrowing availability of $7,133,000$10,368,000 at March 31,June 30, 2023, included a requirement from our lender that we maintain a minimum of $3,000,000 in borrowing availability under our revolving credit until the minimum fixed FCCR requirement for the quarter ended June 30, 2023, has been met and certified to our lender. Although weAs a result of the new term loan in the amount of $2,500,000, our borrowing availability was increased by the amount on July 31, 2023, subject to eligible receivables and certain reserves. We believe that our cash flows from operations, our available liquidity from our credit facility, and our cash on hand should be sufficient to fund our operations for the next twelve months, we continue to work toward improving our liquidity by either amending our existing lines of credit, obtaining new term loans or entering into equity transactions. There are no assurances that we will be successful in increasing our liquidity through these efforts.

 

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The following table reflects the cash flow activities during the first threesix months of 2023:

 

(In thousands)      
Cash provided by operating activities of continuing operations $1,762  $4,762 
Cash used in operating activities of discontinued operations  (198)  (336)
Cash used in investing activities of continuing operations  (748)  (1,047)
Cash used in financing activities of continuing operations  (204)  (290)
Effect of exchange rate changes in cash  5 
Increase in cash and finite risk sinking fund (restricted cash) $612  $3,094 

 

At March 31,June 30, 2023, we were in a positive cash position with no revolving credit balance. At March 31,June 30, 2023, we had cash on hand of approximately $2,411,000.$4,750,000. As a result of an amendment dated July 31, 2023, that we entered into with our lender which provided a new term loan to us of $2,500,000, our cash was increased by the amount of the new term loan on the date of the amendment (see “Financing Activities” below for a discussion of this amendment).

 

Operating Activities

Accounts receivable, net of credit losses, totaled $10,881,000$11,930,000 at March 31,June 30, 2023, an increase of $1,517,000$2,566,000 from the December 31, 2022 balance of $9,364,000. The increase was attributed to increased revenue, timing of invoicing, and our accounts receivable collection. Our contracts with our customers are subject to various payment terms and conditions. Our accounts receivable at March 31,June 30, 2023 include invoices for work performed for a certain Canadian project that remain outstanding and subject to negotiations (See discussion under “Known Trends and Uncertainties – Perma-Fix Canada, Inc. (“PF Canada”) for a discussion as to this certain account receivable.

 

Prepaid and other assets totaled $3,800,000$2,735,000 at March 31,June 30, 2023, a decrease of $1,605,000$2,670,000 from the December 31, 2022 balance of $5,405,000. The decrease was primarily due to the receipt of the ERCEmployee Retention Credit (“ERC”) of $1,975,000 in March 2023 that we applied for during the third quarter of 2022.

 

Accounts payable, totaled $11,812,000$13,896,000 at March 31,June 30, 2023, an increase of $1,487,000$3,571,000 from the December 31, 2022 balance of $10,325,000. Our accounts payable are impacted by the timing of payments as we are continually managing payment terms with our vendors to maximize our cash position throughout all segments.

 

We had working capital of $339,000$1,704,000 (which included working capital of our discontinued operations) at March 31,June 30, 2023, as compared to working capital of $818,000 at December 31, 2022. The decreaseincrease in our working capital was primarily due to increases in our cash and accounts payable and accruals which were mostlyunbilled receivables from improved operations. The overall increase was offset by increasesthe increase in our accounts and unbilled receivables.payable.

 

Investing Activities

For the threesix months ended March 31,June 30, 2023, our purchases of capital equipment totaled approximately $798,000,$1,204,000, of which $50,000$157,000 was subject to financing, with the remaining funded from cash from operations and our credit facility. We have budgeted approximately $2,000,000 for 2023 capital expenditures primarily for our Treatment and Services Segments to maintain operations and regulatory compliance requirements and support revenue growth. Certain of these budgeted projects may either be delayed until later years or deferred altogether. We plan to fund our capital expenditures from cash from operations, our new term loan, and/or financing.financing (see “Financing Activities” for a discussion of an amendment to our credit facility which provided for a new term loan to us dated July 31, 2023). The initiation and timing of projects are also determined by financing alternatives or funds available for such capital projects.

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During March 2022, we signed a joint venture term sheet addressing plans to partner with Springfields Fuels Limited (“SFL”), an affiliate of Westinghouse Electric Company LLC, to develop and manage a nuclear waste-materials treatment facility (the “Facility”) in the United Kingdom. The Facility is for the purpose of expanding the partners’ waste treatment capabilities for the European nuclear market. It is expected that upon finalization of a partnership agreement, SFL will have an ownership interest of fifty-five (55) percent and our interest will be forty-five (45) percent. The finalization, form and capitalization of this unpopulated partnership is subject to numerous conditions, including but not limited to, winning a certain contract, completion and execution of a definitive agreement and facility design, granting of required regulatory, lender or permitting approvals and updated cost and profitability analysis based on current and forecast future economic conditions. Upon finalization of this venture, we will be required to make an investment in this venture. The amount of our investment, the period of which it is to be made and the method of funding are to be determined.

 

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Financing Activities

We entered into a Second Amended and Restated Revolving Credit, Term Loan and Security Agreement, dated May 8, 2020 (“Loan Agreement”), with PNC National Association (“PNC”), acting as agent and lender. The Loan Agreement, as amended, provides us with the following credit facility with a maturity date of May 15, 2024: (a) up to $12,500,000 revolving credit (“revolving credit”)2024 (see below for a discussion of an amendment that we entered into with our lender on March 21,July 31, 2023, which reducedextended the maximummaturity date to May 15, 2027 and provided a new term loan of $2,500,000 to us, among other things below): (a) up to $12,500,000 revolving credit to $12,500,000 from the previous amount of $18,000,000)(“revolving credit”). The maximum that we can borrow under the revolving credit is based on a percentage of eligible receivables (as defined) at any one time reduced by outstanding standby letters of credit and borrowing reductions that our lender may impose from time to time; (b) a term loan (“term loan”) of approximately $1,742,000, requiring monthly installments of $35,547; and (c) a capital expenditure line (“capital loan”) of up to $1,000,000 with advances on the line, subject to certain limitations, permitted for up to twelve months starting May 4, 2021 (the “Borrowing Period”). Only interest was payable on advances during the Borrowing Period. Amount advanced under the capital line at the end of the Borrowing Period totaled approximately $524,000 which requires monthly installments in principal of approximately $8,700 plus interest, starting June 1, 2022. At March 31,June 30, 2023, balance on the capital line was approximately $437,000. At the maturity date of the Loan Agreement, as amended, any unpaid principal balance plus interest, if any, will become due.$410,000.

 

On March 21, 2023, we entered into an amendment to our Loan Agreement, as amended, with our lender which provides, among other things, the following:

 

removed the FCCR testing requirement for the fourth quarter of 2022 and removes the FCCR testing requirement the first quarter of 2023;
reduced the maximum revolving credit line under the credit facility from $18,000,000 to $12,500,000;
reinstates the quarterly FCCR testing requirement starting in the second quarter of 2023 using a trailing twelve-month period (with no change to the minimum 1.15:1 ratio requirement for each quarter); and
requires maintenance of a minimum of $3,000,000 in borrowing availability under the revolving credit until the minimum FCCR requirement for the quarter ended June 30, 2023 has been met and certified to the lender.

 

In connection with the amendment, we paid our lender a fee of $25,000 which is being amortized over the remaining term of the Loan Agreement, as amended, as interest expense-financing fees.

 

Pursuant to the Loan Agreement, as amended, payment of annual rate of interest due on the revolving credit is at prime (8.00%(8.25% at March 31,June 30, 2023) plus 2% or Term Secured Overnight Finance Rate (“SOFR”)SOFR (as defined in the Loan Agreement, as amended) plus 3.00% plus an SOFR Adjustment applicable for an interest period selected by us and payment of annual rate of interest due on the term loan and the capital expenditure line is at prime plus 2.50% or Term SOFR Rate plus 3.50% plus an SOFR Adjustment applicable for an interest period selected by us. A SOFR Adjustment rates of 0.10% and 0.15% are applicable for a one-month interest period and three-month period, respectively, that may be selected by us.

 

After May 7, 2022, the Company may terminate its Loan Agreement, as amended, upon 90 days’ prior written notice upon payment in full of our obligations under the Loan Agreement, as amended, with no early termination fees.

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On July 31, 2023, we entered into an amendment (the “July 31, 2023 Amendment”) with PNC to our Loan Agreement, as amended. The July 31, 2023 Amendment provided the following, among other things:

extended the maturity date of our Loan Agreement, as amended, to May 15, 2027, from May 15, 2024;
an additional term loan (“Additional Term Loan”) to us in the amount of $2,500,000, requiring monthly installments of approximately $41,667. Payment of annual rate of interest due on the Additional Term Loan is at prime plus 3.00% or SOFR plus 4.00% plus an SOFR Adjustment applicable for an interest period selected by the Company. A SOFR Adjustment rate of 0.10% and 0.15% is applicable for a one-month interest period and three-month period, respectively, that may be selected by us;
removed the minimum Tangible Adjusted Net Worth (as defined in the agreement) covenant requirement;
placed an indefinite reduction in borrowing availability of $750,000; and
allows for up to $2,500,000 in capital expenditure made in fiscal year 2023 and thereafter to be treated as financed capital expenditure in our quarterly FCCR covenant calculation requirement.

Pursuant to the July 31, 2023 Amendment, we agreed to pay PNC 1.0% of the total financing under our Loan Agreement, as amended, in the event we pay off our obligations on or before July 31, 2024, and 0.5% of the total financing if we pay off our obligations after July 31, 2024, to and including July 31, 2025. No early termination fee shall apply if we pay off our obligations under our Loan Agreement, as amended, after July 31, 2025.

In connection with the July 31, 2023 Amendment, we paid our lender a fee of $100,000.

All other terms of our Loan Agreement, as amended, remain principally unchanged.

 

Our credit facility under our Loan Agreement, as amended, with PNC contains certain financial covenants, along with customary representations and warranties. A breach of any of these financial covenants, unless waived by PNC, could result in a default under our credit facility allowing our lender to immediately require the repayment of all outstanding debt under our credit facility and terminate all commitments to extend further credit. We were not required to perform testing of the FCCR requirement in the first quarter of 2023 pursuant to the March 21, 2023 amendment as discussed above, otherwise, we met all of our other financial covenant requirements. We met our financial covenant requirements for the second quarter of 2023. We expect to meet our quarterly financial covenant requirements for the next twelve months under our Loan Agreement, as amended.

 

Off Balance Sheet Arrangements

From time to time, we are required to post standby letters of credit and various bonds to support contractual obligations to customers and other obligations, including facility closures. At March 31,June 30, 2023, the total amount of standby letters of credit outstanding totaled approximately $3,016,000$3,200,000 and the total amount of bonds outstanding totaled approximately $27,321,000.$31,870,000. We also provide closure and post-closure requirements through a financial assurance policy for certain of our Treatment Segment facilities through AIG. At March 31,June 30, 2023, the closure and post-closure requirements for these facilities were approximately $22,454,000.$22,461,000.

 

Critical Accounting Policies and Estimates

There were no significant changes in our accounting policies or critical accounting estimates that are discussed in our Annual Report on Form 10-K for the year ended December 31, 2022.

 

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Recent Accounting Pronouncements

See “Note 2 – Summary of Significant Accounting Policies” in the “Notes to Condensed Consolidated Financial Statements” for the recent accounting pronouncements that will be adopted in future periods.

Known Trends and Uncertainties

Significant Customers. Our Treatment and Services Segments have significant relationships with the U.S governmental authorities through contracts entered into indirectly as subcontractors for others who are prime contractors or directly as the prime contractor to government authorities. We also had significant relationships with Canadian government authorities primarily through TOAs entered into with Canadian government authorities. Project work under all TOAs with Canadian government authorities has substantially been completed. The contracts that we are a party to with others as subcontractors to the U.S federal government or directly with the U.S federal government generally provide that the government may terminate the contract at any time for convenience at the government’s option. The contracts/TOAs that we are/were a party to with Canadian governmental authorities also generally provide that the government authorities may terminate the contracts/TOAs at any time for any reason for convenience. Our inability to continue under existing contracts that we have with the U.S government (directly or indirectly as a subcontractor) or significant reductions in the level of governmental funding in any given year could have a material adverse impact on our operations and financial condition.

We performed services relating to waste generated by government clients (domestic and foreign (primarily Canadian)), either indirectly as a subcontractor or directly as a prime contractor or indirectly for others as a subcontractor to government entities, representing approximately $17,247,000$21,899,000 or 85.8%87.5% and $39,146,000 or 86.7% of our total revenuerevenues generated during the three and six months ended March 31,June 30, 2023, respectively, as compared to $14,158,000$17,053,000 or 89.0%87.7% and $31,211,000 or 88.2% of our total revenuerevenues generated during the corresponding period ofthree and six months ended June 30, 2022.

Perma-Fix Canada, Inc. (“PF Canada”)

During the fourth quarter of 2021, PF Canada received a Notice of Termination (“NOT”) from Canadian Nuclear Laboratories, LTD. (“CNL”) on a TOA that PF Canada entered into with CNL in May 2019 for remediation work within Ontario, Canada (“Agreement”). The NOT was received after work under the TOA was substantially completed and work under the TOA has since been completed. CNL may terminate the TOA at any time for convenience. As of March 31,June 30, 2023, PF Canada has approximately $1,855,000$1,895,000 in unpaid receivables due from CNL as a result of work performed under the TOA. Additionally, CNL has approximately $1,061,000$1,084,000 in contractual holdback under the TOA that is payable to PF Canada. CNL also established a bond securing approximately $1,900,000 (CAD) to cover certain issues raised in connection with the TOA. Under the TOA, CNL may be entitled to set off certain costs and expenses incurred by CNL in connection with the termination of the TOA, including the bond as discussed above, against amounts owed to PF Canada for work performed by PF Canada or its subcontractors. PF Canada continues to be in discussions with CNL to finalize the amounts due to PF Canada under the TOA and continues to believe these amounts are due and payable to PF Canada.

 

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Potential Partnership with Springfields Fuels Limited. As discussed above, we have signed a term sheet addressing plans to partner with Springfields Fuels Limited, an affiliate of Westinghouse Electric Company LLC, to develop and manage a nuclear waste-materials treatment facility in the United Kingdom. See “Liquidity and Capital Resources – Investing Activities” of this MD&A for a discussion of this transaction.

 

Inflation and Supply Chain. Our financial results have been negatively impacted from the effects of inflation, supply chain issues, labor shortage, and higher interest rates from the countries’ macroeconomic concerns due, in part, from the impact of COVID-19. Continued increases in any of our operating costs, including utility, transportation, wage rates, and supply costs, may further increase our overall cost of goods sold or operating expenses. Additionally, as previously disclosed, labor shortages and supply chain issues had previously impacted production at certain of our facilities which impacted our financial results. We may attempt to increase our sales prices in order to maintain satisfactory margin from the effect of these factors is discussed above; however, competitive pressures in our industry may have the effect of inhibiting our ability to reflect these increased costs in the prices of our services that we provide to our customers and therefore reduce our profitability.

 

Environmental Contingencies

 

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

 

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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. In the past, numerous third-party disposal sites have improperly managed waste and consequently require remedial action; consequently, any party utilizing these sites may be liable for some or all of the remedial costs. Despite our aggressive compliance and auditing procedures for disposal of wastes, we could further be notified, in the future, that we are a potentially responsible party (“PRP”) at a remedial action site, which could have a material adverse effect.

 

We have three environmental remediation projects, all within our discontinued operations, which principally entail the removal/remediation of contaminated soil, and, in most cases, the remediation of surrounding ground water. We expect to fund the expenses to remediate these sites from funds generated from operations. At March 31,June 30, 2023, we had total accrued environmental remediation liabilities of $861,000 with no change from the December 31, 2022 balance. At March 31,June 30, 2023, $112,000 of the total accrued environmental liabilities was recorded as current.

 

Item 3.Quantitative and Qualitative Disclosures about Market Risks

 

Not required for smaller reporting companies.

 

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Item 4.Controls and Procedures

(a)Evaluation of disclosure controls and procedures.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic reports filed with the Securities and Exchange Commission is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and that such information is accumulated and communicated to our management. As of the end of the period covered by this report, we carried out an evaluation with the participation of our Principal Executive Officer and Principal Financial Officer. Based on this recent assessment, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) were effective as of March 31,June 30, 2023.

 

(b)

Changes in internal control over financial reportingreporting.

There was no other change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

There was no other change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

 

Item 1.Legal Proceedings

 

There are no 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, 2022. Additionally, there has been no other material change in legal proceedings previously disclosed by us in our Form 10-K for the year ended December 31, 2022.

 

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Item 1A.Risk Factors

 

There has been no other material change from the risk factors previously disclosed in our Form 10-K for the year ended December 31, 2022, exceptand our Form 10-Q for the following under “Risks Relating to our Business Operations.”quarter ended March 31, 2023.

 

Climate change could have a negative impact to the Company’s result of operations and financial condition.

Climate change may present both immediate and long-term risks to the Company and our customers and the risks may increase over time. Climate risks can arise from both physical risks (those risks related to the physical effects of climate change) and transition risks (risks related to governmental regulatory requirements, legal technology, market and reputational changes from a transition to a low carbon economy). Climate change could have a material, adverse effect on environmental companies like ours that are involved in the treatment, disposal and other services related to hazardous waste, radioactive waste and/or mixed (waste that contain both hazardous and radioactive) waste by changing or restricting how we perform our services or what services we can perform or taking action that materially increases our costs to do business in order to regulate or reduce climate change.

The collapse of certain U.S. banks and potentially other financial institutions could adversely affect our business, financial condition and results of operations.

Recent negative developments affecting the banking industry, and resulting media coverage, have eroded confidence in the banking system. Concerns regarding the financial systems could result in less favorable commercial financing terms, including higher interest rates, costs, tighter financial and operating covenants, and systemic limitations on access to credit and liquidity sources, thereby making it more difficult for us to acquire capital on acceptable terms, when needed. Additionally, recent developments affecting the banking industry have generated significant market volatility and consumer confidence which in turn, could result in reduced demands for our services which could negatively impact our business operations, financial condition, and results of operations.

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Item 6.Exhibits

(a)Exhibits

3(ii)Second Amended and Restated Bylaws of Perma-Fix Environmental Services, Inc., as amended effective April 20, 2023, as incorporated by reference from Exhibit 3(ii) to the Company’s Form 8-K filed on April 26, 2023.
4.1SixthSeventh Amendment to Second Amended and Restated Revolving Credit, Term Loan and Security Agreement dated March 21,July 31, 2023, between Perma-Fix Environmental Services, Inc. and PNC Bank, National Association, as incorporated by reference from Exhibit 4.3 to the Company’s 2022 Form 10-K filed on March 23, 2023.Association.
10.14.2Term Note dated July 31, 2023, Incentive Compensation Plan for Chief Executive Officer, effective January 1, 2023, as incorporated by reference from Exhibit 99.1 to the Company’s Form 8-K filed on January 23, 2023. CERTAIN INFORMATION WITHIN THIS EXHIBIT HAS BEEN EXCLUDED BECAUSE IT IS NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE COMPANY IF PUBLICLY DISCLOSED.
10.22023 Incentive Compensation Plan for Chief Financial Officer, effective January 1, 2023, as incorporated by reference from Exhibit 99.2 to the Company’s Form 8-K filed on January 23, 2023. CERTAIN INFORMATION WITHIN THIS EXHIBIT HAS BEEN EXCLUDED BECAUSE IT IS NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE COMPANY IF PUBLICLY DISCLOSED.
10.32023 Incentive Compensation Plan for Executive Vice President of Strategic Initiatives, effective January 1, 2023, as incorporated by reference from Exhibit 99.3 to the Company’s Form 8-K filed on January 23, 2023. CERTAIN INFORMATION WITHIN THIS EXHIBIT HAS BEEN EXCLUDED BECAUSE IT IS NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE COMPANY IF PUBLICLY DISCLOSED.
10.42023 Incentive Compensation Plan for Executive Vice President of Nuclear and Technical Services, effective January 1, 2023, as incorporated by reference from Exhibit 99.4 to the Company’s Form 8-K filed on January 23, 2023. CERTAIN INFORMATION WITHIN THIS EXHIBIT HAS BEEN EXCLUDED BECAUSE IT IS NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE COMPANY IF PUBLICLY DISCLOSED.
10.52023 Incentive Compensation Plan for Executive Vice President of Waste Treatment Operations, effective January 1, 2023, as incorporated by reference from Exhibit 99.5 to the Company’s Form 8-K filed on January 23, 23. CERTAIN INFORMATION WITHIN THIS EXHIBIT HAS BEEN EXCLUDED BECAUSE IT IS NOT MATERIAL AND WOULD LLIKELY CAUSE COMPETITIVE HARM TO THE COMPANY IF PUBLICLY DISCLOSED.
10.6Incentive Stock Option Agreement between Perma-Fix Environmental Services, Inc. and Chief Executive Officer, dated January 19, 2023, as incorporated by reference from Exhibit 99.6 to the Company’s Form 8-K filed on January 23, 2023.
10.7Incentive Stock Option Agreement between Perma-Fix Environmental Services, Inc. and Chief Financial Officer, dated January 19, 2023, as incorporated by reference from Exhibit 99.7 to the Company’s Form 8-K filed on January 23, 2023.
10.8Incentive Stock Option Agreement between Perma-Fix Environmental Services, Inc. and EVP of Strategic Initiatives, dated January 19, 2023, as incorporated by reference from Exhibit 99.8 to the Company’s Form 8-K filed on January 23, 2023.
10.9Incentive Stock Option Agreement between Perma-Fix Environmental Services, Inc. and EVP of Nuclear and Technical Services, dated January 19, 2023, as incorporated by reference from Exhibit 99.9 to the Company’s Form 8-K filed on January 23, 2023.
10.10Incentive Stock Option Agreement between Perma-Fix Environmental Services, Inc. and EVP of Waste Treatment Operations, dated January 19, 2023, as incorporated by reference from Exhibit 99.10 to the Company’s Form 8-K filed on January 23, 2023.
10.11Employment Agreement dated April 20, 2023 between Mark Duff, Chief Executive Officer and Perma-Fix Environmental Services, Inc., as incorporated by reference from Exhibit 99.1 to the Company’s Form 8-K filed on April 26, 2023.

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10.12Employment Agreement dated April 20, 2023 between Ben Naccarato, Chief Financial Officer and Perma-Fix Environmental Services, Inc., as incorporated by reference from Exhibit 99.2 to the Company’s Form 8-K filed on April 26, 2023.
10.13Employment Agreement dated April 20, 2023 between Dr. Louis Centofanti, EVP of Strategic Initiatives and Perma-Fix Environmental Services, Inc., as incorporated by reference from Exhibit 99.3 to the Company’s Form 8-K filed on April 26, 2023.
10.14Employment Agreement dated April 20, 2023 between Andrew Lombardo, EVP of Nuclear and Technical Services and Perma-Fix Environmental Services, Inc., as incorporated by reference from Exhibit 99.4 to the Company’s Form 8-K filed on April 26, 2023.
10.15Employment Agreement dated April 20, 2023 between Richard Grondin, EVP of Waste Treatment Operations and Perma-Fix Environmental Services, Inc., as incorporated by reference from Exhibit 99.5 to the Company’s Form 8-K filed on April 26, 2023.PNC Bank, National Association.
31.1Certification by Mark Duff, Chief Executive Officer of the Company pursuant to Rule 13a-14(a) or 15d-14(a).
31.2Certification by Ben Naccarato, Chief Financial Officer of the Company pursuant to Rule 13a-14(a) or 15d-14(a).
32.1Certification by Mark Duff, Chief Executive Officer of the Company furnished pursuant to 18 U.S.C. Section 1350.
32.2Certification by Ben Naccarato, Chief Financial Officer of the Company furnished pursuant to 18 U.S.C. Section 1350.
101.INSInline XBRL Instance Document*
101.SCHInline XBRL Taxonomy Extension Schema Document*
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document*
101.LABInline XBRL Taxonomy Extension Labels Linkbase Document*
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document*
104Cover Page Interactive Data File (formatted as an Inline XBRL document and included in Exhibit 101).

* Pursuant to Rule 406T of Regulation S-T, the Interactive Data File in Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purpose of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

 

* Pursuant to Rule 406T of Regulation S-T, the Interactive Data File in Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purpose of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

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SIGNATURES

 

Pursuant to the requirements of the Securities and 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
   
Date: May 10,August 3, 2023By:/s/ Mark Duff
 

Mark Duff
President and Chief (Principal) Executive Officer
   
Date: May 10,August 3, 2023By:/s/ Ben Naccarato
 Ben Naccarato
 Chief (Principal) Financial Officer

 

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