================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
_______________________
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to _________
Commission File No. 1-11596
______________
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
(Exact name of registrant as specified in its charter)
Delaware 58-1954497
(State or other jurisdiction (IRS Employer
of incorporation or organization Identification Number)
1940 N.W. 67th Place, Gainesville, FL 32653
(Address of principal executive offices) (Zip Code)
(352) 373-4200
(Registrant's telephone number)
N/A
____________________________________________________
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
______ ______
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the close of the latest
practical date.
Class Outstanding at November 12, 1998
_____ ________________________________
Common Stock, $.001 Par Value 12,270,093
_____________________________ __________
(excluding 920,000 shares
held as treasury stock)
_________________________
=================================================================
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
INDEX
Page No.
________
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets -
September 30, 1998 and
December 31, 1997. . . . . . . . . . . . 2
Consolidated Statements of Operations -
Three Months and Nine Months Ended
September 30, 1998 and 1997 . . . . . . . 4
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1998
and 1997 . . . . . . . . . . . . . . . . 5
Consolidated Statements of Stockholder
Equity - September 30, 1998 and
December 31, 1997 . . . . . . . . . . . 6
Notes to Consolidated Financial
Statements . . . . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations . . . . . . . . . . . . . . 16
PART II OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . 25
Item 2. Changes in Securities and Use of
Proceeds . . . . . . . . . . . . . . . . 25
Item 5. Other Information. . . . . . . . . . . . . 29
Item 6. Exhibits and Reports on Form 8-K . . . . . 32
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED FINANCIAL STATEMENTS
PART I, ITEM 1
The consolidated financial statements included herein have
been prepared by the Company, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain
information and note disclosures normally included in financial
statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to
such rules and regulations, although the Company believes the
disclosures which are made are adequate to make the information
presented not misleading. Further, the consolidated financial
statements reflect, in the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to
present fairly the financial position and results of operations as
of and for the periods indicated.
It is suggested that these consolidated financial statements
be read in conjunction with the consolidated financial statements
and the notes thereto included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1997.
The results of operations for the nine months ended
September 30, 1998, are not necessarily indicative of results to be
expected for the fiscal year ending December 31, 1998.
1
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
September 30,
(Amounts in Thousands, 1998 December 31,
Except for Share Amounts) (Unaudited) 1997
___________________________________________________________________
ASSETS
Current assets:
Cash and cash equivalents $ 827 $ 314
Restricted cash equivalents
and investments 112 321
Accounts receivable, net of
allowance for doubtful accounts
of $308 and $374, respectively 5,363 5,282
Insurance claim receivable - 1,475
Inventories 124 119
Prepaid expenses 745 567
Other receivables 15 70
Assets of discontinued operations 471 587
_________ ________
Total current assets 7,657 8,735
Property and equipment:
Buildings and land 5,714 5,533
Equipment 8,822 7,689
Vehicles 1,191 1,202
Leasehold improvements 16 16
Office furniture and equipment 968 1,056
Construction in progress 1,351 1,052
_________ ________
18,062 16,548
Less accumulated depreciation (6,284) (5,564)
_________ ________
Net property and equipment 11,778 10,984
Intangibles and other assets:
Permits, net of accumulated amorti-
zation of $1,021 and $831,
respectively 3,688 3,725
Goodwill, net of accumulated amorti-
zation of $706 and $580,
respectively 4,743 4,701
Other assets 540 425
________ ________
Total assets $ 28,406 $ 28,570
======== ========
The accompanying notes are an integral part of
these consolidated financial statements.
2
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED BALANCE SHEETS, CONTINUED
September 30,
(Amounts in Thousands, 1998 December 31,
Except for Share Amounts) (Unaudited) 1997
___________________________________________________________________
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,852 $ 2,263
Accrued expenses 2,897 3,380
Revolving loan and term note
facility 625 614
Current portion of long-term debt 269 254
Current liabilities of discontinued
operations 628 1,470
_________ _______
Total current liabilities 6,271 7,981
Environmental accruals 405 525
Accrued closure costs 856 831
Long-term debt, less current portion 2,119 3,997
Long-term liabilities of discontinued
operations 2,839 3,042
_________ _______
Total long-term liabilities 6,219 8,395
Commitments and contingencies
(see Note 4) - -
Stockholders' equity:
Preferred Stock, $.001 par value;
2,000,000 shares authorized,
9,850 and 6,850 shares issued
and outstanding, respectively - -
Common Stock, $.001 par value;
50,000,000 shares authorized,
13,181,107 and 12,540,487 shares
issued, including 920,000
shares held as treasury stock 13 12
Redeemable warrants 140 140
Additional paid-in capital 38,073 34,363
Accumulated deficit (20,540) (20,551)
________ _______
17,686 13,964
Less Common Stock in treasury at
cost; 920,000 shares issued
and outstanding (1,770) (1,770)
________ _______
Total stockholders' equity 15,916 12,194
________ _______
Total liabilities and
stockholders' equity $ 28,406 $ 28,570
======== ========
The accompanying notes are an integral part of
these consolidated financial statements.
3
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
September 30,
(Amounts in Thousands, __________________________
Except for Share Amounts) 1998 1997*
___________________________________________________________________
Net revenues $ 8,065 $ 6,921
Cost of goods sold 5,292 4,630
________ ________
Gross profit 2,773 2,291
Selling, general and administrative
expenses 1,708 1,347
Depreciation and amortization 531 490
________ ________
Income from operations 534 454
Other income (expense):
Interest income 10 11
Interest expense (95) (71)
Other 40 118
________ ________
Net income from
continuing operations 489 512
Loss from discontinued operations - (355)
________ _________
Net income (loss) 489 157
Preferred Stock dividends 115 99
________ _________
Net income (loss) applicable
to Common Stock $ 374 $ 58
======== =========
_________________________________________
Basic income (loss) per common share:
Continuing operations $ 0.3 $ .04
Discontinued operations - (.03)
________ ________
Net income (loss) per share $ .03 $ .01
======== =========
Diluted income (loss) per common share:
Continuing operations $ 0.2 $ .03
Discontinued operations - (.02)
________ ________
Net income (loss) per share $ .02 $ .01
======== ========
Basic weighted average common
shares outstanding 12,164 11,090
======== ========
Diluted weighted average common shares
and dilutive securities outstanding 25,018 17,516
======== ========
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Nine Months Ended
September 30,
(Amounts in Thousands, __________________________
Except for Share Amounts) 1998 1997*
___________________________________________________________________
Net revenues $ 22,291 $19,368
Cost of goods sold 15,317 13,492
________ ________
Gross profit 6,974 5,876
Selling, general and administrative
expenses 4,942 4,072
Depreciation and amortization 1,566 1,487
________ ________
Income from operations 466 317
Other income (expense):
Interest income 27 31
Interest expense (364) (331)
Other 172 89
________ ________
Net income from
continuing operations 301 106
Loss from discontinued operations - (1,308)
________ _________
Net income (loss) 301 (1,202)
Preferred Stock dividends 291 262
________ _________
Net income (loss) applicable
to Common Stock $ 10 $ (1,464)
======== =========
_________________________________________
Basic income (loss) per common share:
Continuing operations $ - $ (.01)
Discontinued operations - (.13)
________ ________
Net income (loss) per share $ - $ (.14)
======== ========
Diluted income (loss) per common share:
Continuing operations $ - $ (.01)
Discontinued operations - (.13)
________ ________
Net income (loss) per share $ - $ (.14)
======== ========
Basic weighted average common
shares outstanding 11,947 10,340
======== ========
Diluted weighted average common shares
and dilutive securities outstanding 11,947 10,340
======== ========
<FN>
*Amounts have been restated from that previously reported to
reflect the discontinued operations at Perma-Fix of Memphis, Inc.
(See Note 2).
</FN>
The accompanying notes are an integral part of
these consolidated financial statements.
4
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
(Amounts in Thousands, __________________________
Except for Share Amounts) 1998 1997*
___________________________________________________________________
Cash flows from operating activities:
Net income from continuing
operations $ 301 $ 106
Adjustments to reconcile net loss
to cash provided by operations:
Depreciation and amortization 1,566 1,487
Provision for bad debt and other
reserves 30 52
Gain on sale of plant, property
and equipment (12) (1)
Changes in assets and liabilities,
net of effects from business
acquisitions:
Accounts receivable (97) (118)
Prepaid expenses, inventories and
other assets 1,112 913
Accounts payable and accrued expenses (713) (1,748)
________ ________
Net cash provided by continuing
operations 2,187 691
________ ________
Net cash used by discontinued operations (903) (1,309)
Cash flows from investing activities:
Purchases of property and equipment,
net (1,640) (887)
Proceeds from sale of plant,
property and equipment 14 46
Change in restricted cash, net 196 (67)
Net cash used by discontinued
operations (4) (41)
________ _________
Net cash used in investing
activities (1,434) (949)
Cash flows from financing activities:
Repayments) of revolving loan
and term note facility (2,028) (1,097)
Principal repayments on long-term debt (186) (645)
Proceeds from issuance of stock 2,915 3,380
Net cash used by discontinued
operations (52) (6)
________ ________
Net cash provided by
financing activities 649 1,632
Increase in cash and cash equivalents 499 65
Cash and cash equivalents at beginning
of period including discontinued
operations of $12, and $8,
respectively 326 45
________ ________
Cash and cash equivalents at end
of period, including discontinued
operations of ($2), and ($5),
respectively $ 825 $ 110
======== ========
________________________________________________________________
Supplemental disclosure:
Interest paid $ 455 $ 530
Non cash investing and financing
activities:
Issuance of Common Stock for services 230 68
Long-term debt incurred for purchase
of property 330 256
Issuance of stock for payment of
dividends 359 314
<FN>
*Amounts have been restated from that previously reported to
reflect the discontinued operations at Perma-Fix of Memphis, Inc.
(see Note 2).
</FN>
The accompanying notes are an integral part of
these consolidated financial statements.
5
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(For the nine months ended September 30, 1998)
Preferred Stock Common Stock
Amounts in Thousands, _________________ _________________
Except for Share Amounts Shares Amount Shares Amount
______________________________________________________________________________
Balance at December 31, 1997 6,850 $ - 12,540,487 $ 12
Net income - - - -
Issuance of Common Stock for
Preferred Stock dividend - - 175,825 1
Issuance of Preferred Stock 3,000 - - -
Issuance of Common Stock
for acquisition - - 108,207 -
Issuance of stock for cash
and services - - 165,488 -
Exercise of warrants - - 190,100 -
Option Exercise - - 1,000 -
_______ _______ __________ _______
Balance at September 30,
1998 9,850 $ - 13,181,107 $ 13
======= ======= ========== =======
Common
Additional Stock
Redeemable Paid-In Accumulated Held in
Warrants Capital Deficit Treasury
_________________________________________________________
$ 140 $ 34,363 $ (20,551) $ (1,770)
- - 11 -
- 358 - -
- 2,653 - -
- 207 - -
- 263 - -
- 228 - -
- 1 - -
________ ________ __________ __________
$ 140 $ 38,073 $ (20,540) $ (1,770)
======== ======== ========== ==========
The accompanying notes are an integral part of these
consolidated financial statements.
6
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
Reference is made herein to the notes to consolidated
financial statements included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1997.
1. Summary of Significant Accounting Policies
__________________________________________
The Company's accounting policies are as set forth in the
notes to consolidated financial statements referred to above.
Certain amounts in prior years' consolidated financial
statements have been reclassified to conform to current period
financial statement presentations.
The Company considers all highly liquid investments with
initial maturities of three months or less to be cash equivalents.
Cash equivalents at September 30, 1998, included overnight
repurchase agreements in the approximate amount of $638,000.
Basic income (loss) per share is computed by dividing net
income, after deducting Preferred Stock dividends, by the weighted
average number of common shares outstanding during each period.
Diluted income per share is computed by dividing net income,
before deduction of Preferred Stock dividends, by the weighted
average number of common shares and potentially common shares
outstanding during each period. Diluted income (loss) per share for
the nine months ended September 30, 1997 and 1998 does not include
Common Stock equivalents of 4,117,000 and 7,687,000 respectively as
their effect would be anti-dilutive.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 "Earnings Per Share"
("SFAS 128"). SFAS 128 establishes new standards for computing and
presenting earnings per share ("EPS"). Specifically, SFAS 128 replaces
the presentation of primary EPS with a presentation of basic EPS and
requires dual presentation of basic and diluted EPS on the face of the
income statement for all entities with complex capital structures. SFAS
128 also requires a reconciliation of the numerator and denominator of
the basic EPS computation to the numerator and denominator of the diluted
EPS computation. SFAS 128 was adopted effective December 31, 1997.
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income," ("FAS 130") and No. 131, "Disclosure about
Segments of an Enterprise and Related Information," ("FAS 131"). FAS
130 establishes standards for reporting and displaying comprehensive
income, its components and accumulated balances. FAS 131 establishes
standards for the way that public companies report information about
operating segments in annual financial statements and requires reporting
of selected information about operating segments in interim financial
statements issued to the public. Both FAS 130 and FAS 131 are effective
for periods beginning after December 15, 1997. FAS 130 has no effect on
the Company's financial statements. FAS 131 is effective for the
Company's financial statements and is discussed in Note 5.
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (FAS 133). FAS 133
requires companies to recognize all derivative contracts as either assets
or liabilities in the balance sheet and to measure them at fair value.
FAS 133 is effective for periods beginning after June 15, 1999.
Historically, the Company has not entered into derivative contracts.
Accordingly, FAS 133 is not expected to affect the Company's financial
statements.
7
2. Discontinued Operations
_______________________
On January 27, 1997, an explosion and resulting tank fire
occurred at the Company's subsidiary, Perma-Fix of Memphis, Inc.
("PFM"), a hazardous waste storage, processing and blending
facility, located in Memphis, Tennessee, which resulted in damage
to certain hazardous waste storage tanks located on the facility
and caused certain limited contamination at the facility. Such
occurrence was caused by welding activity performed by employees of
an independent contractor at or near the facility's hazardous waste
tank farm contrary to instructions by PFM. The facility was non-
operational from the date of this event until May 1997, at which
time it began limited operations. Until the time of the incident,
PFM operated as a permitted "fuel blending" facility and serviced
a separate class of customers who generated specific waste streams,
each identified by its waste code and specific characteristics.
As the Company's only such "fuel blending" facility, PFM was
permitted to and capable of mixing certain hazardous liquid, semi-
solid and solid waste in a vat which suspended the solids in order
to pump the mixture into a tank. The tanks also contained mixing
units which kept the solids suspended until the mixture could be
off-loaded into tanker trucks. As a result of the damage to the
tanks and processing equipment and the related cost to rebuild this
operating unit, the Company decided to discontinue this line of
business, which resulted in PFM's inability to service and retain
the existing customer base. The existing customer base represented
principally manufacturing and service companies whose operations
generated certain semi-solid and solid permitted hazardous wastes,
which as a result of permit and processing limitations could not be
served by other Company facilities. The Company continues to
pursue other markets or activities which may be performed at this
facility given the permit limitations, capital requirements and
development of a new line of business and related customer base.
Upon evaluation of the above business decision, and given the loss
of both the existing line of business and its related customer
base, the Company reported the Memphis segment as a discontinued
operation, pursuant to Paragraph 13 of APB 30.
The fuel blending activities were discontinued on the date of
the incident, January 27, 1997. All assets involved in the fuel
blending activities that were not damaged beyond repair in the fire
have subsequently been damaged as a result of the decontamination
process. Accordingly, during the fourth quarter of 1997, the
Company recorded a loss on disposal of discontinued operations of
$3,053,000, which included $1,272,000 for impairment of certain
assets and $1,781,000 for the establishment of certain closure
liabilities.
The net loss from discontinued PFM operations for the nine
months ended September 30, 1998, was $378,000 and was recorded
against the accrued closure cost estimate on the balance sheet.
The net loss for the nine months ended September 30, 1997, was
$1,308,000 and is shown separately in the Consolidated Statements
of Operations. The Company has restated the 1997 operating results
to reflect these discontinued operations. The results of the
discontinued PFM operations do not reflect management fees charged
by the Company, but do include interest expense of $54,000 and
$180,000 during the nine months ended September 30, 1998 and 1997,
respectively, specifically identified to such operations as a
result of such operations incurring debt under the Company's
revolving and term loan credit facility. During March 1998, the
Company received a settlement in the amount of $1,475,000 from its
insurance carrier for the business interruption claim which was
recorded as an insurance claim receivable at December 31, 1997.
This settlement was recognized as a gain in 1997 and thereby
reduced the net loss recorded for the discontinued PFM operations
in 1997.
Revenues of the discontinued PFM operations were $794,000 for
the nine months ended September 30, 1998, and $1,514,000 for the
nine months ended September 30, 1997. These revenues are not
included in revenues as reported in the Consolidated Statements of
Operation.
Net assets and liabilities of the discontinued PFM operations at
the nine months ended September 30, 1998, and December 31, 1997, in
thousands of dollars, consisted of the following:
8
September 30, December 31,
1998 1997
___________ ___________
Assets of discontinued operations:
Cash and cash equivalents $ (2) $ 12
Restricted cash equivalents and investments 218 214
Accounts receivable, net of allowance
for doubtful accounts $101 and $105,
respectively 241 333
Prepaid expenses and other assets 14 28
__________ _________
$ 471 $ 587
========== ==========
Current liabilities of discontinued operations:
Accounts payable $ 225 $ 277
Accrued expenses 134 259
Accrued environmental costs 227 835
Current portion of long-term debt 42 99
_________ _________
$ 628 $ 1,470
======== =========
Long-term liabilities of discontinued operations:
Long-term debt, less current portion $ 7 $ 17
Accrued environmental and closure costs 2,832 3,025
_______ ________
$ 2,839 $ 3,042
======= ========
The accrued environmental and closure costs, as related to
PFM, total $3,059,000 at September 30, 1998, which includes the
Company's current closure cost estimate of approximately $700,000
for the complete cessation of operations and closure of the
facility ("RCRA Closure") based upon guidelines of the Resource
Conservation and Recovery Act of 1976, as amended ("RCRA"). A
majority of this liability relates to the discontinued fuel
blending and tank farm operations and will be recognized over the
next three years. Also included in this accrual is the Company's
estimate of the cost to complete groundwater remediation at the
site of approximately $916,000, the future operating losses as the
Company discontinues its fuel blending operations and certain other
contingent liabilities.
3. Long-Term Debt
______________
Long-term debt consists of the following at September 30, 1998, and
December 31, 1997 (in thousands):
September 30 December 31,
1998 1997
______________ ___________
Revolving loan facility dated
January 15, 1998, collateral-
ized by eligible accounts
receivables, subject to monthly
borrowing base calculation,
variable interest paid monthly
at prime rate plus 1 3/4. $ 52 $ 1,664
Term loan agreement dated January 15,
1998, payable in monthly principal
installments of $52, balance due
in January 2001, variable interest
paid monthly at prime rate plus
1 3/4. 2,083 2,500
Mortgage note agreement payable in
quarterly installments of $15,
plus accrued interest at 10%.
Balance due October 1998 secured
by real property. - 61
Various capital lease and promissory
note obligations, payable 1998 to
2002, interest at rates ranging
from 8.0% to 15.9%. 878 640
______ _______
3,013 4,865
Less current portion of revolving
loan and term note facility 625 614
Less current portion of long-term debt 269 254
_______ ________
$ 2,119 $ 3,997
======= ========
9
On January 15, 1998, the Company, as parent and guarantor,
and all direct and indirect subsidiaries of the Company, as co-
borrowers and cross-guarantors, entered into a Loan and Security
Agreement ("Agreement") with Congress Financial Corporation
(Florida) as lender ("Congress"). The Agreement provides for a
term loan in the amount of $2,500,000, which requires principal
repayments based on a four-year level principal amortization over
a term of 36 months, with monthly principal payments of $52,000.
Payments commenced on February 1, 1998, with a final balloon
payment in the amount of approximately $573,000 due on January 14,
2001. The Agreement also provides for a revolving loan facility in
the amount of $4,500,000. At any point in time the aggregate
available borrowings under the facility are subject to the maximum
credit availability as determined through a monthly borrowing base
calculation, as updated for certain information on a weekly basis,
equal to 80% of eligible accounts receivable accounts of the
Company as defined in the Agreement. The termination date on the
revolving loan facility is also the third anniversary of the
closing date. The Company incurred approximately $237,000 in
financing fees relative to the solicitation and closing of this
loan agreement (principally commitment, legal and closing fees)
which are being amortized over the term of the Agreement.
Pursuant to the Agreement, the term loan and revolving loan
both bear interest at a floating rate equal to the prime rate plus
1 3/4%. The Agreement also provides for a one time rate adjustment
of 1/4%, subject to the Company meeting certain 1998 performance
objectives. The loans also contain certain closing, management and
unused line fees payable throughout the term. The loans are
subject to a 3.0% prepayment fee in the first year, 1.5% in the
second and 1.0% in the third year of the Agreement.
As security for the payment and performance of the Agreement,
the Company granted a first security interest in all accounts
receivable, inventory, general intangibles, equipment and other
assets of the Company and subsidiaries, as well as the mortgage on
two (2) of the Company's facilities. The Agreement contains
affirmative covenants including, but not limited to, certain
financial statement disclosures and certifications, management
reports, maintenance of insurance and collateral. The Agreement
also contains an adjusted net worth financial covenant, as defined
in the Agreement, of $3,000,000.
As of September 30, 1998, the borrowings under the Congress
revolving loan facility totaled $52,000, with borrowing
availability of approximately $3,538,000. The balance under the
Congress term loan at September 30, 1998, was $2,083,000.
During June 1998, the Company entered into a master security
agreement and secured promissory note in the amount of
approximately $317,000 for the purchase and financing of certain
capital equipment at the Perma-Fix of Florida, Inc. facility. The
term of the promissory note is for sixty (60) months, at a rate of
11.58% per annum and monthly installments of approximately $7,000.
As further discussed in Note 2, the long-term debt associated
with the discontinued PFM operation is excluded from the above and
is recorded in the Liabilities of Discontinued Operations total.
The PFM debt obligations total $49,000, of which $42,000 is
current.
4. Commitments and Contingencies
_____________________________
Hazardous Waste
In connection with the Company's waste management services, the
Company handles both hazardous and non-hazardous waste which it
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, the Company could be a potentially responsible party
for the costs of the cleanup notwithstanding any absence of fault on the
part of the Company.
Legal
In the normal course of conducting its business, the Company
is involved in various litigation. There has been no material
changes in legal proceedings from those disclosed previously in the
Company's Form 10-K for year ended December 31, 1997, except as
disclosed below. The Company is not a party to any litigation or
10
governmental proceeding which its management believes could result
in any judgements or fines against it that would have a material
adverse affect on the Company's financial position, liquidity or
results of operations, other than as disclosed in the Company's
Form 10-K.
As previously disclosed in the Form 10-K, the Company received
correspondence dated January 15, 1998 ("PRP Letter"), from the
United States Environmental Protection Agency ("EPA") that it
believes that PFM, a wholly owned subsidiary of the Company, is a
potentially responsible party ("PRP"), as defined under the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980 ("CERCLA"), regarding the remediation of the W. & R.
Drum, Inc. ("Drum") site in Memphis, Tennessee, ("Drum Site"),
primarily as a result of acts by a predecessor of PFM prior to the
time PFM was acquired by the Company. In addition, the EPA has
advised PFM that it has sent PRP letters to approximately 50 other
PRPs as to the Drum Site. The PRP Letter estimated the remediation
costs incurred by the EPA for the Drum Site to be approximately
$1,400,000 as of November 30, 1997. The EPA has orally informed
the Company that such remediation has been substantially completed
as of such date, and that the EPA believes that PFM supplied a
substantial amount of the drums at the Drum Site. During the
second quarter of 1998, PFM and certain other PRPs began
negotiating with the EPA regarding a potential settlement of the
EPA's claims regarding the Drum Site and such negotiations are
currently continuing. During the third quarter of 1998, the
Company extended an offer of $225,000 ($150,000 payable at closing
and the balance payable over a twelve month period) to settle any
potential liability regarding the Drum Site. Based upon
discussions with government officials, the Company believes the
settlement offer will be accepted, however, no assurance can be
made that the Company's current settlement offer will be accepted
or that the Company will be able to settle its claims regarding the
Drum Site in an amount and manner which the Company believes is
reasonable. If PFM cannot reach a settlement which PFM believes
is reasonable, it will continue to vigorously defend against the
EPA's demand regarding remediation costs of the Drum Site. If PFM
is determined to be liable for a substantial portion of the
remediation cost incurred by the EPA at the Drum Site, such could
have a material adverse effect on the Company.
Permits
The Company is subject to various regulatory requirements,
including the procurement of requisite licenses and permits at its
facilities. These licenses and permits are subject to periodic
renewal without which the Company's operations would be adversely
affected. The Company anticipates that, once a license or permit
is issued with respect to a facility, the license or permit will be
renewed at the end of its term if the facility's operations are in
compliance with the applicable regulatory requirements.
Accrued Closure Costs and Environmental Liabilities
The Company maintains closure cost funds to insure the proper
decommissioning of its RCRA facilities upon cessation of
operations. Additionally, in the course of owning and operating
on-site treatment, storage and disposal facilities, the Company is
subject to corrective action proceedings to restore soil and/or
groundwater to its original state. These activities are governed
by federal, state and local regulations and the Company maintains
the appropriate accruals for restoration. The Company has
recorded accrued liabilities for estimated closure costs and
identified environmental remediation costs.
Discontinued Operations
As previously discussed, the Company made the strategic
decision in February 1998 to discontinue its fuel blending
operations at the PFM facility. The Company has, based upon the
best estimates available, recognized accrued environmental and
closure costs in the aggregate amount of $3,059,000. This
liability includes principally, the RCRA closure liability, the
groundwater remediation liability, the potential additional site
investigation and remedial activity which may arise as PFM proceeds
with its closure activities and the Company's best estimate of the
future operating losses as the Company discontinues its fuel
blending operations and other contingent liabilities.
11
Insurance
The business of the Company exposes it to various risks,
including claims for causing damage to property or injuries to
persons or claims alleging negligence or professional errors or
omissions in the performance of its services, which claims could be
substantial. The Company carries general liability insurance which
provides coverage in the aggregate amount of $2 million and an
additional $6 million excess umbrella policy and carries $2 million
per occurrence and $4 million annual aggregate of errors and
omissions/professional liability insurance coverage, which includes
pollution control coverage.
The Company also carries specific pollution liability
insurance for operations involved in the Waste Management Services
segment. The Company believes that this coverage, combined with
its various other insurance policies, is adequate to insure the
Company against the various types of risks encountered.
5. Business Segment Information
____________________________
The Company provides services through two business segments.
The Waste Management Services segment, which provides on-and-off-
site treatment, storage, processing and disposal of hazardous and
non-hazardous industrial and commercial, mixed waste, and
wastewater through its five treatment, storage and disposal
facilities ("TSD facilities"); Perma-Fix Treatment Services, Inc.
("PFTS"), Perma-Fix of Dayton, Inc. ("PFD"), Perma-Fix of Ft.
Lauderdale, Inc. ("PFFL"), Perma-Fix of Florida, Inc. ("PFF") and
PFM. The Company has discontinued all fuel blending activities at
its PFM facility, the principal business segment for this
subsidiary prior to the January 1997 fire and explosion. PFM
currently provides, on a limited basis, an off-site waste storage
and transfer facility and continues to explore other new markets
for utilization of this facility. The Company also provides
through this segment: (i) on-site waste treatment services to
convert certain types of characteristic hazardous wastes into non-
hazardous waste; and (ii) the supply and management of non-
hazardous and hazardous waste to be used by cement plants as a
substitute fuel or raw material source.
The Company also provides services through the Consulting
Engineering Services segment. The Company provides environmental
engineering and regulatory compliance consulting services through
Schreiber, Yonley & Associates in St. Louis, Missouri, and Mintech,
Inc. in Tulsa, Oklahoma. These engineering groups provide
oversight management of environmental restoration projects, air and
soil sampling and compliance reporting, surface and subsurface
water treatment design for removal of pollutants, and various
compliance and training activities.
The accounting policies of the segments are the same as those
described in the summary of significant accounting policies. The
Company evaluates performance based on profit or loss from
continuing operations.
The Company accounts for inter-company sales as a reduction of
"cost of goods sold" and therefore such inter-company sales are not
included in the consolidated revenue total.
The Company's segments are not dependent upon a single
customer, or a few customers, and the loss of any one or more of
which would not have a material adverse effect on the Company's
segment. During the nine months ended September 30, 1998 and 1997,
the Company did not make sales to any single customer that in the
aggregate amount represented more than ten percent (10%) of the
Company's segment revenues.
The table below shows certain financial information by the
Company's segments for nine months ended September 30, 1998 and
1997 and excludes the results of operations of the discontinued
operations. Income (loss) from operations includes revenues less
operating costs and expenses. Marketing, general and
administrative expenses of the corporate headquarters have not been
allocated to the segments. Identifiable assets are those used in
the operations of each business segment, including intangible
assets and discontinued operations. Corporate assets are
principally cash, cash equivalents and certain other assets.
12
Waste Consulting Corporate
Management Engineering and
(Dollars in thousand) Services Services Other Consolidated
_______________________________________________________________________________
1998
Net revenues from
external customers $ 19,102 $ 3,189 $ - $ 22,291
Inter-company revenues 269 395 - 664
Interest income 26 - 1 27
Interest expense 308 39 17 364
Depreciation and
amortization 1,495 59 12 1,566
Income (Loss) from con-
tinuing operations 1,320 91 (1,110) 301
Identifiable assets 11,080 1,845 15,481 28,406
Capital expenditures, net 1,916 12 42 1,970
1997
Net revenues from
external customers $ 15,776 $ 3,592 $ - $ 19,368
Inter-company revenues 834 361 - 1,195
Interest income 29 - 2 31
Interest expense 278 20 33 331
Depreciation and
amortization 1,385 86 16 1,487
Income (Loss) from con-
tinuing operations 1,055 33 (982) 106
Identifiable assets 16,211 2,225 12,879 31,315
Capital expenditures, net 1,122 21 - 1,143
6. Stock Issuance
______________
On or about June 30, 1998, the Company issued to RBB Bank
Aktiengesellschaft, located in Graz, Austria ("RBB Bank"), 3,000
shares of newly-created Series 10 Class J Convertible Preferred
Stock, par value $.001 per share ("Series 10 Preferred"), at a
price of $1,000 per share, for an aggregate sales price of
$3,000,000. The sale to RBB Bank was made in a private placement
under Section 4(2) of the Securities Act of 1933, as amended (the
"Act") and/or Rule 506 of Regulation D under the Act, pursuant to
the terms of a Subscription and Purchase Agreement, dated June 30,
1998 between the Company and RBB Bank ("Subscription Agreement").
The net proceeds of $2,768,000 from this private placement, after
the deduction for certain fees and expenses, was received by the
Company on July 14, 1998, and has been recorded as a Preferred
Stock Receivable at June 30, 1998. The Company also accrued at
June 30, 1998, approximately $115,000 for certain additional
closing, legal and related expenses. The Series 10 Preferred has
a liquidation preference over the Company's Common Stock, par value
$.001 per share ("Common Stock"), equal to $1,000 consideration per
outstanding share of Series 10 Preferred (the "Liquidation Value"),
plus an amount equal to all unpaid and accrued dividends thereon.
The Series 10 Preferred accrues dividends on a cumulative basis at
a rate of four percent (4%) per annum of the Liquidation Value
("Dividend Rate"), and is payable semi-annually within ten (10)
business days after each subsequent June 30 and December 31 (each
a "Dividend Declaration Date"), and shall be payable in cash or
shares of the Company's Common Stock at the Company's option. The
first Dividend Declaration Date shall be December 31, 1998. No
dividends or other distributions may be paid or declared or set
aside for payment on the Company's Common Stock until all accrued
and unpaid dividends on all outstanding shares of Series 10
Preferred have been paid or set aside for payment. Dividends may be
paid, at the option of the Company, in the form of cash or Common
Stock of the Company. If the Company pays dividends in Common
Stock, such is payable in the number of shares of Common Stock
equal to the product of (a) the quotient of (i) the Dividend Rate
divided by (ii) the average of the closing bid quotation of the
Common Stock as reported on the NASDAQ for the five trading days
immediate prior to the date the dividend is declared, times (b) a
fraction, the numerator of which is the number of days elapsed
during the period for which the dividend is to be paid and the
denominator of which is 365.
The holder of the Series 10 Preferred may convert into Common
Stock any or all of the Series 10 Preferred on and after 180 days
after June 30, 1998 (December 28, 1998). The conversion price per
13
outstanding share of Preferred Stock ("Conversion Price") is
$1.875; except that if the average of the closing bid price per
share of Common Stock quoted on the NASDAQ (or the closing bid
price of the Common Stock as quoted on the national securities
exchange if the Common Stock is not listed for trading on the
NASDAQ but is listed for trading on a national securities exchange)
for the five (5) trading days immediately prior to the particular
date on which the holder notified the Company of a conversion
("Conversion Date") is less than $2.34, then the Conversion Price
for that particular conversion shall be eighty percent (80 %) of
the average of the closing bid price of the Common Stock on the
NASDAQ (or if the Common Stock is not listed for trading on the
NASDAQ but is listed for trading on a national securities exchange
then eighty percent (80%) of the average of the closing bid price
of the Common Stock on the national securities exchange) for the
five (5) trading days immediately prior to the particular
Conversion Date. As of June 30, 1998, the closing price of Common
Stock on the NASDAQ was $1.875 per share.
As part of the of the sale of the Series 10 Preferred, the
Company also issued to RBB Bank (a) a warrant entitling the holder
to purchase up to an aggregate of 150,000 shares of Common Stock at
an exercise price of $2.50 per share of Common Stock expiring three
(3) years after June 30, 1998 and (b) a warrant entitling the
holder to purchase up to an aggregate of 200,000 shares of Common
Stock at an exercise price of $1.875 per share of Common Stock and
expiring three (3) years after June 30, 1998. Collectively, these
warrants are referred to herein as the "RBB Warrants." The Common
Stock issuable upon the conversion of the Series 10 Preferred and
upon the exercise of the RBB Warrants is subject to certain
registration rights pursuant to the Subscription Agreement.
The Company utilized the proceeds received on the sale of
Series 10 Preferred for working capital and to reduce the
outstanding balance of its credit facilities, subject to the
Company reborrowing under such credit facilities.
In connection with the placement of Series 10 Preferred to RBB
Bank, the Company paid fees (excluding legal and accounting) of
$210,000 and issued to (a) Liviakis Financial Communications, Inc.
("Liviakis") for assistance with the placement of the Series 10
Preferred, warrants entitling the holder to purchase up to an
aggregate of 1,875,000 shares of Common Stock, subject to certain
anti-dilution provisions, at an exercise price of $1.875 per share
of Common Stock which warrants may be exercised after January 15,
1999, and which expire after four (4) years; (b) Robert B. Prag,
an executive officer of Liviakis for assistance with the placement
of the Series 10 Preferred, warrants entitling the holder to
purchase up to an aggregate of 625,000 shares of Common Stock,
subject to certain anti-dilution provisions, at an exercise price
of $1.875 per share of Common Stock, which warrants may be
exercised after January 15, 1999, and which expire after four (4)
years; (c) JW Genesis Financial Corporation for assistance with the
placement of the Series 10 Preferred, warrants entitling the holder
to purchase up to an aggregate of 150,000 shares of Common Stock,
subject to certain anti-dilution provisions, at an exercise price
of $1.875 per share of Common Stock, which warrants expire after
three (3) years; and (d) Fontenoy Investments for assistance with
the placement of the Series 10 Preferred, warrants entitling the
holder to purchase up to an aggregate of 350,000 shares of Common
Stock, subject to certain anti-dilution provisions, at an exercise
price of $1.875 per share of Common Stock, which warrants expire
after three (3) years. Under the terms of each warrant, the holder
is entitled to certain registration rights with respect to the
shares of Common Stock issuable on the exercise of each warrant.
7. Subsequent Events
_________________
During October 1998, the Company entered into a master
security agreement and secured promissory note in the amount of
approximately $207,000 for the purchase and financing of certain
capital equipment at the Perma-Fix of Florida, Inc., Perma-Fix of
Ft. Lauderdale, Inc. and Perma-Fix of Dayton, Inc. facilities. The
term of the promissory note is for sixty (60) months, at a rate of
10.52% per annum and monthly installments of approximately $4,000.
14
On October 14, 1998, the Board of Directors authorized the
repurchase of up to 500,000 shares of the Company's Common Stock
from time to time in open market or privately negotiated
transactions, in accordance with SEC Rule 10b-18. The repurchases
will be at prevailing market prices. The Company will utilize its
current working capital and available borrowings to acquire such
shares.
During November 1998, the Company signed a letter of intent
("Letter") with the shareholders of Chemical Conservation
Corporation (Florida), Chemical Conversation of Georgia, Inc.
(Collectively, "Chem-Con") and Chem-Met Services, Inc. ("Chem-Met")
regarding a potential acquisition of Chem-Con and Chem-Met by the
Company (the "Acquisition"). Chem-Con and Chem-Met generate, on a
consolidated basis, approximately $24 million in revenue, resulting
principally from the collection, treatment, and recycling of
industrial and hazardous waste, including waste oils, water and
miscellaneous solid waste. Chem-Met Services, Inc. treats and
stabilizes inorganic wastes, Chemical Conservation Corporation runs
a Part B-permitted transfer station that also serves as the base
for the private trucking fleet, and Chemical Conservation of
Georgia, Inc. recycles solvents and treats hazardous waste.
Pursuant to the terms of the Letter, the aggregate purchase price
for the Acquisition is to be approximately $7.4 million, payable in
Common Stock of the Company based upon the closing price of the
Common Stock on the NASDAQ for the five trading days preceding the
closing date. The Company will also enter into a four (4) year
consulting agreement with a certain executive manager of Chem-Con
and Chem-Met in the approximate aggregate amount of $1.3 million.
The Acquisition is subject to the ability of the parties to, among
other things:
* finalize definitive documents satisfactory to all parties;
* qualify the Acquisition as a pooling of interest
transaction, which means that the merged companies will be
treated as if they had always been combined for accounting
and financial reporting purposes;
* resolve certain issues regarding real property used by
Chem-Con and Chem-Met;
* resolve and quantify certain potential environmental
liabilities of Chem-Con and
Chem-Met;
* resolve certain tax treatment issues;
* complete due diligence in a satisfactory manner; and
* obtain approval of the Company's shareholders.
No assurance can be made that the Acquisition will occur.
15
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PART I, ITEM 2
Forward-Looking Statements
Certain statements contained with 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 statements 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. In addition, forward-looking statements contained
herein relate to, among other things, (i) anticipated financial
performance, (ii) ability to comply with the Company's general
working capital requirements, (iii) ability to generate sufficient
cash flow from operations to fund all costs of operations and
remediation of certain formerly leased property in Dayton, Ohio,
and the Company's facility in Memphis, Tennessee, (iv) ability to
remediate certain contaminated sites for projected amounts, (v)
"Year 2000" computer issues, (vi) the government's acceptance of
the Company's offer regarding settlement of claims involving the
Drum Site (as defined), (vii) acquisition of Chem-Met and Chem-Con
(as defined), (viii) the Oak Ridge Contracts (as defined), (ix)
anticipated revenues from the Oak Ridge Contracts and completion of
the scope of work with M&EC (as defined), and all other statements
which are not statements of historical fact. While the Company
believes the expectations reflected in such forward-looking
statements are reasonable, it can give no assurance such
expectations will prove to have been correct. There are a variety
of factors which could cause future outcomes to differ materially
from those described in this report, including, but not limited to,
(i) general economic conditions, (ii) inability to maintain
profitability, (iii) material reduction in revenues, (iv) inability
to collect in a timely manner a material amount of receivables, (v)
increased competitive pressures, (vi) the inability to maintain and
obtain required permits and approvals to conduct operations, (vii)
the inability to develop new and existing technologies in the
conduct of operations, (viii) overcapacity in the environmental
industry, (ix) discovery of additional contamination or expanded
contamination at a certain Dayton, Ohio, property formerly leased
by the Company or the Company's facility at Memphis, Tennessee,
which would result in a material increase in remediation
expenditures, (x) changes in federal, state and local laws and
regulations, especially environmental regulations, or
interpretation of such, (xi) potential increases in equipment,
maintenance, operating or labor costs, (xii) management retention
and development, (xiii) the requirement to use internally generated
funds for purposes not presently anticipated, (xiv) inability to
settle on reasonable terms certain claims made by the federal
government against a certain subsidiary of the Company that is a
potentially responsible party for clean up costs incurred by the
government in remediating certain sites owned and operated by
others and (xv) inability or failure to convert the computer
systems of the Company's key suppliers, customers, creditors and
financial services organizations, in order to be "Year 2000"
compliant, (xvi) inability to complete acquisitions of Chem-Met and
Chem-Con because of failure to comply with one or more of the
conditions precedent to the acquisition, (xvii) inability of the
Company and M&EC to finalize the scope of work documents relating
to the Oak Ridge Contracts, (xviii) inability of the Company and
M&EC to design and construct the required processing equipment in
connection with the Oak Ridge Contracts, (xix) the actual volume of
waste to be received under the Oak Ridge Contracts will not meet
the expected totals as presented by the DOE (as defined), (xx) a
determination that the amount of work to be performed by the
Company under the Oak Ridge Contracts is less than anticipated, and
(xxi) the inability of the Company to perform the work assigned to
it under the Oak Ridge Contracts in a profitable manner. The
Company undertakes no obligations to update publicly any forward-
looking statement, whether as a result of new information, future
events or otherwise.
16
Results of Operations
The table below should be used when reviewing management's
discussion and analysis for the nine months ended September 30,
1998 and 1997:
Three Months Ended
September 30,
_________________________________
Consolidated 1998 % 1997* %
____________ _______ _____ _______ _____
Net Revenues $ 8,065 100.0 $ 6,921 100.0
Cost of Goods Sold 5,292 65.6 4,630 66.9
______ _____ ______ _____
Gross Profit 2,773 34.4 2,291 33.1
Selling, General &
Administrative 1,708 21.2 1,347 19.5
Depreciation/Amortization 531 6.6 490 7.1
______ _____ ______ _____
Income (Loss) from
from Operations $ 534 6.6 $ 454 6.5
====== ===== ====== =====
Loss from discontinued
Operations $ - - $ (355) (5.1)
Interest Expense (95) (1.2) (71) (1.0)
Preferred Stock Dividends (115) (1.4) (99) (1.4)
====== ====== ====== =====
Nine Months Ended
September 30,
_________________________________
1998 % 1997* %
_______ _____ _______ _____
$22,291 100.0 $19,368 100.0
15,317 68.7 13,492 69.7
______ _____ ______ _____
6,974 31.3 5,876 30.3
4,942 22.2 4,072 21.0
1,566 7.0 1,487 7.7
______ _____ ______ _____
$ 466 (2.1) $ 317 1.6
====== ===== ====== =====
$ - - $(1,308) (6.8)
(364) (1.6) (331) (1.7)
(291) (1.3) (262) (1.4)
====== ===== ====== =====
<FN>
* Amounts have been restated from that previously reported
to reflect the discontinued operations at PFM (see Note
2).
</FN>
Summary Three and Nine Months Ended September 30, 1998 and 1997
_________________________________________________________________
The Company provides services through two business segments.
The Waste Management Services segment is engaged in on-and off-site
treatment, storage, disposal and processing of a wide variety of
by-products and industrial, hazardous and mixed hazardous and low
level radioactive wastes. This segment competes for materials and
services with numerous regional and national competitors to provide
comprehensive and cost-effective Waste Management Services to a
wide variety of customers located throughout the continental United
States. The Company operates and maintains facilities and
businesses in the waste by-product brokerage, on-site treatment and
stabilization, and off-site blending, treatment and disposal
industries. The Company's Consulting Engineering segment provides
a wide variety of environmental related consulting and engineering
services to industry and government. Through the Company's wholly-
owned subsidiaries in Tulsa, Oklahoma and St. Louis, Missouri, the
Consulting Engineering segment provides oversight management of
environmental restoration projects, air and soil sampling,
compliance reporting, surface and subsurface water treatment design
for removal of pollutants, and various compliance and training
activities.
Consolidated net revenues increased $1,144,000 for the quarter
ended September 30, 1998, as compared to the quarter ended
September 30, 1997. This increase of 16.5% is attributable to the
Waste Management Services segment which experienced an increase in
revenues of $1,278,000, partially offset by a decrease in revenues
from the Consulting Engineering segment. The increase in the Waste
Management Services segment is the result of the growth in the
wastewater and mixed waste markets. The most significant increases
occurred at the PFF facility, which recognized a $783,000 increase
resulting principally from the completion of various mixed waste
contracts, the PFTS facility, which recognized a $260,000 increase
due to the increased processing capacities at this facility, and
the PFFL facility, which recognized a $485,000 increase resulting
principally from increased services within the cruise ship industry
and other remedial contracts completed. Consolidated net revenues
increased to $22,291,000 from $19,368,000 for the nine months ended
September 30, 1998, as compared to the same nine months ended in
17
1997. This increase of $2,923,000, or 15.1%, is attributable to
the Waste Management Services segment which experienced an increase
in revenues of $3,325,000, partially offset by a decrease in
revenues from the Consulting Engineering segment. The most
significant increases occurred at the PFF facility which recognized
a $1,422,000 increase resulting principally from the completion of
various mixed waste contracts, the PFTS facility, which recognized
an $837,000 increase due to the increased processing capacities at
this deep-well wastewater disposal facility resulting from a
recently completed upgrade, and the PFFL facility, which recognized
a $725,000 increase resulting principally from growth in services
within the cruise ship industry. This increase in the Waste
Management Services segment was partially offset by a reduction of
$403,000 in the Consulting Engineering segment. This Consulting
Engineering reduction is principally a result of the completion of
several larger contracts in 1997, which were not duplicated in
1998.
Cost of goods sold for the Company increased $662,000, or
14.3%, for the quarter ended September 30, 1998, as compared to the
quarter ended September 30, 1997. This consolidated increase in
cost of goods sold reflects principally the increased disposal,
transportation and operating costs corresponding to the 16.5%
increase in revenues, as discussed above. The resulting gross
profit for the quarter ended September 30, 1998, increased $482,000
to $2,773,000, which as a percentage of revenue is 34.4%,
reflecting an increase over the 1997 percentage of revenue of
33.1%. Cost of goods sold for the Company increased $1,825,000 or
13.5% for the nine months ended September 30, 1998, as compared to
the nine months ended September 30, 1997. This consolidated
increase in cost of goods sold reflects principally the increased
disposal, transportation and operating costs, corresponding to the
15.1% increase in revenues, as discussed above. The resulting
gross profit for the nine months ended September 30, 1998,
increased $1,098,000 to $6,974,000, which as a percentage of
revenue is 31.3%, reflecting an increase over the 1997 percentage
of revenue of 30.3%.
Selling, general and administrative expenses increased
$361,000 or 26.8% for the quarter ended September 30, 1998, as
compared to the quarter ended September 30, 1997. As a percentage
of revenue, selling, general and administrative expense also
increased to 21.2% for the quarter ended September 30, 1998,
compared to 19.5% for the same period in 1997. Selling, general
and administrative expenses increased $870,000, or 21.3%, for the
nine months ended September 30, 1998, as compared to the nine
months ended September 30, 1997. As a percentage of revenue,
selling, general and administrative expense also increased to 22.2%
for the nine months ended September 30, 1998, compared to 21.0% for
the same period in 1997. The increases for both the quarter and
nine months ended September 30, 1998, reflects the increased
expenses associated with the Company's additional sales and
marketing efforts as it continues to refocus its business segments
into new environmental markets, such as nuclear and mixed waste and
the development of certain on-site wastewater services, and the
additional administrative overhead associated with the Company's
research and development efforts, all of which are expensed in the
current period as incurred.
Depreciation and amortization expense for the quarter ended
September 30, 1998, reflects an increase of $41,000 as compared to
the same quarter ended September 30, 1997. This increase is
attributable to a depreciation increase of $23,000 due to capital
improvements being introduced at the Company's transportation,
storage and disposal ("TSD") facilities to improve efficiencies.
Amortization expense reflects a total increase of $18,000 for the
quarter ended September 30, 1998, as compared to the same quarter
1997 due to the increased amortization, resulting from new
capitalized permitting costs. Depreciation and amortization
expense for the nine months ended September 30, 1998, reflects an
increase of $79,000 as compared to the nine months ended September
30, 1997. This increase is attributable to a depreciation expense
increase of $49,000 due to the capital improvements being
introduced at the Company's TSD facilities to improve efficiencies.
Amortization expense reflects a total increase of $30,000 for the
nine months ended September 30, 1998, as compared to the nine
months ended September 30, 1997, due to the increased amortization,
resulting from new capitalized permitting costs.
Interest expense increased $24,000 for the quarter ended
September 30, 1998, as compared to the corresponding period of
1997, and by $33,000 from the nine months ended September 30, 1998,
18
as compared to the corresponding period of 1997. The increase in
interest expense during 1998 reflects the additional interest as
incurred on the Congress Financial Corporation (Florida)
("Congress") term loan, which as a result of the January 1998
refinancing of the Heller Financial and Ally Capital Corporation
debt obligations was reloaded to an increased balance of $2.5
million. The Congress revolving loan balance and related interest
expense reflected increases during the first six months of 1998,
over the same period of 1997, which were partially offset by
reduced revolving loan interest expense in the third quarter of
1998, resulting from the proceeds of the Series 10 Preferred in
conjunction with improved operating cash flow. The Preferred Stock
dividends increased $29,000 for the nine months ended September 30,
1998, as compared to the same period of 1997, to a total of
$291,000. This increase is principally a result of the $26,000 of
additional dividends incurred relative to the Series 10 Preferred,
issued in July 1998. Also reflected in this increase is a full
nine (9) months of dividends in 1998 for the Series 8 and Series 9
Preferred, as compared to three (3) months in 1997, partially
offset by reduced dividends resulting from the conversion of 1500
shares of Series 3 Preferred during the period May through August
of 1997.
Discontinued Operations
On January 27, 1997, an explosion and resulting tank fire
occurred at the PFM facility, a hazardous waste storage, processing
and blending facility, which resulted in damage to certain
hazardous waste storage tanks located on the facility and caused
certain limited contamination at the facility. Such occurrence was
caused by welding activity performed by employees of an independent
contractor at or near the facility's hazardous waste tank farm
contrary to instructions by PFM. The facility was non-operational
from the date of this event until May 1997, at which time it began
limited operations. Until the time of the incident, PFM operated as
a permitted "fuel blending" facility and serviced a separate class
of customers who generated specific waste streams, identified by
its waste code and specific characteristics. As the Company's only
such "fuel blending" facility, PFM was permitted to and capable of
mixing certain hazardous liquid, semi-solid and solid waste in a
vat which suspended the solids in order to pump the mixture into a
tank. The tanks also contained mixing units which kept the solids
suspended until the mixture could be off-loaded into tanker trucks.
As a result of the damage to the tanks and processing equipment and
the related cost to rebuild this operating unit, the Company
decided to discontinue this line of business, which resulted in
PFM's inability to service and retain the existing customer base.
The existing customer base represented principally manufacturing
and service companies whose operations generated certain semi-solid
and solid permitted hazardous wastes, which as a result of permit
and processing limitations could not be served by other Company
facilities. The Company continues to pursue other markets or
activities which may be performed at this facility given the permit
limitations, capital requirements and development of a new line of
business and related customer base. Upon evaluation of the above
business decision, and given the loss of both the existing line of
business and its related customer base, the Company reported the
Memphis segment as a discontinued operation, pursuant to Paragraph
13 of APB 30.
The fuel blending activities were discontinued on the date of
the incident, January 27, 1997. All assets involved in the fuel
blending activities that were not damaged beyond repair in the fire
have subsequently been damaged as a result of the decontamination
process. Accordingly, during the fourth quarter of 1997, the Company
recorded a loss on disposal of discontinued operations of $3,053,000,
which included $1,272,000 for impairment of certain assets and $1,781,000
for the establishment of certain closure liabilities.
The net loss from discontinued PFM operations for the nine months
ended September 30, 1998, was $378,000 and was recorded against the
accrued closure cost estimate on the balance sheet. The net loss for the
nine months ended September 30, 1997, was $1,308,000 and is shown
separately in the Consolidated Statements of Operations. The Company has
restated the 1997 operating results to reflect this discontinued
operations. The results of the discontinued PFM operations do not
reflect management fees charged by the Company, but do include
interest expense of $54,000 and $180,000 during the nine months
ended September 30, 1998 and 1997, respectively, specifically
identified to such operations as a result of such operations actual
incurred debt under the Corporation's revolving and term loan
credit facility. During March of 1998, the Company received a
settlement in the amount of $1,475,000 from its insurance carrier
for the business interruption claim. This settlement was
recognized as a gain in 1997 and thereby reducing the net loss
19
recorded for the discontinued PFM operations in 1997. Revenues of
the discontinued PFM operations were $794,000 for the nine months
ended September 30, 1998, and $1,514,000 for the nine months ended
September 30, 1997. These revenues are not included in revenues as
reported in the Consolidated Statements of Operation.
Liquidity and Capital Resources of the Company
At September 30, 1998, the Company had cash and cash
equivalents of $825,000, including ($2,000) from discontinued
operations. This cash and cash equivalents total reflects an
increase of $499,000 from December 31, 1997, as a result of net
cash provided by continuing operations of $2,187,000 (including
the PFM insurance settlement of $1,475,000), offset by cash used by
discontinued operation of $903,000, cash used in investing
activities of $1,434,000 (principally purchases of equipment, net
totaling $1,640,000) and cash provided by financing activities of
$649,000 (principally proceeds from the issuance of stock partially
offset by the repayment of the Company's credit facilities).
Accounts receivable, net of allowances for continuing operations,
totaled $5,363,000, an increase of $81,000 over the December 31,
1997, balance of $5,282,000, which principally reflects the impact
of increased sales during the third quarter of 1998.
During fiscal year 1997 and 1998 there were numerous events,
many of which were precipitated by the Company, which served to
increase the Company's liquidity on a short term and long term
basis. During 1997, the Company and certain of its subsidiaries
(i) sold non productive assets in the amount of $245,000. (ii)
entered into and received business interruption insurance proceeds
for Ft. Lauderdale facility in the amount of $231,000, (iii) issued
Common Stock pursuant to certain stock purchase agreements and
warrant and option exercises which yielded $751,000, (iv) issued
two (2) Series of Preferred Stock for $2,850,000, (v) received
insurance proceeds of $422,000 as a result of the fire and
explosion at PFM; and (vi) issued $378,000 of Common Stock for
outstanding debts.
As detailed below, during 1998 the Company entered into the
Loan Agreement with Congress, pursuant to which (i) the previous
loan arrangements with Heller Financial Corporation ("Heller") and
Ally Capital Corporation ("Ally") were replaced, (ii) the then
existing loan covenant violations of the Company under the Heller
and Ally loan arrangements were eliminated, and (iii) the Company
received increased lending availability. During 1998, the Company
also received insurance proceeds related to the fire and explosion
at PFM in the amount of $1,475,000, issued the Series 10 Preferred
for $3,000,000, and issued $588,863 of Common Stock for outstanding
debts.
On January 15, 1998, the Company, as parent and guarantor,
and all direct and indirect subsidiaries of the Company, as co-
borrowers and cross-guarantors, entered into a Loan and Security
Agreement ("Agreement") with Congress Financial Corporation
(Florida) as lender ("Congress"). The Agreement provides for a
term loan in the amount of $2,500,000, which requires principal
repayments based on a four-year level principal amortization over
a term of 36 months, with monthly principal payments of $52,000.
Payments commenced on February 1, 1998, with a final balloon
payment in the amount of approximately $573,000 due on January 14,
2001. The Agreement also provides for a revolving loan facility in
the amount of $4,500,000. At any point in time the aggregate
available borrowings under the facility are subject to the maximum
credit availability as determined through a monthly borrowing base
calculation, as updated for certain information on a weekly basis,
equal to 80% of eligible accounts receivable accounts of the
Company as defined in the Agreement. The termination date on the
revolving loan facility is also the third anniversary of the
closing date. The Company incurred approximately $237,000 in
financing fees relative to the solicitation and closing of this
loan agreement (principally commitment, legal and closing fees)
which are being amortized over the term of the Agreement.
Pursuant to the Agreement, the term loan and revolving loan
both bear interest at a floating rate equal to the prime rate plus
1 3/4%. The Agreement also provides for a one time rate adjustment
of 1/4%, subject to the company meeting certain 1998 performance
objectives. The loans also contain certain closing, management and
unused line fees payable throughout the term. The loans are
subject to a 3.0% prepayment fee in the first year, 1.5% in the
second and 1.0% in the third year of the Agreement.
20
As security for the payment and performance of the Agreement,
the Company granted a first security interest in all accounts
receivable, inventory, general intangibles, equipment and other
assets of the Company and its subsidiaries, as well as the
mortgage on two (2) facilities owned by subsidiaries of the
Company. The Agreement contains affirmative covenants including,
but not limited to, certain financial statement disclosures and
certifications, management reports, maintenance of insurance and
collateral. The Agreement also contains an Adjusted Net Worth
financial covenant, as defined in the Agreement, of $3,000,000.
Under the Agreement, the Company, and its subsidiaries are limited to
granting liens on their equipment, including capitalized leases, (other
than liens on the equipment to which Congress has a security interest)
in an amount not to exceed $2,500,000 in the aggregate at any time
outstanding.
The proceeds of the Agreement were utilized to repay in full on
January 15, 1998, the outstanding balance of $3,115,000 under the Heller
Loan and Security Agreement which was comprised of a revolving loan and
term loan, and to repay the outstanding balance of $624,000 under the
Ally Equipment Financing Agreements. The Company had borrowing
availability under the Congress Agreement of approximately $1,500,000 as
of the date of closing, based on 80% of eligible accounts receivable
accounts. The Company recorded the December 31, 1997, Heller and Ally
debt balances as though the Congress transaction had been closed as of
December 31, 1997. As a result of this transaction, and the repayment
of the Heller and Ally debt, the combined monthly debt payments were
reduced from approximately $104,000 per month to $52,000 per month. As
of September 30, 1998, the borrowings under the Congress revolving loan
facility totaled $52,000, with borrowing availability of approximately
$3,538,000 based on the amount of outstanding eligible accounts
receivable as of September 30, 1998. The balance under the Congress term
loan at September 30, 1998, was $2,083,000.
At September 30, 1998, the Company had $3,013,000 in aggregate
principal amounts of outstanding debt, related to continuing operations,
as compared to $4,865,000 at December 31, 1997. This decrease in
outstanding debt of $1,852,000 principally reflects the decreased
borrowings under the Company's revolving credit facility ($2,028,000)
resulting from cash provided by continuing operations and cash proceeds
from the Series 10 Preferred, and the new equipment financing at the
Perma-Fix of Florida, Inc. facility ($317,000), partially offset by the
scheduled principal repayments on the Company's other credit agreements.
As of September 30, 1998, the Company had $49,000 in aggregate
principal amounts of outstanding debt related to PFM discontinued
operations, of which $42,000 is classified as current.
As of September 30, 1998, total consolidated accounts payable for
continuing operations of the Company was $1,852,000, a reduction of
$411,000 from the December 31, 1997, balance of $2,263,000.
The Company's net purchases of new capital equipment for continuing
operations for the nine month period ended September 30, 1998, totaled
approximately $1,970,000, including $330,000 of financed purchases.
These expenditures were for expansion and improvements to the operations
principally within the Waste Management segment. These capital
expenditures were principally funded by the $1,475,000 PFM insurance
settlement, utilization of the Company's revolving credit facility,
internally generated funds, and other lease financing. The Company had
budgeted capital expenditures of $1,950,000 for 1998, subsequently
increase to a level of approximately $2,100,000 which includes completion
of certain current projects, as well as other identified capital and
permit compliance purchases, excluding environmental contingencies as
discussed below. The Company anticipates funding the remainder of its
1998 capital expenditures by a combination of lease financing with
lenders other than the equipment financing arrangement discussed above,
proceeds from the Series 10 Preferred Stock, and/or internally generated
funds.
On or about June 30,1998, the Company issued 3,000 shares of newly
created Series 10 Class J Convertible Preferred Stock ("Series 10
Preferred"), as further discussed in Note 6 to Consolidated Financial
Statements and Item 2 "Changes in Securities and Use of Proceeds." The
Company received net proceeds of $2,768,000 (after deduction of the
payment of $210,000 for broker's commission and certain other closing
21
costs, but prior to the Company's legal fees and other costs in
connection with the sale of the Series 10 Preferred and the registration
of the Common Stock issuable upon conversion of such Preferred Stock) for
the sale of the Series 10 Preferred. These net proceeds were received
by the Company on July 14, 1998, and have been recorded as a Preferred
Stock receivable at June 30,1998. Each share of Series 10 Preferred sold
for $1,000 per share and has a liquidation value of $1,000 per share.
The Company utilized the proceeds received on the sale of Series 10
Preferred for working capital and/or to reduce the outstanding
balance of its revolving credit facility, subject to the Company
reborrowing under such credit facility.
With the issuance of the Series 10 Preferred, the Company has
outstanding 9,850 shares of Preferred Stock, with each share having
a liquidation preference of $1,000 ("Liquidation Value"). Annual
dividends on the Preferred Stock ranges from 4% to 6% of the
Liquidation Value, depending upon the Series. Dividends on the
Preferred Stock are cumulative, and are payable, if and when
declared by the Company's Board of Directors, on a semi-annual
basis. Dividends on the outstanding Preferred Stock may be paid at
the option of the Company, if declared by the Board of Directors,
in cash or in the shares of the Company's Common Stock as described
under Note 6 of the Consolidated Financial Statements and Item 2 of
Part II hereof. The accrued dividends for the period from January
1, 1998, through June 30, 1998, on the then outstanding shares of
the Company's Preferred Stock in the amount of approximately
$176,000 were paid in July 1998, by the Company issuing 90,609
shares of the Company's Common Stock. It is the present intention
of the Company to pay any dividends declared by the Company's Board
of Directors on its outstanding shares of Preferred Stock in Common
Stock of the Company.
As of September 30, 1998, there are certain events, which may
have a material impact on the Company's liquidity on a short-term
basis. The Company's Board of Directors has authorized the
repurchase of up to 500,000 share of the Company's Common Stock
from time to time in the open market or privately negotiated
transactions, in accordance with SEC Rule 106-18, which if such
shares were purchased as of the date of the report would result in
the expenditure of approximately $1.0 million in cash, (ii)
extended an offer of $225,000 (payable $150,000 at closing and
$75,000 over a twelve month period) to settle any potential
liability regarding the Drum Site as discussed below, and (iii)
signed a letter of intent regarding potential acquisitions as
further discussed in Note 7 to the Notes to Consolidated Financial
Statements. In conjunction with this proposed acquisition, the
Company would fund certain closing costs and accrued liabilities in
amounts yet to be determined. The Company anticipates funding
these activities from cash provided by continuing operations and
borrowings under the Company's revolving credit facility.
The working capital position of the Company at September 30,
1998, was $1,386,000, as compared to $754,000 at December 31, 1997,
which reflects an increase of $632,000 during this first nine
months of 1998. This increased working capital position is
principally a result of the Series 10 Preferred equity proceeds
received in July 1998 and the cash contributions provided by the
continuing operations, partially offset by the fact that the
Company reduced its current liabilities during the first nine
months of 1998 by approximately $1,710,000. The Company also
reduced its long-term liabilities by $2,176,000, to a balance of
$6,219,000 at September 30, 1998.
Environmental Contingencies
The Company is 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, the Company is subject to rigorous
federal, state and local regulations. These regulations mandate
strict compliance and therefore are a cost and concern to the
Company. The Company makes every reasonable attempt to maintain
complete compliance with these regulations; however, even with a
diligent commitment, the Company, as with many of its competitors,
may be required to pay fines for violations or investigate and
potentially remediate its waste management facilities.
The Company routinely uses third party disposal companies, who
ultimately destroy landfill residual materials generated at its
facilities or at a client's site. The Company, compared to its
22
competitors, disposes of significantly less hazardous or industrial
by-products from its operations due to rendering material non-
hazardous, discharging treated wastewaters to publicly-owned
treatment works and/or processing wastes into saleable products.
In the past, numerous third party disposal sites have improperly
managed wastes and consequently require remedial action;
consequently, any party utilizing these sites may be liable for
some or all of the remedial costs. Despite the Company's
aggressive compliance and auditing procedures for disposal of
wastes, the Company could, in the future, be notified that it is a
potentially responsible party ("PRP") at a remedial action site,
which could have a material adverse effect on the Company.
In addition to budgeted capital expenditures of $2,100,000 for
1998 at the TSD facilities of the Company, which are necessary to
maintain permit compliance and improve operations, the Company has
also budgeted for 1998 an additional $1,045,000 in environmental
expenditures to comply with federal, state and local regulations in
connection with remediation of two locations. One location owned
by PFM and the other location leased by a predecessor of another
subsidiary of the Company. The Company has estimated the
expenditures for 1998 to be approximately $210,000 at the site
leased by a predecessor of a subsidiary of the Company and
$835,000 at the PFM location. Additional funds will be required
for the next five to ten years to properly investigate and
remediate these sites. The Company expects to fund these expenses
to remediate these two sites from funds generated internally.
In addition the Company's subsidiary, PFM, has been notified
by the United States Environmental Protection Agency ("EPA") that
it believes that PFM is a PRP regarding the remediation of a drum
reconditioning facility in Memphis, Tennessee, owned by others
("Drum Site"), primarily as a result of activities by PFM prior to
the date that the Company acquired PFM in December 1993. The EPA
has advised PFM that it has spent approximately $1.4 million to
remediate the Drum Site, and that the EPA has sent PRP letters to
approximately 50 other PRPs regarding the Drum Site in addition to
PFM. The EPA has further advised that it believes that PFM
supplied a substantial amount of drums to the Drum Site. The
Company is currently negotiating with the EPA regarding the
possibility of settling the EPA's claims against PFM as to the Drum
Site. During the third quarter of 1998, the Company extended an
offer of $225,000 (payable $150,000 at closing and the balance over
a twelve month period) to settle any potential liability regarding
the Drum Site. Based upon discussions with government officials,
the Company believes the settlement offer will be accepted,
however, no assurance can be made that the Company's current
settlement offer will be accepted or that the Company will be able
to settle its claims regarding the Drum Site in an amount and
manner which the Company believes is reasonable. If PFM is unable
to settle such claims by the EPA and PFM is determined to be
liable for all or a substantial portion of the remediation costs
incurred by the EPA at the Drum Site, such could have a material
adverse effect on the Company.
Year 2000 Issues
The staff of the Securities and Exchange Commission has
indicated that each public company should discuss its "Year 2000"
issues. The Year 2000 problem arises because many computer systems
were designed to identify a year using only two digits, instead of
four digits, in order to converse memory and other resources. For
instance, "1997" would be held in the memory of a computer as "97."
When the year changes from 1999 to 2000, a two digit system
would read the year as changing from "99" to "00." For a variety
of reasons, many computer systems are not designed to make such a
date change or are not designed to "understand" or react
appropriately to such a date change. Therefore, as the date
changes to the year 2000, many computer systems could completely
stop working or could perform in an improper and unpredictable
manner.
The Company has conducted a review of its computer systems to
identify the systems which it anticipated could be affected by the
Year 2000 issue, and the Company believes that all such systems
were already, or have been converted to be, Year 2000 complaint.
Such conversion, when required, did not entail material
expenditures by the Company. Pursuant to the Company's Year 2000
planning, the Company has requested information regarding the
computer systems of its key suppliers, customers, creditors, and
financial service organizations and has been informed that they are
substantially Year 2000 compliant. There can be no assurance,
however, that such key organizations are actually Year 2000
23
complaint and that the Year 2000 issue will not adversely affect
the Company's financial position or results of operations. The
Company believes that its expenditures in addressing its Year 2000
issues will not have a material adverse effect on the Company's
financial position or results of operations.
24
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
PART II - Other Information
Item 1. Legal Proceedings
_________________
There are no additional material legal proceedings pending
against the Company and/or its subsidiaries not previously reported
by the Company in Item 3 of its Form 10-K for the year ended
December 31, 1997. As previously disclosed in such Form 10-K, the
Company received correspondence dated January 15, 1998 ("PRP
Letter"), from the United States Environmental Protection Agency
("EPA") that it believes that PFM, a wholly owned subsidiary of the
Company is a potentially responsible party ("PRP"), as defined
under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA"), regarding the remediation of the
W. & R. Drum, Inc. ("Drum") site in Memphis, Tennessee, ("Drum
Site"), primarily as a result of acts by a predecessor of PFM prior
to the time PFM was acquired by the Company. In addition, the EPA
has advised PFM that it has sent PRP letters to approximately 50
other PRPs as to the Drum Site. The PRP Letter estimated the
remediation costs incurred by the EPA for the Drum Site to be
approximately $1,400,000 as of November 30, 1997. The EPA has
orally informed the Company that such remediation has been
substantially completed as of such date, and that the EPA believes
that PFM supplied a substantial amount of the drums at the Drum
Site. During the second quarter of 1998, PFM and certain other
PRPs began negotiating with the EPA regarding a potential
settlement of the EPA's claims regarding the Drum Site and such
negotiations are currently continuing. During the third quarter of
1998, the Company extended an offer of $225,000 (payable $150,000
at closing and the balance over a twelve month period) to settle
any potential liability regarding the Drum Site. Based upon
discussions with government officials, the Company believes the
settlement offer will be accepted, however, no assurance can be
made that the Company's current settlement offer will be accepted
or that the Company will be able to settle its claims regarding the
Drum Site in an amount and manner which the Company believes is
reasonable. If PFM cannot reach a settlement which PFM believes
is reasonable, it will continue to vigorously defend against the
EPA's demand regarding remediation costs of the Drum Site. If PFM
is determined to be liable for a substantial portion of the
remediation cost incurred by the EPA at the Drum Site, such could
have a material adverse effect on the Company.
Item 2. Changes in Securities and Use of Proceeds
_________________________________________
During the quarter ended September 30, 1998, the Company sold
or entered into an agreement to sell, equity securities that were
not registered under the Securities Act of 1933, as amended
("Securities Act") as follows:
(i) Pursuant to the terms of a Private Securities
Subscription Agreement, dated as of June 30, 1998 ("Subscription
Agreement"), the Company issued to RBB Bank Aktiengesellschaft,
located in Graz, Austria ("RBB Bank"), 3,000 shares of newly-
created Series 10 Class J Convertible Preferred Stock, par value
$.001 per share ("Series 10 Preferred"), at a price of $1,000 per
share, for an aggregate sales price of $3,000,000. The Company
received net proceeds of approximately $2,768,000 from the sale of
the Series 10 Preferred after deducting certain commissions and
expenses. Pursuant to the terms of the Subscription Agreement, the
Company granted to RBB Bank the RBB Series 10 Warrants (as defined
and discussed below). The sale to RBB Bank of the Series 10
Preferred and the granting of the RBB Series 10 Warrants as
described below were made in a private placement under Section 4(2)
of the Securities Act and/or Rule 506 of Regulation D as
promulgated under the Securities Act.
In the Subscription Agreement, RBB Bank represents inter alia,
(i) it is an "accredited investor" as such term is defined in Rule
501 as promulgated under the Securities Act; (ii) the placement was
not made in connection with any general solicitation or
advertising; (iii) RBB Bank alone, or together with its purchaser
representative is a sophisticated investor; and (iv) RBB Bank's
acquisition under the Subscription Agreement is for its own account
and not with a view to resale or distribution of any part thereof.
25
The Series 10 Preferred has a liquidation preference over
the Company's Common Stock, par value $.001 per share ("Common
Stock"), equal to $1,000 consideration per outstanding share of
Series 10 Preferred (the "Series 10 Liquidation Value"), plus an
amount equal to all unpaid dividends accrued thereon. The Series
10 Preferred accrues dividends on a cumulative basis at a rate of
four percent (4%) per annum of the Series 10 Liquidation Value
("Dividend Rate"), and is payable semi-annually when and as
declared by the Board of Directors. Dividends, as declared by the
Board of Directors, may be paid at the option of the Company, in
cash or shares of Common Stock. No dividends or other
distributions may be paid or declared or set aside for payment on
the Common Stock until all accrued and unpaid dividends on all
outstanding shares of Series 10 Preferred have been paid or set
aside for payment. If the Company pays dividends in Common Stock,
such are payable in the number of shares of Common Stock equal to
the product of (a) the quotient of (i) the Dividend Rate divided by
(ii) the average of the closing bid quotation of the Common Stock
as reported on the NASDAQ for the five trading days immediately
prior to the date the dividend is declared, time (b) a fraction,
the numerator of which is the number of days elapsed during the
period for which the dividend is to be paid and the denominator of
which is 365.
The holder of the Series 10 Preferred may convert into Common
Stock any or all of the Series 10 Preferred on and after 180 days
after June 30, 1998. The conversion price per outstanding share of
Preferred Stock ("Series 10 Conversion Price") is $1.875; except
that if the average of the closing bid price per share of Common
Stock quoted on the NASDAQ (or the closing bid price of the Common
Stock as quoted on the national securities exchange if the Common
Stock is not listed for trading on the NASDAQ but is listed for
trading on a national securities exchange) for the five (5) trading
days immediately prior to the particular date on which the holder
notified the Company of a conversion ("Series 10 Conversion Date")
is less than $2.34, then the Series 10 Conversion Price for that
particular conversion shall be eighty percent (80%) of the average
of the closing bid price of the Common Stock on the NASDAQ (or if
the Common Stock is not listed for trading on the NASDAQ but is
listed for trading on a national securities exchange then eighty
percent (80%) of the average of the closing bid price of the Common
Stock on the national securities exchange) for the five (5) trading
days immediately prior to the particular Series 10 Conversion Date.
As of June 30,1998, the closing price of Common Stock on the NASDAQ
was $1.875 per share.
As part of the sale of the Series 10 Preferred, the Company
also issued to RBB Bank two warrants: (a) one warrant entitling the
holder to purchase up to an aggregate of 150,000 shares of Common
Stock at an exercise price of $2.50 per share of Common Stock
expiring three (3) years after June 30, 1998 and (b) a second
warrant entitling the holder to purchase up to an aggregate of
200,000 shares of Common Stock at an exercise price of $1.875 per
share of Common Stock and expiring three (3) years after June 30,
1998. Collectively, these warrants are referred to herein as the
"RBB Series 10 Warrants." The shares of Common Stock issuable upon
the conversion of the Series 10 Preferred and upon the exercise of
the RBB Series 10 Warrants are subject to certain registration
rights pursuant to the Subscription Agreement.
The Company intends to utilize the net proceeds received on
the sale of Series 10 Preferred for working capital and/or to
reduce the outstanding balance of its credit facilities, subject to
the Company reborrowing under such credit facilities.
In connection with the placement of Series 10 Preferred with
RBB Bank, the Company paid commissions of $210,000 and issued to
(a) Liviakis Financial Communications, Inc. ("Liviakis") for
assistance with the placement of the Series 10 Preferred, warrants
entitling the holder to purchase up to an aggregate of 1,875,000
shares of Common Stock, subject to certain anti-dilution
provisions, at an exercise price of $1.875 per share of Common
Stock which warrants may be exercised after January 15, 1999, and
which expire after four (4) years; (b) Robert B. Prag, an executive
officer of Liviakis ("Prag"), for assistance with the placement of
the Series 10 Preferred, warrants entitling the holder to purchase
up to an aggregate of 625,000 shares of Common Stock, subject to
certain anti-dilution provisions, at an exercise price of $1.875
per share of Common Stock, which warrants may be exercised after
January 15, 1999, and which expire after four (4) years; (c) JW
Genesis Financial Corporation ("Genesis") for assistance with the
placement of the Series 10 Preferred, warrants entitling the holder
26
to purchase up to an aggregate of 150,000 shares of Common Stock,
subject to certain anti-dilution provisions, at an exercise price
of $1.875 per share of Common Stock, which warrants expire after
three (3) years; and (d) Fontenoy Investments ("Fontenoy") for
assistance with the placement of the Series 10 Preferred, warrants
entitling the holder to purchase up to an aggregate of 350,000
shares of Common Stock, subject to certain anti-dilution
provisions, at an exercise price of $1.875 per share of Common
Stock, which warrants expire after three (3) years. Under the
terms of each warrant, the holder is entitled to certain
registration rights with respect to the shares of Common Stock
issuable on the exercise of each warrant. The issuance of the
warrants to Liviakis, Prag, Genesis and Fontenoy was made in a
private placement under Section 4(2) of the Securities Act and/or
Rule 506 of Regulation D as promulgated under the Securities Act.
Under certain circumstances, the Company may not issue shares
of Common Stock upon conversion of the Series 10 Preferred and the
exercise of warrants granted in connection with the issuance of the
Series 10 Preferred ("Series 10 Warrants") without obtaining
shareholder approval as to such transactions. Shareholder approval
is required if (i) the aggregate number of shares of Common Stock
issued by the Company pursuant to the terms of the Series 10
Preferred and the Series 10 Warrants exceeds 2,388,347 shares of
Common Stock (which equals 19.9% of the outstanding shares of
Common Stock of the Company as of June 30, 1998) and (ii) RBB Bank
has converted or elects to convert any of the then outstanding
shares of Series 10 Preferred pursuant to the terms of the Series
10 Preferred at a conversion price of less than $1.875 ($1.875
being the market value per share of Common Stock as quoted on the
NASDAQ as of the close of business on June 30, 1998), other than if
the Conversion Price is less than $1.875 solely as a result of the
anti-dilution provisions of the Series 10 Preferred, then the
Company must obtain shareholder approval before the Company can
issue any additional shares of Common Stock pursuant to the terms
of the Series 10 Preferred and Series 10 Warrants. The requirement
for shareholder approval is set forth in subparagraphs
(25)(H)(i)d, (iv) and (v) of Rule 4310 of the NASDAQ Marketplace
Rules.
(ii) On or about September 10, 1988, pursuant to the terms of
a certain Consulting Agreement ("Consulting Agreement") entered
into effective as of January 1, 1998, the Company issued 2,170
shares of Common Stock in payment of accrued earnings of $3,000 to
Alfred C. Warrington IV, an outside, independent consultant to the
Company, as consideration for certain consulting services rendered
to the Company by Warrington from April through June 1998. The
issuance of Common Stock pursuant to the Consulting Agreement was
a private placement under Section 4(2) of the Securities Act and/or
Rule 506 of Regulation D as promulgated under the Securities Act.
The Consulting Agreement provides that Warrington will be paid
$1,000 per month of service to the Company, payable, at the option
of Warrington (i) all in cash, (ii) sixty-five percent in shares of
Common Stock and thirty-five percent in cash, or (iii) all in
Common Stock. If Warrington elects to receive part or all of his
compensation in Common Stock, such will be valued at seventy-five
percent of its "Fair Market Value" (as defined in the Consulting
Agreement). Warrington elected to receive all of his accrued
compensation through the end of 1997 in Common Stock.
Warrington represented and warranted in the Consulting
Agreement, inter alia, as follows: (i) the Common Stock is being
acquired for Warrington's own account, and not on behalf of any
other persons; (ii) Warrington is acquiring the Common Stock to
hold for investment, and not with a view to the resale or
distribution of all or any part of the Common Stock; (iii)
Warrington will not sell or otherwise transfer the Common Stock in
the absence of an effective registration statement under the
Securities Act, or an opinion of counsel satisfactory to the
Company, that the transfer can be made without violating the
registration provisions of the Securities Act and the rules and
regulations promulgated thereunder; (iv) Warrington is an
"accredited investor" as defined in Rule 501 of Regulation D as
promulgated under the Securities Act; (v) Warrington has such
knowledge, sophistication and experience in financial and business
matters that he is capable of evaluating the merits and risks of
the acquisition of the Common Stock; (vi) Warrington fully
understands the nature, scope and duration of the limitations on
transfer of the Common Stock as contained in the Consulting
Agreement, (vii) Warrington understands that a restrictive legend
as to transferability will be placed upon the certificates for any
of the shares of Common Stock received by Warrington under the
Consulting Agreement and that stop transfer instructions will be
given to the Company's transfer agent regarding such certificates.
27
(iii) On or about each of July 20, 1998, and August 27, 1998,
Joseph C. Canouse ("Canouse") purchased 30,000 shares each of
Common Stock for $21,900 or an aggregate of 60,000 shares for
$43,800. These shares were purchased pursuant to the terms of a
certain warrant ("Carey Warrant") which had been originally issued
to J.P. Carey Enterprises, Inc., a provider of investment banking
services to the Company ("Carey"), allowing the purchase of 195,000
shares of Common Stock for $0.73 per share and which was partially
assigned on January 5, 1998, to Canouse, a shareholder of Carey.
The issuance to Carey was described in a Form D which was filed
with the Securities and Exchange Commission ("SEC") under Rule 506
on August 3, 1996.
The shares of Common Stock were issued to Canouse in a private
placement under Section 4(2) of the Act as Canouse had access to
the same kind of information which would be included in a
registration statement and is a highly sophisticated investor. The
shares issued to Canouse are restricted shares which were issued
with a restrictive legend, however, such shares are covered by an
effective registration statement on Form S-3, No. 333-14513 ("1996
Registration Statement"), filed with the SEC, effective November
13, 1996, registering for reoffer or resale from time to time
certain shares of Common Stock including the 195,000 shares of
Common Stock, to be issued from time to time upon exercise of the
Carey Warrant.
On January 29, 1998, a Third Supplement to the Prospectus
dated November 13, 1996, ("Third Supplement") was flied with the
SEC, which Third Supplement described, among other things, the
assignment of a portion of the Carey Warrant to Canouse. The Third
Supplement also served to supplement and amend the Selling Security
Holders by, among other things, (i) adding Canouse as a Selling
Shareholder; and (ii) adjusting the offering information applicable
to Carey, to account for the assignment by Carey of the Carey
Warrant.
(iv) On or about July 15, 1998, and July 31, 1998, Dionysus
Limited ("Dionysus"), an Isle of Man corporation, which has since
changed its name to Fontenoy Investments Limited. purchased, 48,800
and 3,000 shares of Common Stock, respectively, or an aggregate of
51,800 shares for an aggregate of $88,060. These shares were
purchased pursuant to the terms of a certain warrant ("Dionysus
Warrant") issued to Dionysus in connection with a private placement
allowing the purchase of 100,000 shares of Common Stock for $1.70
per share. The issuance of the Dionysus Warrant was described in a
Form D which was filed with the SEC under Rule 506 on July 16,
1998.
The shares of Common Stock were issued to Dionysus in a
private placement under Section 4(2) of the Act as Dionysus had
access to the same kind of information which would be included in
a registration statement and is a highly sophisticated investor.
The shares issued to Dionysus are restricted shares which were
issued with a restricted legend and such shares are addressed in a
registration statement on Form S-3, No. 333-43149 ("Registration
Statement"), which has been filed with the SEC, but which has not
been declared effective.
On or about July 15, 1998, Dionysus also purchased 38,300
shares of Common Stock for $57,450 pursuant to the terms of a
certain warrant ("Charles Warrant") which was originally issued to
JW Charles Financial Services, Inc. ("Charles"), which at the time
was a provider of investment banking services to the Company. The
Charles Warrant allowed the purchase of 450,000 shares of Common
Stock for $1.50 per share. On or about July 13, 1997, a portion of
the Charles Warrant was assigned to a principal of Charles, Paul T.
Mannion ("Mannion") and effective August 5, 1997, Mannion assigned
his entire portion of the Charles Warrant to Dionysus. The issuance
to Charles was described in a Form D which was filed with the SEC
under Rule 506 on August 3, 1996.
The shares of Common Stock were issued to Dionysus in a
private placement under Section 4(2) of the Act as Dionysus had
access to the same kind of information which would be included in
a registration statement and is a highly sophisticated investor.
The shares issued to Dionysus under the Charles Warrant are
restricted shares which were issued with a restrictive legend,
however, such shares are covered by the 1996 Registration
Statement, which registered for reoffer or resale from time to time
28
up to 7,450,000 shares of Common Stock including the 450,000 shares
of Common Stock, to be issued from time to time upon exercise of
the Charles Warrant.
On June 27, 1997, a Supplement to the Prospectus contained
within the 1996 Registration Statement. ("First Supplement") was
filed with the SEC, which First Supplement described, among other
things, the assignment of the portion of the Charles Warrant to
Mannion. The First Supplement also served to supplement and amend
the Selling Security Holders table set forth at page 21 of the
Prospectus by (i) adding as a Selling Stockholder each assignee of
a portion of the Charles Warrant who was not previously listed as
a Selling Stockholder, and (ii) adjusting the offering information
applicable to Charles, to account for the assignment by Charles of
the Charles Warrant.
On September 26, 1997, a Second Supplement to the Prospectus
contained within the 1996 Registration Statement ("Second
Supplement") was filed with the SEC, which Second Supplement
described, among other things, the assignment of the Mannion
Warrant to Dionysus. The Second Supplement also served to
supplement and amend the Selling Security Holders table set forth
at page 21 of the Prospectus by, among other things, (i) adding
Dionysus as a Selling Shareholder, and (ii) adjusting the offering
information applicable to Mannion to account for his assignment of
the Mannion Warrant to Dionysus.
Item 5. Other Information
_________________
Possible Acquisition
During November 1998, the Company signed a letter of intent
("Letter") with the shareholders of Chemical Conservation
Corporation (Florida), Chemical Conversation of Georgia, Inc.
(Collectively, "Chem-Con") and Chem-Met Services, Inc. ("Chem-Met")
regarding a potential acquisition of Chem-Con and Chem-Met by the
Company (the "Acquisition"). Chem-Con and Chem-Met generate, on a
consolidated basis, approximately $24 million in revenue, resulting
principally from the collection, treatment, and recycling of
industrial and hazardous waste, including waste oils, water and
miscellaneous solid waste. Chem-Met Services, Inc. treats and
stabilizes inorganic wastes, Chemical Conservation Corporation runs
a Part B-permitted transfer station that also serves as the base
for the private trucking fleet, and Chemical Conservation of
Georgia, Inc. recycles solvents and treats hazardous waste.
Pursuant to the terms of the Letter, the aggregate purchase price
for the Acquisition is to be approximately $7.4 million, payable in
Common Stock based upon the closing price of the Common Stock on
the NASDAQ for the five trading days preceding the closing date.
The Company will also enter into a four (4) year consulting
agreement with a certain executive manager of Chem-Con and Chem-Met
in the approximate aggregate amount of $1.3 million. The
Acquisition is subject to the ability of the parties to, among
other things:
* finalize definitive documents satisfactory to all
parties;
* qualify the Acquisition as a pooling of interest
transaction, which means that the merged companies will
be treated as if they had always been combined for
accounting and financial reporting purposes;
* resolve certain issues regarding real property used by
Chem-Con and Chem-Met;
* resolve and quantify certain potential environmental
liabilities of Chem-Con and Chem-Met;
* resolve certain tax treatment issues;
* complete due diligence in a satisfactory manner; and
* obtain approval of the Company's shareholders.
29
No assurance can be made that the Acquisition will occur.
Common Stock Repurchase
On October 14, 1998, the Board of Directors authorized the
repurchase of up to 500,000 shares of the Company's Common Stock
from time to time in open market or privately negotiated
transactions, in accordance with SEC Rule 10b-18. The repurchases
will be at prevailing market prices and subject to approval by
Company's lender. The Company will utilize its current working
capital and available borrowings to acquire such shares. The
Company also announced that certain Directors and Officers may be
acquiring additional shares in open market transaction, pursuant to
SEC Rule 10b-18.
Oak Ridge System Contract Award
The Company and East Tennessee Materials and Energy Corp.
("M&EC") entered into a teaming agreement ("M&EC Contract")
pursuant to which the Company and M&EC agreed to act as a team in
the performance of certain contracts that either the Company or
M&EC may obtain from customers of the U.S. Department of Energy
("DOE") regarding treatment and disposal of certain types of
radioactive, hazardous or mixed waste (waste containing both
hazardous and low level radioactive waste) at DOE facilities. The
teaming agreement provides that if either M&EC or the Company is
issued a contract that comes under the teaming agreement, then the
Company and M&EC must complete a scope of work regarding the work
each party is to perform under such contract. If the parties are
unable to finalize a scope of work, the party receiving the
contract may complete the contract without the other party to the
teaming agreement. In connection with proposals relating to the
treatment and disposal of organic contaminated mixed waste at DOE's
Oak Ridge, Tennessee, system ("Oak Ridge"), M&EC and the Company
made a joint proposal to DOE, with M&EC to act as the team leader.
In August 1998, M&EC, as the team leader, was awarded three
contracts ("Oak Ridge Contracts") by Bechtel Jacobs Company, LLC,
the government-appointed manager of the environmental program for
Oak Ridge, to perform certain treatment and disposal services
relating to Oak Ridge. The Oak Ridge Contracts were issued by DOE
based on proposals by M&EC and the Company.
The Oak Ridge Contracts are similar in nature to a blanket
purchase order whereby the DOE specifies the approved waste
treatment process and team to be used for certain disposal, but the
DOE does not specify a schedule as to dates for disposal or
quantities of disposal material to be processed. The initial term
of the contract will represent a demonstration period for the
team's successful treatment of the waste and the resulting ability
of such processed waste to meet acceptance criteria for its
ultimate disposal location.
As with most such blanket processing agreements, the Oak Ridge
Contracts contain no minimum or maximum processing guarantees, and
may be terminated by either party pursuant to standard DOE
procurement regulation terms. Each specific waste stream processed
under the Oak Ridge Contracts will require a separate work order
from DOE and will be priced separately with an intent of
recognizing an acceptable profit margin.
The Company anticipates that, as a member of the team with
M&EC in connection with the Oak Ridge Contracts and finalization of
the scope of work documents with M&EC relating to the work to be
performed by each of the Company and M&EC under the Oak Ridge
Contracts, it will (i) provide certain of the Company's
environmental remediation technologies, (ii) install equipment
necessary to apply the Company's technology, and (iii) supervise
certain aspects of the remediation process operations. In
addition, the teaming agreement provides that M&EC will purchase
all equipment necessary to perform under the Oak Ridge Contract.
The Company anticipates that work, if any, related to the Oak Ridge
Contract will begin during the later part of 1999. The Company
also anticipates that a substantial portion of any work performed
under the Oak Ridge Contracts will be performed at M&EC's facility
at Oak Ridge currently under development as of the date of this
filing. The DOE estimates that the Oak Ridge Contracts have the
potential to generate up to $100 million in gross revenues over an
estimated time span of more than five years. As of the date of
this filing, however, the Company cannot estimate (i) the amount of
work or revenues, if any, which will be received by M&EC under the
Oak Ridge Contracts, (ii) the percentage or amount of work received
by M&EC under the Oak Ridge Contracts which will be performed by
30
the Company, or (iii) the ultimate profitability, or lack of
profitability, of the Oak Ridge Contracts for the Company. The
Company and M&EC have not completed, as of the date of this report,
the scope of work relating to the Oak Ridge Contracts, and there
are no assurances that the parties will complete the scope of work
documents. See "Special Note Regarding Forward Looking
Statements."
31
Item 6. Exhibits and Reports on Form 8-K
_________________________________
(a) Exhibits
________
4.1 Congress Financial, Inc. subordination and consent letter
dated June 25, 1998.
4.2 Congress Financial, Inc. subordination and consent letter
dated October 16, 1998.
4.3 Congress Financial Corporation (Florida) consent letter
dated October 26, 1998.
10.1 Basic Oak Ridge Agreement between East Tennessee
Materials and Energy Corporation (M&EC) and Bechtel
Jacobs Company, LLC No. 1GB-99446V dated June 23, 1998.
(Exhibits to this contract as listed in the index are
omitted, but will be provided to the Commission upon
request.)
10.2 Basic Oak Ridge Agreement between East Tennessee
Materials and Energy Corporation (M&EC) and Bechtel
Jacobs Company, LLC No. 1GB-99447V dated June 23, 1998.
(Exhibits to this contract as listed in the index are
omitted, but will be provided to the Commission upon
request.)
10.3 Basic Oak Ridge Agreement between East Tennessee
Materials and Energy Corporation (M&EC) and Bechtel
Jacobs Company, LLC No. 1GB-99448V dated June 23, 1998.
(Exhibits to this contract as listed in the index are
omitted, but will be provided to the Commission upon
request.)
10.4 General agreement between East Tennessee Materials and
Energy Corporation (M&EC) and Perma-Fix Environmental
Services, Inc. dated May 27, 1998.
10.5 Appendix B to general agreement between East Tennessee
Materials and Energy Corporation (M&EC) and Perma-Fix
Environmental Services, Inc. dated November 6, 1998.
27 Financial Data Sheet
99.1 Letter of intent Chem-Con/Chem-Met acquisition dated
November 5, 1998, with letter of intent relating to
Chemical Conservation Corporation (Florida) and Chemical
Conservation of Georgia, Inc. and letter of intent
relating to Chem-Met Services, Inc. attached thereto.
(b) Report on Form 8-K
__________________
A current report on Form 8-K (Item 5 - Other Events),
dated June 30, 1998, was filed on July 17, 1998 of (i)
the newly-created Series 10 Preferred Stock and the RBB
Series 10 Warrants to RBB Bank, (ii) the Liviakis Warrant
to Liviakis, (iii) the Prag Warrant to Prag, (iv) the
Genesis Warrant to Genesis, and (v) the Fontenoy Warrant
to Fontenoy.
32
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
PERMA-FIX ENVIRONMENTAL
SERVICES, INC.
Date: November 16, 1998 By: /s/ Louis F. Centofanti
___________________________
Chairman of the Board
Chief Executive Officer
By: /s/ Richard T. Kelecy
__________________________
Richard T. Kelecy
Chief Financial Officer
33
EXHIBIT INDEX
Exhibit
No. Description Page No.
________ ___________ ________
4.1 Congress Financial, Inc. subordination and
consent letter dated June 25, 1998.
4.2 Congress Financial, Inc. subordination and
consent letter dated October 16, 1998.
4.3 Congress Financial Corporation (Florida)
consent letter dated October 26, 1998.
10.1 Basic Oak Ridge Agreement between
East Tennessee Materials and Energy
Corporation (M&EC) and Bechtel Jacobs
Company, LLC No. 1GB-99446V dated
June 23, 1998. (Exhibits to this contract
as listed in the index are omitted, but
will be provided to the Commission upon
request.)
10.2 Basic Oak Ridge Agreement between
East Tennessee Materials and Energy
Corporation (M&EC) and Bechtel Jacobs
Company, LLC No. 1GB-99447V dated
June 23, 1998. (Exhibits to this contract
as listed in the index are omitted, but
will be provided to the Commission upon
request.)
10.3 Basic Oak Ridge Agreement between
East Tennessee Materials and Energy
Corporation (M&EC) and Bechtel Jacobs
Company, LLC No. 1GB-99448V dated
June 23, 1998. (Exhibits to this contract
as listed in the index are omitted, but
will be provided to the Commission upon
request.)
10.4 General Agreement between East Tennessee
Materials and Energy Corporation (M&EC)
and Perma-Fix Environmental Services, Inc.
dated May 27, 1998.
10.5 Appendix B to General Agreement between
East Tennessee Materials and Energy
Corporation (M&EC) and Perma-Fix
Environmental Services, Inc. dated
November 6, 1998.
27 Financial Data Sheet
99.1 Letter of intent Chem-Con/Chem-Met
acquisition dated November 5, 1998, with
letter of intent relating to Chemical
Conservation Corporation (Florida)
and Chemical Conservation of Georgia, Inc.
and letter of intent relating to Chem-Met
Services, Inc. attached thereto.