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 June 30, 1999
__________________________
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 August 13, 1999
_____ ________________________________
Common Stock, $.001 Par Value 20,362,702
_____________________________ __________
(excluding 988,000 shares
held as treasury stock)
_________________________
=================================================================
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
INDEX
Page No.
________
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets -
June 30, 1999 and December 31,
1998 . . . . . . . . . . . . . . . . 2
Consolidated Statements of Opera-
tions - Three Months and Six
Months Ended June 30, 1999
and 1998. . . . . . . . . . . . . . . 4
Consolidated Statements of Cash
Flows - Six Months Ended
June 30, 1999 and 1998. . . . . . . . 5
Consolidated Statements of Stock-
holders Equity - Six Months
Ended June 30, 1999 . . . . . . . . . 6
Notes to Consolidated Financial
Statements . . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations . . . . . . . . . . . . . 19
PART II OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . 27
Item 2. Changes in Securities and Use
of Proceeds . . . . . . . . . . . . . . 27
Item 5. Other Information. . . . . . . . . . . . . 28
Item 6. Exhibits and Reports on Form 8-K . . . . . 31
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, 1998.
The results of operations for the six months ended June 30,
1999, are not necessarily indicative of results to be expected for
the fiscal year ending December 31, 1999.
1
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
June 30,
1999 December 31,
(Amounts in Thousands, Except for Share Amounts) (Unaudited) 1998
_____________________________________________________________________________
ASSETS
Current assets:
Cash and cash equivalents $ 482 $ 776
Restricted cash equivalents and investments 1,043 111
Accounts receivable, net of allowance for doubtful
accounts of $1,426 and $313, respectively 11,133 5,950
Inventories 160 145
Prepaid expenses 820 471
Other receivables 153 11
Assets of discontinued operations 498 489
_______ ______
Total current assets 14,289 7,953
Property and equipment:
Buildings and land 12,180 5,804
Equipment 10,860 8,606
Vehicles 1,459 941
Leasehold improvements 16 16
Office furniture and equipment 988 782
Construction in progress 2,325 1,592
_______ _______
27,828 17,741
Less accumulated depreciation (6,546) (5,836)
_______ _______
Net property and equipment 21,282 11,905
Intangibles and other assets:
Permits, net of accumulated amortization of
$1,248 and $1,088, respectively 9,883 3,661
Goodwill, net of accumulated amortization of
$852 and $751, respectively 7,507 4,698
Other assets 602 531
_______ _______
Total assets $ 53,563 $ 28,748
======= =======
The accompanying notes are an integral part of
these consolidated financial statements.
2
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED BALANCE SHEETS, CONTINUED
June 30,
1999 December 31,
(Amounts in Thousands, Except for Share Amounts) (Unaudited) 1998
_____________________________________________________________________________
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,661 $ 2,422
Accrued expenses 7,726 3,369
Revolving loan and term note facility 938 625
Current portion of long-term debt 1,280 302
Current liabilities of discontinued operations 719 863
_______ _______
Total current liabilities 15,324 7,581
Environmental accruals 4,744 520
Accrued closure costs 948 715
Long-term debt, less current portion 11,299 2,087
Long term liabilities of discontinued operations 1,433 1,892
_______ _______
Total long-term liabilities 18,424 5,214
Commitments and contingencies (see Note 5) - -
Stockholders' equity:
Preferred Stock, $.001 par value; 2,000,000 shares
authorized, 5,287 and 9,850 shares issued and
outstanding, respectively - -
Common Stock, $.001 par value; 50,000,000 shares
authorized, 21,246,442 and 13,215,093 shares
issued, including 988,000 and 943,000 shares
held as treasury stock, respectively 21 13
Redeemable warrants - 140
Additional paid-in capital 43,096 39,769
Accumulated deficit (21,440) (22,157)
_______ _______
21,677 17,765
Less Common Stock in treasury at cost; 988,000
and 943,000 shares issued and outstanding (1,862) (1,812)
_______ _______
Total stockholders' equity 19,815 15,953
_______ _______
Total liabilities and stockholders' equity $ 53,563 $ 28,748
======= =======
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 Six Months Ended
June 30, June 30,
(Amounts in Thousands, __________________ _________________
Except for Share Amounts) 1999 1998 1999 1998
______________________________________________________________________________
Net revenues $ 10,573 $ 7,678 $ 18,385 $ 14,226
Cost of goods sold 6,819 5,238 12,109 10,025
_______ _______ ________ _______
Gross profit 3,754 2,440 6,276 4,201
Selling, general and admini-
strative expenses 2,295 1,679 4,133 3,234
Depreciation and amortization 597 527 1,116 1,035
_______ ______ ________ ______
Income (loss) from
operations 862 234 1,027 (68)
Other income (expense):
Interest income 11 9 18 17
Interest expense (91) (142) (118) (269)
Other (6) 115 (20) 132
_______ _______ _______ ______
Net income (loss) 776 216 907 (188)
Preferred Stock dividends (73) (89) (190) (176)
_______ _______ _______ ______
Net income (loss) applicable
to Common Stock $ 703 $ 127 $ 717 $ (364)
======= ======= ======= ======
_____________________________________________________________
Net income (loss) per share
Basic $ .04 $ .01 $ .05 $ (.03)
====== ====== ====== ======
Fully diluted $ .04 $ .01 $ .05 $ (.03)
====== ====== ====== ======
Number of shares and Common Stock
equivalents used in computing net
income (loss) per share:
Basic 16,570 11,965 14,483 11,836
======= ======= ======== =======
Fully diluted 20,254 18,006 18,175 11,836
====== ====== ======== =======
The accompanying notes are an integral
part of the consolidated financial statements
4
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
(Amounts in Thousands, ___________________
Except for Share Amounts) 1999 1998
_____________________________________________________________________________
Cash flows from operating activities:
Net income (loss) from continuing operations $ 907 $ (188)
Adjustments to reconcile net income (loss)
to cash provided by operations:
Depreciation and amortization 1,116 1,035
Provision for bad debt and other reserves 12 19
Loss on sale of plant, property and equipment 3 -
Changes in assets and liabilities, net of
effects from business acquisitions:
Accounts receivable (1,118) 136
Prepaid expenses, inventories and other assets (432) 930
Accounts payable and accrued expenses 84 (461)
______ _____
Net cash provided by continuing operations 572 1,471
Net cash used by discontinued operations (551) (417)
Cash flows from investing activities:
Purchases of property and equipment, net (895) (1,027)
Proceeds from sale of plant, property and
equipment 14 -
Change in restricted cash, net 82 (16)
Cash used for acquisition consideration (1,000) -
Net cash used for acquisition settlements (1,616) -
Net cash used by discontinued operations (40) -
______ ______
Net cash used in investing activities (3,455) (1,043)
Cash flows from financing activities:
Borrowings of revolving loan and term note
facility 3,279 262
Principal repayments on long-term debt (134) (113)
Purchase of treasury stock (50) -
Proceeds from issuance of stock 66 55
Net cash used by discontinued operations (17) (30)
_______ ______
Net cash provided by financing activities 3,144 174
Increase (decrease) in cash and cash equivalents (290) 185
Cash and cash equivalents at beginning of period
including discontinued operations of $0, and
$12, respectively 776 326
______ ______
Cash and cash equivalents at end of period,
including discontinued operations of $4,
and $3 respectively $ 486 $ 511
======= ======
___________________________________________________________________
Supplemental disclosure:
Interest and dividends paid $ 422 $ 351
Non cash investing and financing activities:
Issuance of Common Stock for services 15 218
Issuance of stock for payment of dividends 114 183
Long-term debt incurred for purchase of
property and equipment 221 330
Long-term debt incurred for acquisition 4,700 -
Issuance of stock for acquisition 3,000 -
The accompanying notes are an integral part of these
consolidated financial statements.
5
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited, for the six months ended June 30, 1999)
Preferred Stock Common Stock
Amounts in Thousand, ____________________ ____________________
Except for Share Amounts) Shares Amount Shares Amount
________________________________________________________________________________
Balance at December 31, 1998 9,850 $ - 13,215,093 $ 13
Net income - - - -
Issuance of Common Stock for
Preferred Stock dividend - - 85,802 -
Issuance of Common Stock in
exchange for warrants - - 200,000 -
Issuance of Common stock for
acquisition - - 1,500,000 2
Issuance of stock for cash
and services - - 32,185 -
Conversion of Preferred Stock
to Common (4,563) - 6,119,135 6
Redemption of Common Stock
to Treasury Stock - - - -
Exercise of warrants - - 62,227 -
Option Exercise - - 32,000 -
Expiration of redeemable
warrants - - - -
______ ______ __________ ________
Balance at June 30, 1999 5,287 $ - 21,246,442 $ 21
====== ====== ========== ========
Common
Additional Stock
Redeemable Paid-In Accumulated Held in
Warrants Capital Deficit Treasury
________________________________________________
$ 140 $ 39,769 $ (22,157) $ (1,812)
- - 717 -
- 114 - -
- - - -
- 2,998 - -
- 37 - -
- (6) - -
- - - (50)
- 11 - -
- 33 - -
(140) 140 - -
________ _________ __________ ________
$ - $ 43,096 $ (21,440) $ (1,862)
======== ========= ========== ========
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, 1999
(Unaudited)
Reference is made herein to the notes to consolidated
financial statements included in our Annual Report on Form 10-K for
the year ended December 31, 1998.
1. Summary of Significant Accounting Policies
__________________________________________
Our accounting policies are as set forth in the notes to
consolidated financial statements referred to above.
The Company adopted Financial Accounting Standards Board
Statement No. 128, "Earnings per Share" ("SFAS No. 128") effective
December 31, 1997. SFAS No. 128 requires presentation of both
Basic Earnings per share ("Basic EPS") and Diluted Earnings per
share ("Diluted EPS"). Basic EPS is based on the weighted average
number of shares of Common Stock outstanding during the year.
Diluted EPS also includes the dilutive effect of common stock
equivalents or potential common shares. Potential common shares
include 1,333,597 in stock options, 6,225,351 in warrants and
3,129,772 shares underlying the Convertible Preferred Stock at the
minimum conversion price. Diluted loss per share for the six
months ended June 30, 1998, does not include Common Stock
equivalents as their effect would be anti-dilutive.
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, we have not entered into derivative contracts. Accordingly,
FAS 133 is not expected to affect our financial statements.
2. 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, 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. Given the loss of both the existing line of business and
its related customer base, we 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.
The accrued environmental and closure costs related to PFM total
$1,943,000 as of June 30, 1999, a decrease of $558,000 from the
December 31, 1998, accrual balance. This reduction was principally a
result of the specific costs related to general closure and remedial
activities, including groundwater remediation, and agency and
investigative activities ($222,000), and the general operating losses,
including indirect labor, materials and supplies, incurred in conjunction
with the above actions ($336,000). The general operating losses do not
reflect management fees charged by the corporation, but does include
interest expense of $144,000 for the quarter ended June 30, 1999,
specifically identified to such operations, including that debt
specifically incurred under the Company's revolving and term loan
facility. The Company's revolving and term loan debt is recorded on a
consolidated basis and therefore, the revolving and term loan debt
specifically attributable to PFM is not recorded as liabilities of
discontinued operations. The remaining environmental and closure
liability represents the best estimate of the cost to complete the
groundwater remediation at the site of approximately $892,000, the costs
to complete the facility closure activities over the next five (5) to ten
(10) year period (including agency and investigative activities, and
future operating losses during such closure period) totaling
approximately $826,000, and the potential PRP liability of $225,000.
7
3. Proposed Acquisition.
____________________
On May 27, 1999, (i) Perma-Fix Environmental Services, Inc.
(the "Company"), Chemical Conservation Corporation; a Florida
corporation ("Chemical Florida"); Chemical Conservation of Georgia,
Inc., a Georgia corporation ("Chemical Georgia"); The Thomas P.
Sullivan Living Trust, dated September 6, 1978 ("TPS Trust"); The
Ann L. Sullivan Living Trust, dated September 6, 1978 ("ALS
Trust"); Thomas P. Sullivan, an individual ("TPS"); and Ann L.
Sullivan, an individual, entered into a Stock Purchase Agreement
("Chem-Con Stock Purchase Agreement"), wherein the Company agreed
to purchase all of the outstanding capital stock of Chemical
Florida and Chemical Georgia from the ALS Trust pursuant to the
terms of the Chem-Con Stock Purchase Agreement, and (ii) the
Company, Chem-Met Services, Inc., a Michigan corporation
("Chem-Met"), the TPS Trust, the ALS Trust, TPS and ALS entered
into a Stock Purchase Agreement ("Chem-Met Stock Purchase
Agreement"), whereby the Company agreed to purchase all of the
outstanding capital stock of Chem-Met from the TPS Trust pursuant
to the terms of the Chem-Met Stock Purchase Agreement. The
Chem-Con Stock Purchase Agreement and the Chem-Met Stock Purchase
Agreement are collectively referred to as the "Stock Purchase
Agreements." Chemical Florida and Chemical Georgia are
collectively referred to as "Chem-Con." TPS and ALS are husband
and wife.
On May 27, 1999, the Stock Purchase Agreements and related
transaction documents ("Documents") were executed and placed into
escrow pending satisfaction of certain conditions precedent to
closing. On June 1, 1999, the conditions precedent to closing of
the Stock Purchase Agreement were completed, the Stock Purchase
Agreements were consummated and the Documents were released from
escrow.
Under the terms of the Stock Purchase Agreements, the purchase
price paid by the Company in connection with the Chem-Con/Chem-Met
acquisition was $8,700,000, consisting of (i) $1,000,000 in cash
paid at closing, (ii) three promissory notes ("Promissory Notes"),
in the aggregate amount of $4,700,000, to be paid in equal monthly
installments of principal and interest of approximately $90,000
over five years and having an interest rate of 5.5% for the first
three years and 7% for the remaining two years, with payment of
such Promissory Notes being guaranteed by Chem-Met under a
non-recourse guaranty, which non-recourse guaranty is secured by
certain real estate owned by Chem-Met, and (iii) $3,000,000 paid in
the form of 1,500,000 shares of Perma-Fix Common Stock, par value
$.001 per share ("Common Stock"), paid to the ALS Trust at closing;
however, if the ALS Trust owns any of such shares of Common Stock
at the end of eighteen (18) months from the June 1, 1999, closing
date (the "Guarantee Period") and the market value (as determined
below) per share of Common Stock at the end of the Guarantee Period
is less than $2.00 per share, the Company shall pay the ALS Trust,
within ten (10) business days after the end of the Guarantee
Period, an amount equal to the sum determined by multiplying the
number of shares of Common Stock issued to the ALS Trust under the
Stock Purchase Agreements that are still owned by the ALS Trust at
the end of the Guarantee Period by $2.00 less the market value (as
determined below) of such shares of Common Stock owned by the ALS
Trust at the end of the Guarantee Period, with such amount, if any,
payable by the Company to the ALS Trust, at the Company's option,
in cash or in Common Stock or a combination thereof.
Notwithstanding anything to the contrary, the aggregate number of
shares of Common Stock issued or issuable under the Stock Purchase
Agreements for any reason whatsoever shall not exceed eighteen
percent (18%) of the number of issued and outstanding shares of
Common Stock on the date immediately preceding the June 1, 1999,
closing date. The market value of each share of Common Stock at
the end of the Guarantee Period shall be determined based on the
average of the closing sale price per share of Common Stock as
reported on the NASDAQ SmallCap Market ("NASDAQ") for the five (5)
consecutive trading days ending with the trading day immediately
prior to the end of the Guarantee Period. Under the Company's loan
agreement, the Company may only pay any such amount due the ALS
Trust at the end of the Guarantee Period in Common Stock unless the
lender agrees that the Company may satisfy all or part of such in
cash.
The cash portion of the purchase price for Chem-Con and
Chem-Met was obtained through borrowing from the Company's primary
lender, Congress Financial Corporation (Florida) ("Congress"), as
described below. The Company anticipates that the Promissory Notes
will be paid with working capital generated from operations and/or
borrowing under the Company's revolving credit facility with
8
Congress. In connection with the closing, using funds borrowed from
Congress, the Company paid an aggregate of approximately $3,843,000
to satisfy certain obligations of Chem-Met.
The acquisition was accounted for using the purchase method
effective June 1, 1999, and accordingly, the assets and liabilities
as of this date are included in the accompanying consolidated
financial statements. As of June 1, 1999, the Company has
performed a preliminary purchase price allocation based upon
information available as of this date. Accordingly, the purchase
price has been preliminarily allocated to the net assets acquired
and net liabilities assumed based on their estimated fair values.
Included in this preliminary allocation were acquired assets of
approximately $13,996,000 and assumed liabilities of approximately
$14,535,000, against total consideration of $8,700,000. This
preliminary allocation has resulted in goodwill and intangible
permits of $2,911,000 and $6,328,000, respectively. The goodwill
and intangible permits are being amortized on a straight line basis
over 20 years. The preliminary purchase price allocation is
subject to completing the valuation of certain assets, which have
not been finalized, and may or may not result in a change to the
estimated fair market values assigned. The results of the acquired
businesses have been included in the consolidated financial
statements since the date of acquisition. The audited combined net
revenues of Chem-Con for the fiscal year ended September 30, 1998,
were, in the aggregate, approximately $21.8 million.
We accrued for the estimated closure costs, determined
pursuant to RCRA guidelines, for the three regulated facilities
acquired. This accrual, recorded at $218,000, represents the
potential future liability to close and remediate such facilities,
should such a cessation of operations ever occur. We also
recognized long-term environmental accruals totaling $4,319,000.
This amount represents management's best estimate of the long-term
costs to remove contaminated soil and to undergo groundwater
remediation activities at two of the Chem-Con acquired facilities,
Valdosta, Georgia and Detroit, Michigan. Both facilities have
pursued remedial activities for the last five years with additional
studies forthcoming and potential groundwater restoration could
extend for a period of ten years. No insurance or third party
recovery was taken into account in determining our cost estimates
or reserve, nor do our cost estimates or reserve reflect any
discount for present value purposes.
At the date of acquisition, we also initiated the payoff of a
Small Business Administration (SBA) loan, in the full amount of
$971,000. Prior to the acquisition, as required by the SBA loan
agreement the previous owners had placed approximately $331,000 of
restricted cash into an SBA trust account. Pursuant to the
acquisition and terms of the SBA loan agreement, we placed the
remaining payoff amount ($640,000) into the SBA trust account,
thereby fully funding the loan repayment. The SBA loan repayment
process requires various filings and notifications which take
approximately sixty days, at which time funds are withdrawn from
the trust account. As of June 30, 1999, such funds were reflected
as restricted cash and the corresponding liability in accrued
expenses. The restricted cash was withdrawn and SBA loan repaid on
August 1, 1999.
The principal businesses of Chem-Con and Chem-Met are the
collection, treatment, and recycling of industrial and hazardous
waste, including waste oils, water and miscellaneous solid waste.
Chemical Florida operates a permitted treatment and storage
facility and transfer station that also serves as the base for a
private trucking fleet; Chemical Georgia treats hazardous waste and
recycles solvents and Chem-Met treats and stabilizes inorganic
wastes and maintains a government services division that is focused
principally on the Defense Revitalization and Marketing Services
market. The Company intends to continue using the Chem-Con and
Chem-Met facilities for substantially the same purposes as such
were being used prior to the acquisition by the Company.
The following unaudited pro forma information presents the
consolidated statement of operations of the company as if the
acquisition had taken place on January 1, 1998. Chem-Con and Chem-
Met were on a September 30 fiscal year-end and therefore, their
results for the year ended September 30, 1998, have been
9
consolidated with our results for the year ended December 31, 1998.
Correspondingly, Chem-Con and Chem-Met's results for the six months
ended March 31, 1999 and 1998, have been consolidated with our
results for the six months ended June 30, 1999 (excluding the Chem-
Con results for June 1999 included therein) and 1998.
Six Months Ended
Year Ended June 30,
(Amounts in thousands, December 31, ________________
except per share amounts) 1998 1999 1998
________________________________________________________________
Net revenues $ 52,352 $27,036 $24,981
Net income (loss) applicable
to Common Stock (1,046) (5) 75
Net income (loss) per share (.08) - .01
Weighted average number of common
shares outstanding 13,528 15,983 13,336
These unaudited pro forma results have been prepared for
comparative purposes only and include certain adjustments, such as
additional amortization expense as a result of goodwill and
intangible permits and increased interest expense on acquisition
related debt. They do not purport to be indicative of the results
of operations that actually would have resulted on the date
indicated, or which may result in the future.
<CAPTION
4. Long-Term Debt
______________
Long-term debt consists of the following at June 30, 1999, and
December 31, 1998 (in thousands):
June 30,
1999 December 31,
(Unaudited) 1998
____________ ____________
Revolving loan facility dated January 15,
1998, as amended May 27, 1999, collater-
alized by eligible accounts receivable
subject to monthly borrowing base cal-
culation, variable interest paid
monthly at prime rate plus 1 3/4. $ 3,642 $ 97
Term loan agreement dated January 15, 1998,
as amended May 27, 1999, payable in
monthly principal installments of $78,
balance due in June 2002, variable
interest paid monthly at prime rate
plus 1 3/4. 3,672 1,927
Three promissory notes dated May 27, 1999,
payable in equal monthly installments
of principal and interest of $90 over
60 months, due June 2004, interest at
5.5% for first three years and 7%
for remaining two years. 4,700 -
Various capital lease and promissory note
obligations, payable 1999 to 2004,
interest at rates ranging from 7.5% to
13.0%. 1,503 990
_______ ________
13,517 3,014
Less current portion of revolving loan and
term note facility 938 625
Less current portion of long-term debt 1,280 302
_______ ________
$11,299 $ 2,087
======= ========
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 initially provided
for a term loan in the amount of $2,500,000, which required
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 provided 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
10
accounts of the Company as defined in the Agreement. The
termination date on the revolving loan facility was also the third
anniversary of the closing date. The Company incurred
approximately $230,000 in financing fees relative to the
solicitation and closing of this original 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 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 original Agreement dated
January 15, 1998.
In connection with the acquisition of Chemical Conservation
Corporation, Chemical Conservation of Georgia and Chem-Met
Services, Inc. (" Chem-Con") on May 27, 1999, Congress, the
Company, and the Company's subsidiaries, including Chem-Con entered
into an Amendment and Joinder to Loan and Security Agreement (the
"Loan Amendment") dated May 27, 1999, pursuant to which the Loan
and Security Agreement ("Original Loan Agreement") among Congress,
the Company and the Company's subsidiaries was amended to provide,
among other things, (i) the credit line being increased from
$7,000,000 to $11,000,000, with the revolving line of credit
portion being determined as the maximum credit of $11,000,000, less
the term loan balance, with the exact amount that can be borrowed
under the revolving line of credit not to exceed eighty percent
(80%) of the Net Amount of Eligible Accounts (as defined in the
Original Loan Agreement) less certain reserves; (ii) the term loan
portion of the Original Loan Agreement being increased from its
current balance of approximately $1,600,000 to $3,750,000 and it
shall be subject to a four year amortization schedule payable over
three years at an interest rate of 1.75% over prime; (iii) the term
of the Original Loan Agreement, as amended, will be extended for
three years from the date of the acquisition, subject to earlier
termination pursuant to the terms of the Original Loan Agreement,
as amended; (iv) Chemical Florida, Chemical Georgia and Chem-Met
being added as co-borrowers under the Original Loan Agreement, as
amended; (v) the interest rate on the revolving line of credit will
continue at 1.75% over prime, with a rate adjustment to 1.5% if
1999 net income applicable to Common Stock of the Company is equal
to or greater than $1,500,000 for either fiscal year ended
December 31, 1999 or 2000; (vi) the monthly service fee shall
increase from $1,700 to $2,000; (vii) government receivables will
be limited to 20% of eligible accounts receivable; and (viii)
certain obligations of Chem-Met shall be paid at closing of the
acquisition of Chem-Con and Chem-Met. The Loan Amendment became
effective on June 1, 1999, when the Stock Purchase Agreements were
consummated. Payments under the term loan commenced on June 1,
1999, with monthly principal payments of approximately $78,000 and
a final balloon payment in the amount of $938,000 on June 1, 2002.
The Company incurred approximately $40,000 in additional financing
fees relating to the closing of this amendment, which is being
amortized over the remaining term of the agreement.
Under the terms of the Original Loan Agreement, as amended,
the Company has agreed to maintain an Adjusted Net Worth (as
defined in the Original Loan Agreement) of not less than $3,000,000
throughout the term of the Original Loan Agreement, as amended.
The Company has agreed that it will not pay any dividends on any
shares of capital stock of the Company, except that dividends may
be paid on the Company's shares of Preferred Stock outstanding as
of the date of the Loan Amendment (collectively, "Excepted
Preferred Stock") under the terms of the applicable Excepted
Preferred Stock and if and when declared by the Board of Directors
of the Company pursuant to Delaware General Corporation Law. As
security for the payment and performance of the Original Loan
Agreement, as amended, the Company and its subsidiaries (including
Chem-Con and Chem-Met) have granted a first security interest in
all accounts receivable, inventory, general intangibles, equipment
and certain of their other assets, as well as the mortgage on two
facilities owned by subsidiaries of the Company, and except for
certain real property owned by Chem-Met, for which a first security
interest is held by the TPS Trust and the ALS Trust as security for
Chem-Met's non-recourse guaranty of the payment of the Promissory
Notes. All other terms and conditions of the original loan remain
unchanged.
11
As of June 30, 1999, borrowings under the revolving loan
agreement were approximately $3,642,000, an increase of $3,545,000
over the December 31, 1998, balance of $97,000. This increase
represents $2,799,000 funded pursuant to the Chem-Con acquisition
on June 1, 1999, and $746,000 for general working capital needs
which is typical during increased revenue periods. The balance
under the Congress term loan at June 30, 1999, was $3,672,000, an
increase of $1,745,000 over the December 31, 1998, balance of
$1,927,000. This increase represents $2,083,000 funded pursuant to
the Chem-Con acquisition on June 1, 1999, partially offset by
scheduled repayments of $338,000. We funded through the revolving
and term loan a total of $4,882,000 pursuant to the Chem-Con
acquisition excluding legal, professional and other closing fees,
of which $2,651,000 represented the repayment of certain debt
obligations, $1,192,000 represented payment of certain settlement
obligations and $1,000,000 of the cash consideration as paid to the
former owners of Chem-Con. As of June 30, 1999, the Company's
borrowing availability under the Congress credit facility, based on
its then outstanding eligible accounts receivable, was approximately
$3,062,000.
Pursuant to the terms of the Stock Purchase Agreements in
connection with the acquisition of Chem-Con, a portion of the
consideration was paid in the form of three promissory notes, in
the aggregate amount of $4,700,000 payable to the former owners of
the Company. The promissory notes are paid in equal monthly
installments of principal and interest of approximately $90,000
over five years with the first installment due on July 1, 1999, and
having an interest rate of 5.5% for the first three years and 7%
for the remaining two years. The current portion of the three
promissory notes total $846,000 at June 30, 1999. Payment of such
promissory notes are guaranteed by Chem-Met under a non-recourse
guaranty, which non-recourse guaranty is secured by certain real
estate owned by Chem-Met. See Note 3 for further discussion of the
above referenced acquisition.
As further discussed in Note 2, the long-term debt, other than
revolving and term loan 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 $11,000, all of which is current.
5. Commitments and Contingencies
_____________________________
Hazardous Waste
In connection with our waste management services, we handle
both hazardous and non-hazardous waste which we transport to our
own or other facilities for destruction or disposal. As a result
of disposing of hazardous substances, in the event any cleanup is
required, we could be a potentially responsible party for the costs
of the cleanup notwithstanding any absence of fault on our part.
Legal
In the normal course of conducting its business, we are
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, 1998. We are not
a party to any litigation or governmental proceeding which our
management believes could result in any judgements or fines against
us that would have a material adverse affect on the Company's
financial position, liquidity or results of operations.
Permits
We are subject to various regulatory requirements, including
the procurement of requisite licenses and permits at our
facilities. These licenses and permits are subject to periodic
renewal without which our operations would be adversely affected.
We anticipate that, once a license or permit is issued with respect
to a facility, the license or permit will be renewed at the end of
its term if the facility's operations are in compliance with the
applicable regulatory requirements.
Accrued Closure Costs and Environmental Liabilities
We maintain closure cost funds to insure the proper
decommissioning of our RCRA facilities upon cessation of
operations. Additionally, in the course of owning and operating
12
on-site treatment, storage and disposal facilities, we are subject
to corrective action proceedings to restore soil and/or groundwater
to its original state. These activities are governed by federal,
state and local regulations and we maintain the appropriate
accruals for restoration. We have recorded accrued liabilities for
estimated closure costs and identified environmental remediation
costs. See Note 3 for discussion of the accrued closure costs and
long-term environmental accruals recorded in conjunction with the
Chem-Con acquisition.
Insurance
We believe we maintain insurance coverage adequate for our
needs and which is similar to, or greater than, the coverage
maintained by other companies of our size in the industry. There
can be no assurances, however, that liabilities which may be
incurred by us will be covered by our insurance or that the dollar
amount of such liabilities which are covered will not exceed our
policy limits. Under our insurance contracts, we usually accept
self-insured retentions which we believe appropriate for our
specific business risks. We are required by EPA regulations to
carry environmental impairment liability insurance providing
coverage for damages on a claims-made basis in amounts of at least
$1 million per occurrence and $2 million per year in the aggregate.
To meet the requirements of customers, we have exceeded these
coverage amounts.
6. Business Segment Information
____________________________
Pursuant to FAS 131, we define an operating segment as:
* A business activity from which we may earn revenue and
incur expenses;
* Whose operating results are regularly reviewed by our
chief operating division maker to make decisions about
resources to be allocated to the segment and assess its
performance; and
* For which discrete financial information is available.
We have thirteen operating segments which are defined as each
separate facility or location that we operate. We clearly view
each facility as a separate segment and make decisions based on the
activity and profitability of that particular location. These
segments however, exclude the Corporate headquarters which does not
generate revenue and Perma-Fix of Memphis, Inc. which is reported
elsewhere as a discontinued operation. See Note 2 regarding
discontinued operations.
Pursuant to FAS 131 we have aggregated two or more operating
segments into two reportable segments to ease in the presentation
and understanding of our business. We used the following criteria
to aggregate our segments:
* The nature of our products and services;
* The nature of the production processes;
* The type or class of customer for our products and
services;
* The methods used to distribute our products or provide
our services; and
* The nature of the regulatory environment.
Our reportable segments are defined as follows:
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 our seven TSD facilities; Perma-Fix Treatment
Services, Inc., Perma-Fix of Dayton, Inc., Perma-Fix of Ft.
Lauderdale, Inc., Perma-Fix of Florida, Inc, Chem-Met Services,
Inc., Chem-Met Government Services, Chemical Conservation
Corporation and Chem-Con of Georgia, Inc. We provide through Perma-
Fix Inc. and Perma-Fix of New Mexico, Inc. on-site waste treatment
services to convert certain types of characteristic hazardous
wastes into non-hazardous waste. We also provide through
Reclamation Systems, Inc. and Industrial Waste Management, Inc. the
supply and management of non-hazardous and hazardous waste to be
used by cement plants as a substitute fuel or raw material source
and the resell of by-product materials generated at cement plants
for environmental applications.
13
The Consulting Engineering Services segment provides environmental
engineering and regulatory compliance services through Schreiber, Yonley
& Associates, Inc. and Mintech, Inc. These engineering groups provide
oversight management of environmental restoration projects, air and soil
sampling and compliance and training activities, as well as, engineering
support as needed by our other segment.
The table below shows certain financial information by business
segment for quarter ended June 30, 1999 and quarter ended June 30, 1998
and excludes the results of operations of the discontinued operations.
Segment Reporting Quarter Ended 06/30/99
Waste Segment
Services Engineering Total
________ ___________ ________
Revenue from external customers $9,640 $993 $10,573
Intercompany revenues 1,190 98 1,288
Interest income 11 - 11
Interest expense 92 23 115
Depreciation and amortization 573 20 593
Segment profit (loss) 1,170 19 1,189
Segment assets(1) 49,735 2,119 51,854
Expenditures for segment assets 564 2 566
Consolidated
Corp(2) Memphis(3) Total
_______ __________ ___________
$ - $ - $ 10,573
- - 1,288
- - 11
(24) - 91
4 - 597
(486) - 703
1,211 498 53,563
88 - 654
Segment Reporting Quarter Ended 06/30/98
Waste Segment
Services Engineering Total
________ ___________ ________
Revenue from external customers $ 6,550 $1,128 $ 7,678
Intercompany revenues 75 109 184
Interest income 9 - 9
Interest expense 125 8 133
Depreciation and amortization 504 19 523
Segment profit (loss) 419 108 527
Segment assets(1) 24,104 2,410 26,514
Expenditures for segment assets 402 3 405
Consolidated
Corp(2) Memphis(3) Total
_______ __________ ___________
$ - $ - $ 7,678
- - 184
- - 9
9 - 142
4 - 527
(400) - 127
3,961 459 30,934
- - 405
<FN>
(1) Segment assets have been adjusted for intercompany accounts to
reflect actual assets for each segment.
(2) Amounts reflect the activity for corporate headquarters.
(3) Amounts reflect the activity for Perma-Fix of Memphis, Inc.,
which is a discontinued operation, not included in the segment
information (See Note 2).
</FN>
The table below shows certain financial information by business
segment for the six months ended June 30, 1999 and the six months
ended June 30, 1998 and excludes the results of oeprations of the
discontinued operations.
Segment Reporting Six Months Ended 06/30/99
Waste Segment
Services Engineering Total
________ ___________ _______
Revenue from external customers $16,241 $2,144 $18,385
Intercompany revenues 1,283 191 1,474
Interest income 16 - 16
Interest expense 133 43 176
Depreciation and amortization 1,067 40 1,107
Segment profit (loss) 1,440 96 1,536
Segment assets(1) 49,735 2,119 51,854
Expenditures for segment assets 1,009 15 1,024
Consolidated
Corp(2) Memphis(3) Total
_______ __________ ___________
$ - $ - $ 18,385
- - 1,474
2 - 18
(58) - 118
9 - 1,116
(819) - 717
1,211 498 53,563
93 - 1,117
14
Segment Reporting Six Months Ended 06/30/98
Waste Segment
Services Engineering Total
________ ___________ _________
Revenue from external customers $12,047 $2,179 $14,226
Intercompany revenues 158 235 393
Interest income 17 - 17
Interest expense 225 27 252
Depreciation and amortization 986 41 1,027
Segment profit (loss) 292 88 380
Segment assets(1) 24,104 2,410 26,514
Expenditures for segment assets 1,353 4 1,357
Consolidated
Corp(2) Memphis(3) Total
_______ __________ ___________
$ - $ - $ 14,226
- - 393
- - 17
17 - 269
8 - 1,035
(744) - (364)
3,961 459 30,934
- - 1,357
<FN>
(1) Segment assets have been adjusted for intercompany accounts to
reflect actual assets for each segment.
(2) Amounts reflect the activity for corporate headquarters.
(3) Amounts reflect the activity for Perma-Fix of Memphis, Inc.,
which is a discontinued operation, not included in the segment
information (See Note 2).
</FN>
7. Stock
_____
On April 20, 1999, the Company and RBB Bank Aktiengesellschaft
("RBB Bank") entered into an agreement to restructure the Company's
Convertible Preferred Stock held by RBB Bank, which totaled
approximately $9.5 million. Under the restructuring the Company and
RBB Bank agreed to the following:
1. RBB Bank converted, pursuant to existing terms of the
Convertible Preferred Stock, $4.6 million of the Convertible
Preferred Stock into approximately 6.1 million shares of the
Company's Common Stock, which was completed in May 1999.
2. The Company was granted the right to purchase at a stated
value ($1,000 per share) $750,000 of the Convertible
Preferred Stock, which was subsequently purchased on July 15,
1999.
3. The terms of the balance of the Convertible Preferred Stock
(approximately $4.2 million) was changed, as follows:
a. Not subject to conversion for 12 months from the date of
the restructuring ("Lock-Up Period");
b. For one (1) year from the end of the Lock-Up Period, any
conversion of the Convertible Preferred Stock would be
subject to a minimum conversion price of $1.50 per share
of Common Stock; and
c. The Company will be granted the option to redeem the
shares of the Convertible Preferred Stock at 110% of the
stated value ($1,000 per share) for the first twelve
months from the date of restructuring and RBB Bank may
not convert such shares redeemed during such twelve month
period, and thereafter the Company has the option to
redeem the Convertible Preferred Stock at 120% of the
stated value ($1,000 per share) of the Convertible
Preferred Stock and upon notice of such redemption RBB
Bank will have the right to exercise its conversion
rights pursuant to the then current terms of the
Convertible Preferred Stock.
4. The Company is required to register with the Commission the
Common Stock issuable upon conversion of the Convertible
Preferred Stock by January 31, 2000. The Company agreed that
if a registration statement covering such Common Stock is not
declared effective by the Commission by January 31, 2000, the
Company agrees to pay to RBB Bank a penalty in an amount
equal to two percent (2%) of the product of (a) the number
of shares of such Convertible Preferred Stock then
outstanding times (b) $1,000, payable in cash. The Company
agreed that for each month thereafter which terminates
without such registration statement being declared effective
by the Commission before the end of the last day thereof, the
Company shall pay to RBB Bank a penalty in an amount equal
to two percent (2%) of the product of (a) the number of
shares of Convertible Preferred Stock then outstanding times
(b) $1,000, payable in cash.
5. The remaining terms of the Convertible Preferred Stock will
remain unchanged.
15
The restructuring was accomplished through two exchange
agreements ("First Exchange Agreement" and "Second Exchange
Agreement") which are further described as follows:
First Exchange Agreement
On July 15, 1999, the Company and RBB Bank entered into (i) an
Exchange Agreement, dated July 15, 1999 ("Series 3 Exchange
Agreement"), pursuant to which the 1,769 outstanding shares of
Series 3 Preferred, all of which were held by RBB Bank, were
exchanged for an equal number of shares of newly created Series 11
Class K Convertible Preferred Stock par value $.001 per share
("Series 11 Preferred"); (ii) an Exchange Agreement, dated July 15,
1999 ("Series 8 Exchange Agreement"), pursuant to which the
outstanding shares of Series 8 Preferred, all of which were held by
RBB Bank, were exchanged for an equal number of shares of newly
created Series 12 Class L Convertible Preferred Stock, par value
$.001 per share ("Series 12 Preferred"); and (iii) an Exchange
Agreement, dated July 15, 1999 ("Series 10 Exchange Agreement"),
pursuant to which the outstanding shares of Series 10 Preferred
Stock, all of which were held by RBB Bank, were exchanged for an
equal number of shares of newly created Series 13 Class M
Convertible Preferred Stock, par value $.001 per share ("Series 13
Preferred").
The Series 8 Preferred was redeemable by the Company (a)
within four (4) years from June 9, 1997 at $1,300 per share when
the average of the closing bid price of the Common Stock for ten
(10) consecutive days is in excess of $4.00 per share as quoted on
the NASDAQ and (b) at $1,000 per share after four years from
June 9, 1997. The Company had to provide thirty (30) days notice
to the Series 8 Preferred holder prior to any date stipulated by
the Company for redemption and at such time, the Series 8 Preferred
holder has the option of converting the shares which are to be
redeemed.
Under the terms of the Series 12 Preferred, the Company is
permitted to redeem up to 300 shares of Series 12 Preferred for
$1,000 per share, or an aggregate of $300,000, provided that any
such redemption must occur within 120 days of issuance of the
Series 12 Preferred. On July 15, 1999, the Company redeemed 300
shares of Series 12 Preferred leaving 616 shares of Series 12
Preferred issued and outstanding.
The Series 10 was not redeemable by the Company. Under the
terms of the Series 13 Preferred, the Company is permitted to
redeem up to 450 shares of Series 13 Preferred for $1,000 per
share, or an aggregate of $450,000, provided that any such
redemption must occur within 120 days of issuance of the Series 13
Preferred. On July 15, 1999, the Company redeemed 450 shares of
Series 13 Preferred leaving 1,802 shares of Series 13 Preferred
issued and outstanding.
In addition to the different redemption terms for the Series
12 Preferred and the Series 13 Preferred described above, the
Series 11 Preferred, Series 12 Preferred and Series 13 Preferred
(collectively, the "Exchange Preferred") each contain provisions,
described hereafter, which are different from those provisions in
the Series 3 Preferred, Series 8 Preferred and Series 10 Preferred,
as applicable.
* RBB Bank may make no conversions of the Exchange
Preferred for 12 months from July 15, 1999.
* Each of the Exchange Preferred has a minimum conversion
price of $1.50 per share for a 24 month period from
July 15, 1999.
* For 12 months from July 15, 1999, the Company may redeem
at any time and from time to time any of the Exchange
Preferred held by RBB Bank at 110% of its "stated value"
of $1,000 per share. Thereafter, the Company may redeem
at any time and from time to time any of such Exchange
Preferred at 120% of its "stated value" of $1,000 per
share. After 12 months from July 15, 1999, upon any
notice of redemption, RBB shall have only 5 business days
to exercise its conversion rights regarding the redeemed
16
shares. For 12 months from July 15, 1999, RBB Bank
cannot elect to convert shares of Exchange Preferred even
if the Company redeems such shares of Exchange Preferred.
Second Exchange Agreements
On August 3, 1999, the Company and RBB Bank entered into (i)
an Exchange Agreement, dated August 3, 1999 ("Series 11 Exchange
Agreement"), pursuant to which the 1,769 outstanding shares of
Series 11 Preferred, all of which were held by RBB Bank, were
exchanged for an equal number of shares of newly created Series 14
Class N Convertible Preferred Stock par value $.001 per share
("Series 14 Preferred"); (ii) an Exchange Agreement, dated August
3, 1999 ("Series 12 Exchange Agreement"), pursuant to which the 616
outstanding shares of Series 12 Preferred, all of which were held
by RBB Bank, were exchanged for an equal number of shares of newly
created Series 15 Class O Convertible Preferred Stock, par value
$.001 per share ("Series 15 Preferred"); and (iii) an Exchange
Agreement, dated August 3, 1999 ("Series 13 Exchange Agreement"),
pursuant to which the 1,802 outstanding shares of Series 13
Preferred Stock, all of which were held by RBB Bank, were exchanged
for an equal number of shares of newly created Series 16 Class P
Convertible Preferred Stock, par value $.001 per share ("Series 16
Preferred").
The exchanges of the Series 14 Preferred, Series 15 Preferred,
and Series 16 Preferred (collectively, the "Second Exchange
Preferred") to RBB Bank were made in private placements under
Section 4(2) and/or Section 3(a)(9) of the Securities Act. The
terms of each of the Second Exchange Preferred are substantially
identical to the particular Exchange Preferred for which each was
exchanged except that the July 15 dates as described above in
connection with the Exchange Preferred were changed to April 20.
Therefore, (i) RBB Bank may make no conversions of the Second
Exchange Preferred for 12 months from April 20, 1999; (ii) each of
the Second Exchange Preferred has a minimum conversion price of
$1.50 per share for a 24 month period from April 20, 1999; and
(iii) for 12 months from April 20, 1999, the Company may redeem at
any time and from time to time any of the Second Exchange Preferred
held by RBB Bank at 110% of its "stated value" of $1,000 per share.
Thereafter, the Company may redeem at any time and from time to
time any of such Second Exchange Preferred at 120% of its "stated
value" of $1,000 per share. After 12 months from April 20, 1999,
upon any notice of redemption, RBB shall have only 5 business days
to exercise its conversion rights regarding the redeemed shares.
During the 12 months after April 20, 1999, RBB Bank cannot elect to
convert shares of Second Exchange Preferred even if the Company
redeems such shares of Second Exchange Preferred.
During May 1999, the Company issued to RBB Bank
Aktiengesellschaft ("RBB Bank"), located in Graz, Austria, 6,119,135
shares in the aggregate of the Company's Common Stock relating to
conversion of certain series of the Company's Preferred Stock in
accordance with the terms of such Preferred Stock, summarized as
follows:
(i) During May 1999, the Company issued to RBB Bank
Aktiengesellschaft ("RBB Bank"), 3,090,563 shares of Common Stock
to reflect RBB Bank's conversion on April 20, 1999, of 2,231 shares
of the Company's Series 3 Class C Convertible Preferred Stock
("Series 3 Preferred") pursuant to the terms of the Series 3
Preferred. The issuance of the Common Stock was made in a private
placement pursuant to an exemption from registration under Section
4(2) and/or Section 3(a)9 of the Securities Act. As of the
conclusion of the described conversion, there were 1,769 shares of
Series 3 Preferred remaining outstanding, all of which were held by
RBB Bank.
(ii) During May 1999, the Company issued to RBB Bank 2,057,143
shares of Common Stock to reflect RBB Bank's conversion on
April 20, 1999, of 1,584 shares of the Company's Series 8 Class H
Convertible Preferred Stock ("Series 8 Preferred") pursuant to the
terms of the Series 8 Preferred. The issuance of the Common Stock
was made in a private placement pursuant to an exemption from
registration under Section 4(2) and/or Section 3(a)9 of the
Securities Act. As of the conclusion of the described conversion,
there were 916 shares of Series 8 Preferred remaining outstanding,
all of which were held by RBB Bank.
17
(iii) During May 1999, the Company issued to RBB Bank 971,429
shares of Common Stock to reflect RBB Bank's conversion on
April 20, 1999, of 748 shares of the Company's Series 10 Class J
Convertible Preferred Stock ("Series 10 Preferred") pursuant to the
terms of the Series 10 Preferred. The issuance of the Common Stock
was made in a private placement pursuant to an exemption from
registration under Section 4(2) and/or Section 3(a)9 of the
Securities Act. As of the conclusion of the described conversion,
there were 2,252 shares of Series 10 Preferred remaining
outstanding, all of which were held by RBB Bank.
During May 1999, the Company issued certain shareholders of
Chem-Con, 1,500,000 shares of the Company's Common Stock relating
to the acquisition of Chem-Con. See Note 3 for further discussion
of the above referenced acquisition.
18
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PART I, ITEM 2
Forward-Looking Statements
Certain statements contained within this report may be deemed
"forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended (collectively, the
"Private Securities Litigation Reform Act of 1995"). All
statements in this report other than 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. Forward-looking statements contained herein relate to,
among other things, (i) ability to fund capital expenditures by a
combination of lease financing and/or internally generated funds,
(ii) the ability to integrate the Chem-Con companies in a cost
effective and efficient manner, (iii) anticipated financial
performance, (iv) ability to comply with the Company's general
working capital requirements, (v) ability to retain or receive
certain permits or patents, (vi) ability to be able to continue to
borrow under the Company's revolving line of credit, (vii) ability
to generate sufficient cash flow from operations to fund all costs
of operations and remediation of certain formerly leased property
in Dayton, Ohio, and the Company's facilities in Memphis,
Tennessee, Valdosta, Georgia, and Detroit, Michigan, (viii) ability
to remediate certain contaminated sites for projected amounts, (ix)
the government's acceptance of the Company's offer regarding
settlement of claims involving the WR Drum Site, and (x) 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) material reduction in
revenues, (iii) inability to collect in a timely manner a material
amount of receivables, (iv) increased competitive pressures, (v)
the ability to maintain and obtain required permits and approvals
to conduct operations, (vi) the ability to develop new and existing
technologies in the conduct of operations, (vii) overcapacity in
the environmental industry, (viii) discovery of additional
contamination or expanded contamination at a certain Dayton, Ohio,
property formerly leased by the Company or the Company's facilities
at Memphis, Tennessee, Valdosta, Georgia and Detroit, Michigan,
which would result in a material increase in remediation
expenditures, (ix) determination that PFM is the source of
chlorinated compounds at the Allen Well Field, (x) changes in
federal, state and local laws and regulations, especially
environmental regulations, or in 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 operate profitably, or if
unable to become profitable, the inability to secure additional
liquidity in the form of additional equity or debt. The Company
undertakes no obligations to update publicly any forward-looking
statement, whether as a result of new information, future events or
otherwise.
19
Results of Operations
The table below should be used when reviewing management's
discussion and analysis for the six months ended June 30, 1999 and
1998:
Three Months Ended
June 30
___________________________________
Consolidated 1999 % 1998 %
____________ ______ _____ ______ _____
Net Revenues $10,573 100.0 $7,678 100.0
Cost of Goods Sold 6,819 64.5 5,238 68.2
______ _____ ______ _____
Gross Profit 3,754 35.5 2,440 31.8
Selling, General &
Administrative 2,295 21.7 1,679 21.9
Depreciation/Amortization 597 5.6 527 6.9
______ _____ ______ _____
Income (Loss) from
Operations $ 862 8.2 $ 234 3.0
====== ===== ====== =====
Interest Expense $ (91) (0.9) $ (142) (1.8)
Preferred Stock Dividends (73) (0.7) (89) (1.1)
Six Months Ended
June 30
___________________________________
1999 % 1998 %
______ _____ ______ _____
$18,385 100.0 $14,226 100.0
12,109 65.9 10,025 70.4
______ _____ ______ _____
6,276 34.1 4,201 29.6
4,133 22.5 3,234 22.7
1,116 6.1 1,035 7.3
______ _____ ______ _____
$ 1,027 5.5 $ (68) (.4)
====== ===== ====== =====
$ (118) (0.6) $ (269) (1.9)
(190) (1.0) (176) (1.2)
Summary - Three and Six Months Ended June 30, 1999 and 1998
___________________________________________________________
We provide services through two reportable operating 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 and hazardous 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 in the
Midwest, Southeast and Southwest regions of the country. We
operate and maintain facilities and businesses in the waste by-
product brokerage, on-site treatment and stabilization, and off-
site blending, treatment and disposal industries. Effective June 1,
1999, we acquired three additional facilities, with similar lines
of business as those currently operating within this waste
management services segment. The facilities acquired were Chemical
Conservation Corporation, Chemical Conservation of Georgia and
Chem-Met Services, Inc. (Chem-Con) which are further described in
Note 3 to Notes to Consolidated Financial Statements. Our
Consulting Engineering segment provides a wide variety of
environmental related consulting and engineering services to
industry and government. Through our 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 to $10,573,000 from
$7,678,000 for the quarter ended June 30, 1999, as compared to the
same quarter in 1998. This increase of $2,895,000 or 37.7% is
attributable to the Waste Management Services segment which
experienced an increase in revenues of $3,090,000, including
approximately $2,345,000 of additional revenue resulting from the
Chem-Con acquisition on June 1, 1999. This waste management
services increase for the quarter was partially offset by a
reduction in revenue of $195,000 from the consulting engineering
segment. Consolidated net revenues increased to $18,385,000 from
$14,226,000 for the six month period ended June 30, 1999. This
increase of $4,159,000 or 29.2% is again attributable to the waste
management services segment which experienced an increase in
revenues of $4,194,000, including the above reference Chem-Con
revenue for the month of June 1999. We recognized revenue growth
across all of the operating facilities, which were partially offset
by reductions in certain of the offsite/service related operations.
Cost of goods sold for the Company increased $1,581,000 or
30.2% for the quarter ended June 30, 1999, as compared to the
quarter ended June 30, 1998. This consolidated increase in cost of
20
goods sold reflects principally the increased operating, disposal
and transportation costs, corresponding to the increased revenue of
37.7% as discussed above. The resulting gross profit for the
quarter ended June 30, 1999, increased $1,314,000 to $3,754,000,
which as a percentage of revenue is 35.5%, reflecting an increase
over the corresponding quarter in 1998 percentage of revenue of
31.8%. Cost of goods sold also increased $2,084,000 or 20.8% for
the six month period ended June 30, 1999, as compared to the six
month period ended June 30, 1998. As with the quarter, this
increase is a direct result of the increased revenue of 29.2%, as
discussed above. The resulting gross profit for the six months of
1999 increased $2,075,000 to $6,276,000, which as a percentage of
revenue is 34.1%, also reflecting an increase over the
corresponding six month period of 1998 percentage of revenue of
29.6%. This increase in gross margins for the quarter and six
month period ended June 30, 1999, occurred within both the waste
management and consulting services segments, and reflects the
improved pricing structures we have been able to achieve, along
with the continued focus on cost reductions.
Selling, general and administrative expenses increased
$616,000 or 36.7% for the quarter ended June 30, 1999, as compared
to the quarter ended June 30, 1998. However, as a percentage of
revenue, selling, general and administrative expense decreased to
21.7% for the quarter ended June 30, 1999, compared to 21.9% for
the same period in 1998. Selling, general and administrative
expenses also increased for the six month period of 1999, as
compared to 1998, by $899,000 or 27.8%. However, as a percentage
of revenue, selling, general and administrative expense decreased
to 22.5% for the six month period ended June 30, 1999, compared to
22.7% for the same period of 1998. The increase in the total
selling, general, and administrative expenses is partially due to
the addition of Chem-Con which contributed $339,000 of this
increase, in addition to the increased expenses associated with the
our additional sales and marketing efforts as we continue to
refocus the business segments into new environmental markets, such
as nuclear and mixed waste, and the additional administrative
overhead associated with our research and development efforts. We
have continued to expense in the current period all research and
development costs associated with the development of various
technologies which we aggressively pursued during 1999.
Depreciation and amortization expense for the six month period
ended June 30, 1999, reflects an increase of $81,000 as compared to
the same period of 1998. This increase is attributable to the
acquisition of Chem-Con, effective June 1, 1999, for which
depreciation of $44,000 and amortization expense of $38,000 were
recorded during June of 1999. This acquisition also accounted for
the change in the quarter ended June 30, 1999.
Interest expense decreased $51,000 from the quarter ended
June 30, 1999, as compared to the corresponding period of 1998,
excluding discontinued operations. Interest expense also decreased
by $151,000 for the six month period ending June 30, 1999, as
compared to the corresponding period of 1998, excluding
discontinued operations. The decrease in interest expense for both
the quarter and six month periods of 1999 are a direct result of
the reduced borrowing levels on the Congress Financial Corporation
revolving loan and term note. During the last half of 1998, the
revolving loan had been paid down to a minimal balance. However,
in conjunction with the acquisition of Chem-Con, certain debt was
consolidated into the Congress Financial Corporation revolving loan
and term debt and additional borrowing were made to fund certain
settlements and repayments in conjunction with the acquisition,
which resulted in increased borrowing levels effective June 1999.
See Notes 3 and 4 to Notes to Consolidated Financial Statements for
additional disclosure on the Chem-Con acquisition and Congress
Financial Corporation debt. Interest expense for discontinued
operations was $144,000 for the six month period ended June 30,
1999, specifically identified to such operations, including that
debt specifically incurred under the Company's revolving note and
term loan facility. See Note 2 to Notes to Consolidated Financial
Statements regarding discontinued operations.
Preferred Stock dividends increased $14,000 for the six month
period ended June 30, 1999, as compared to the corresponding period
of 1998. This increase is due to the issuance and subsequent
dividends of the Series 10 Class J Convertible Preferred Stock
which were issued in June of 1998. However, for the quarter ended
June 30, 1999, Preferred Stock dividends decreased by $16,000 to
21
$73,000, as compared to $89,000 for the quarter ended June 30,
1998. This decrease in the second quarter of 1999 is a result of
the conversion of $4,563,000 of the Convertible Preferred Stock
into Common Stock on April 20, 1999, of the total of $9,850,000
outstanding prior to such conversion.
Discontinued Operations
On January 27, 1997, an explosion and resulting tank fire
occurred at the Perma-Fix of Memphis, Inc. ("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. As a result of the significant disruption and the cost to
rebuild and operate this segment, the Company made a strategic
decision, in February 1998, to discontinue its fuel blending
operations at PFM. The fuel blending operations represented the
principal line of business for PFM prior to this event, which
included a separate class of customers, and its discontinuance has
required PFM to attempt to develop new markets and customers,
through the utilization of the facility as a storage facility under
its RCRA permit and as a transfer facility.
Liquidity and Capital Resources of the Company
At June 30, 1999, the Company had cash and cash equivalents of
$486,000, including $4,000 from discontinued operations. This cash
and cash equivalents total reflects a decrease of $290,000 from
December 31, 1998, as a result of net cash provided by continuing
operations of $572,000, offset by cash used by discontinued
operation of $551,000, cash used in investing activities of
$3,455,000 (principally purchases of equipment, net totaling
$895,000 and the net cash used to fund the acquisition totaling
$2,616,000) and cash provided by financing activities of
$3,144,000 (principally additional borrowing under the revolving
loan and term note facility pursuant to the acquisition). Accounts
receivable, net of allowances for doubtful accounts, totaled
$11,133,000, an increase of $5,183,000 over the December 31, 1998,
balance of $5,950,000. This increase in accounts receivable
represents the addition of the Chem-Con receivables as acquired
effective June 1, 1999, in the amount of $4,146,000 and the
increase of $1,037,000 resulting from the increased revenues during
the second quarter of 1999.
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 $230,000 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 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.
In connection with the acquisition of Chemical Conservation
Corporation, Chemical Conservation of Georgia and Chem-Met
Services, Inc. (" Chem-Con") on May 27, 1999, Congress, the
Company, and the Company's subsidiaries, including Chem-Con entered
into an Amendment and Joinder to Loan and Security Agreement (the
"Loan Amendment") dated May 27, 1999, pursuant to which the Loan
and Security Agreement ("Original Loan Agreement") among Congress,
the Company and the Company's subsidiaries was amended to provide,
among other things, (i) the credit line being increased from
22
$7,000,000 to $11,000,000, with the revolving line of credit
portion being determined as the maximum credit of $11,000,000, less
the term loan balance, with the exact amount that can be borrowed
under the revolving line of credit not to exceed eighty percent
(80%) of the Net Amount of Eligible Accounts (as defined in the
Original Loan Agreement) less certain reserves; (ii) the term loan
portion of the Original Loan Agreement being increased from its
current balance of approximately $1,600,000 to $3,750,000 and it
shall be subject to a four year amortization schedule payable over
three years at an interest rate of 1.75% over prime; (iii) the term
of the Original Loan Agreement, as amended, will be extended for
three years from the date of the acquisition, subject to earlier
termination pursuant to the terms of the Original Loan Agreement,
as amended; (iv) Chemical Florida, Chemical Georgia and Chem-Met
being added as co-borrowers under the Original Loan Agreement, as
amended; (v) the interest rate on the revolving line of credit will
continue at 1.75% over prime, with a rate adjustment to 1.5% if
1999 net income applicable to Common Stock of the Company is equal
to or greater than $1,500,000 for either fiscal year ended December
31, 1999 or 2000; (vi) the monthly service fee shall increase from
$1,700 to $2,000; (vii) government receivables will be limited to
20% of eligible accounts receivable; and (viii) certain obligations
of Chem-Met shall be paid at closing of the acquisition of
Chem-Con and Chem-Met. The Loan Amendment became effective on
June 1, 1999, when the Stock Purchase Agreements were consummated.
Payments under the term loan commenced on June 1, 1999, with
monthly principal payments of approximately $78,000 and a final
balloon payment in the amount of $938,000 on June 1, 2002. The
Company incurred approximately $40,000 in additional financing fees
relating to the closing of this amendment, which is being amortized
over the remaining term of the agreement.
As of June 30, 1999, borrowings under the revolving loan
agreement were approximately $3,642,000, an increase of $3,545,000
over the December 31, 1998, balance of $97,000. This increase
represents $2,799,000 funded pursuant to the Chem-Con acquisition
on June 1, 1999, and $746,000 for general working capital needs
which is typical during increased revenue periods. The balance
under the Congress term loan at June 30, 1999, was $3,672,000, an
increase of $1,745,000 over the December 31, 1998, balance of
$1,927,000. This increase represents $2,083,000 funded pursuant to
the Chem-Con acquisition on June 1, 1999, partially offset by
scheduled repayments of $338,000. We funded through the revolving
and term loan a total of $4,882,000 pursuant to the Chem-Con
acquisition excluding legal, professional and other closing fees,
of which $2,651,000 represented the repayment of certain debt
obligations, $1,192,000 represented payment of certain settlement
obligations and $1,000,000 of the cash consideration as paid to the
former owners of Chem-Con. As of June 30, 1999, the Company's
borrowing availability under the Congress credit facility, based on
its then outstanding eligible accounts receivable, was
approximately $3,062,000.
Pursuant to the terms of the Stock Purchase Agreements in
connection with the acquisition of Chem-Con, a portion of the
consideration was paid in the form of three promissory notes, in
the aggregate amount of $4,700,000 payable to the former owners of
the Company. The promissory notes are paid in equal monthly
installments of principal and interest of approximately $90,000
over five years with the first installment due on July 1, 1999.
The three promissory notes have an interest rate of 5.5% for the
first three years and 7% for the remaining two years. Payment of
such promissory notes are guaranteed by Chem-Met under a non-
recourse guaranty, which non-recourse guaranty is secured by
certain real estate owned by Chem-Met. See Note 3 for further
discussion of the above referenced acquisition.
At June 30, 1999, we had $13,517,000 in aggregate principal
amounts of outstanding debt, related to continuing operations, as
compared to $3,014,000 at December 31, 1998. This increase in
outstanding debt of $10,503,000 reflects the net borrowings on the
Congress Financial Corporation revolving loan and term note
facility of $5,290,000 principally related to the Chem-Con
acquisition as discussed above, $4,700,000 in the form of three new
promissory notes in payment of a portion of the consideration for
the Chem-Con acquisition as discussed above, approximately $425,000
in various capital lease obligations assumed in conjunction with
the acquisition of Chem-Con and $221,000 of debt related to new
capital equipment at several of our existing facilities. As of
June 30, 1999, we had $11,000 in aggregate principal amounts of
outstanding debt related to PFM discontinued operations, all of
which is classified as current.
23
Our net purchases of new capital equipment for continuing
operations for the three and six month period ended June 30, 1999,
totaled approximately $654,000 and $1,117,000, respectively, of
which $89,000 and $132,000, respectively, was financed. We have
budgeted capital expenditures of $2,500,000 for 1999 related to the
original Perma-Fix locations, which includes completion of certain
current projects, as well as other identified capital and permit
compliance purchases. We have not completed as of yet a capital
asset budget for the Chem-Con facilities for the reminder of 1999.
However, we do not foresee significant capital asset requirements
in the short term. We anticipate funding the remainder of these
capital expenditures by a combination of lease financing with
lenders other than the equipment financing arrangement discussed
above, and/or internally generated funds.
Our working capital position at June 30, 1999, was a deficit
of $1,035,000, as compared to capital of $372,000 at December 31,
1998, which reflects a decrease in this position of $1,407,000
during this first six months of 1999. This reduced working capital
position is principally a result of the impact of the Chem-Con
acquisition. The consideration was paid in the form of cash, notes
and debt, with the cash portion being $1,000,000, a portion of
which came from current cash and a portion funded through the
Congress long term revolving loan. The Congress term loan was also
increased by $2,083,000 pursuant to this acquisition, which
resulted in an increase of $313,000 in the current portion of the
term loan debt. Additionally, as of June 30, 1999, the acquired
Chem-Con companies had a deficit working capital position of
approximately $360,000. See Note 3 to Notes to Consolidated
Financial Statements for further discussion on this acquisition.
On April 20, 1999, the Company and RBB Bank Aktiengesellschaft
("RBB Bank") entered into an agreement to restructure the Company's
Convertible Preferred Stock held by RBB Bank, which totaled
approximately $9.5 million. The restructuring was accomplished
through two exchange agreements ("First Exchange Agreement" and
"Second Exchange Agreement") which are further described in Note 7
to Notes to Consolidated Financial Statements and in "Part II-Item
5. Other Information". Under the restructuring the Company and RBB
Bank :
1. RBB Bank converted, pursuant to existing terms of the
Convertible Preferred Stock, $4.6 million of the Convertible
Preferred Stock into approximately 6.1 million shares of the
Company's Common Stock, which was completed in May 1999.
2. The Company was granted the right to purchase at a stated
value ($1,000 per share) $750,000 of the Convertible Preferred
Stock, which was subsequently purchased on July 15, 1999.
3. The terms of the balance of the Convertible Preferred Stock
(approximately $4.2 million) was changed, as follows:
a. Not subject to conversion for 12 months from the date of
the restructuring ("Lock-Up Period");
b. For one (1) year from the end of the Lock-Up Period, any
conversion of the Convertible Preferred Stock would be
subject to a minimum conversion price of $1.50 per share
of Common Stock; and
c. The Company will be granted the option to redeem the
shares of the Convertible preferred stock at 110% of
the stated value ($1,000 per share) for the first twelve
months from the date of restructuring and RBB Bank may
not convert such shares redeemed during such twelve
month period, and thereafter the Company has the option
to redeem the Convertible Preferred Stock at 120% of
the stated value ($1,000 per share) of the Convertible
preferred stock and upon notice of such redemption RBB
Bank will have the right to exercise its conversion
rights pursuant to the then current terms of the
Convertible Preferred Stock.
4. The Company is required to register with the Commission the
Common Stock issuable upon conversion of the Convertible
Preferred Stock by January 31, 2000. The Company agreed that
if a registration statement covering such Common Stock is not
declared effective by the Commission by January 31, 2000, the
Company agrees to pay to RBB Bank a penalty in an amount equal
to two percent (2%) of the product of (a) the number of shares
24
of such Convertible Preferred Stock then outstanding times (b)
$1,000, payable in cash. The Company agreed that for each
month thereafter which terminates without such registration
statement being declared effective by the Commission before
the end of the last day thereof, the Company shall pay to RBB
Bank a penalty in an amount equal to two percent (2%) of the
product of (a) the number of shares of Convertible Preferred
Stock then outstanding times (b) $1,000, payable in cash.
5. The remaining terms of the Convertible Preferred Stock will
remain unchanged.
The Company financed the redemption of $750,000 of
Convertible Preferred Stock through borrowings under its revolving
credit facility. See "Part II-Item 5. Other Information".
As discussed above, on June 1, 1999, the Company purchased all
of the outstanding stock of Chem-Con and paid $8.7 million, as
follows: (i) $1 million in cash, (ii) five (5) year promissory
notes totaling the original principal amount of $4.7 million,
bearing an annual rate of interest of 5.5% for the first three
years and 7% for the last two years, with principal and accrued
interest payable in monthly installments of approximately $90,000
each, and (iii) $3 million payable in the form of 1.5 million
shares of the Company's Common Stock based on each share having an
agreed value of $2.00. If the average of the closing price of the
Company's Common Stock as quoted on the NASDAQ for the five (5)
trading days immediately preceding the date eighteen (18) months
after June 1, 1999 ("Valuation Date") is less than $2.00 per share,
the Company is to pay in cash or Common Stock or a combination
thereof, at the Company's option, the difference between $3 million
and the value of the 1.5 million shares of Common Stock based on
the five (5) trading day average as quoted on the NASDAQ
immediately preceding the Valuation Date. Under the Company's loan
agreement, the Company may pay such amount, if any, only in Common
Stock unless the lender agrees that the Company may satisfy such in
whole or in part in cash. However, the Company is not to issue in
connection with the acquisition of Chem-Con more than 18% of the
outstanding shares of Common Stock at the closing of the
acquisition of Chem-Con.
The Company funded the cash portion of the purchase price for
Chem-Con through borrowings under its revolving credit facility as
discussed above and will fund the payment of the promissary notes
issued as a part of the purchase price by borrowings under its
revolving credit facility and/or working capital generated from
operations.
In addition, the Company arranged with its lenders to include
within its revolving credit facility Chem-Con and, as a result,
increased its credit facility from approximately $7 million to
approximately $11 million, and used the expanded credit facility
(a) to pay certain claims against Chem-Con totaling approximately
$1,192,000 million and (b) to replace approximately $2,651,000
million of Chem-Con existing credit facilities.
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 or secure landfill residual materials generated
at its facilities or at a client's site. The Company, compared to
its 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
25
Company's aggressive compliance and auditing procedures for
disposal of wastes, the Company could, in the future, be notified
that it is a PRP at a remedial action site, which could have a
material adverse effect on the Company.
During January 1998, PFM was notified by the EPA that it
believed that PFM was a PRP regarding the remediation of a site
owned and operated by W.R. Drum, Inc. ("WR Drum") in Memphis,
Tennessee (the "Drum Site"), as further discussed in Item 3 "Legal
Proceedings" in the Company's Annual Report on Form 10-K for the
year ended December 31, 1998. During the third quarter of 1998, the
government agreed to PFM's offer to pay $225,000 ($150,000 payable
at closing and the balance payable over a twelve month period) to
settle any potential liability regarding this Drum Site. During
January 1999, the Company executed a "Partial Consent Decree"
pursuant to this settlement, which settlement is subject to
approval of the court. It is anticipated that the settlement will
be approved and the initial payment of $150,000 will be made during
the third quarter of 1999. However, there are no assurances that
the settlement will be approved by the court.
In addition to budgeted capital expenditures of $2,500,000 for
1999 at the TSD facilities, which are necessary to maintain permit
compliance and improve operations, as discussed above in this
Management's Discussion and Analysis, we have also budgeted for
1999 an additional $437,000 in environmental expenditures to comply
with federal, state and local regulations in connection with
remediation of certain contaminates at two locations. The two
locations where these expenditures will be made are a parcel of
property leased by a predecessor to PFD in Dayton, Ohio (EPS), a
former RCRA storage facility as operated by the former owners of
PFD, and PFM's facility in Memphis, Tennessee. We have estimated
the expenditures for 1999 to be approximately $222,000 at the EPS
site and $215,000 at the PFM location of which $39,000 and $88,000
were spent during the first six months of 1999, respectively.
Additional funds will be required for the next five to ten years to
properly investigate and remediate these sites. We expect to fund
these expenses to remediate these two sites from funds generated
internally, however, no assurances can be made that we will be able
to do so.
We also recognized long-term environmental accruals totaling
$4,319,000 related to the Chem-Con facilities acquired effective
June 1, 1999, of which we anticipate spending approximately
$432,000 over the next twelve months. This amount represents
management's best estimate of the long-term costs to remove
contaminated soil and to undergo groundwater remediation activities
at two of the Chem-Con acquired facilities, Valdosta, Georgia and
Detroit, Michigan. Both facilities have pursued remedial
activities for the last five years with additional studies
forthcoming and potential groundwater restoration could extend for
a period of ten years. No insurance or third party recovery was
taken into account in determining our cost estimates or reserve,
nor do our cost estimates or reserve reflect any discount for
present value purposes.
Recent Accounting Pronouncements
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, we have not entered into
derivative contracts. Accordingly, FAS 133 is not expected to
affect our financial statements.
26
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, 1998, which Item 3 is incorporated herein by
reference.
Item 2. Changes in Securities and Use of Proceeds
_________________________________________
(c) During the quarter ended June 30, 1999, the Company sold
or entered into an agreement to sell, equity securities that were
not registered under the Securities Act of 1933, as amended (the
"Securities Act"), other than as previously reported, as such term
is defined under Rule 12b-2 of the Exchange Act of 1934, as amended
(the "Exchange Act"), as follows:
(i) During May 1999, the Company issued to RBB Bank
Aktiengesellschaft ("RBB Bank"), 3,090,563 shares of Common Stock
to reflect RBB Bank's conversion on April 20, 1999, of 2,231 shares
of the Company's Series 3 Class C Convertible Preferred Stock
("Series 3 Preferred") pursuant to the terms of the Series 3
Preferred. The issuance of the Common Stock was made in a private
placement pursuant to an exemption from registration under Section
4(2) and/or Section 3(a)9 of the Securities Act. As of the
conclusion of the described conversion, there were 1,769 shares of
Series 3 Preferred remaining outstanding, all of which were held by
RBB Bank.
(ii) During May 1999, the Company issued to RBB Bank 2,057,143
shares of Common Stock to reflect RBB Bank's conversion on
April 20, 1999, of 1,584 shares of the Company's Series 8 Class H
Convertible Preferred Stock ("Series 8 Preferred") pursuant to the
terms of the Series 8 Preferred. The issuance of the Common Stock
was made in a private placement pursuant to an exemption from
registration under Section 4(2) and/or Section 3(a)9 of the
Securities Act. As of the conclusion of the described conversion,
there were 916 shares of Series 8 Preferred remaining outstanding,
all of which were held by RBB Bank.
(iii) During May 1999, the Company issued to RBB Bank 971,429
shares of Common Stock to reflect RBB Bank's conversion on
April 20, 1999, of 748 shares of the Company's Series 10 Class J
Convertible Preferred Stock ("Series 10 Preferred") pursuant to the
terms of the Series 10 Preferred. The issuance of the Common Stock
was made in a private placement pursuant to an exemption from
registration under Section 4(2) and/or Section 3(a)9 of the
Securities Act. As of the conclusion of the described conversion,
there were 2,252 shares of Series 10 Preferred remaining
outstanding, all of which were held by RBB Bank.
(iv) On or about April 29, 1999, Jeffery M. Canouse, James P.
Canouse, and John C. Canouse (collectively, the "Canouses")
purchased 14,887, 20,020, and 12,320 shares of Common Stock,
respectively, or an aggregate of 47,227 shares of Common Stock.
These shares were purchased on a cashless basis pursuant to the
terms, as amended, of a certain warrant ("Carey Warrant") by the
Canouses tendering certain portions of the "in the money" Carey
Warrant as consideration for the exercise of other portions of the
Carey Warrant. The Carey Warrant 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 the Canouses, shareholders of
Carey, allowing each of them to purchase up to 39,000 shares of
Common Stock thereunder. 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 Canouses in a private placement under Section
27
4(2) of the Act as the Canouses 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 Canouses
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 re-offer 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 ("Third Supplement") to the
Prospectus dated November 13, 1996, contained within the 1996
Registration Statement ("Prospectus") was filed 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
table in the Prospectus 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. On June 4, 1999, a Fourth Supplement
("Fourth Supplement") to the Prospectus was filed with the SEC,
which Fourth Supplement described, among other things, the
amendment of the Carey Warrant to allow the holders thereof to
exercise such warrants on a cashless basis. The Fourth Supplement
also served to supplement and amend the Selling Security Holders
table in the Prospectus by, among other things, adjusting the
offering information applicable to the Canouses as Selling
Shareholders to account for their exercises of the Carey Warrant.
(v) On or about May 4, 1999, pursuant to the terms of a
certain Consulting Agreement ("Consulting Agreement") entered into
effective as of January 1, 1998, the Company issued 4,000 shares of
Common Stock in payment of accrued fees 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 January through March 1999. The
issuance of Common Stock pursuant to the Consulting Agreement was
a private placement under Section 4(2) of the Act and/or Rule 506
of Regulation D as promulgated under the 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 from
January 1999 through the end of March 1999 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 Act, or an opinion of
counsel satisfactory to the Company, that the transfer can be made
without violating the registration provisions of the 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 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.
Item 5. Other Information
_________________
First Exchange Agreements
On July 15, 1999, the Company and RBB Bank entered into (i) an
Exchange Agreement, dated July 15, 1999 ("Series 3 Exchange
Agreement"), pursuant to which the 1,769 outstanding shares of
28
Series 3 Preferred, all of which were held by RBB Bank, were
exchanged for an equal number of shares of newly created Series 11
Class K Convertible Preferred Stock par value $.001 per share
("Series 11 Preferred"); (ii) an Exchange Agreement, dated July 15,
1999 ("Series 8 Exchange Agreement"), pursuant to which the
outstanding shares of Series 8 Preferred, all of which were held by
RBB Bank, were exchanged for an equal number of shares of newly
created Series 12 Class L Convertible Preferred Stock, par value
$.001 per share ("Series 12 Preferred"); and (iii) an Exchange
Agreement, dated July 15, 1999 ("Series 10 Exchange Agreement"),
pursuant to which the outstanding shares of Series 10 Preferred
Stock, all of which were held by RBB Bank, were exchanged for an
equal number of shares of newly created Series 13 Class M
Convertible Preferred Stock, par value $.001 per share ("Series 13
Preferred").
The sales of the Series 11 Preferred, Series 12 Preferred, and
Series 13 Preferred to RBB Bank were made in private placements
under Section 4(2) and/or Section 3(a)(9) of the Securities Act.
The terms of the newly issued securities are substantially the same
as the series for which each was exchanged with the exception of
certain differences as described hereafter.
Redemption Terms of Series 8 Preferred and Series 12 Preferred
The Series 8 Preferred was redeemable by the Company (a)
within four (4) years from June 9, 1997 at $1,300 per share when
the average of the closing bid price of the Common Stock for ten
(10) consecutive days is in excess of $4.00 per share as quoted on
the NASDAQ and (b) at $1,000 per share after four years from
June 9, 1997. The Company had to provide thirty (30) days notice
to the Series 8 Preferred holder prior to any date stipulated by
the Company for redemption and at such time, the Series 8 Preferred
holder has the option of converting the shares which are to be
redeemed.
Under the terms of the Series 12 Preferred, the Company is
permitted to redeem up to 300 shares of Series 12 Preferred for
$1,000 per share, or an aggregate of $300,000, provided that any
such redemption must occur within 120 days of issuance of the
Series 12 Preferred. On July 15, 1999, the Company redeemed 300
shares of Series 12 Preferred leaving 616 shares of Series 12
Preferred issued and outstanding.
Redemption Terms of Series 10 Preferred and Series 13 Preferred
The Series 10 was not redeemable by the Company. Under the
terms of the Series 13 Preferred, the Company is permitted to
redeem up to 450 shares of Series 13 Preferred for $1,000 per
share, or an aggregate of $450,000, provided that any such
redemption must occur within 120 days of issuance of the Series 13
Preferred. On July 15, 1999, the Company redeemed 450 shares of
Series 13 Preferred leaving 1,802 shares of Series 13 Preferred
issued and outstanding.
Other Differences
In addition to the different redemption terms for the
Series 12 Preferred and the Series 13 Preferred described above,
the Series 11 Preferred, Series 12 Preferred and Series 13
Preferred (collectively, the "Exchange Preferred") each contain
provisions, described hereafter, which are different from those
provisions in the Series 3 Preferred, Series 8 Preferred and Series
10 Preferred, as applicable.
* RBB Bank may make no conversions of the Exchange
Preferred for 12 months from July 15, 1999.
* Each of the Exchange Preferred has a minimum conversion
price of $1.50 per share for a 24 month period from
July 15, 1999.
* For 12 months from July 15, 1999, the Company may redeem
at any time and from time to time any of the Exchange
Preferred held by RBB Bank at 110% of its "stated value"
29
of $1,000 per share. Thereafter, the Company may redeem
at any time and from time to time any of such Exchange
Preferred at 120% of its "stated value" of $1,000 per
share. After 12 months from July 15, 1999, upon any
notice of redemption, RBB shall have only 5 business days
to exercise its conversion rights regarding the redeemed
shares. For 12 months from July 15, 1999, RBB Bank
cannot elect to convert shares of Exchange Preferred even
if the Company redeems such shares of Exchange Preferred.
Second Exchange Agreements
On August 3, 1999, the Company and RBB Bank entered into
(i) an Exchange Agreement, dated August 3, 1999 ("Series 11
Exchange Agreement"), pursuant to which the 1,769 outstanding
shares of Series 11 Preferred, all of which were held by RBB Bank,
were exchanged for an equal number of shares of newly created
Series 14 Class N Convertible Preferred Stock par value $.001 per
share ("Series 14 Preferred"); (ii) an Exchange Agreement, dated
August 3, 1999 ("Series 12 Exchange Agreement"), pursuant to which
the 616 outstanding shares of Series 12 Preferred, all of which
were held by RBB Bank, were exchanged for an equal number of shares
of newly created Series 15 Class O Convertible Preferred Stock, par
value $.001 per share ("Series 15 Preferred"); and (iii) an
Exchange Agreement, dated August 3, 1999 ("Series 13 Exchange
Agreement"), pursuant to which the 1,802 outstanding shares of
Series 13 Preferred Stock, all of which were held by RBB Bank, were
exchanged for an equal number of shares of newly created Series 16
Class P Convertible Preferred Stock, par value $.001 per share
("Series 16 Preferred").
The sales of the Series 14 Preferred, Series 15 Preferred, and
Series 16 Preferred (collectively, the "Second Exchange Preferred")
to RBB Bank were made in private placements under Section 4(2)
and/or Section 3(a)(9) of the Securities Act. The terms of each of
the Second Exchange Preferred are substantially identical to the
particular Exchange Preferred for which each was exchanged except
that the July 15 dates as described above in connection with the
Exchange Preferred were changed to April 20 and certain
registration rights were granted regarding the shares of Common
Stock issuable under the Second Exchange Preferred. Therefore, (i)
RBB Bank may make no conversions of the Second Exchange Preferred
for 12 months from April 20, 1999; (ii) each of the Second Exchange
Preferred has a minimum conversion price of $1.50 per share for a
24 month period from April 20, 1999; (iii) for 12 months from April
20, 1999, the Company may redeem at any time and from time to time
any of the Second Exchange Preferred held by RBB Bank at 110% of
its "stated value" of $1,000 per share; and (iv) if the Company
does not register with the Commission the Common Stock issuable
upon conversion of the Convertible Preferred Stock by January 31,
2000, the Company agrees to pay to RBB Bank a penalty in an amount
equal to two percent (2%) of the product of (a) the number of
shares of such Convertible Preferred Stock then outstanding times
(b) $1,000, payable in cash. The Company further agreed that for
each month thereafter which terminates without such registration
statement being declared effective by the Commission before the end
of the last day thereof, the Company shall pay to RBB Bank a
penalty in an amount equal to two percent (2%) of the product of
(a) the number of shares of Convertible Preferred Stock then
outstanding times (b) $1,000, payable in cash. After 12 months from
April 20, 1999, the Company may redeem at any time and from time to
time any of such Second Exchange Preferred at 120% of its "stated
value" of $1,000 per and, upon any notice of redemption, RBB shall
have only 5 business days to exercise its conversion rights
regarding the redeemed shares. During the 12 months after
April 20, 1999, RBB Bank cannot elect to convert shares of Second
Exchange Preferred even if the Company redeems such shares of
Second Exchange Preferred.
As of the date of this report, RBB Bank holds 6,891,427 shares
of Common Stock of, or approximately 33.8% of the outstanding
shares of Common Stock.
30
Stockholder Proposals
The Company's 1998 Annual Meeting of Stockholders took place on
May 20, 1998, however, the Company anticipates that its 1999 Annual
Meeting of Stockholders will occur on November 4, 1999. Pursuant
to Rule 14a-5(f) as promulgated under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), stockholder proposals
submitted to the Company pursuant to Rule 14a-8 under the Exchange
Act, for inclusion in the Company's proxy materials for its 1999
Annual Meeting of Stockholders must be received by the Company a
reasonable time before the Company begins to print and mail its
proxy materials. Any stockholder proposal submitted with respect
to the Company's 1999 Annual Meeting of Stockholders which proposal
is received by the Company after such time will be considered
untimely for purposes of Rule 14a-4 and 14a-5 under the Exchange
Act and the Company may vote against such proposal using its
discretionary voting authority as authorized by proxy.
Item 6. Exhibits and Reports on Form 8-K
________________________________
(a) Exhibits
________
3(i) Restated Certificate of Incorporation, as amended, and
all Certificates of Designations.
4.1 Exchange Agreement exchanging 1,769 shares of Series 3
Class C Convertible Preferred Stock, Par Value $.001 per
share of Perma-Fix Environmental Services, Inc. for 1,769
shares of Series 11 Class K Convertible Preferred Stock,
Par Value $.001 per share of Perma-Fix Environmental
Services, Inc. dated July 15, 1999, between the Company
and RBB Bank Aktiengesellschaft.
4.2 Exchange Agreement exchanging 916 shares of Series 8
Class H Convertible Preferred Stock, Par Value $.001 per
share of Perma-Fix Environmental Services, Inc. for 916
shares of Series 12 Class L Convertible Preferred Stock,
Par Value $.001 per share of Perma-Fix Environmental
Services, Inc. dated July 15, 1999, between the Company
and RBB Bank Aktiengesellschaft.
4.3 Exchange Agreement exchanging 2,252 shares of Series 10
Class J Convertible Preferred Stock, Par Value $.001 per
share of Perma-Fix Environmental Services, Inc. for 2,252
shares of Series 13 Class Convertible Preferred Stock,
Par Value $.001 per share of Perma-Fix Environmental
Services, Inc. dated July 15, 1999, between the Company
and RBB Bank Aktiengesellschaft.
4.4 Certificate of Designations of Series 11 Class K
Convertible Preferred Stock, dated July 15, 1999, as
contained in Exhibit 3(i) herein.
4.5 Specimen copy of Certificate relating to the Series 11
Class K Convertible Preferred Stock.
4.6 Certificate of Designations of Series 12 Class L
Convertible Preferred Stock, dated July 15, 1999, as
contained in Exhibit 3(i) herein.
4.7 Specimen copy of Certificate relating to the Series 12
Class L Convertible Preferred Stock.
4.8 Certificate of Designations of Series 13 Class M
Convertible Preferred Stock, dated July 15, 1999, as
contained in Exhibit 3(i) herein.
4.9 Specimen copy of Certificate relating to the Series 13
Class M Convertible Preferred Stock.
31
4.10 Exchange Agreement exchanging 1,769 shares of Series 11
Class K Convertible Preferred Stock, Par Value $.001 per
share of Perma-Fix Environmental Services, Inc. for 1,769
shares of Series 14 Class N Convertible Preferred Stock,
Par Value $.001 per share of Perma-Fix Environmental
Services, Inc. dated August 3, 1999, between the Company
and RBB Bank Aktiengesellschaft.
4.11 Exchange Agreement exchanging 616 shares of Series 12
Class L Convertible Preferred Stock, Par Value $.001 per
share of Perma-Fix Environmental Services, Inc. for 616
shares of Series 15 Class O Convertible Preferred Stock,
Par Value $.001 per share of Perma-Fix Environmental
Services, Inc. dated August 3, 1999, between the Company
and RBB Bank Aktiengesellschaft.
4.12 Exchange Agreement exchanging 1,802 shares of Series 13
Class M Convertible Preferred Stock, Par Value $.001 per
share of Perma-Fix Environmental Services, Inc. for 1,802
shares of Series 16 Class P Convertible Preferred Stock,
Par Value $.001 per share of Perma-Fix Environmental
Services, Inc. dated August 3, 1999, between the Company
and RBB Bank Aktiengesellschaft.
4.13 Certificate of Designations of Series 14 Class N
Convertible Preferred Stock, dated August 10, 1999, as
contained in Exhibit 3(i) herein.
4.14 Specimen copy of Certificate relating to the Series 14
Class N Convertible Preferred Stock.
4.15 Certificate of Designations of Series 15 Class O
Convertible Preferred Stock, dated August 10, 1999, as
contained in Exhibit 3(i) herein.
4.16 Specimen copy of Certificate relating to the Series 15
Class O Convertible Preferred Stock.
4.17 Certificate of Designations of Series 16 Class P
Convertible Preferred Stock, dated August 10, 1999, as
contained in Exhibit 3(i) herein.
4.18 Specimen copy of Certificate relating to the Series 16
Class P Convertible Preferred Stock.
27 Financial Data Sheet
(b) Reports on Form 8-K
___________________
A current report on Form 8-K (Item 5 - Other Events), dated
June 1, 1999, was filed by the Company reporting (i) the Company's
entry into a Stock Purchase Agreement ("Chem-Con Stock Purchase
Agreement") with Chemical Conservation Corporation; a Florida
corporation ("Chemical Florida"); Chemical Conservation of Georgia,
Inc., a Georgia corporation ("Chemical Georgia"); The Thomas P.
Sullivan Living Trust, dated September 6, 1978 ("TPS Trust"); The
Ann L. Sullivan Living Trust, dated September 6, 1978 ("ALS
Trust"); Thomas P. Sullivan, an individual ("TPS"); and Ann L.
Sullivan, an individual, wherein the Company agreed to purchase all
of the outstanding capital stock of Chemical Florida and Chemical
Georgia from the ALS Trust pursuant to the terms of the Chem-Con
Stock Purchase Agreement, and (ii) the Company's entry into a Stock
Purchase Agreement ("Chem-Met Stock Purchase Agreement") with Chem-
Met Services, Inc., a Michigan corporation ("Chem-Met"), the TPS
Trust, the ALS Trust, TPS and ALS wherein the Company agreed to
purchase all of the outstanding capital stock of Chem-Met from the
TPS Trust pursuant to the terms of the Chem-Met Stock Purchase
Agreement.
32
A current report on Form 8-K (Item 5 - Other Events), dated
April 8, 1999, was filed by the Company reporting the amendment of
the letter of intent regarding the proposed acquisition of Chemical
Florida, Chemical Georgia and Chem-Met.
A current report on Form 8-K/A (Item 5 - Other Events), dated
June 1, 1999, was filed on August 16, 1999, by the Company
reporting (i) the audited combined financial statements of Chemical
Florida, Chemical Georgia and Chem-Met and the unaudited interim
combined financial statements of Chemical Florida, Chemical Georgia
and Chem-Met required by Rule 3-05(b) of Regulation S-X, as
promulgated pursuant to the Securities Act and the Securities
Exchange Act of 1934,as amended (the "Exchange Act") and (ii) the
unaudited pro forma financial information required by Article 11of
Regulation S-X, as promulgated pursuant to the Securities Act and
the Exchange Act.
33
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: August 19, 1999 By: /s/ Louis F. Centofanti
_____________________________
Dr. Louis F. Centofanti
Chairman of the Board
Chief Executive Officer
By: /s/ Richard T. Kelecy
_____________________________
Richard T. Kelecy
34
EXHIBIT INDEX
_____________
Exhibit Sequential
Number Description Page No.
_______ ___________ __________
3(i) Restated Certificate of Incorporation,
as amended, and all Certificates of
Designations. 37
4.1 Exchange Agreement exchanging 1,769
shares of Series 3 Class C Convertible
Preferred Stock, Par Value $.001 per
share of Perma-Fix Environmental Services,
Inc. for 1,769 shares of Series 11
Class K Convertible Preferred Stock, Par
Value $.001 per share of Perma-Fix
Environmental Services, Inc. dated July 15,
1999, between the Company and RBB Bank
Aktiengesellschaft. 264
4.2 Exchange Agreement exchanging 916 shares
of Series 8 Class H Convertible Preferred
Stock, Par Value $.001 per share of Perma-
Fix Environmental Services, Inc. for 916
shares of Series 12 Class L Convertible
Preferred Stock, Par Value $.001 per share
of Perma-Fix Environmental Services, Inc.
dated July 15, 1999, between the Company
and RBB Bank Aktiengesellschaft. 285
4.3 Exchange Agreement exchanging 2,252 shares
of Series 10 Class J Convertible Preferred
Stock, Par Value $.001 per share of Perma-
Fix Environmental Services, Inc. for 2,252
shares of Series 13 Class Convertible
Preferred Stock, Par Value $.001 per share
of Perma-Fix Environmental Services, Inc.
dated July 15, 1999, between the Company
and RBB Bank Aktiengesellschaft. 306
4.4 Certificate of Designations of Series 11
Class K Convertible Preferred Stock, dated
July 15, 1999, as contained in Exhibit 3(i)
herein.
4.5 Specimen copy of Certificate relating to
the Series 11 Class K Convertible Preferred
Stock. 333
4.6 Certificate of Designations of Series 12
Class L Convertible Preferred Stock, dated
July 15, 1999, as contained in Exhibit 3(i)
herein.
4.7 Specimen copy of Certificate relating to the
Series 12 Class L Convertible Preferred Stock. 334
4.8 Certificate of Designations of Series 13
Class M Convertible Preferred Stock, dated
July 15, 1999, as contained in Exhibit 3(i)
herein.
4.9 Specimen copy of Certificate relating to the
Series 13 Class M Convertible Preferred Stock. 335
4.10 Exchange Agreement exchanging 1,769 shares of
Series 11 Class K Convertible Preferred Stock,
Par Value $.001 per share of Perma-Fix
Environmental Services, Inc. for 1,769 shares
of Series 14 Class N Convertible Preferred
Stock, Par Value $.001 per share of Perma-Fix
Environmental Services, Inc. dated August 3,
1999, between the Company and RBB Bank
Aktiengesellschaft. 336
4.11 Exchange Agreement exchanging 616 shares of
Series 12 Class L Convertible Preferred Stock,
Par Value $.001 per share of Perma-Fix
Environmental Services, Inc. for 616 shares of
Series 15 Class O Convertible Preferred Stock,
Par Value $.001 per share of Perma-Fix
Environmental Services, Inc. dated August 3,
1999, between the Company and RBB Bank
Aktiengesellschaft. 363
4.12 Exchange Agreement exchanging 1,802 shares
of Series 13 Class M Convertible Preferred
Stock, Par Value $.001 per share of Perma-
Fix Environmental Services, Inc. for 1,802
shares of Series 16 Class P Convertible
Preferred Stock, Par Value $.001 per share
of Perma-Fix Environmental Services, Inc.
dated August 3, 1999, between the Company
and RBB Bank Aktiengesellschaft. 377
4.13 Certificate of Designations of Series 14
Class N Convertible Preferred Stock, dated
August 10, 1999, as contained in Exhibit
3(i) herein.
4.14 Specimen copy of Certificate relating to
the Series 14 Class N Convertible Preferred
Stock. 378
4.15 Certificate of Designations of Series 15
Class O Convertible Preferred Stock, dated
August 10, 1999, as contained in Exhibit
3(i) herein.
4.16 Specimen copy of Certificate relating to
the Series 15 Class O Convertible Preferred
Stock. 379
4.17 Certificate of Designations of Series 16
Class P Convertible Preferred Stock, dated
August 10, 1999, as contained in Exhibit
3(i) herein.
4.18 Specimen copy of Certificate relating to
the Series 16 Class P Convertible Preferred
Stock. 380
27 Financial Data Sheet 381