EXHIBIT 99.7
 
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
 
On October 31, 2011, Perma-Fix Environmental Services, Inc. (“Perma-Fix”, “we”, “our” or the “Company”) completed the acquisition of all of the issued and outstanding shares of capital stock of Safety & Ecology Holdings Corporation (“SEHC”) and its subsidiaries, Safety & Ecology Corporation, SEC Federal Services Corporation, Safety & Ecology Corporation Limited and SEC Radcon Alliance, LLC, pursuant to that certain Stock Purchase Agreement, dated July 15, 2011 (“Purchase Agreement”), between the Company, Homeland Capital Security Corporation (“Homeland”) and SEHC.  SEHC is an international provider of environmental, hazardous and radiological remediation infrastructure upgrades and nuclear energy services.  SEHC provides remediation of nuclear materials for the U.S. government and other commercial customers.  We acquired SEHC and its subsidiaries for a total consideration of approximately $17.9 million determined as follows:

(i)
cash consideration of approximately $14.9 million, after certain working capital closing adjustments. This cash consideration was reduced by approximately $1 million total consideration for the Company’s Common Stock purchased from the Company by certain security holders of Homeland as discussed below;

(ii)
the sum of $2.0 million deposited in an escrow account to satisfy any claims that the Company may have against Homeland for indemnification pursuant to the Purchase Agreement and the Escrow Agreement, dated October 31, 2011 (“Escrow Agreement”);

(iii)
$2.5 million unsecured, non-negotiable promissory note (the “Note”), bearing an annual rate of interest of 6%, payable in 36 monthly installments, which Note provides that the Company has the right to prepay such at any time without interest or penalty.  The Company prepaid $500,000 of the principal amount of the Note within 10 days of closing of the acquisition.  The Note may be subject to offset of amounts Homeland owes the Company for indemnification for breach of, or failure to perform, certain terms and provisions of the Purchase Agreement if the Escrow Agreement has terminated pursuant to its terms or the amount held in escrow has been exhausted pursuant to the terms of the Purchase Agreement.   Under the terms of the Note, in the event of a continuing event of default under the Note, Homeland has the option to convert the unpaid portion of the Note into the Company’s restricted shares of Common Stock equal to the quotient determined by dividing the principal amount owing under the Note and all accrued and unpaid interest thereon, plus certain expenses, by the average of the closing prices per share of the Company Common Stock as reported by the primary national securities exchange or automatic quotation system on which the Company’s Common Stock is traded during the 30 consecutive trading day period ending on the trading day immediately prior to receipt by the Company of Homeland’s written notice of its election to receive the Company’s Common Stock as a result of the event of default that is continuing; provided that the number of shares of Company Common Stock to be issued to Homeland under the Note in the event of a continuing event of default plus the number of shares of the Company Common Stock issued to the Management Investors, as discussed below, shall not exceed 19.9% of the voting power of all of the Company’s voting securities issued and outstanding as of the date of the Purchase Agreement; and

(iv)
in connection with the closing of the acquisition, Homeland and SEHC agreed that they were in material breach of certain of their representations and warranties contained in the Purchase Agreement relating to a contract that a subsidiary of SEHC is a party to (“Sub’s Contract”). Homeland and SEHC have agreed that if, for any reason, the Sub’s Contract has not been renewed by the other party to the contract on or before December 31, 2011, for an additional term of not less than three years and, based upon our determination, would not generate revenues of not less than $6.0 million each year during the renewal term, or if the Sub’s Contract has not been renewed by the other party to the contract on or before December 31, 2011, on terms set forth above, and the other party to the Sub’s Contract has not awarded the SEHC subsidiary in question, for any reason, by December 31, 2011, a new subcontract for the project covered by the Sub’s Contract having a term of not less than three years that would not, based upon our determination, generate revenues to the SEHC subsidiary in question of not less than $6.0 million each year during the term of such new subcontract, then the Escrow Agent under the Escrow Agreement shall distribute to the Company the sum of $1.5 million of the amount held in escrow (“$1.5 million Distribution”) on January 3, 2012, or such later date as instructed in writing by the Company.  The above terms were not met by December 31, 2011, and, as a result, on January 10, 2012, the Company received from the escrow the $1.5 million Distribution.

 
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Pursuant to the terms of the Purchase Agreement, upon closing of the Purchase Agreement, certain security holders of Homeland (“Management Investors”) purchased 813,007 restricted shares of the Company’s Common Stock for a total consideration of approximately $1 million, or $1.23 a share, which is the average of the closing prices of the Company’s Common Stock as quoted on the Nasdaq during the 30 trading days ending on the trading day immediately prior to the closing of the acquisition.  The purchase of the Company’s Common Stock was pursuant to a private placement under Section 4(2) of the Securities Act of 1933, as amended (the “Act”) or Rule 506 of Regulation D promulgated under the Act.

Upon the closing of the acquisition of SEHC and its subsidiaries on October 31, 2011, Mr. Christopher Leichtweis (“Leichtweis”), a former officer and director of Homeland, was appointed a Senior Vice President of the Company and President of Safety and Ecology Corporation pursuant to the terms of a four year employment agreement.  In connection with Leichtweis’ employment on October 31, 2011, we granted Leichtweis a non-qualified stock option (the “Option”) to purchase up to 250,000 shares of our Common Stock as reported on the Nasdaq on the grant date, which was $1.35.  The Option has a term of 10 years from grant date, with 25% yearly vesting over a four-year period.  The Option was granted in accordance with, and is subject to, a Non-Qualified Stock Option Agreement, dated October 31, 2011.

In connection with the acquisition of SEHC and its subsidiaries, the Company entered into an Amended and Restated Revolving Credit, Term Loan and Security Agreement, dated October 31, 2011 (“Amended Loan Agreement”), with its lender, PNC Bank, National Association (“PNC”), amending and restating its previous Loan Agreement with PNC.  The Amended Loan Agreement provides the Company with the following credit facilities:

 
·
up to $25 million revolving credit facility, subject to the amount of borrowings based on a percentage of eligible receivables and subject to certain reserves;

 
·
a term loan of $16 million, which requires monthly installments of approximately $190,000; and

 
·
equipment line of credit up to $2.5 million, subject to certain limitations.

The Company has the option of paying an annual rate of interest due on the revolving credit facility at prime plus 2% or London Inter Bank Offer Rate (“LIBOR”) plus 3% and the term and equipment credit facilities at prime plus 2.5% or LIBOR plus 3.5%.

The following unaudited pro forma condensed combined balance sheet as of June 30, 2011 and unaudited pro forma condensed combined statements of operations for the year ended December 31, 2010 and six months ended June 30, 2011 (collectively, the “Pro Forma Statements”) are based on the historical consolidated financial statements of Perma-Fix and SEHC and its subsidiaries.  The Company’s historical financial statements referred to above as of and for the year ended December 31, 2010 are included in our Annual Report on Form 10-K for the year ended December 31, 2010 and the historical financial statements as of and for the six months ended June 30, 2011 are included in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2011.  The audited Consolidated Balance Sheets of SEHC and its subsidiaries as of June 26, 2011 and June 27, 2010 and the related Consolidated Statements of Operations, Consolidated Statements of Cash Flows, and Consolidated Statements of Stockholders’ Equity are included in this Current Report on Form 8-K/A as exhibit 99.6.  The historical statement of operations results for the twelve months ended December 31, 2010 for SEHC and its subsidiaries are derived from the audited Consolidated Statements of Operations for the year ended June 26, 2011 for SEHC and its subsidiaries adjusted by deducting third and fourth quarter financial results and adding the comparable preceding year interim results of the audited Consolidated Statements of Operations for the year ended June 27, 2010. The historical statement of operations results for the six months ended June 30, 2011 for SEHC and its subsidiaries are derived from the third and fourth quarter financial results of the audited Consolidated Statements of Operations for the year ended June 26, 2011 for SEHC and its subsidiaries. The Pro Forma Statements were adjusted to give effect to the acquisition of SEHC and its subsidiaries pursuant to the Stock Purchase Agreement, dated July 15, 2011 between the Company, Homeland Capital Security Corporation (“Homeland”) and SEHC.  The acquisition was accounted for in the Pro Forma Statements using the purchase method of accounting based on the assumptions and adjustments in the accompanying Notes to Unaudited Pro Forma Combined Financial Statements. The estimated purchase price allocation is preliminary and is subject to further revision. The unaudited pro forma condensed combined balance sheet gives effect to the transaction as if it occurred on June 30, 2011 and the unaudited pro forma condensed combined statements of operations for the year ended December 31, 2010 and for the six months ended June 30, 2011 give effect to the transaction as if it occurred on January 1, 2010.

 
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The pro forma adjustments are based upon available information and certain assumptions that the Company believes are (1) directly attributable to the transaction and (2) factually supportable. The Pro Forma Statements are provided for informational purposes only and do not purport to represent what our financial position and results of operations would actually have been had the SEHC acquisition occurred on such dates or to project our financial position or results of operations for any future period.
 
 
The Pro Forma Statements and the Notes thereto should be read in conjunction with the historical Consolidated Financial Statements of Perma-Fix and the Notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2010, Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, and the historical Financial Statements of SEHC and its subsidiaries and the Notes thereto included in this Form 8-K/A.

 
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PERMA-FIX ENVIRONMENTAL SERVICES, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF JUNE 30, 2011

(Amounts in Thousands)
  
Historical
Perma-Fix
    
Historical
SEHC &
Subsidiaries
    
Pro Forma
Adjustments
    
Pro Forma
  
                         
ASSETS
                        
Current assets:
                        
Cash
   $ 27     $ 934     $ (867 )(a)   $ 94  
Restricted cash
     35       -       1,500
(a)
     1,535  
Net receivables
     25,436       20,558       (3,107 )(u)     42,887  
Inventories
     385       -       -       385  
Prepaid and other assets
     2,072       501       -       2,573  
Deferrred tax asset - current
     562       -       -       562  
Current assets related to discontinued operations, net of allowance for doubtful accounts
     2,187       -       -       2,187  
Total current assets
     30,704       21,993       (2,474 )     50,223  
                                 
Property and equipment:
                                
Property and equipment, net of accumulated depreciation
     39,863       587       1,796  (b)     42,246  
                                 
Property and equipment related to discontinued operations, net of accumulated depreciation
     4,213       -       -       4,213  
                                 
Intangibles and other assets:
                                
Goodwill
     16,170       7,165       2,558
(c)
     25,893  
Permits
     16,878       -       -       16,878  
Other Intangibles
     -       302       3,078 (d)     3,380  
Unbilled receivables - non-current
     1,756       -       -       1,756  
Finite Risk Sinking Fund
     19,329       -       -       19,329  
Other assets
     2,179       22       -       2,201  
Intangible and other assets related to
                                
discontinued operations
     1,190       -       -       1,190  
Total assets
   $ 132,282     $ 30,069     $ 4,958     $ 167,309  

See Notes to Unaudited Pro Forma Condensed Combined Financial Statements

 
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PERMA-FIX ENVIRONMENTAL SERVICES, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET (CONTINUED)
AS OF JUNE 30, 2011


(Amounts in Thousands)
 		  
Historical
Perma-Fix
    
Historical
SEHC &
Subsidiaries
    
Pro Forma
Adjustments
    
Pro Forma
  
                         
LIABILITIES AND STOCKHOLDERS’ EQUITY
                        
Current liabilities:
                        
Accounts payable
   $ 6,480     $ 9,002       -     $ 15,482  
Accrued expenses
     9,268       2,794       199   (s)     12,261  
Unearned revenue
     6,410       1,509       (1,509 ) (u)     6,410  
Deferred tax liability - current
     -       16       (16 ) (q)     -  
Current liabilities related to discontinued operations
     3,414       -       -       3,414  
Customer contracts
     -       -       3,502   (u)     3,502  
Current portion of long-term debt
     2,328       -       2,605   (e)     4,933  
Total current liabilities
     27,900       13,321       4,781       46,002  
                                 
Accrued closure costs
     12,401       -       -       12,401  
Other long-term liabilities
     579       -       -       579  
Deferred tax liability
     1,235       365       (365 ) (q)     1,235  
Long-term liabilities related to discontinued operations
     2,199       -       -       2,199  
Long-term debt, less current portion
     6,929       -       14,929   (a),(e)     21,858  
Total long-term liabilities
     23,343       365       14,564       38,272  
                                 
                                 
Total liabilities
     51,243       13,686       19,345       84,274  
                                 
Preferred Stock of subsidiary
     1,285       -       -       1,285  
                                 
Equity:
                                
Common Stock
     55       -       1   (g)     56  
Preferred Stock
     -       10       (10 ) (f)     -  
Additional paid-in capital
     101,157       15,232       (15,232 ) (f)     102,156  
                      999   (g)     -  
Accumulated deficit
     (21,370 )     2,211       (2,211 ) (f)     (20,710 )
      -       -       859   (t)     -  
      -       -       (199 ) (s)     -  
Accumulated other comprehensive (loss) - foreign
                                
currency translation adjustments
     -       (118 )     118   (f)     -  
Common Stock in treasury at cost
     (88 )     -       -       (88 )
Payment to parent company
     -       (1,288 )     1,288   (f)     -  
Total stockholders' equity
     79,754       16,047       (14,387 )     81,414  
Noncontrolling interest
     -       336       -       336  
Total liabilities and equity
   $ 132,282     $ 30,069     $ 4,958     $ 167,309  

See Notes to Unaudited Pro Forma Condensed Combined Financial Statements

 
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PERMA-FIX ENVIRONMENTAL SERVICES, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 2011

(Amounts in Thousands, Except for Per Share Amounts)
  
Historical
Perma-Fix
Six Months
Ended
June 30, 2011
    
Historical
SEHC &
Subsidiaries
Six Months
Ended
June 30, 2011
    
Pro Forma
Adjustments
    
ProForma
  
                         
Net revenues
   $ 52,528     $ 49,069     $ (1 ) (h)   $ 101,596  
Cost of goods sold
     41,449       44,818       (1 ) (h)     89,550  
      -       -       3,257   (i)     -  
      -       -       27   (j)     -  
Gross profit
     11,079       4,251       (3,284 )     12,046  
                                 
Selling, general and administrative expenses
     6,808       7,236       (3,257 ) (i)     10,390  
      -       -       23   (k)     -  
      -       -       (151 ) (j)     -  
      -       -       (269 ) (r)     -  
Research and development
     661       -       -       661  
Income (loss) from operations
     3,610       (2,985 )     370       995  
                                 
Other income (expense):
                                
Interest income
     26       -       -       26  
Interest expense
     (359 )     (12 )     (217 ) (l),(m)     (588 )
Interest expense-financing fees
     (156 )     -       (23 ) (n)     (179 )
Other
     3       -       -       3  
Income (loss) from continuing operations before taxes
     3,124       (2,997 )     130       257  
Income tax expense (benefit)
     1,105       (1,263 )     49   (o)     (109 )
Income (loss) from continuing operations
     2,019       (1,734 )     81       366  
Less income attributable to noncontrolling interest
     -       195       -       195  
Net income (loss) attributable to common shareholders
   $ 2,019     $ (1,929 )   $ 81     $ 171  
                                 
Net income (loss) per common share – basic
                                
Continuing operations
   $ .04                     $ -  
                                 
Net income (loss) per common share – diluted
                                
Continuing operations
   $ .04                     $ -  
                                 
Number of common shares used in computing
                                
net income (loss) per share:
                                
Basic
     55,118               813   (f)     55,931  
Diluted
     55,123               813   (f)     55,936  

See Notes to Unaudited Pro Forma Condensed Combined Financial Statements

 
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PERMA-FIX ENVIRONMENTAL SERVICES, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2010

(Amounts in Thousands, Except for Per Share Amounts)
  
Historical
Perma-Fix
Year Ended
December 31, 2010
    
Historical
SEHC &
Subsidiaries
Year Ended
December 31, 2010
    
Pro Forma
Adjustments
    
ProForma
  
                         
Net revenues
   $ 97,790     $ 94,624     $ (435 ) (h)   $ 191,979  
Cost of goods sold
     77,175       75,379       (435 ) (h)     155,523  
      -       -       7,200   (i)     -  
      -       -       (294 ) (j)     -  
      -       -       (3,502 ) (u)     -  
Gross profit
     20,615       19,245       (3,404 )     36,456  
                                 
Selling, general and administrative expenses
     13,361       11,439       (7,200 ) (i)     17,161  
      -       -       46   (k)     -  
      -       -       (467 ) (j)     -  
      -       -       (18 ) (r)     -  
Research and development
     921       -       -       921  
Asset Impairment loss
     -       425       -       425  
Loss on disposal of property and equipment
     138       -       -       138  
Income from operations
     6,195       7,381       4,235       17,811  
                                 
Other income (expense):
                                
Interest income
     65       -       -       65  
Interest expense
     (755 )     (201 )     (479 ) (l),(m)     (1,435 )
Interest expense-financing fees
     (412 )     -       (46 ) (n)     (458 )
Loss on extinguishment of debt
     -       -       (117 ) (p)     (117 )
Other
     24       (55 )     -       (31 )
Income from continuing operations before taxes
     5,117       7,125       3,593       15,835  
Income tax expense (benefit)
     1,846       2,892       1,365   (o)     5,244  
      -       -       (859 ) (t)     -  
Income from continuing operations
     3,271       4,233       3,087       10,591  
Less income attributable to noncontrolling interest
     -       262       -       262  
Net income attributable to common shareholders
   $ 3,271     $ 3,971     $ 3,087     $ 10,329  
                                 
Net income (loss) per common share – basic
                                
Continuing operations
   $ .06                     $ 0.19  
                                 
Net income (loss) per common share – diluted
                                
Continuing operations
   $ .06                     $ 0.18  
                                 
Number of common shares used in computing net income (loss) per share:
                                
Basic
     54,947               813   (f)     55,760  
Diluted
     55,030               813   (f)     55,843  


 
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PERMA-FIX ENVIRONMENTAL SERVICES, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

 
1. BASIS OF PRESENTATION
 
On October 31, 2011, Perma-Fix Environmental Services, Inc. (“Perma-Fix”, “we”, “our” or the “Company”) completed the acquisition of all of the issued and outstanding shares of capital stock of Safety & Ecology Holdings Corporation (“SEHC”) and its subsidiaries, Safety & Ecology Corporation, SEC Federal Services Corporation, Safety & Ecology Corporation Limited and SEC Radcon Alliance, LLC, pursuant to that certain Stock Purchase Agreement, dated July 15, 2011 (“Purchase Agreement”), between the Company, Homeland Capital Security Corporation (“Homeland”) and SEHC.  SEHC is an international provider of environmental, hazardous and radiological remediation infrastructure upgrades and nuclear energy services.  SEHC provides remediation of nuclear materials for the U.S. government and other commercial customers.  We acquired SEHC and its subsidiaries for a total consideration of approximately $17.9 million determined as follows:

(i)
cash consideration of approximately $14.9 million, after certain working capital closing adjustments. This cash consideration was reduced by approximately $1 million total consideration for the Company’s Common Stock purchased from the Company by certain security holders of Homeland as discussed below;

(ii)
the sum of $2.0 million deposited in an escrow account to satisfy any claims that the Company may have against Homeland for indemnification pursuant to the Purchase Agreement and the Escrow Agreement, dated October 31, 2011 (“Escrow Agreement”);

(iii)
$2.5 million unsecured, non-negotiable promissory note (the “Note”), bearing an annual rate of interest of 6%, payable in 36 monthly installments, which Note provides that the Company has the right to prepay such at any time without interest or penalty.  The Company prepaid $500,000 of the principal amount of the Note within 10 days of closing of the acquisition.  The Note may be subject to offset of amounts Homeland owes the Company for indemnification for breach of, or failure to perform, certain terms and provisions of the Purchase Agreement if the Escrow Agreement has terminated pursuant to its terms or the amount held in escrow has been exhausted pursuant to the terms of the Purchase Agreement.   Under the terms of the Note, in the event of a continuing event of default under the Note, Homeland has the option to convert the unpaid portion of the Note into the Company’s restricted shares of Common Stock equal to the quotient determined by dividing the principal amount owing under the Note and all accrued and unpaid interest thereon, plus certain expenses, by the average of the closing prices per share of the Company Common Stock as reported by the primary national securities exchange or automatic quotation system on which the Company’s Common Stock is traded during the 30 consecutive trading day period ending on the trading day immediately prior to receipt by the Company of Homeland’s written notice of its election to receive the Company’s Common Stock as a result of the event of default that is continuing; provided that the number of shares of Company Common Stock to be issued to Homeland under the Note in the event of a continuing event of default plus the number of shares of the Company Common Stock issued to the Management Investors, as discussed below, shall not exceed 19.9% of the voting power of all of the Company’s voting securities issued and outstanding as of the date of the Purchase Agreement; and

(iv)
in connection with the closing of the acquisition, Homeland and SEHC agreed that they were in material breach of certain of their representations and warranties contained in the Purchase Agreement relating to a contract that a subsidiary of SEHC is a party to (“Sub’s Contract”). Homeland and SEHC have agreed that if, for any reason, the Sub’s Contract has not been renewed by the other party to the contract on or before December 31, 2011, for an additional term of not less than three years and, based upon our determination, would not generate revenues of not less than $6.0 million each year during the renewal term, or if the Sub’s Contract has not been renewed by the other party to the contract on or before December 31, 2011, on terms set forth above, and the other party to the Sub’s Contract has not awarded the SEHC subsidiary in question, for any reason, by December 31, 2011, a new subcontract for the project covered by the Sub’s Contract having a term of not less than three years that would not, based upon our determination, generate revenues to the SEHC subsidiary in question of not less than $6.0 million each year during the term of such new subcontract, then the Escrow Agent under the Escrow Agreement shall distribute to the Company the sum of $1.5 million of the amount held in escrow (“$1.5 million Distribution”) on January 3, 2012, or such later date as instructed in writing by the Company.  The above terms were not met by December 31, 2011, and, as a result, on January 10, 2012, the Company received from the escrow the $1.5 million Distribution.

 
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Pursuant to the terms of the Purchase Agreement, upon closing of the Purchase Agreement, certain security holders of Homeland (“Management Investors”) purchased 813,007 restricted shares of the Company’s Common Stock for a total consideration of approximately $1 million, or $1.23 a share, which is the average of the closing prices of the Company’s Common Stock as quoted on the Nasdaq during the 30 trading days ending on the trading day immediately prior to the closing of the acquisition.  The purchase of the Company’s Common Stock was pursuant to a private placement under Section 4(2) of the Securities Act of 1933, as amended (the “Act”) or Rule 506 of Regulation D promulgated under the Act.

Upon the closing of the acquisition of SEHC and its subsidiaries on October 31, 2011, Mr. Christopher Leichtweis (“Leichtweis”), a former officer and director of Homeland, was appointed a Senior Vice President of the Company and President of Safety and Ecology Corporation pursuant to the terms of a four year employment agreement.  In connection with Leichtweis’ employment on October 31, 2011, we granted Leichtweis a non-qualified stock option (the “Option”) to purchase up to 250,000 shares of our Common Stock as reported on the Nasdaq on the grant date, which was $1.35.  The Option has a term of 10 years from grant date, with 25% yearly vesting over a four-year period.  The Option was granted in accordance with, and is subject to, a Non-Qualified Stock Option Agreement, dated October 31, 2011.

In connection with the acquisition of SEHC and its subsidiaries, the Company entered into an Amended and Restated Revolving Credit, Term Loan and Security Agreement, dated October 31, 2011 (“Amended Loan Agreement”), with its lender, PNC Bank, National Association (“PNC”), amending and restating its previous Loan Agreement with PNC.  The Amended Loan Agreement provides the Company with the following credit facilities:

 
·
up to $25 million revolving credit facility, subject to the amount of borrowings based on a percentage of eligible receivables and subject to certain reserves;

 
·
a term loan of $16 million, which requires monthly installments of approximately $190,000; and

 
·
equipment line of credit up to $2.5 million, subject to certain limitations.

The Company has the option of paying an annual rate of interest due on the revolving credit facility at prime plus 2% or London Inter Bank Offer Rate (“LIBOR”) plus 3% and the term and equipment credit facilities at prime plus 2.5% or LIBOR plus 3.5%.

The Company has made assumptions and estimates in determining the preliminary estimated purchase price and the preliminary allocation of the estimated purchase price (See “PRELIMINARY PURCHASE PRICE ALLOCATION” below) in the unaudited pro forma condensed combined financial statements.  These preliminary estimates and assumptions are subject to change during the measurement period (up to one year from the acquisition date) as the Company finalizes the valuations of identifiable intangible assets, net tangible assets, contracts, non-controlling interest and resulting goodwill.  In particular, the final valuations of these items may change from the Company’s preliminary estimates.  These changes could result in material variances between the Company’s future financial results and the amounts presented in these unaudited pro forma condensed combined financial statements, including variances in fair values recorded, as well as expenses associated with these items.  Our preliminary estimated purchase price and preliminary allocation of the estimated purchase price in the unaudited pro forma condensed combined financial statements do not include the $1.5 million Distribution as mentioned above.

 
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2. PRELIMINARY PURCHASE PRICE ALLOCATION
 
This acquisition will be recorded in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805, “Business Combinations”, which includes an evaluation of the existence of any identifiable intangible assets at the date of acquisition, such as permits and customer relationships. Due to the strategic nature of the acquisition, goodwill of approximately $9.7 million is expected to be recorded in connection with the acquisition. However, final allocation of purchase price has not been finalized.  The following table summarizes the preliminary purchase price allocation of the fair values of the assets acquired and liabilities assumed, as though the acquisition had occurred on June 30, 2011:
 
(Amounts in thousands)
      
       
Current assets
   $ 18,886  
Property, plant and equipment
     2,383  
Intangibles
     3,380  
Goodwill
     9,723  
Other assets
     22  
Total assets acquired
     34,394  
Current liabilities
     (11,797 )
Customer Contracts
     (3,502 )
Non-current liabilities
     (859 )
Total liabilities acquired
     (16,158 )
Non Controlling Interest
     (336 )
Total consideration
   $ 17,900  

The following table summarizes the preliminary components of intangible assets acquired:

(Amounts in thousands)
  
Preliminary
Fair Value
  
Weighted
Average
Estimated
Useful Life
         
Customer Relationships
   $ 3,120  
12.0 years
Non-Competition Agreement
     260  
5.0 years
Total Intangible Assets
   $ 3,380    
           
Customer Contracts
   $ (3,502 )
0.5 years


 
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The intangible asset of Customer Relationships will be amortized using an accelerated method which will result in an impact to our operations in the amount of approximately $1.8 million over a five year period as follows:

   
Amount
  
Year
  
(In thousands)
  
       
1   $ 435  
2     391  
3     352  
4     317  
5     285  
    $ 1,780  


The following table summarizes the preliminary components of tangible assets acquired:

       
Weighted
       
Average
   
Preliminary
  
Estimated
(Amounts in thousands)
  
Fair Value
  
Useful Life
         
Vehicles
   $ 517  
5.0 years
Lab Equipment
     1,382  
7.0 years
Other
     484  
4.0 years
Total Tangible Assets
   $ 2,383    

3. PRO FORMA ADJUSTMENTS
 
(a)
Reflects cash outlay at closing of $15.9 million, consisting of $14.9 million cash portion of the purchase price reduced by approximately $1 million total consideration for the Company’s Common Stock purchased from the Company by certain security holders of Homeland (See 3.(g) below), and $2.0 million placed in an escrow account.  The restricted cash represents the expected distribution of $1.5 million to the Company from the escrow account in connection with certain contract of a subsidiary of SEHC as discussed in “Basis of Presentation”.  The cash outlay was funded primarily from incremental borrowing of $11.8 million from the Term Loan and $3.2 million from the Revolving Credit under the Amended Loan Agreement (See 3.(e) below).
 
(b)           Reflects increase to record property and equipment to estimated fair value of $2.4 million.
 
(c)
Reflects the estimated goodwill of $9.7 million resulting from the business combination. See Note 2.  The Company has not yet finalized the allocation of purchase price; thus this is subject to revision.
 
(d)
Reflects increase to record definite-lived intangible assets to estimated fair value of $3.4 million resulting from the business combination.
 

 
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(e)
Reflects current and long-term portion of borrowings by the Company as follows:  $3.2 million borrowed on the Revolving Credit, $11.8 million net proceeds from the Term Loan, and $2.5 million note payable related to the acquisition.
 
(f)
Reflects the elimination of equity accounts of SEHC and its subsidiaries.
 
(g)
Reflects the issuance of 813,007 shares of the Company’s restricted Common Stock resulting from the purchase by certain security holders of Homeland (“Management Investors”) upon closing of the Purchase Agreement, pursuant to the terms of the Purchase Agreement. The 813,007 shares were valued at $1.0 million or $1.23 a share, which is the average of the closing prices of the Company’s Common Stock as quoted on the Nasdaq during the 30 trading days ending on the trading day immediately prior to the closing of the acquisition.
 
(h)
Reflects intercompany revenue between Perma-Fix and SEHC and its subsidiaries.
 
(i)
Reflects reclassification of certain selling, general, and administrative expenses to cost of goods sold to be consistent with Perma-Fix’s historical presentation.
 
(j)
Reflects the difference between depreciation on fixed assets and amortization on definite-lived intangible assets based on their preliminary estimated fair value and estimated useful lives compared to historical amounts.
 
(k)
Reflects option expense recorded resulting from issuance of 250,000 non-qualified stock options (the “Option”) issued to Mr. Christopher Leichtweis, a former officer and director of Homeland, who was appointed a Senior Vice President of the Company and President of Safety and Ecology Corporation pursuant to the terms of a four year employment agreement, upon the closing of the acquisition.  The option has a term of ten years with 25% yearly vesting over a four-year period.  The Option was valued in accordance with FASB ASC 718, “Compensation – Stock Compensation” using the Black-Scholes valuation model.
 
(l)
Reflects interest expense of $32,000 for the six months ended June 30, 2011 and $87,000 for the twelve months ended December 31, 2010, on the $2.5 million Note in connection with the acquisition at a rate of 6.0% per year, which includes the impact of a prepayment of $500,000 of the principal amount of the Note paid within 10 days of closing of the acquisition.
 
(m)
Reflects interest expense on the incremental borrowing under the Amended Loan Agreement of $11.8 million for the Term Loan and $3.2 million for the Revolving Credit at a committed rate of London InterBank Offer Rate (“LIBOR”) plus 3.5% and LIBOR plus 3.0%, respectively, with assumed LIBOR rate of .5%.  A 1/8 percent variance in the LIBOR rate would result in an increase/decrease in interest expense of approximately $14,000 for the six months ended June 30, 2011, and $28,000 for the twelve months ended December 31, 2010.
 
(n)
Reflects incremental financing fees related to the Amended Loan Agreement, net of write-off of unamortized financing fees related to the Company’s previous Loan Agreement with PNC.
 
(o)
Reflects current income tax expense calculated at the Company’s statutory tax rate net of income tax deferred related to non-deductible depreciation and amortization of acquired tangible and definite-lived intangible assets and release of the valuation allowance on the Company’s deferred tax assets.
 
(p)
Reflects loss on extinguishment of debt resulting from the Amended Loan Agreement.
 

 
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(q)
Reflects the net effect of the increase of the deferred tax liability resulting from the write-up in value of tangible assets and the excess purchase price assigned to definite lived intangible assets and the release of the valuation allowance on the Company’s deferred tax assets.
 
(r)
Reflects costs directly related to the acquisition which do not have a continuing impact on the combined entity’s results of operations.
 
(s)
Reflects estimated transaction costs of $199,000 (primarily legal costs) which have been excluded from the pro forma purchase price allocation and the unaudited pro forma condensed combined statement of operations as they are non-recurring one-time charges.  However, these costs have been accrued and charged to accumulated deficit net of the related tax effect and are included in the unaudited pro forma condensed combined balance sheet.
 
(t)
Reflects the release of the valuation allowance on the Company’s deferred tax assets as a result of the increase in the deferred tax liabilities from the acquisition.
 
(u)
Reflects adjustment to bring the acquired in-progress long-term contracts to their estimated fair value at the date of acquisition.
 
 
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