perma20151201

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

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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.

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X ]

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

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

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act).

The aggregate market value of the Registrant's voting and non-voting common equity held by nonaffiliates of the Registrant computed by reference to the closing sale price of such stock as reported by NASDAQ as of the last business day of the most recently completed second fiscal quarter (June 30, 2015), was approximately $40,332,000. For the purposes of this calculation, all directors of the Registrant (as indicated in Item 12) are deemed to be affiliates. Such determination should not be deemed an admission that such directors, are, in fact, affiliates of the Registrant. The Company's Common Stock is listed on the NASDAQ Capital Markets.

As of March 6, 2016, there were 11,557,944 shares of the registrant's Common Stock, $.001 par value, outstanding.

Perma-Fix Environmental Services, Inc. (the Company, which may be referred to as we, us, or our), a Delaware corporation incorporated in December of 1990, is an environmental and environmental technology know-how company, which provides services through our three reporting segments as discussed below, Treatment, Services, and Medical.

On April 4, 2014, the Company completed the acquisition of a controlling interest in a Polish Company, a publicly traded shell company on the NewConnect (alternative share market run by the Warsaw Stock Exchange) in Poland and sold to the Polish shell all of the shares of Perma-Fix Medical Corporation, a Delaware corporation organized by the Company (incorporated in January 2014). Perma-Fix Medical Corporation’s only asset was a worldwide license granted by the Company to use, develop and market the new process and technology developed by the Company in the production of Technetium-99 (“Tc-99m”) for medical diagnostic applications. Tc-99m is the most widely used medical isotope in the world. Since the acquired shell company (now named Perma-Fix Medical S.A. or “PF Medical”) did not meet the definition of a business under Accounting Standards Codification (“ASC”) 805, “Business Combinations”, the transaction was accounted for as a capital transaction. PF Medical, our majority-owned Polish subsidiary (of which we own approximately 60.5%), continues to perform research and development (“R&D”) of its new medical isotope production technology. Currently, nearly all of the world’s supply of Tc-99m is generated using highly enriched uranium at a small number of highly specialized reactors. Maintenance and unexpected shutdown of these reactors have in the past, created supply shortages throughout the world and the supply shortages are expected to continue as one of the specialized reactors is expected to cease production of and go off-line in the near future. PF Medical’s new medical isotope production technology does not require the use of uranium which is expected to improve safety and can use standard research and commercial reactors, thereby eliminating the need for special purpose reactors, thus improving the reliability of supply. As of December 31, 2015, PF Medical has not generated any revenue as it is primarily in the R&D stage. In accordance with ASC 280, “Segment Reporting,” the Company has determined that the operations of PF Medical meet the definition of a reportable segment. Accordingly, all of the historical numbers presented in the consolidated financial statements have been recast to include the operations of PF Medical as a separate reportable segment (“Medical Segment”).

We have grown through acquisitions and internal growth. Our goal is to continue to focus on the efficient operation of our facilities and on-site activities, to continue to evaluate strategic acquisitions, to continue the R&D of innovative technologies to expand company service offering and to treat nuclear waste, mixed waste, and industrial waste. In addition, our majority-owned subsidiary, PF Medical, continues to dedicate resources to the R&D of its new medical isotope production technology and to take the necessary steps for eventual submittal of this technology for U.S. Food and Drug Administration (“FDA”) and other regulatory approval and commercialization of this technology. The Company continues to focus on expansion into both commercial and international markets to help offset the uncertainties of government spending in the USA, from which a significant portion of the Company’s revenue is derived. This includes new services, new customers and increased market share in our current markets.

The Company has three reportable segments. In accordance with Financial Accounting Standards Board (“FASB”) ASC 280, “Segment Reporting”, we define an operating segment as:

For 2015, the Treatment Segment accounted for $41,318,000 or 66.2% of total revenue from continuing operations, as compared to $42,343,000 or 74.2% of total revenue from continuing operations for 2014. See “– Dependence Upon a Single or Few Customers” for further details and a discussion as to our Segments’ contracts with the federal government or with others as a subcontractor to the federal government.

For 2015, the Services Segment accounted for $21,065,000 or 33.8% of total revenue from continuing operations, as compared to $14,722,000 or 25.8% of total revenue from continuing operations for 2014. See “ – Dependence Upon a Single or Few Customers” for further details and a discussion as to our Segments’ contracts with the federal government or with others as a subcontractor to the federal government

MEDICAL SEGMENT reporting includes: R&D costs for the new medical isotope production technology from our majority-owned Polish subsidiary, PF Medical. The Medical Segment has not generated any revenue as it continues to be primarily in the R&D stage. R&D costs consist primarily of employee salaries and benefits, laboratory costs, third party fees, and other related costs associated with the development of new technology.

Our Treatment and Services Segments provide services to research institutions, commercial companies, public utilities, and governmental agencies nationwide, including the U.S. Department of Energy (“DOE”) and U.S. Department of Defense (“DOD”). The distribution channels for our services are through direct sales to customers or via intermediaries.

Our corporate office is located at 8302 Dunwoody Place, Suite 250, Atlanta, Georgia 30350.

Our consolidated revenue from continuing operations for 2015 and 2014 included approximately $199,000 or 0.3% and $147,000 or 0.3%, respectively, from our United Kingdom operation, Perma-Fix UK Limited (“PF UK Limited”).

Our consolidated revenue from continuing operations for 2015 and 2014 included approximately $279,000 or 0.4% and $1,855,000 or 3.3%, respectively, from customers located in Canada.

We do not believe we are dependent on any particular trademark in order to operate our business or any significant segment thereof. We have received registration to May 2022 and December 2020, for the service marks “Perma-Fix Environmental Services” and “Perma-Fix”, respectively. In addition, we have received registration for three service marks for our Safety & Ecology Holdings Corporation and its subsidiaries (collectively known as “Safety and Ecology Corporation” or “SEC”) to periods ranging from 2016 to 2017.

We are active in the R&D of technologies that allow us to address certain of our customers' environmental needs. To date, our R&D efforts have resulted in the granting of thirteen active patents and the filing of several applications for which patents are pending. These thirteen active patents have remaining lives ranging from approximately three to sixteen years. These active patents granted to the Company include a patent for the new technology for the production of Tc-99m for certain types of medical applications, which we have granted a worldwide exclusive license to a U.S. subsidiary of PF Medical. This patent is effective through March 2032.

PF Medical has completed successful scale-up of its technology in producing Tc-99m. These tests have confirmed that its proprietary technology has produced clinically useful doses of Tc-99m. PF Medical plans to conduct additional tests in the near future as part of its multi-step validation and fine tuning of its Tc-99m technology.

Waste management service companies are subject to extensive, evolving and increasingly stringent federal, state, and local environmental laws and regulations. Such federal, state and local environmental laws and regulations govern our activities regarding the treatment, storage, processing, disposal and transportation of hazardous, non-hazardous and radioactive wastes, and require us to obtain and maintain permits, licenses and/or approvals in order to conduct certain of our waste activities. We are dependent on our permits and licenses discussed below in order to operate our businesses. Failure to obtain and maintain our permits or approvals would have a material adverse effect on us, our operations, and financial condition. The permits and licenses have terms ranging from one to ten years, and provided that we maintain a reasonable level of compliance, renew with minimal effort, and cost. Historically, there have been no compelling challenges to the permit and license renewals. We believe that these permit and license requirements represent a potential barrier to entry for possible competitors.

PFF, located in Gainesville, Florida, operates its hazardous, mixed and low-level radioactive waste activities under a RCRA (“Resource Conservation and Recovery Act”) Part B permit, Toxic Substances Control Act (“TSCA”) authorization, Restricted RX Drug Distributor-Destruction license, and a radioactive materials license issued by the State of Florida.

DSSI, located in Kingston, Tennessee, conducts mixed and low-level radioactive waste storage and treatment activities under RCRA Part B permits and a radioactive materials license issued by the State of Tennessee Department of Environment and Conservation. Co-regulated TSCA Polychlorinated Biphenyl (“PCB”) wastes are also managed for PCB destruction under the EPA Approval effective June 2008.

M&EC, located in Oak Ridge, Tennessee, performs hazardous, low-level radioactive and mixed waste storage and treatment operations under a RCRA Part B permit and a radioactive materials license issued by the State of Tennessee Department of Environment and Conservation. Co-regulated TSCA PCB wastes are also managed under EPA Approvals applicable to site-specific treatment units.

PFNWR, located in Richland, Washington, operates a low-level radioactive waste processing facility as well as a mixed waste processing facility. Radioactive material processing is authorized under radioactive materials licenses issued by the State of Washington and mixed waste processing is additionally authorized under a RCRA Part B permit with TSCA authorization issued jointly by the State of Washington and the EPA.

The combination of a RCRA Part B hazardous waste permit, TSCA authorization, and a radioactive materials license, as held by PFF, DSSI M&EC, and PFNWR are very difficult to obtain for a single facility and make these facilities unique.

PF Medical, our majority-owned Polish subsidiary, owns 100% of a U.S. subsidiary, Perma-Fix Medical Corporation (“PFMC”). PFMC holds a license granted to it by the Company to use, develop and market a new process and technology in the production of Tc-99m for medical diagnostic applications. PFMC’s only asset was this license granted to PFMC by the Company. PF Medical must complete development of its Tc-99m medical diagnostic technology and obtain approvals as to its Tc-99m medical diagnostic application from a certain U.S. governmental agency before it can market its process in the U.S. and may be required to obtain approvals from certain foreign governmental authorities before it can market its process in those respective foreign countries.

The Treatment Segment of our Company maintains a backlog of stored waste, which represents waste that has not been processed. The backlog is principally a result of the timing and complexity of the waste being brought into the facilities and the selling price per container. As of December 31, 2015, our Treatment Segment had a backlog of approximately $4,698,000, as compared to approximately $9,228,000 as of December 31, 2014. Additionally, the time it takes to process waste from the time it arrives may increase due to the types and complexities of the waste we are currently receiving. We typically process our backlog during periods of low waste receipts, which historically has been in the first or fourth quarter.

Our Treatment and Services Segments have significant relationships with the federal government, and continue to enter into contracts, directly as the prime contractor or indirectly for others as a subcontractor, with the federal government. The contracts that we are a party to with the federal government or with others as a subcontractor to the federal government generally provide that the government may terminate or renegotiate the contracts on 30 days notice, at the government's election. Our inability to continue under existing contracts that we have with the federal government (directly or indirectly as a subcontractor) could have a material adverse effect on our operations and financial condition.

We performed services relating to waste generated by the federal government representing approximately $36,105,000 or 57.9% of our total revenue from continuing operations during 2015, as compared to $34,780,000 or 60.9% of our total revenue from continuing operations during 2014.

Revenue generated by one of the customers (non-government related and excluded from above) in the Services Segment accounted for 10% or more of the total revenues generated from continuing operations for the twelve months ended December 31, 2015:

As our revenues are project/event based where the completion of one contract with a specific customer may be replaced by another contract with a different customer from year to year, we do not believe the loss of one specific customer from one year to the next will generally have a material adverse effect on our operations and financial condition.

The Treatment Segment’s largest competitor is EnergySolutions (“ES”) which operates treatment and disposal facilities in Oak Ridge, TN and Clive, UT. Waste Control Specialists (“WCS”), which has licensed disposal capabilities in Andrews, TX, has also emerged as a competitor in the treatment market with increasing market share. Perma-Fix now has two options for disposal of treated nuclear waste and thus mitigates prior risk of EnergySolutions providing the only outlet for disposal. Recently, ES signed a definitive agreement to acquire WCS. In the event that this acquisition of WCS by ES is completed, ES will again become the owner of the only privately owned disposal sites for treated commercially generated nuclear waste. In such event, if ES should refuse to accept our nuclear and mixed waste or make demands on us that are unreasonable or cease operations at its sites, such may have a material adverse effect on us for commercial wastes. The Treatment Segment treats and disposes of DOE generated wastes largely at DOE owned sites and thus this potential acquisition should not have any significant adverse impact on our Treatment Segment. Smaller competitors are also present in the market place; however, we believe they do not present a significant challenge at this time. Our Treatment Segment currently solicits business primarily on a North American basis with both government and commercial clients; however, we are also focusing on emerging international markets for additional work.

We believe that the permitting and licensing requirements, and the cost to obtain such permits, are barriers to the entry of hazardous waste and radioactive and mixed waste activities as presently operated by our waste treatment subsidiaries. If the permit requirements for hazardous waste treatment, storage, and disposal (“TSD”) activities and/or the licensing requirements for the handling of low level radioactive matters are eliminated or if such licenses or permits were made less rigorous to obtain, we believe such would allow companies to enter into these markets and provide greater competition.

Our Services Segment is engaged in highly competitive businesses in which a number of our government contracts and some of our commercial contracts are awarded through competitive bidding processes. The extent of such competition varies according to the industries and markets in which our customers operate as well as the geographic areas in which we operate. The degree and type of competition we face is also often influenced by the project specification being bid on and the different specialty skill sets of each bidder for which our Services Segment competes, especially projects subject to the governmental bid process. We also have the ability to prime federal government small business procurements (small business set asides). Large businesses are more willing to team with small businesses in order to be part of these often substantial procurements. There are a number of qualified small businesses in our market that will provide intense competition that may provide a challenge to our ability to maintain strong growth rates and acceptable profit margins. For international business there are additional competitors, many from within the country the work is to be performed, making winning work in foreign countries more challenging. If our Services Segment is unable to meet these competitive challenges, it could lose market share and experience an overall reduction in its profits.

Our Medical Segment operation consists of R&D activities for a new medical isotope production technology at our PF Medical, our majority-owned Polish subsidiary. Due to the world-wide shortage of Tc-99m resulting from limited special purpose reactors and the safety and environmental concerns associated with the current production methodology, a number of companies are also pioneering new methods in the production of medical isotope technology. The path to commercialization of a new medical isotope production technology is tedious, expensive, and is subject to extensive government regulations. Some of these companies, including NorthStar Medical Radioisotopes and Shine Medical Technologies, have entered into this potential market earlier than us, and may be further along in the developmental and commercialization stages. In addition, some companies have greater resources, including funding from government programs and collaboration with others, in the development of medical isotope production technology. If PF Medical is not able to successfully commercialize its new medical isotope technology in order to generate revenues, such may have a material impact to our financial results. See “Business—Importance of Patents, Trademarks and Proprietary Technology” for discussion of current status of development of technology for the production of Tc-99m.

We have three remediation projects, which are currently in progress at our Perma-Fix of Dayton, Inc. (“PFD”), Perma-Fix of Memphis, Inc. (“PFM”), and Perma-Fix South Georgia, Inc. (“PFSG”) subsidiaries, which are all included within our discontinued operations. These remediation projects principally entail the removal/remediation of contaminated soil and, in most cases, the remediation of surrounding ground water. Remediation activities at our Perma-Fix of Michigan, Inc. subsidiary (“PFMI”) in Brownstown, Michigan, were completed in 2015. These remediation activities are closely reviewed and monitored by the applicable state regulators.

At December 31, 2015, we had total accrued environmental remediation liabilities of $900,000, of which $9,000 is recorded as a current liability, which reflects a decrease of $116,000 from the December 31, 2014 balance of $1,016,000. The net decrease of $116,000 represents payments on remediation projects at PFSG and PFM totaling approximately $78,000 and a reduction in reserve of $38,000 due to completion of remediation activities at our PFMI location.

No insurance or third party recovery was taken into account in determining our cost estimates or reserves.

The nature of our business exposes us to significant cost to comply with governmental environmental laws, rules and regulations and risk of liability for damages. Such potential liability could involve, for example, claims for cleanup costs, personal injury or damage to the environment in cases where we are held responsible for the release of hazardous materials; claims of employees, customers or third parties for personal injury or property damage occurring in the course of our operations; and claims alleging negligence or professional errors or omissions in the planning or performance of our services. In addition, we could be deemed a responsible party for the costs of required cleanup of any property, which may be contaminated by hazardous substances generated or transported by us to a site we selected, including properties owned or leased by us. We could also be subject to fines and civil penalties in connection with violations of regulatory requirements.

Innovation and technical know-how by our operations is very important to the success of our business. Our goal is to discover, develop and bring to market innovative ways to process waste that address unmet environmental needs. We conduct research internally, and also through collaborations with other third parties. The majority of our research activities are performed as we receive new and unique waste to treat. Our competitors also devote resources to research and development and many such competitors have greater resources at their disposal than we do. PF Medical continues to commit significant resources to the R&D of its medical isotope production technology and to take the necessary steps for eventual submittal of this technology for FDA and other regulatory approval and commercialization of this technology. We have estimated that during 2015 and 2014, we spent approximately $2,302,000 and $1,315,000, respectively, in research and development activities, of which approximately $2,114,000 and $759,000, respectively, were spent by our Medical Segment for the R&D of its medical isotope production technology.

In our service-driven business, our employees are vital to our success. We believe we have good relationships with our employees. As of December 31, 2015, we employed approximately 262 employees, of whom 258 are full-time employees and four are part-time/temporary employees.

Environmental companies, such as us, and their customers are subject to extensive and evolving environmental laws and regulations by a number of national, state and local environmental, safety and health agencies, the principal of which being the EPA. These laws and regulations largely contribute to the demand for our services. Although our customers remain responsible by law for their environmental problems, we must also comply with the requirements of those laws applicable to our services. We cannot predict the extent to which our operations may be affected by future enforcement policies as applied to existing laws or by the enactment of new environmental laws and regulations. Moreover, any predictions regarding possible liability are further complicated by the fact that under current environmental laws we could be jointly and severally liable for certain activities of third parties over whom we have little or no control. Although we believe that we are currently in substantial compliance with applicable laws and regulations, we could be subject to fines, penalties or other liabilities or could be adversely affected by existing or subsequently enacted laws or regulations. The principal environmental laws affecting our customers and us are briefly discussed below.

The Resource Conservation and Recovery Act of 1976, as amended (“RCRA”)

RCRA and its associated regulations establish a strict and comprehensive permitting and regulatory program applicable to companies, such as us, that treat, store or dispose of hazardous waste. The EPA has promulgated regulations under RCRA for new and existing treatment, storage and disposal facilities including incinerators, storage and treatment tanks, storage containers, storage and treatment surface impoundments, waste piles and landfills. Every facility that treats, stores or disposes of hazardous waste must obtain a RCRA permit or must obtain interim status from the EPA, or a state agency, which has been authorized by the EPA to administer its program, and must comply with certain operating, financial responsibility and closure requirements.

The Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA,” also referred to as the “Superfund Act”)

CERCLA governs the cleanup of sites at which hazardous substances are located or at which hazardous substances have been released or are threatened to be released into the environment. CERCLA authorizes the EPA to compel responsible parties to clean up sites and provides for punitive damages for noncompliance. CERCLA imposes joint and several liabilities for the costs of clean up and damages to natural resources.

The operation of our environmental activities is subject to the requirements of the OSHA and comparable state laws. Regulations promulgated under OSHA by the Department of Labor require employers of persons in the transportation and environmental industries, including independent contractors, to implement hazard communications, work practices and personnel protection programs in order to protect employees from equipment safety hazards and exposure to hazardous chemicals.

The Atomic Energy Act of 1954 governs the safe handling and use of Source, Special Nuclear and Byproduct materials in the U.S. and its territories. This act authorized the Atomic Energy Commission (now the Nuclear Regulatory Commission “USNRC”) to enter into “Agreements with States to carry out those regulatory functions in those respective states except for Nuclear Power Plants and federal facilities like the VA hospitals and the DOE operations.” The State of Florida (with the USNRC oversight), Office of Radiation Control, regulates the permitting and radiological program of the PFF facility, and the State of Tennessee (with the USNRC oversight), Tennessee Department of Radiological Health, regulates permitting and the radiological program of the DSSI and M&EC facilities. The State of Washington (with the USNRC oversight) Department of Health, regulates permitting and the radiological operations of the PFNWR facility.

Our activities are subject to other federal environmental protection and similar laws, including, without limitation, the Clean Water Act, the Clean Air Act, the Hazardous Materials Transportation Act and the TSCA. Many states have also adopted laws for the protection of the environment which may affect us, including laws governing the generation, handling, transportation and disposition of hazardous substances and laws governing the investigation and cleanup of, and liability for, contaminated sites. Some of these state provisions are broader and more stringent than existing federal law and regulations. Our failure to conform our services to the requirements of any of these other applicable federal or state laws could subject us to substantial liabilities which could have a material adverse effect on us, our operations and financial condition. In addition to various federal, state and local environmental regulations, our hazardous waste transportation activities are regulated by the U.S. Department of Transportation, the Interstate Commerce Commission and transportation regulatory bodies in the states in which we operate. We cannot predict the extent to which we may be affected by any law or rule that may be enacted or enforced in the future, or any new or different interpretations of existing laws or rules.

The following are certain risk factors that could affect our business, financial performance, and results of operations. These risk factors should be considered in connection with evaluating the forward-looking statements contained in this Form 10-K, as the forward-looking statements are based on current expectations, and actual results and conditions could differ materially from the current expectations. Investing in our securities involves a high degree of risk, and before making an investment decision, you should carefully consider these risk factors as well as other information we include or incorporate by reference in the other reports we file with the Securities and Exchange Commission (the “Commission”).

Failure to maintain our financial assurance coverage that we are required to have in order to operate our permitted treatment, storage and disposal facilities could have a material adverse effect on us.

American International Group (“AIG”) provides our finite risk insurance policies which provide financial assurance to the applicable states for our permitted facilities in the event of unforeseen closure of those facilities. We are required to provide and to maintain financial assurance that guarantees to the state that in the event of closure, our permitted facilities will be closed in accordance with the regulations. Our initial policy provides a maximum of $39,000,000 of financial assurance coverage. We also maintain a financial assurance policy for our PFNWR facility, which provides a maximum coverage of $8,200,000. In the event that we are unable to obtain or maintain our financial assurance coverage for any reason, this could materially impact our operations and our permits which we are required to have in order to operate our treatment, storage, and disposal facilities.

If we cannot maintain adequate insurance coverage, we will be unable to continue certain operations.

Our business exposes us to various risks, including claims for causing damage to property and injuries to persons that may involve allegations of negligence or professional errors or omissions in the performance of our services. Such claims could be substantial. We believe that our insurance coverage is presently adequate and similar to, or greater than, the coverage maintained by other companies in the industry of our size. If we are unable to obtain adequate or required insurance coverage in the future, or if our insurance is not available at affordable rates, we would violate our permit conditions and other requirements of the environmental laws, rules, and regulations under which we operate. Such violations would render us unable to continue certain of our operations. These events would have a material adverse effect on our financial condition.

The inability to maintain existing government contracts or win new government contracts over an extended period could have a material adverse effect on our operations and adversely affect our future revenues.

A material amount of our segments’ revenues are generated through various U.S. government contracts or subcontracts involving the U.S. government. Our revenues from governmental contracts and subcontracts relating to governmental facilities within our segments were approximately $36,105,000 or 57.9% and $34,780,000 or 60.9%, of our consolidated operating revenues from continuing operations for 2015 and 2014, respectively. Most of our government contracts or our subcontracts granted under government contracts are awarded through a regulated competitive bidding process. Some government contracts are awarded to multiple competitors, which increase overall competition and pricing pressure and may require us to make sustained post-award efforts to realize revenues under these government contracts. All contracts with, or subcontracts involving, the federal government are terminable, or subject to renegotiation, by the applicable governmental agency on 30 days notice, at the option of the governmental agency. If we fail to maintain or replace these relationships, or if a material contract is terminated or renegotiated in a manner that is materially adverse to us, our revenues and future operations could be materially adversely affected.

Our existing and future customers may reduce or halt their spending on hazardous waste and nuclear services with outside vendors, including us.

A variety of factors may cause our existing or future customers (including the federal government) to reduce or halt their spending on hazardous waste and nuclear services from outside vendors, including us. These factors include, but are not limited to:

These events could result in or cause the federal government to terminate or cancel its existing contracts involving us to treat, store or dispose of contaminated waste and/or to perform remediation projects, at one or more of the federal sites since all contracts with, or subcontracts involving, the federal government are terminable upon or subject to renegotiation at the option of the government on 30 days notice. These events also could adversely affect us to the extent that they result in the reduction or elimination of contractual requirements, lower demand for nuclear services, burdensome regulation, disruptions of shipments or production, increased operational costs or difficulties or increased liability for actual or threatened property damage or personal injury.

Economic downturns and/or reductions in government funding could have a material negative impact on our businesses.

Demand for our services has been, and we expect that demand will continue to be, subject to significant fluctuations due to a variety of factors beyond our control, including economic conditions, reductions in the budget for spending to remediate federal sites due to numerous reasons, including, without limitation, the substantial deficits that the federal government has and is continuing to incur. During economic downturns and large budget deficits that the federal government and many states are experiencing, the ability of private and government entities to spend on waste services, including nuclear services, may decline significantly. Our operations depend, in large part, upon governmental funding, particularly funding levels at the DOE. Significant reductions in the level of governmental funding (for example, the annual budget of the DOE) or specifically mandated levels for different programs that are important to our business could have a material adverse impact on our business, financial position, results of operations and cash flows.

One or a few governmental customers or governmental related customers have in the past, and may in the future, account for a significant portion of our revenue in any one year or over a period of several consecutive years. Because customers generally contract with us for specific projects, we may lose these significant customers from year to year as their projects with us are completed. Our inability to replace the business with other similar significant projects could have an adverse effect on our business and results of operations.

As a government contractor, we are subject to extensive government regulation, and our failure to comply with applicable regulations could subject us to penalties that may restrict our ability to conduct our business.

Our governmental contracts, which are primarily with the DOE or subcontracts relating to DOE sites, are a significant part of our business. Allowable costs under U.S. government contracts are subject to audit by the U.S. government. If these audits result in determinations that costs claimed as reimbursable are not allowed costs or were not allocated in accordance with applicable regulations, we could be required to reimburse the U.S. government for amounts previously received.

Governmental contracts or subcontracts involving governmental facilities are often subject to specific procurement regulations, contract provisions and a variety of other requirements relating to the formation, administration, performance and accounting of these contracts. Many of these contracts include express or implied certifications of compliance with applicable regulations and contractual provisions. If we fail to comply with any regulations, requirements or statutes, our existing governmental contracts or subcontracts involving governmental facilities could be terminated or we could be suspended from government contracting or subcontracting. If one or more of our governmental contracts or subcontracts are terminated for any reason, or if we are suspended or debarred from government work, we could suffer a significant reduction in expected revenues and profits. Furthermore, as a result of our governmental contracts or subcontracts involving governmental facilities, claims for civil or criminal fraud may be brought by the government or violations of these regulations, requirements or statutes.

We are a holding company and depend, in large part, on receiving funds from our subsidiaries to fund our indebtedness.

Because we are a holding company and operations are conducted through our subsidiaries, our ability to meet our obligations depends, in large part, on the operating performance and cash flows of our subsidiaries.

Our success depends on the contributions of our key management, environmental and engineering personnel, especially Dr. Louis F. Centofanti, President and Chief Executive Officer. The loss of Dr. Centofanti could have a material adverse effect on our operations, revenues, prospects, and our ability to raise additional funds. Our future success depends on our ability to retain and expand our staff of qualified personnel, including environmental specialists and technicians, sales personnel, and engineers. Without qualified personnel, we may incur delays in rendering our services or be unable to render certain services. We cannot be certain that we will be successful in our efforts to attract and retain qualified personnel as their availability is limited due to the demand for hazardous waste management services and the highly competitive nature of the hazardous waste management industry. We do not maintain key person insurance on any of our employees, officers, or directors.

Changes in environmental regulations and enforcement policies could subject us to additional liability and adversely affect our ability to continue certain operations.

We cannot predict the extent to which our operations may be affected by future governmental enforcement policies as applied to existing laws, by changes to current environmental laws and regulations, or by the enactment of new environmental laws and regulations. Any predictions regarding possible liability under such laws are complicated further by current environmental laws which provide that we could be liable, jointly and severally, for certain activities of third parties over whom we have limited or no control.

Our Treatment Segment has limited end disposal sites to utilize to dispose of its waste which could significantly impact our results of operations.

Our Treatment Segment has limited options available for disposal of its nuclear waste. Currently, there are only two disposal sites, each site having different owners, for our low level radioactive waste we receive from non-governmental sites, allowing us to take advantage of the pricing competition between the two sites. There is currently an agreement whereby the owner of one site has agreed to buy the other site. If this transaction is consummated, we could become subject to the unreasonable demands as to pricing and other terms of the acquiring party that owns both disposal sites, which could significantly increase our cost of disposal and negatively impact our results of operations. Further, if such acquisition is completed, and the owner refuses to accept our waste or demands terms that we deem to be unreasonable, such could have a material adverse effect on us.

Our businesses subject us to substantial potential environmental liability.

Our business of rendering services in connection with management of waste, including certain types of hazardous waste, low-level radioactive waste, and mixed waste (waste containing both hazardous and low-level radioactive waste), subjects us to risks of liability for damages. Such liability could involve, without limitation:

Our operations are subject to numerous environmental laws and regulations. We have in the past, and could in the future, be subject to substantial fines, penalties, and sanctions for violations of environmental laws and substantial expenditures as a responsible party for the cost of remediating any property which may be contaminated by hazardous substances generated by us and disposed at such property, or transported by us to a site selected by us, including properties we own or lease.

As our operations expand, we may be subject to increased litigation, which could have a negative impact on our future financial results.

Our operations are highly regulated and we are subject to numerous laws and regulations regarding procedures for waste treatment, storage, recycling, transportation, and disposal activities, all of which may provide the basis for litigation against us. In recent years, the waste treatment industry has experienced a significant increase in so-called “toxic-tort” litigation as those injured by contamination seek to recover for personal injuries or property damage. We believe that, as our operations and activities expand, there will be a similar increase in the potential for litigation alleging that we have violated environmental laws or regulations or are responsible for contamination or pollution caused by our normal operations, negligence or other misconduct, or for accidents, which occur in the course of our business activities. Such litigation, if significant and not adequately insured against, could adversely affect our financial condition and our ability to fund our operations. Protracted litigation would likely cause us to spend significant amounts of our time, effort, and money. This could prevent our management from focusing on our operations and expansion.

Our operations are subject to seasonal factors, which cause our revenues to fluctuate.

We have historically experienced reduced revenues and losses during the first and fourth quarters of our fiscal years due to a seasonal slowdown in operations from poor weather conditions, overall reduced activities during these periods resulting from holiday periods, and finalization of government budgets during the fourth quarter of each year. During our second and third fiscal quarters there has historically been an increase in revenues and operating profits. If we do not continue to have increased revenues and profitability during the second and third fiscal quarters, this could have a material adverse effect on our results of operations and liquidity.

If environmental regulation or enforcement is relaxed, the demand for our services will decrease.

The demand for our services is substantially dependent upon the public's concern with, and the continuation and proliferation of, the laws and regulations governing the treatment, storage, recycling, and disposal of hazardous, non-hazardous, and low-level radioactive waste. A decrease in the level of public concern, the repeal or modification of these laws, or any significant relaxation of regulations relating to the treatment, storage, recycling, and disposal of hazardous waste and low-level radioactive waste would significantly reduce the demand for our services and could have a material adverse effect on our operations and financial condition. We are not aware of any current federal or state government or agency efforts in which a moratorium or limitation has been, or will be, placed upon the creation of new hazardous or radioactive waste regulations that would have a material adverse effect on us; however, no assurance can be made that such a moratorium or limitation will not be implemented in the future.

We and our customers operate in a politically sensitive environment, and the public perception of nuclear power and radioactive materials can affect our customers and us.

We and our customers operate in a politically sensitive environment. Opposition by third parties to particular projects can limit the handling and disposal of radioactive materials. Adverse public reaction to developments in the disposal of radioactive materials, including any high profile incident involving the discharge of radioactive materials, could directly affect our customers and indirectly affect our business. Adverse public reaction also could lead to increased regulation or outright prohibition, limitations on the activities of our customers, more onerous operating requirements or other conditions that could have a material adverse impact on our customers’ and our business.

We may be exposed to certain regulatory and financial risks related to climate change.

Climate change is receiving ever increasing attention from scientists and legislators alike. The debate is ongoing as to the extent to which our climate is changing, the potential causes of this change and its potential impacts. Some attribute global warming to increased levels of greenhouse gases, including carbon dioxide, which has led to significant legislative and regulatory efforts to limit greenhouse gas emissions.

Presently there are no federally mandated greenhouse gas reduction requirements in the United States. However, there are a number of legislative and regulatory proposals to address greenhouse gas emissions, which are in various phases of discussion or implementation. The outcome of federal and state actions to address global climate change could result in a variety of regulatory programs including potential new regulations. Any adoption by federal or state governments mandating a substantial reduction in greenhouse gas emissions could increase costs associated with our operations. Until the timing, scope and extent of any future regulation becomes known, we cannot predict the effect on our financial position, operating results and cash flows.

We may not be successful in winning new business mandates from our government and commercial customers or international customers.

We must be successful in winning mandates from our government, commercial customers and international customers to replace revenues from projects that we have completed or that are nearing completion and to increase our revenues. Our business and operating results can be adversely affected by the size and timing of a single material contract.

The elimination or any modification of the Price-Anderson Acts indemnification authority could have adverse consequences for our business.

The Atomic Energy Act of 1954, as amended, or the AEA, comprehensively regulates the manufacture, use, and storage of radioactive materials. The Price-Anderson Act (“PAA”) supports the nuclear services industry by offering broad indemnification to DOE contractors for liabilities arising out of nuclear incidents at DOE nuclear facilities. That indemnification protects DOE prime contractor, but also similar companies that work under contract or subcontract for a DOE prime contract or transporting radioactive material to or from a site. The indemnification authority of the DOE under the PAA was extended through 2025 by the Energy Policy Act of 2005.

Under certain conditions, the PAA’s indemnification provisions may not apply to our processing of radioactive waste at governmental facilities, and do not apply to liabilities that we might incur while performing services as a contractor for the DOE and the nuclear energy industry. If an incident or evacuation is not covered under PAA indemnification, we could be held liable for damages, regardless of fault, which could have an adverse effect on our results of operations and financial condition. If such indemnification authority is not applicable in the future, our business could be adversely affected if the owners and operators of new facilities fail to retain our services in the absence of commercial adequate insurance and indemnification.

We are engaged in highly competitive businesses and typically must bid against other competitors to obtain major contracts.

We are engaged in highly competitive business in which most of our government contracts and some of our commercial contracts are awarded through competitive bidding processes. We compete with national and regional firms with nuclear and/or hazardous waste services practices, as well as small or local contractors. Some of our competitors have greater financial and other resources than we do, which can give them a competitive advantage. In addition, even if we are qualified to work on a new government contract, we might not be awarded the contract because of existing government policies designed to protect certain types of businesses and under-represented minority contractors. Although the Company has the ability to certify and bid government contract as a small business, there are a number of qualified small businesses in our market that will provide intense competition. For international business, which we continue to focus on, there are additional competitors, many from within the country the work is to be performed, making winning work in foreign countries more challenging. Competition places downward pressure on our contract prices and profit margins. If we are unable to meet these competitive challenges, we could lose market share and experience on overall reduction in our profits.

Our failure to maintain our safety record could have an adverse effect on our business.

Our safety record is critical to our reputation. In addition, many of our government and commercial customers require that we maintain certain specified safety record guidelines to be eligible to bid for contracts with these customers. Furthermore, contract terms may provide for automatic termination in the event that our safety record fails to adhere to agreed-upon guidelines during performance of the contract. As a result, our failure to maintain our safety record could have a material adverse effect on our business, financial condition and results of operations.

We have approximately $4,651,000 and $52,784,000 in net operating loss carryforwards which will expire in various amounts starting in 2021 if not used against future federal and state income tax liabilities, respectively. Our net loss carryforwards are subject to various limitations. Our ability to use the net loss carryforwards depends on whether we are able to generate sufficient income in the future years. Further, our net loss carryforwards have not been audited or approved by the Internal Revenue Service.

If our permit or other intangible assets become impaired, we may be required to record significant charge to earnings.

Under accounting principles generally accepted in the United States (“U.S. GAAP”), we review our intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Our permits are tested for impairment at least annually (the Company has no goodwill as of December 31, 2015). Factors that may be considered a change in circumstances, indicating that the carrying value of our permit or other intangible assets may not be recoverable, include a decline in stock price and market capitalization, reduced future cash flow estimates, and slower growth rates in our industry. We may be required, in the future, to record additional impairment charges in our financial statements, in which any impairment of our permit or other intangible assets is determined. Such impairment charges could negatively impact our results of operations.

We bear the risk of cost overruns in fixed-price contracts. We may experience reduced profits or, in some cases, losses under these contracts if costs increase above our estimates.

Our revenues may be earned under contracts that are fixed-price in nature. Fixed-price contracts expose us to a number of risks not inherent in cost-reimbursable contracts. Under fixed price and guaranteed maximum-price contracts, contract prices are established in part on cost and scheduling estimates which are based on a number of assumptions, including assumptions about future economic conditions, prices and availability of labor, equipment and materials, and other exigencies. If these estimates prove inaccurate, or if circumstances change such as unanticipated technical problems, difficulties in obtaining permits or approvals, changes in local laws or labor conditions, weather delays, cost of raw materials or our suppliers’ or subcontractors’ inability to perform, cost overruns may occur and we could experience reduced profits or, in some cases, a loss for that project. Errors or ambiguities as to contract specifications can also lead to cost-overruns.

We are often required to provide performance bonds or other financial assurances to customers under fixed-price contracts, primarily within our Services Segment. These surety instruments indemnify the customer if we fail to perform our obligations under the contract. If a bond is required for a particular project and we are unable to obtain it due to insufficient liquidity or other reasons, we may not be able to pursue that project. We currently have a bonding facility but, the issuance of bonds under that facility is at the surety’s sole discretion. Moreover, due to events that affect the insurance and bonding markets generally, bonding may be more difficult to obtain in the future or may only be available at significant additional cost. There can be no assurance that bonds will continue to be available to us on reasonable terms. Our inability to obtain adequate bonding and, as a result, to bid on new work could have a material adverse effect on our business, financial condition and results of operations.

PF Medical’s inability to commercialize its medical isotope production technology may have a material impact on our financial results.

Our majority-owned subsidiary, PF Medical, continues to dedicate significant resources to the R&D of its new medical isotope production technology. The ability to successfully commercialize this new technology is complex and an uncertain process requiring high levels of innovation and investment. As a majority owner of PF Medical, if PF Medical is unable to successfully commercialize this new technology and generate revenue, our financial result may be impacted materially resulting from the amount of costs to be incurred. Further, PF Medical must complete the development of the new medical isotope technology and obtain approvals as to its Tc-99m medical diagnostic application from a certain U.S. governmental agency before it can market its process in the U.S. and may be required to obtain approvals from certain foreign governmental authorities before it can market its process in those respective countries. We are prohibited from financing PF Medical with proceeds obtained under our Loan Agreement with PNC. In order to raise the necessary capital for PF Medical to complete its development of its new medical isotope technology and to obtain approvals required to market its technology, PF Medical may be required to obtain its own credit facility, which could restrict our rights as majority owner of PF Medical, or raise additional equity capital which, if successful, could result in a dilution of our ownership in PF Medical.

Failure to maintain effective internal control over financial reporting or failure to remediate a material weakness in internal control over financial reporting could have a material adverse effect on our business, operating results, and stock price.

Maintaining effective internal control over financial reporting is necessary for us to produce reliable financial reports and is important in helping to prevent financial fraud. If we are unable to maintain adequate internal controls, our business and operating results could be harmed. We are required to satisfy the requirements of Section 404 of Sarbanes Oxley and the related rules of the Commission, which require, among other things, management to assess annually the effectiveness of our internal control over financial reporting. If we are unable to maintain adequate internal control over financial reporting or effectively remediate any material weakness identified in internal control over financial reporting, there is a reasonable possibility that a misstatement of our annual or interim financial statements will not be prevented or detected in a timely manner. If we cannot produce reliable financial reports, investors could lose confidence in our reported financial information, the market price of our common stock could decline significantly, and our business, financial condition, and reputation could be harmed.

Systems failures, interruptions or breaches of security and other cyber security risks could have an adverse effect on our financial condition and results of operations.

We are subject to certain operational risks, including, but not limited to, data processing system failures and errors, cyber security breaches, inadequate or failed internal processes, customer or employee fraud and catastrophic failures resulting from terrorist acts or natural disasters. We depend upon data processing, software, communication, and information exchange on a variety of computing platforms and networks and over the internet. We also rely on the services of a variety of vendors to meet our data processing and communication needs. Despite our implemented security measures, we cannot be certain that all of our systems are entirely free from vulnerability to attack or other technological difficulties or failures. Information security risks have increased significantly due to the use of online banking channels and the increased sophistication and activities of organized crime, hackers, terrorists and other external parties. Our technologies, systems, and networks may become the target of cyber-attacks, computer viruses, malicious code, phishing attacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of our or our clients’ confidential, proprietary and other information and the disruption of our business operations. A security breach could result in violations of applicable privacy and other laws, financial loss to us or to our customers, loss of confidence in our security measures, litigation exposure, and harm to our reputation. While we maintain a system of internal controls and procedures, any of these results could have a material adverse effect on our business, financial condition, results of operations or liquidity.

If we cannot maintain our governmental permits or cannot obtain required permits, we may not be able to continue or expand our operations.

We are a nuclear services and waste management company. Our business is subject to extensive, evolving, and increasingly stringent federal, state, and local environmental laws and regulations. Such federal, state, and local environmental laws and regulations govern our activities regarding the treatment, storage, recycling, disposal, and transportation of hazardous and non-hazardous waste and low-level radioactive waste. We must obtain and maintain permits or licenses to conduct these activities in compliance with such laws and regulations. Failure to obtain and maintain the required permits or licenses would have a material adverse effect on our operations and financial condition. If any of our facilities are unable to maintain currently held permits or licenses or obtain any additional permits or licenses which may be required to conduct its operations, we may not be able to continue those operations at these facilities, which could have a material adverse effect on us.

We believe that it is important that we maintain our proprietary technologies. There can be no assurance that the steps taken by us to protect our proprietary technologies will be adequate to prevent misappropriation of these technologies by third parties. Misappropriation of our proprietary technology could have an adverse effect on our operations and financial condition. Changes to current environmental laws and regulations also could limit the use of our proprietary technology.

Breach of financial covenants in our Credit Facility could result in a default, triggering repayment of outstanding debt under the credit facility.

Our Credit Facility with our bank contains financial covenants. A breach of any of these covenants could result in a default under our credit facility triggering our lender to immediately require the repayment of all outstanding debt under our Credit Facility and terminate all commitments to extend further credit. In the past, we had instances in which we failed to meet our quarterly fixed charge coverage ratio; however, these instances of non-compliance were waived by our lender. In the past, our lender also has amended the methodology in calculating the quarterly fixed charge coverage ratio and changed the minimum quarterly fixed charge coverage ratio requirement so we can meet our quarterly fixed charge coverage ratio. We met each of our quarterly fixed charge coverage ratio requirements in 2015. If we fail to meet the minimum quarterly fixed charge coverage ratio requirement in the future and our lender does not waive the non-compliance or revise our covenant so that we are in compliance, our lender could accelerates the payment of our borrowings under our credit facility. In such event, we may not have sufficient liquidity to repay our debt under our Credit Facility and other indebtedness.

At December 31, 2015, our aggregate consolidated debt was approximately $9,988,000 (net of debt discount of $50,000). Our Amended and Restated Revolving Credit, Term Loan and Security Agreement, dated October 31, 2011, as amended (“Amended Loan Agreement”) provides for a total Credit Facility commitment of $28,000,000, consisting of a $12,000,000 revolving line of credit and a term loan of $16,000,000. The maximum we can borrow under the revolving part of the Credit Facility is based on a percentage of the amount of our eligible receivables outstanding at any one time. As of December 31, 2015, we had borrowings under the revolving part of our Credit Facility of approximately $2,349,000 and borrowing availability of up to an additional $2,687,000 based on our outstanding eligible receivables. A lack of positive operating results could have material adverse consequences on our ability to operate our business. Our ability to make principal and interest payments, or to refinance indebtedness, will depend on both our and our subsidiaries' future operating performance and cash flow. Prevailing economic conditions, interest rate levels, and financial, competitive, business, and other factors affect us. Many of these factors are beyond our control. On March 24, 2016, we entered into an amendment to the Amended Loan Agreement with our lender which, among other things, extended the due date of our current Credit Facility to March 24, 2021. Pursuant to the amendment, the revolving line of credit is to remain at $12,000,000 with the term loan revised to approximately $6,100,000, which approximates our term loan balance under our existing Credit Facility at the date of the amendment.

Our substantial level of indebtedness could limit our financial and operating activities, and adversely affect our ability to incur additional debt to fund future needs.

We currently have a substantial amount of indebtedness. As a result, this level of indebtedness could, among other things:

Any of the foregoing could adversely impact our operating results, financial condition, and liquidity. Our ability to continue our operations depends on our ability to generate profitable operations or complete equity or debt financings to increase our capital.

Issuance of substantial amounts of our Common Stock could depress our stock price.

Any sales of substantial amounts of our Common Stock in the public market could cause an adverse effect on the market price of our Common Stock and could impair our ability to raise capital through the sale of additional equity securities. The issuance of our Common Stock will result in the dilution in the percentage membership interest of our stockholders and the dilution in ownership value. As of December 31, 2015, we had 11,543,590 shares of Common Stock outstanding.

In addition, as of December 31, 2015, we had outstanding options to purchase 218,200 shares of Common Stock at exercise prices from $2.79 to $14.75 per share and two outstanding warrants to purchase up to an aggregate 70,000 shares of Common Stock at exercise price of $2.23 per share. Further, our preferred share rights plan, if triggered, could result in the issuance of a substantial amount of our Common Stock. The existence of this quantity of rights to purchase our Common Stock under the preferred share rights plan could result in a significant dilution in the percentage ownership interest of our stockholders and the dilution in ownership value. Future sales of the shares issuable could also depress the market price of our Common Stock.

We do not intend to pay dividends on our Common Stock in the foreseeable future.

Since our inception, we have not paid cash dividends on our Common Stock, and we do not anticipate paying any cash dividends in the foreseeable future. Our Credit Facility prohibits us from paying cash dividends on our Common Stock.

The price of our Common Stock may fluctuate significantly, which may make it difficult for our stockholders to resell our Common Stock when a stockholder wants or at prices a stockholder finds attractive.

The price of our Common Stock on the Nasdaq Capital Markets constantly changes. We expect that the market price of our Common Stock will continue to fluctuate. This may make it difficult for our stockholders to resell the Common Stock when a stockholder wants or at prices a stockholder finds attractive.

Future issuance of our Common Stock could adversely affect the price of our Common Stock, our ability to raise funds in new stock offerings and could dilute the percentage ownership of our common stockholders.

Future sales of substantial amounts of our Common Stock or equity-related securities in the public market, or the perception that such sales or conversions could occur, could adversely affect prevailing trading prices of our Common Stock and could dilute the value of Common Stock held by our existing stockholders. No prediction can be made as to the effect, if any, that future sales of shares of Common Stock or the availability of shares of Common Stock for future sale will have on the trading price of our Common Stock. Such future sales or conversions could also significantly reduce the percentage ownership of our common stockholders.

Delaware law, certain of our charter provisions, our stock option plans, outstanding warrants and our Preferred Stock may inhibit a change of control under circumstances that could give you an opportunity to realize a premium over prevailing market prices.

We are a Delaware corporation governed, in part, by the provisions of Section 203 of the General Corporation Law of Delaware, an anti-takeover law. In general, Section 203 prohibits a Delaware public corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. As a result of Section 203, potential acquirers may be discouraged from attempting to effect acquisition transactions with us, thereby possibly depriving our security holders of certain opportunities to sell, or otherwise dispose of, such securities at above-market prices pursuant to such transactions. Further, certain of our option plans provide for the immediate acceleration of, and removal of restrictions from, options and other awards under such plans upon a “change of control” (as defined in the respective plans). Such provisions may also have the result of discouraging acquisition of us.

We have authorized and unissued 18,160,568 (which includes shares issuable under outstanding options to purchase 218,200 shares of our Common Stock and two warrants to purchase 70,000 shares of our Common Stock) shares of Common Stock and 2,000,000 shares of Preferred Stock as of December 31, 2015 (which includes 600,000 shares of our Preferred Stock reserved for issuance under our preferred share rights plan). These unissued shares could be used by our management to make it more difficult, and thereby discourage an attempt to acquire control of us.

Our Preferred Share Rights Plan (the “Rights Plan”) may adversely affect our stockholders.

In May 2008, we adopted a Rights Plan, designed to ensure that all of our stockholders receive fair and equal treatment in the event of a proposed takeover or abusive tender offer. However, the Rights Plan may also have the effect of deterring, delaying, or preventing a change in control that might otherwise be in the best interests of our stockholders.

In general, under the terms of the Rights Plan, subject to certain limited exceptions, if a person or group acquires 20% or more of our Common Stock or a tender offer or exchange offer for 20% or more of our Common Stock is announced or commenced, our other stockholders may receive upon exercise of the rights (the “Rights”) issued under the Rights Plan the number of shares our Common Stock or of one-one hundredths of a share of our Series A Junior Participating Preferred Stock, par value $.001 per share, having a value equal to two times the purchase price of the Right. In addition, if we are acquired in a merger or other business combination transaction in which we are not the survivor or more than 50% of our assets or earning power is sold or transferred, then each holder of a Right (other than the acquirer) will thereafter have the right to receive, upon exercise, common stock of the acquiring company having a value equal to two times the purchase price of the Right. The initial purchase price of each Right was $13, subject to adjustment and adjustment for the reverse stock split.

The Rights will cause substantial dilution to a person or group that attempts to acquire us on terms not approved by our board of directors. The Rights may be redeemed by us at $0.001 per Right at any time before any person or group acquires 20% or more of our outstanding common stock. The rights should not interfere with any merger or other business combination approved by our board of directors. The Rights expire on May 2, 2018.

Our principal executive office is in Atlanta, Georgia. Our Business Center is located in Knoxville, Tennessee. Our Treatment Segment facilities are located in Gainesville, Florida; Kingston, Tennessee; Oak Ridge, Tennessee, and Richland, Washington. Our Services Segment maintains operations located in Knoxville, Tennessee and Blaydon On Tyne, England, of which we lease all of the properties. PF Medical maintains a leased administrative office in Mobile, Alabama. We maintain properties in Valdosta, Georgia; Brownstown, Michigan; and Memphis, Tennessee, which are all non-operational and are included within our discontinued operations.

The properties where three of our facilities operate on (Kingston, Tennessee; Gainesville, Florida; and Richland, Washington) are held by our senior lender as collateral for our credit facility. The Company currently leases properties in the following locations:

We believe that the above facilities currently provide adequate capacity for our operations and that additional facilities are readily available in the regions in which we operate, which could support and supplement our existing facilities.

During the fourth quarter of 2015, an arbitrator ordered the Company to pay approximately $1,278,000 to a contractor hired by the Company to perform emergency response services at the Company’s PFSG subsidiary located in Valdosta, Georgia, which suffered an explosion and fire on August 14, 2013. The PFSG facility site is undergoing regulatory closure, subject to state and federal environmental permitting requirements and is included in the Company’s discontinued operations. In arbitration, the contractor had sought payment of unpaid invoices totaling approximately $1,400,000 (which included interest of approximately $600,000) and contract penalties totaling approximately $800,000. In addition, the contractor claimed approximately $500,000 in attorney’s fees. On December 7, 2015, the Company was notified of the following Arbitrator’s award totaling approximately $1,278,000, which was paid on December 31, 2015: (a) $747,000 for unpaid invoices; (b) interest of $400,000; (c) attorney fees of $125,000; and (d) $6,000 in certain administrative fees in connection with the arbitration. The Company had previously accrued approximately $871,000 for this matter. The remaining charge of approximately $407,000 was recorded by the Company in 2015 (in the fourth quarter of 2015), with $400,000 recorded as interest expense.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our Common Stock is traded on the NASDAQ Capital Markets (“NASDAQ”) under the symbol “PESI”. The following table sets forth the high and low market trade prices quoted for the Common Stock during the periods shown. The source of such quotations and information is the NASDAQ online trading history reports.

As of February 29, 2016, there were approximately 212 stockholders of record of our Common Stock, including brokerage firms and/or clearing houses holding shares of our Common Stock for their clientele (with each brokerage house and/or clearing house being considered as one holder). However, the total number of beneficial stockholders as of February 29, 2016 was approximately 2,688.

Since our inception, we have not paid any cash dividends on our Common Stock and have no dividend policy. Our Amended Loan Agreement prohibits us from paying any cash dividends on our Common Stock without prior approval from the lender. We do not anticipate paying cash dividends on our outstanding Common Stock in the foreseeable future.

No sales of unregistered securities occurred during 2015. There were no purchases made by us or on behalf of us or any of our affiliated members of shares of our Common Stock during 2015.

We have adopted a preferred share rights plan, which is designed to protect us against certain creeping acquisitions, open market purchases, and certain mergers and other combinations with acquiring companies. See Item 1A. - Risk Factors – “Our Preferred Share Rights Plan (the “Rights Plan”) may adversely affect our stockholders” as to further discussion relating to the terms of our Rights Plan.

See “Equity Compensation Plan” in Part III, Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matter” for securities authorized for issuance under equity compensation plans which is incorporated herein by reference.

On September 18, 2014 at the Company’s 2014 Annual Meeting of Stockholders, the Company’s stockholders approved an amendment to the Company’s Restated Certificate of Incorporation to reduce the number of shares of Common Stock the Company is authorized to issue from 75,000,000 to 30,000,000. This amendment became effective on September 19, 2014.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Certain statements contained within this “Management's Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”) 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”). See “Special Note regarding Forward-Looking Statements” contained in this report.

Management's discussion and analysis is based, among other things, upon our audited consolidated financial statements and includes our accounts, the accounts of our wholly-owned subsidiaries and the accounts of our majority-owned Polish subsidiary, after elimination of all significant intercompany balances and transactions.

The following discussion and analysis should be read in conjunction with our consolidated financial statements and the notes thereto included in Item 8 of this report.

Revenue increased $5,318,000 or 9.3% to $62,383,000 for the twelve months ended December 31, 2015 from $57,065,000 for the corresponding period of 2014. The revenue increase was primarily in the Services Segment where we saw an increase in revenue of $6,343,000 or 43.1%. Revenue from our Treatment Segment decreased $1,025,000 or 2.4% primarily from lower waste volume. Gross profit increased $2,443,000 or 20.5% primarily due to the increase in revenue in the Services Segment and our continued cost reduction efforts throughout all segments. Selling, General, and Administrative (“SG&A”) expenses decreased $977,000 or 8.2% for the twelve months ended December 31, 2015 as compared to the corresponding period of 2014. R&D costs increased $987,000 or 75.0% primarily due to R&D costs incurred for the new medical isotope production technology for our Medical Segment.

We had working capital of $3,091,000 at December 31, 2015, as compared to working capital of $372,000 at December 31, 2014, an increase of $2,719,000.

The Company’s Treatment and Services Segments’ business continues to be heavily dependent on services that we provide to governmental clients directly as the contractor or indirectly as a subcontractor. We believe demand for our services will continue to be subject to fluctuations due to a variety of factors beyond our control, including the current economic conditions and the manner in which the government will be required to spend funding to remediate federal sites. In addition, our governmental contracts and subcontracts relating to activities at governmental sites are generally subject to termination or renegotiation on 30 days notice at the government’s option. Significant reductions in the level of governmental funding or specifically mandated levels for different programs that are important to our business could have a material adverse impact on our business, financial position, results of operations and cash flows.

Our majority-owned Polish subsidiary, PF Medical, continues to dedicate resources to the R&D of the new medical isotope production technology and to take the necessary steps for eventual submittal of this technology for U.S. Food and Drug Administration (“FDA”) and other regulatory approval and commercialization of this technology. The need for capital by PF Medical may require PF Medical to obtain such capital requirements through obtaining its own credit facility or additional equity raise. A capital raise by PF Medical, if required and successful, could limit our ownership rights if accomplished by PF Medical entering into a new credit facility or could dilute our ownership if accomplished by raising additional equity capital.

The Company’s cash flow requirements during 2015 were primarily financed by our operations, Credit Facility availability, and an equity raise by PF Medical (“see “Financing Activities” in “Liquidity and Capital Resources” in this MD&A for further information regarding the equity raise). The Company is continually reviewing operating costs and is committed to further reducing operating costs to bring them in line with revenue levels, when needed.

The Company continues to focus on expansion into both commercial and international markets to increase revenues in our Treatment and Services Segments to offset the uncertainties of government spending in the United States of America. This focus has resulted in an increase in revenue from commercial sources in 2015 which is expected to continue into 2016. In addition, the Company remains focused on increasing its international market share.

The reporting of financial results and pertinent discussions are tailored to our three reportable segments: The Treatment Segment (“Treatment”), the Services Segment (“Services”), and the Medical Segment (“Medical”). Our Medical Segment has not generated any revenue and all costs incurred are included within R&D:

Below are the results of continuing operations for our years ended December 31, 2015 and 2014 (amounts in thousands):

Consolidated revenues from continuing operations increased $5,318,000 for the year ended December 31, 2015, compared to the year ended December 31, 2014, as follows:

Treatment Segment revenue decreased $1,025,000 or 2.4% for the year ended December 31, 2015 over the same period in 2014. The decrease in revenue was primarily due to lower other nuclear waste revenue of approximately $1,214,000 or 15.1% resulting from lower waste volume. Hazardous/non-hazardous revenue decreased approximately $154,000 or 3.4% primarily due to lower averaged price waste. Revenue generated from government clients increased approximately $343,000 or 1.2% primarily due to higher waste volume. Services Segment revenue increased $6,343,000 or 43.1% in the twelve months ended December 31, 2015 as compared to the corresponding period of 2014 primarily as a result of increased revenue generated from a certain contract awarded to us in the second half of 2014 in the nuclear services area. Revenue generated from this contract was approximately $10,686,000 in 2015 as compared to approximately $3,591,000 for the corresponding period of 2014. The decrease in revenue in the technical services area was primarily due to the divestiture of our Schreiber, Yonley, and Associates subsidiary (“SYA”) in July 2014, which generated revenues of approximately $1,888,000 in 2014.

Cost of goods sold increased $2,875,000 for the year ended December 31, 2015, as compared to the year ended December 31, 2014, as follows:

Cost of goods sold for the Treatment Segment decreased by $1,455,000 or 4.6% primarily due to lower revenue. We incurred lower transportation, disposal, material and supplies, lab, and outside services costs totaling approximately $850,000. Our overall fixed costs were lower by approximately $636,000. We incurred a significant reduction in depreciation expense of approximately $235,000 as certain fixed assets became fully depreciated in June 2014. Salaries and payroll-related expenses were lower by approximately $715,000 due to lower headcount/healthcare/worker compensation costs which were partially offset by higher 401(k) matching expenses in the amount of approximately $127,000 as we re-established our matching program effective January 1, 2015. In addition, general costs were lower by approximately $83,000 over various categories as we continue to streamline our costs. These lower fixed costs were offset by higher maintenance costs of approximately $270,000 resulting from maintenance of certain buildings and equipment. Services Segment cost of goods sold increased $4,330,000 or 32.6% primarily due to the increase in revenue as discussed above, with increases primarily in labor, payroll related and travel expenses totaling approximately $2,300,000, with the remaining increases in material and supplies of $590,000 and disposal/transportation/lab costs totaling approximately $1,500,000 resulting from waste shipped off-site in connection with certain projects. Included within cost of goods sold is depreciation and amortization expense of $3,548,000 and $3,826,000 for the twelve months ended December 31, 2015, and 2014, respectively.

Gross profit for the year ended December 31, 2015, was $2,443,000 higher than 2014, as follows:

Treatment Segment gross profit increased $430,000 or 4.1% and gross margin increased to 26.4% from 24.8% primarily due to the reduction in certain of our fixed costs as discussed above and revenue mix. In the Services Segment, the increases in gross profit of $2,013,000 and gross margin from 9.7% in 2014 to 16.3% in 2015 were primarily due to the increase in revenue as discussed above. In addition, in the second quarter of 2014, we completed a reduction in work force which reduced headcount in our effort to bring our cost structure in line with our revenue.

SG&A expenses decreased $977,000 for the year ended December 31, 2015, as compared to the corresponding period for 2014, as follows:

The decrease in SG&A was primarily within the Services Segment. Services SG&A was lower due to lower salaries and payroll related expenses of approximately $345,000 from lower headcount which was attributed to a reduction in workforce which occurred in May 2014. Bad debt expense was lower by approximately $690,000 resulting from a reduction in our allowance for doubtful account as a previously reserved amount for an uncertain account receivable was determined to be collectible at December 31, 2015. In 2014, we reserved approximately $260,000 for a different uncertain account receivable. Amortization expense was lower by approximately $140,000 due to certain amortizable intangible assets which became fully amortized in July 2014. The lower costs were partially offset by higher legal/business consulting expenses totaling approximately $150,000 and higher travel costs of approximately $70,000. The increase in administrative SG&A was primarily due to Management Incentive Plan (“MIP”) compensation earned by our executives totaling approximately $214,000 based on fiscal year 2015 financial results and higher outside services expenses of approximately $70,000 resulting from more consulting/business/legal matters. These higher costs were partially offset by lower salaries and payroll related expenses totaling approximately $110,000 and lower general expenses of approximately $116,000 in various categories as we continue to streamline costs. Treatment SG&A was lower primarily due to lower salaries and payroll related expenses totaling approximately $210,000 and lower outside services expenses of approximately $58,000 resulting from fewer consulting/business/legal matters. These lower costs were mostly offset by higher travel expenses of approximately $36,000 and higher trade show costs by approximately $113,000. Included in SG&A expenses is depreciation and amortization expense of $169,000 and $324,000 for the twelve months ended December 31, 2015 and 2014, respectively.

R&D costs increased $987,000 for the year ended December 31, 2015, as compared to the corresponding period of 2014. The increase in R&D costs was primarily due to increased costs incurred by our Medical Segment in connection with the development of the new medical isotope technology. Research and development costs consist primarily of employee salaries and benefits, laboratory costs, third party fees, and other related costs associated with the development of new technologies and technological enhancement of new potential waste treatment processes. Included in research and development expense is depreciation expense of $0 and $90,000 for the twelve months ended December 31, 2015 and 2014, respectively.

Interest expense decreased $127,000 for the twelve months ended December 31, 2015, as compared to the corresponding periods of 2014 primarily due to lower interest on our declining Term Loan balance and lower interest from the declining $3,000,000 loan dated August 2, 2013. In addition, interest expense was lower in 2015 as compared to 2014 as interest expense for the twelve months ended December 31, 2014 included approximately $37,000 in loss on debt modification (recorded in accordance with ASC 470-50, “Debt – Modification and Extinguishment”) incurred as a result of an amended loan agreement that we entered into with our lender on April 14, 2014, which reduced our Revolving Credit line from $18,000,000 to $12,000,000. The lower interest expense was partially offset by higher interest expense resulting from higher average revolver loan balance over the period.

Interest expense-financing fees increased $36,000 for the twelve months ended December 31, 2015 as compared to the corresponding period of 2014. The increase was primarily due to the increase in monthly amortized financing fees associated with amendments to our Credit Facility that we entered into with our lender on April 14, 2014 and July 25, 2014.

We recorded income tax expenses of $543,000 and $417,000 for continuing operations for the years ended December 31, 2015 and 2014, respectively. The Company’s effective tax rates were approximately 40.0% and (19.7%) for the twelve months ended December 31, 2015 and 2014, respectively. The differences in effective tax rate for the twelve months ended December 31, 2015 as compared to the twelve months ended December 31, 2014 was primarily due to deferred tax expense related to the Company’s indefinite-lived intangibles not covered by valuation allowance.

The Company’s discontinued operations consist of subsidiaries included in our Industrial Segment: (1) subsidiaries divested in 2011 and prior, (2) two previously closed locations, and (3) our Perma-Fix South Georgia, Inc. (“PFSG”) facility which suffered a fire and explosion on August 14, 2013 and is currently undergoing regulatory closure. In June 2014, the Company entered into a settlement agreement and release with one of its insurance carriers, resulting in receipt of approximately $3,850,000 in insurance settlement proceeds, which was used for working capital purposes. The Company subsequently recorded a gain on insurance settlement of approximately $3,842,000 in connection with the fire and explosion at our PFSG facility. In 2014, the Company also recorded approximately $723,000 of asset impairment charges as result of the Company’s decision not to rebuild PFSG in accordance with ASC 360, “Property, Plant, and Equipment.”

On May 11, 2015, PFSG received a Notice of Violation and proposed Consent Order (“CO”) from the Georgia Department of Natural Resources Environmental Protection Division (“GAEPD”), which alleged certain violations (resulting from the fire and explosion in 2013 and prior inspections of the facility) of Georgia hazardous waste management regulations and PFSG hazardous waste management permit. The proposed CO also established the process for formally closing the PFSG hazardous waste management facilities, should PFSG elect to do so; and proposed the assessment of a civil penalty. The final terms of the CO, including a $201,200 civil penalty, were executed on July 1, 2015. The civil penalty was paid by the Company and recorded in the second quarter of 2015. On September 29, 2015, the Company submitted a draft Post-Closure Plan for review and approval by the GAEPD.

On June 4, 2015, Perma-Fix of Michigan, Inc. (“PFMI”) entered into a letter of intent (“LOI”) to sell the property PFMI formerly operated for a sale price of approximately $450,000. PFMI is a closed location. As required by ASC 360, the Company concluded that tangible asset impairment existed for PFMI and recorded approximately $150,000 in asset impairment charge in the second quarter of 2015. On September 29, 2015, PFMI entered into a Purchase Agreement (the “Agreement”) for the sale of the property for a sales price of $450,000, which is subject to completion of a due diligence by the buyer. Upon execution of the Agreement, PFMI received a $20,000 deposit which is being held in an escrow account (recorded as restricted cash within discontinued operations). In consideration of an amendment to the Agreement entered into on February 17, 2016, which included extending the time period for completion of the due diligence by the buyer, the buyer agreed to forfeit $10,000 of the $20,000 held in escrow to PFMI, which the $10,000 was received by PFMI on February 18, 2016. Upon timely closing of the transaction, which is expected to be completed during the latter part of March 2016, the buyer shall receive a credit against the purchase price which shall be the lesser of $15,000 and 50% of funds paid by the buyer for certain due diligence costs, and a credit against the purchase price of $20,000. At closing, PFMI is expected to receive $50,000 (which includes the remaining $10,000 held in escrow) reduced by sales commissions and certain other closing costs and PFMI and the buyer will execute a Land Contract (“Contract”) which will provide for, among other things, the remaining balance of the purchase price of $375,000 to be paid by the buyer in 60 equal monthly installment of approximately $7,250, due on or before the 15^th of each month immediately following the execution of the Contract. PFMI retains legal title to the property until the buyer fulfills the obligations under the Contract.

During the fourth quarter of 2015, an arbitrator ordered the Company to pay approximately $1,278,000 to a contractor hired by the Company to perform emergency response services at our PFSG subsidiary resulting from the fire and explosion in 2013. As discussed above, PFSG is currently undergoing regulatory closure, subject to state and federal environmental permitting requirements. In arbitration, the contractor had sought payment of unpaid invoices totaling approximately $1,400,000 (which included interest of approximately $600,000) and contract penalties totaling approximately $800,000. In addition, the contractor claimed approximately $500,000 in attorney’s fees. On December 7, 2015, the Company was notified of the following Arbitrator’s award totaling approximately $1,278,000, which was paid on December 31, 2015: (a) $747,000 for unpaid invoices; (b) interest of $400,000; (c) attorney fees of $125,000; and (d) $6,000 in certain administrative fees in connection with the arbitration. The Company had previously accrued approximately $871,000 for this matter. The remaining charge of approximately $407,000 was recorded by the Company in 2015 (in the fourth quarter), with $400,000 recorded as interest expense.

Our discontinued operations had no revenue for the twelve months ended December 31, 2015 and 2014. We had a net loss of $1,864,000 and net income of $1,688,000 for our discontinued operations for the twelve months ended December 31, 2015 and 2014, respectively. Our net loss for the twelve months ended December 31, 2015 included the civil penalty recorded during the second quarter of 2015 for our PFSG facility and the asset impairment charge recorded during the second quarter of 2015 for our PFMI facility as discussed above. In addition, our net loss for the twelve months ended December 31, 2015 included the $407,000 expenses recorded in the fourth quarter in connection with the arbitration award as discussed above. Our net income for our discontinued operations for the twelve months ended December 31, 2014, included a gain on insurance settlement of approximately $3,842,000 and asset impairment charge of approximately $723,000 in connection with the fire and explosion sustained at our PFSG subsidiary.

We achieved improvement in financial position and liquidity in the twelve months ended December 31, 2015 as compared to the corresponding period of 2014. As of December 31, 2015, working capital was approximately $3,091,000, an improvement of $2,719,000 from a working capital of approximately $372,000 as of December 31, 2014. Our loss from continuing operations was $63,000 as compared to a loss from continuing operations of $2,992,000 in 2014. We generated positive cash flow from continuing operations of approximately $1,704,000 in 2015 as compared to $661,000 in 2014. The Company’s financial results were negatively impacted by certain non-recurring charges incurred in 2015 within discontinued operations as discussed previously (“Discontinued Operations” above).

Our cash flow requirements during 2015 consisted of general working capital needs, scheduled payments on our debt obligations, remediation projects and planned capital expenditures and were financed primarily by our operations, Credit Facility, and equity raise by our majority-owned Polish subsidiary, PF Medical (“see “Financing Activities” below for further information regarding the equity raise). We continue to explore all potential sources of increasing revenue, including our Medical Segment’s R&D of the new medical isotope production technology. We are continually reviewing operating costs and are committed to further reducing operating costs to bring them in line with revenue levels, when needed. Although there are no assurances, we believe that our cash flows from operations and our availability from our Credit Facility are sufficient to fund our operations for the next twelve months.

The Company’s cash flow requirements for 2016 will consist primarily of general working capital needs, scheduled principal payments on our debt obligations and capital leases, remediation projects and planned capital expenditures which we plan to fund from operations and our Credit Facility availability. The Company’s majority-owned Polish subsidiary, PF Medical, continues to dedicate resources to the R&D of the new medical isotope production technology and to take the necessary steps for eventual submittal of this technology for U.S. Food and Drug Administration (“FDA”) and other regulatory approval and commercialization of this technology. Costs to be incurred for our Medical Segment for fiscal year 2016 is expected to be similar to costs incurred for fiscal year 2015, which was approximately $2,114,000. The need for capital by PF Medical may require PF Medical to obtain its own credit facility or by additional equity raises. If PF Medical obtains its own separate credit facility, such could result in restrictions on our rights as a majority stock owner. Any equity raises, if successful, would result in dilution of the Company’s ownership of PF Medical.

The following table reflects the cash flow activity during the twelve months ended December 31, 2015 and the corresponding period of 2014:

As of December 31, 2015, we were in a net borrowing position (Revolving Credit). We utilize a centralized cash management system, which includes a remittance lock box and is structured to accelerate collection activities and reduce cash balances, as idle cash is moved without delay to the Revolving Credit Facility or the Money Market account, if applicable. The cash balance at December 31, 2015, was primarily cash received from the sale of certain equity by our majority-owned Polish subsidiary, PF Medical, which is not a credit party under our Amended Loan Agreement with PNC Bank and minor petty cash and local account balances used for miscellaneous services and supplies at our remaining subsidiaries.

Accounts Receivable, net of allowances for doubtful accounts, totaled $9,673,000 at December 31, 2015, an increase of $1,401,000 from the December 31, 2014 balance of $8,272,000. The increase was primarily due to increased revenue and timing of accounts receivable collections due to the variety of payment terms provided to our customers.

Accounts Payable, totaled $6,109,000 at December 31, 2015, an increase of $759,000 from the December 31, 2014 balance of $5,350,000. The increase was primarily related to the increase in activity as evidence by the increase in revenue. Also, we continue to manage payment terms with our vendors to maximize our cash position throughout all segments.

Disposal/transportation accrual as of December 31, 2015, totaled $1,107,000, a decrease of $630,000 over the December 31, 2014 balance of $1,737,000. Our disposal accrual can vary based on revenue mix and the timing of waste shipments for final disposal. During the twelve months of 2015, we shipped more waste for disposal which is reflected in a lower inventory on-site as compared to year end 2014. In addition, we disposed of certain waste at a less expensive disposal outlet which positively impacted our disposal accrual.

We had working capital of $3,091,000 (which included working capital of our discontinued operations) as of December 31, 2015, as compared to working capital of $372,000 as of December 31, 2014. Our working capital was positively impacted primarily by cash generated from our operations offset by payments of certain of our current liabilities, the reduction of deferred revenue, and the reduction of our current-debt.

During 2015, our purchases of capital equipment totaled approximately $623,000. These expenditures were primarily for improvements in our Treatment Segment. These capital expenditures were funded by cash from operations. We have budgeted approximately $1,200,000 for 2016 capital expenditures for our Treatment and Services Segments to maintain operations and regulatory compliance requirements. Certain of these budgeted projects may either be delayed until later years or deferred altogether. We have traditionally incurred actual capital spending totals for a given year at less than the initial budgeted amount. We plan to fund our capital expenditures from cash from operations and/or financing. The initiation and timing of projects are also determined by financing alternatives or funds available for such capital projects.

The Company entered into an Amended and Restated Revolving Credit, Term Loan and Security Agreement, dated October 31, 2011 (“Loan Agreement”), with PNC Bank, National Association (“PNC”), acting as agent and lender. The Loan Agreement, as amended (“Amended Loan Agreement”) provided us with the following Credit Facility: (a) up to $12,000,000 revolving credit (“Revolving Credit”), subject to the amount of borrowings based on a percentage of eligible receivables (as defined) and (b) a term loan (“Term Loan”) of $16,000,000, which required monthly installments of approximately $190,000 (based on a seven-year amortization). PF Medical is not a credit party under our Amended Loan Agreement; as such, the Company is prohibited from financing PF Medical with proceeds obtained under our Amended Loan Agreement. As of December 31, 2015, the availability under our Revolving Credit was approximately $2,687,000, based on our eligible receivables and was net of an indefinite reduction of borrowing availability of $1,500,000. The Amended Loan Agreement authorized us to use the $3,850,000 insurance settlement proceeds received on June 30, 2014 by our PFSG subsidiary (which suffered a fire and explosion on August 14, 2013 and is included within our discontinued operations) for working capital purposes but placed an indefinite reduction on our borrowing availability by the $1,500,000 as discussed above.

Under the Amended Loan Agreement, which is to terminate on October 31, 2016, we had the option of paying an annual rate of interest due on the Revolving Credit at prime plus 2% or London Inter Bank Offer Rate (“LIBOR”) plus 3% and the Term Loan at prime plus 2.5% or LIBOR plus 3.5%.

On March 24, 2016, we entered into an amendment to our Amended Loan Agreement with our lender which provided, among other things, the following (the amendment, together with the Amended Loan Agreement is collectively known as the “Revised Loan Agreement”):

In connection with the amendment, the Company paid PNC a closing fee of $70,000.

Pursuant to the amendment, we may terminate the Revised Loan Agreement upon 90 days’ prior written notice upon payment in full of its obligations under the Revised Loan Agreement. We have agreed to pay PNC 1.0% of the total financing in the event we pay off our obligations on or before March 23, 2017, .50% of the total financing if we pay off our obligations after March 23, 2017 but prior to or on March 23, 2018, and .25% of the total financing if we pays off our obligations after March 23, 2018 but prior to or on March 23, 2019. No early termination fee shall apply if we pay off its obligations after March 23, 2019.

In accordance with ASC 470, “Debt,” this post balance-sheet date agreement demonstrated the Company’s ability to refinance its short-term obligations on a long-term basis; therefore, the Company has reclassified our outstanding debt under the Amended Loan Agreement as discussed above at December 31, 2015 to long-term except for $1,486,000 in principal payments that will be due by December 31, 2016.

Our Credit Facility with PNC contains certain financial covenants, along with customary representations and warranties. A breach of any of these financial covenants, unless waived by PNC, could result in a default under our Credit Facility allowing our lender to immediately require the repayment of all outstanding debt under our Credit Facility and terminate all commitments to extend further credit. The following table illustrates the quarterly financial covenant requirements under our Credit Facility as of December 31, 2015:

We met our quarterly fixed charge coverage ratio and minimum tangible adjusted net worth requirements in each of the quarters in 2015 in accordance with our Amended Loan Agreement and we expect to meet these requirements in 2016 under our loan agreement; however, if we fail to meet any of these quarterly financial covenant requirements in any of the quarters in 2016 and PNC does not waive the non-compliance or further revise our covenant so that we are in compliance, our lender could accelerate the repayment of borrowings under our loan agreement. In the event that our lender accelerates the payment of our borrowings, we may not have sufficient liquidity to repay our debt under our loan agreement and other indebtedness.

On August 2, 2013, we completed a lending transaction with Messrs. Robert Ferguson and William Lampson (“collectively, the “Lenders”), whereby we borrowed from the Lenders the sum of $3,000,000 (the “Loan”). Mr. Ferguson serves as an advisor to the Company’s Board of Directors and is also a member of the Board of Directors of our majority-owned Polish Subsidiary (see “Related Party Transactions – Mr. Robert L. Ferguson” in this section for further information on Mr. Ferguson). The proceeds from the Loan were used for general working capital purposes. The promissory note is unsecured, with a term of three years with interest payable at a fixed interest rate of 2.99% per annum. The promissory note provided for monthly payments of accrued interest only during the first year of the Loan and monthly payments of $125,000 in principal plus accrued interest for the second and third year of the Loan. In connection with the above Loan, the Lenders entered into a Subordination Agreement with our Credit Facility lender, whereby the Lenders agreed to subordinate payment under the Loan, and agreed that the Loan will be junior in right of payment to the Credit Facility in the event of default or bankruptcy or other insolvency proceeding by us. As consideration for us receiving the Loan, we issued a Warrant to each Lender to purchase up to 35,000 shares of our Common Stock at an exercise price of $2.23 per share which was based on the closing price of our Common Stock at the closing of the transaction. The Warrants are exercisable six months from August 2, 2013 and expire on August 2, 2016. The fair value of the Warrants was estimated to be approximately $59,000 using the Black-Scholes option pricing model. As further consideration for the Loan, we also issued an aggregate 90,000 shares of our Common Stock, with each Lender receiving 45,000 shares. We determined the fair value of the 90,000 shares of Common Stock to be approximately $200,000 which was based on the closing price of the Company’s Common Stock of $2.23 per share on August 2, 2013. The fair value of the Warrants and Common Stock and the related closing fees incurred from the transaction were recorded as a debt discount, which is being amortized using the effective interest method over the term of the Loan as interest expense – financing fees in the accompanying Consolidated Statements of Operations.

During August 2014, PF Medical executed stock subscription agreements totaling approximately $2,357,000 for 250,000 shares of its Series E Common Stock to non-U.S. persons in an offshore private placement. In connection with this transaction, PF Medical has received approximately $1,478,000 and $67,000 in proceeds (before deduction for commissions and legal expenses relating to this offering of approximately $242,000) in 2014 and 2015, respectively, for the 250,000 shares. As of December 31, 2015, the $67,000 is being held in an escrow account and is expected to be released from the escrow account during the first quarter of 2016 for payment of certain expenses related to the medical isotope project. The Company has recorded the amount held in escrow as restricted cash on the accompanying Consolidated Balance Sheets as of December 31, 2015. PF Medical has elected to transfer all the rights, title, and interests of the remaining approximately 86,585 unpaid shares back to PF Medical. The unpaid shares to be transferred back to PF Medical will require the termination of the original stock subscription agreements for the 86,585 shares.

On April 30, 2015, PF Medical officially accepted a grant awarded by the National Centre for Research and Development (“NCRD”) in Poland to further develop and commercialize a novel prototype generator for the production of Tc-99m for use in cancer and cardiac imaging (“Generator Project”), subject to official issuance of the grant. The Generator Project is under the leadership and supervision of PF Medical and consists of four additional entities from Poland (together known as the “Generator Project team”). NCRD’s subsidy grant for the Generator Project is approximately $2,547,000 and will be funded by NCRD over a four year period. If needed, PF Medical expects to fund any capital requirements in excess of the subsidy grant for the Generator Project allocated by NCRD through the sale of equity. Of the $2,547,000 subsidy grant allocation, PF Medical will directly receive approximately $745,000 over a four year period and the remaining amount will be allocated to other members of the Generator Project team to be used solely to support technology development and testing of the Generator Project. PF Medical officially was awarded the grant by NCRD in December 2015. The subsidy grant will be funded based on milestone completion of the Generator Project.

On July 24, 2015, PF Medical and Digirad Corporation, a Delaware corporation (“Digirad”), Nasdaq: DRAD, entered into a multi-year Tc-99m Supplier Agreement (the “Supplier Agreement”) and a Series F Stock Subscription Agreement (the “Subscription Agreement”), (together, the “Digirad Agreements”). The Supplier Agreement became effective upon the completion of the Subscription Agreement. Pursuant to the terms of the Digirad Agreements, Digirad purchased, in a private placement, 71,429 shares of PF Medical’s restricted Series F Stock for an aggregate purchase price of $1,000,000, which was received on July 24, 2015. As of December 31, 2015, legal expenses incurred for this offering totaled approximately $29,000. The 71,429 share investment made by Digirad constituted approximately 5.4% of the outstanding common shares of PF Medical. As a result of this transaction, the Company’s ownership interest in PF Medical diluted from approximately 64.0% to 60.5%. The Supplier Agreement provides, among other things, that upon PF Medical’s commercialization of certain Tc99m generators, Digirad will purchase agreed upon quantities of Tc-99m for its nuclear imaging operations either directly or in conjunction with its preferred nuclear pharmacy supplier and PF Medical will supply Digirad, or its preferred nuclear pharmacy supplier, with Tc-99m at a preferred pricing, subject to certain conditions.

We have a number of routine operating leases, primarily related to office space rental, office equipment rental and equipment rental for contract projects as of December 31, 2015, which total approximately $1,539,000, payable as follows: $675,000 in 2016; $670,000 in 2017; with the remaining $194,000 in 2018.

From time to time, we are required to post standby letters of credit and various bonds to support contractual obligations to customers and other obligations, including facility closures. As of December 31, 2015, the total amount of these bonds and letters of credit outstanding was approximately $1,738,000, of which the majority of the amount relates to various bonds. Our Treatment Segment facilities operate under licenses and permits that require financial assurance for closure and post-closure costs. We provide for these requirements through financial assurance policies. As of December 31, 2015, the closure and post-closure requirements for these facilities were approximately $46,404,000. We have recorded approximately $21,380,000 in a sinking fund related to these policies in other long term assets on the accompanying Consolidated Balance Sheets.

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

Revenue Recognition Estimates. We utilize a performance based methodology for purposes of revenue recognition in our Treatment Segment. As we accept more complex waste streams in this segment, the treatment of those waste streams become more complicated and time consuming. We have continued to enhance our waste tracking capabilities and systems, which has enabled us to better match the revenue earned to the processing phases achieved using a proportional performance method. The major processing phases are receipt, treatment/processing and shipment/final disposition. Upon receiving various wastes we recognize a certain percentage (generally ranging from 9.0% to 33%) of revenue as we incur costs for transportation, analyses and labor associated with the receipt of mixed waste. As the waste is processed, shipped and disposed of, we recognize the remaining revenue and the associated costs of transportation and burial. We review and evaluate our revenue recognition estimates and policies on an annual basis.

For our Services Segment, revenues on services are performed under time and material, fixed price, and cost-reimbursement contracts. Revenues and costs associated with fixed price contracts are recognized using the percentage of completion (efforts expended) method. We estimate our percentage of completion based on attainment of project milestones. Revenues and costs associated with time and material contracts are recognized as revenue when earned and costs are incurred.

Under cost-reimbursement contracts, we are reimbursed for costs incurred plus a certain percentage markup for indirect costs, in accordance with contract provisions. Costs incurred in excess of contract funding may be renegotiated for reimbursement. We also earn a fee based on the approved costs to complete the contract. We recognize this fee using the proportion of costs incurred to total estimated contract costs.

Contract costs include all direct labor, material and other non-labor costs and those indirect costs related to contract support, such as depreciation, fringe benefits, overhead labor, supplies, tools, repairs and equipment rental. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions and estimated profitability, including those arising from contract penalty provisions and final contract settlements, may result in revisions to costs and income and are recognized in the period in which the revisions are determined.

Allowance for Doubtful Accounts. The carrying amount of accounts receivable is reduced by an allowance for doubtful accounts, which is a valuation allowance that reflects management's best estimate of the amounts that are uncollectible. We regularly review all accounts receivable balances that exceed 60 days from the invoice date and, based on an assessment of current credit worthiness, estimate the portion, if any, of the balances that are uncollectible. Specific accounts that are deemed to be uncollectible are reserved at 100% of their outstanding balance. The remaining balances aged over 60 days have a percentage applied by aging category (5% for balances 61-90 days, 20% for balances 91-120 days and 40% for balances over 120 days aged), based on a historical valuation, that allows us to calculate the total reserve required. This allowance was approximately 2.4% of revenue for 2015 and 13.2% of accounts receivable as of December 31, 2015. Additionally, this allowance was approximately 3.8% of revenue for 2014 and 20.8% of accounts receivable as of December 31, 2014.

Intangible Assets. Intangible assets consist primarily of the recognized value of the permits required to operate our business. We continually monitor the propriety of the carrying amount of our permits to determine whether current events and circumstances warrant adjustments to the carrying value.

Indefinite-lived intangible assets are not amortized but are reviewed for impairment annually as of October 1, or when events or changes in the business environment indicate that the carrying value may be impaired. If the fair value of the asset is less than the carrying amount, we perform a quantitative test to determine the fair value. The impairment loss, if any, is measured as the excess of the carrying value of the asset over its fair value. Significant judgments are inherent in these analyses and include assumptions for, among other factors, forecasted revenue, gross margin, growth rate, operating income, timing of expected future cash flows, and the determination of appropriate long term discount rates.

We performed impairment testing of our permits related to our Treatment reporting unit as of October 1, 2015 and 2014 and determined there was no impairment.

Intangible assets that have definite useful lives are amortized using the straight-line method over the estimated useful lives (with the exception of customer relationships which are amortized using an accelerated method) and are excluded from our annual intangible asset valuation review as of October 1. The Company has one definite-lived permit which was excluded from our annual impairment review as noted above. The net carrying value of this one definite-lived permit as of December 31, 2015 and 2014 was approximately $172,000 and $227,000, respectively. Intangible assets with definite useful lives are also tested for impairment whenever events or changes in circumstances indicate that the asset’s carrying value may not be recoverable.

Accrued Closure Costs and Asset Retirement Obligations (“ARO”). Accrued closure costs represent our estimated environmental liability to clean up our facilities as required by our permits, in the event of closure. ASC 410, “Asset Retirement and Environmental Obligations” requires that the discounted fair value of a liability for an ARO be recognized in the period in which it is incurred with the associated ARO capitalized as part of the carrying cost of the asset. The recognition of an ARO requires that management make numerous estimates, assumptions and judgments regarding such factors as estimated probabilities, timing of settlements, material and service costs, current technology, laws and regulations, and credit adjusted risk-free rate to be used. This estimate is inflated, using an inflation rate, to the expected time at which the closure will occur, and then discounted back, using a credit adjusted risk free rate, to the present value. ARO’s are included within buildings as part of property and equipment and are depreciated over the estimated useful life of the property. In periods subsequent to initial measurement of the ARO, the Company must recognize period-to-period changes in the liability resulting from the passage of time and revisions to either the timing or the amount of the original estimate of undiscounted cash flow. Increases in the ARO liability due to passage of time impact net income as accretion expense and are included in cost of goods sold in the Consolidated Statements of Operations. Changes in the estimated future cash flows costs underlying the obligations (resulting from changes or expansion at the facilities) require adjustment to the ARO liability calculated and are capitalized and charged as depreciation expense, in accordance with the Company’s depreciation policy.

Accrued Environmental Liabilities. We have three remediation projects in progress (all within discontinued operations). The current and long-term accrual amounts for the projects are our best estimates based on proposed or approved processes for clean-up. The circumstances that could affect the outcome range from new technologies that are being developed every day to reduce our overall costs, to increased contamination levels that could arise as we complete remediation which could increase our costs, neither of which we anticipate at this time. In addition, significant changes in regulations could adversely or favorably affect our costs to remediate existing sites or potential future sites, which cannot be reasonably quantified (See “Environmental Contingencies” below for further information of these liabilities).

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

Stock-Based Compensation. We account for stock-based compensation in accordance with ASC 718, “Compensation – Stock Compensation.” ASC 718 requires all stock-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. We use the Black-Scholes option-pricing model to determine the fair-value of stock-based awards which requires subjective assumptions. Assumptions used to estimate the fair value of stock options granted include the exercise price of the award, the expected term, the expected volatility of the Company’s stock over the option’s expected term, the risk-free interest rate over the option’s expected term, and the expected annual dividend yield. In addition, judgment is also required in estimating the amount of stock-based awards that are expected to be forfeited.

Income Taxes. The provision for income tax is determined in accordance with ASC 740, “Income Taxes.” As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. We record this amount as a provision or benefit for taxes. This process involves estimating our actual current tax exposure, including assessing the risks associated with tax audits, and assessing temporary differences resulting from different treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities. We assess the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent that we believe recovery is not likely, we establish a valuation allowance. As of December 31, 2015, we had net deferred tax assets of approximately $8,592,000 (which excludes a deferred tax liability relating to goodwill and indefinite lived intangible assets), which were primarily related to federal and state net operating loss (“NOL”) carryforwards, impairment charges, and closure costs. As of December 31, 2015 and 2014, we concluded that it was more likely than not that $8,592,000 and $7,896,000 of our deferred income tax assets would not be realized, and as such, a full valuation allowance was applied against those deferred income tax assets. Our net operating losses are subject to audit by the Internal Revenue Services, and, as a result, the amounts could be reduced.

Economic Conditions. The Company’s business continues to be heavily dependent on services that we provide to governmental clients (including the U.S. Department of Energy (“DOE”) and U.S. Department of Defense (“DOD”)) directly as the contractor or indirectly as a subcontractor. We believe demand for our services will continue to be subject to fluctuations due to a variety of factors beyond our control, including the current economic conditions, the large budget deficit that the government is facing, and the manner in which the government will be required to spend funding to remediate federal sites. In addition, our governmental contracts and subcontracts relating to activities at governmental sites are generally subject to termination or renegotiation on 30 days notice at the government’s option. Significant reductions in the level of governmental funding or specifically mandated levels for different programs that are important to our business could have a material adverse impact on our business, financial position, results of operations and cash flows.

Significant Customers. Our Treatment and Services Segments have significant relationships with the federal government, and continue to enter into contracts, directly as the prime contractor or indirectly for others as a subcontractor, with the federal government. The contracts that we are a party to with the federal government or with others as a subcontractor to the federal government generally provide that the government may terminate or renegotiate the contracts on 30 days notice, at the government's election. Our inability to continue under existing contracts that we have with the federal government (directly or indirectly as a subcontractor) could have a material adverse effect on our operations and financial condition.

As our revenues are event/project based where the completion of one contract with a specific customer may be replaced by another contract with a different customer from year to year, we do not believe the loss of one specific customer from one year to the next will generally have a material adverse effect on our operations and financial condition.

The Company’s majority-owned Polish subsidiary, PF Medical, continues to dedicate resources to the R&D of the new medical isotope production technology and to take the necessary steps for eventual submittal of this technology for U.S. Food and Drug Administration (“FDA”) and other regulatory approval and commercialization of this technology. Costs to be incurred for our Medical Segment for fiscal year 2016 is expected to be similar to costs incurred for fiscal year 2015, which was approximately $2,114,000. The need for capital by PF Medical may require PF Medical to obtain its own credit facility or by additional equity raises. If PF Medical obtains its own separate credit facility, such could result in restrictions on our rights as a majority stock owner. Any equity raises, if successful, may result in dilution of the Company’s ownership of PF Medical.

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

We routinely use third party disposal companies, who ultimately destroy or secure landfill residual materials generated at our facilities or at a client's site. In the past, numerous third party disposal sites have improperly managed waste and consequently require remedial action; consequently, any party utilizing these sites may be liable for some or all of the remedial costs. Despite our aggressive compliance and auditing procedures for disposal of wastes, we could further be notified, in the future, that we are a potentially responsible party (“PRP”) at a remedial action site, which could have a material adverse effect.

Our subsidiaries where the remediation expenditures will be made are the former Environmental Processing Services, Inc. (“EPS”) site in Dayton, Ohio, a former Resource Conservation and Recovery Act (”RCRA”) storage facility operated by the former owners of Perma-Fix Dayton, Inc. (“PFD”), Perma-Fix of Memphis Inc.’s (“PFM” – closed location) site in Memphis, Tennessee, and PFSG facility in Valdosta, Georgia (in closure status). The environmental liability of PFD (as it relates to the remediation of the EPS site assumed by the Company as a result of the original acquisition of the PFD facility) was retained by the Company upon the sale of PFD in March 2008. Remediation activities at our Perma-Fix of Michigan, Inc. subsidiary (“PFMI” – closed location) in Brownstown, Michigan, were completed in 2015. All of the reserves noted above are within our discontinued operations. While no assurances can be made that we will be able to do so, we expect to fund the expenses to remediate these sites from funds generated internally.

At December 31, 2015, we had total accrued environmental remediation liabilities of $900,000, of which $9,000 is recorded as a current liability, which reflects a decrease of $116,000 from the December 31, 2014 balance of $1,016,000. The net decrease of $116,000 represents payments on remediation projects at PFSG and PFM totaling approximately $78,000 and reduction in reserve of $38,000 due to completion of remediation activities at our PFMI location. The December 31, 2015 current and long-term accrued environmental liability at December 31, 2015 is summarized as follows (in thousands):

Mr. David Centofanti serves as our Vice President of Information Systems. For such position, he received annual compensation of $168,000 and $163,000 in 2015 and 2014, respectively. Mr. David Centofanti is the son of our Chief Executive Officer (“CEO”), President and a Board of Directors (“Board”) member, Dr. Louis F. Centofanti. We believe the compensation received by Mr. Centofanti for his technical expertise which he provides to the Company is competitive and comparable to compensation we would have to pay to an unaffiliated third party with the same technical expertise.

Mr. Robert L. Ferguson serves as an advisor to the Company’s Board and is also a member of the Supervisory Board of Perma-Fix Medical, a majority-owned Polish subsidiary of the Company. Mr. Ferguson previously served as a Board member of the Company from June 2007 to February 2010 and again from August 2011 to September 2012. As an advisor to the Company’s Board, Mr. Ferguson is paid $4,000 monthly plus reasonable expenses. For such services, Mr. Ferguson received compensation of approximately $58,000 and $56,000 for the years ended December 31, 2015 and 2014, respectively. On August 2, 2013, the Company completed a lending transaction with Messrs. Robert Ferguson and William Lampson (“collectively, the “Lenders”), whereby the Company borrowed from the Lenders the sum of $3,000,000 pursuant to the terms of a Loan and Security Purchase Agreement and promissory note (the “Loan”) (see further details and terms of this Loan in this “MD&A – Liquidity and Capital Resources - Financing Activities”).

On June 2, 2015, Mr. Climaco, a current member of the Company’s Board and a member of the Strategic Advisory Committee of the Board, was elected as the Executive Vice President (“EVP”) of PF Medical. As EVP of PF Medical, Mr. Climaco receives an annual salary of $150,000 and is not eligible to receive compensation for serving on the Company’s Board.

On October 17, 2014, the Company’s Compensation and Stock Option Committee and the Board, with Mr. Climaco abstaining, approved a consulting agreement with Mr. Climaco. Pursuant to the consulting agreement, Mr. Climaco was responsible to, among other things:

Mr. Climaco was paid $22,000 per month under the consulting agreement, beginning September 2014, until the termination of the consulting agreement effective June 2, 2015, upon Mr. Climaco’s election as EVP of PF Medical. For his services under the consulting agreement, Mr. Climaco received approximately $117,000 and $107,000 in 2015 and 2014, respectively.

Mr. Climaco is also a Director of Digirad Corporation. On July 24, 2015 PF Medical and Digirad entered into a multi-year Tc-99m Supplier Agreement and a Subscription Agreement (see further details of the these agreement this “MD&A – Liquidity and Capital Resources - Financing Activities”).

During March 2011, we entered into a five-year lease with Lawrence Properties LLC for certain office and warehouse space used and occupied by Schreiber, Yonley and Associates (“SYA”), a wholly owned subsidiary of the Company until its sale by the Company on July 29, 2014. Lawrence Properties is owned by Robert Schreiber, Jr., the President of SYA until his resignation on July 29, 2014, and Mr. Schreiber’s spouse. Under the lease, which commenced June 1, 2011, we paid monthly rent of approximately $11,400, which we believe was lower than costs charged by unrelated third party landlords. Rent payment under this lease was approximately $72,000 for the year ended December 31, 2014. In connection with the Company’s sale of SYA, the lease was terminated on July 29, 2014. Mr. Schreiber is a member of the Supervisory Board of PF Medical, a majority-owned Polish subsidiary of the Company.

We have employment agreements (each dated July 10, 2014) with each of Dr. Centofanti (our President and CEO), Ben Naccarato (our Chief Financial Officer or “CFO”), and John Lash (our Chief Operating Officer or “COO”). Each employment agreement provides for annual base salaries, bonuses, and other benefits commonly found in such agreements. In addition, each employment agreement provides that in the event of termination of such officer without cause or termination by the officer for good reason (as such terms are defined in the employment agreement), the terminated officer shall receive payments of an amount equal to benefits that have accrued as of the termination but had not yet been paid, plus an amount equal to one year’s base salary at the time of termination. In addition, the employment agreements provide that in the event of a change in control (as defined in the employment agreements), all outstanding stock options to purchase the Company’s Common Stock granted to, and held by, the officer covered by the employment agreement to be immediately vested and exercisable.

The Company has an individual MIP for each of our CEO, CFO and COO, which awards cash compensation based on achievement of certain performance targets for fiscal year 2015. A total of approximately $214,000 is payable as of December 31, 2015 under the three MIPs for 2015. Such payment is expected to be paid during the second quarter of 2016. On February 4, 2016, the Company’s Compensation and Stock Option Committee approved individual MIPs for our CEO, COO, and CFO. The MIPs are effective as of January 1, 2016. Each MIP awards cash compensation based on achievement of performance thresholds, with the amount of such compensation established as a percentage of base salary. The potential target performance compensation ranges from 5% to 100% or $13,962 to $279,248 of the 2016 base salary for the CEO, 5% to 100% or $10,750 to $215,000 of the 2016 base salary for the COO, and 5% to 100% or $11,033 to $220,667 of the 2016 base salary for the CFO.

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

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:

In accordance with the rules of Regulation S-X, schedules are not submitted because they are not applicable to or required by the Company.

We have audited the accompanying consolidated balance sheets of Perma-Fix Environmental Services, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2015 and 2014, and the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for each of the two years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Perma-Fix Environmental Services, Inc. and subsidiaries as of December 31, 2015 and 2014, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

(Amounts in Thousands, Except for Share and per Share Amounts)	2015			2014

ASSETS
Current assets:
Cash	$	1,435		$	3,680
Restricted cash		99			85
Accounts receivable, net of allowance for doubtful accounts of $1,474 and $2,170, respectively		9,673			8,272
Unbilled receivables - current		4,569			7,177
Inventories		377			498
Prepaid and other assets		4,081			3,010
Current assets related to discontinued operations		34			20
Total current assets		20,268			22,742

Property and equipment:
Buildings and land		20,209			20,362
Equipment		35,191			35,434
Vehicles		422			403
Leasehold improvements		11,626			11,613
Office furniture and equipment		1,755			1,799
Construction-in-progress		497			336
		69,700			69,947
Less accumulated depreciation		(49,707	)		(47,123	)
Net property and equipment		19,993			22,824

Property and equipment related to discontinued operations		531			681

Intangibles and other long term assets:
Permits		16,761			16,709
Other intangible assets - net		2,066			2,435
Unbilled receivables – non-current		707			273
Finite risk sinking fund		21,380			21,334
Other assets		1,359			1,253
Total assets	$	83,065		$	88,251

(Amounts in Thousands, Except for Share and per Share Amounts)	2015			2014

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	6,109		$	5,350
Accrued expenses		4,341			4,540
Disposal/transportation accrual		1,107			1,737
Deferred revenue		2,631			4,873
Current liabilities related to discontinued operations		531			2,137
Current portion of long-term debt		1,508			2,319
Current portion of long-term debt - related party		950			1,414
Total current liabilities		17,177			22,370

Accrued closure costs		5,301			5,508
Other long-term liabilities		867			803
Deferred tax liabilities		5,424			5,006
Long-term liabilities related to discontinued operations		1,064			590
Long-term debt, less current portion		7,530			6,690
Long-term debt, less current portion - related party		—			949
Total long-term liabilities		20,186			19,546

Total liabilities		37,363			41,916

Commitments and Contingencies (Note 13)

Series B Preferred Stock of subsidiary, $1.00 par value; 1,467,396 shares authorized, 1,284,730 shares issued and outstanding, liquidation value $1.00 per share plus accrued and unpaid dividends of $867 and $803, respectively		1,285			1,285

Stockholders' Equity:
Preferred Stock, $.001 par value; 2,000,000 shares authorized, no shares issued and outstanding		—			—
Common Stock, $.001 par value; 30,000,000 shares authorized; 11,551,232 and 11,476,485 shares issued, respectively; 11,543,590 and 11,468,843 shares outstanding, respectively		11			11
Additional paid-in capital		105,556			104,541
Accumulated deficit		(60,808	)		(59,758	)
Accumulated other comprehensive (loss) income		(117	)		11
Less Common Stock in treasury, at cost; 7,642 shares		(88	)		(88	)
Total Perma-Fix Environmental Services, Inc. stockholders' equity		44,554			44,717
Non-controlling interest		(137	)		333
Total stockholders' equity		44,417			45,050

Total liabilities and stockholders' equity	$	83,065		$	88,251

(Amounts in Thousands, Except for Per Share Amounts)	2015			2014

Net revenues	$	62,383		$	57,065
Cost of goods sold		48,032			45,157
Gross profit		14,351			11,908

Selling, general and administrative expenses		10,996			11,973
Research and development		2,302			1,315
Impairment loss on goodwill		—			380
Gain on disposal of property and equipment		(80	)		(41	)
Income (loss) from operations		1,133			(1,719	)

Other income (expense):
Interest income		53			27
Interest expense		(489	)		(616	)
Interest expense-financing fees		(228	)		(192	)
Foreign currency loss		(10	)		(24	)
Other		21			(51	)
Income (loss) from continuing operations before taxes		480			(2,575	)
Income tax expense		543			417
Loss from continuing operations, net of taxes		(63	)		(2,992	)

(Loss) income from discontinued operations, net of taxes		(1,864	)		1,688
Net loss		(1,927	)		(1,304	)

Net loss attributable to non-controlling interest		(877	)		(79	)

Net loss attributable to Perma-Fix Environmental Services, Inc. common stockholders	$	(1,050	)	$	(1,225	)

Net income (loss) per common share attributable to Perma-Fix Environmental Services, Inc. stockholders - basic and diluted:
Continuing operations	$	.07		$	(.26	)
Discontinued operations		(.16	)		.15
Net loss per common share	$	(.09	)	$	(.11	)


Number of common shares used in computing net income (loss) per share:
Basic		11,516			11,443
Diluted		11,552			11,443

(Amounts in Thousands)	2015			2014

Net loss	$	(1,927	)	$	(1,304	)
Other comprehensive (loss) income:
Foreign currency translation (loss) gain		(128	)		9
Total other comprehensive (loss) income		(128	)		9

Comprehensive loss		(2,055	)		(1,295	)
Comprehensive loss attributable to non-controlling interest		(877	)		(79	)
Comprehensive loss attributable to Perma-Fix Environmental Services, Inc. common stockholders	$	(1,178	)	$	(1,216	)

	Common Stock				Additional Paid-In		Common Stock Held			Accumulated Other Comprehensive			Non-controlling Interest in			Accumulated			Total Stockholders'
	Shares		Amount		Capital		In Treasury			Income (Loss)			Subsidiary			Deficit			Equity

Balance at December 31, 2013		11,406,573	$	11	$	103,454	$	(88	)	$	2		$	—		$	(58,533	)	$	44,846
Net loss		—		—		—		—			—			(79	)		(1,225	)		(1,304	)
Foreign currency translation		—		—		—		—			9			—			—			9
Issuance of stock - Perma-Fix Medical S.A., net of expenses of $242		—		—		776		—			—			412			—			1,188
Issuance of Common Stock upon exercise of options		2,577		—		7		—			—			—			—			7
Issuance of Common Stock for services		67,335		—		270		—			—			—			—			270
Stock-Based Compensation		—		—		34		—			—			—			—			34
Balance at December 31, 2014		11,476,485	$	11	$	104,541	$	(88	)	$	11		$	333		$	(59,758	)	$	45,050
Net loss		—		—		—		—			—			(877	)		(1,050	)		(1,927	)
Foreign currency translation		—		—		—		—			(128	)		—			—			(128	)
Issuance of stock - Perma-Fix Medical S.A., net of expenses of $29		—		—		631		—			—			407			—			1,038
Issuance of Common Stock upon exercise of options		3,423		—		10		—			—			—			—			10
Issuance of Common Stock for services		71,324		—		282		—			—			—			—			282
Stock-Based Compensation		—		—		92		—			—			—			—			92
Balance at December 31, 2015		11,551,232	$	11	$	105,556	$	(88	)	$	(117	)	$	(137	)	$	(60,808	)	$	44,417

(Amounts in Thousands)	2015			2014
Cash flows from operating activities:
Net loss	$	(1,927	)	$	(1,304	)
Less: (loss) income on discontinued operations, net of taxes		(1,864	)		1,688

Loss from continuing operations		(63	)		(2,992	)
Adjustments to reconcile net income (loss) from continuing operations to cash used in operating activities:		──
Depreciation and amortization		3,717			4,240
Amortization of debt discount		87			86
Deferred tax expense		418			539
(Recovery of) provision for bad debt reserves		(433	)		291

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

8302 Dunwoody Place, #250, Atlanta, GA		30350
(Address of principal executive offices)		(Zip Code)
	(770) 587-9898
	(Registrant's telephone number)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class		Name of each exchange on which registered

Common Stock, $.001 Par Value		NASDAQ Capital Markets

		Page No.

PART I

Item 1.	Business	1

Item 1A.	Risk Factors	8

Item 1B.	Unresolved Staff Comments	17

Item 2.	Properties	18

Item 3.	Legal Proceedings	18

Item 4.	Mine Safety Disclosure	18

PART II

Item 5.	Market for Registrant’s Common Equity and Related Stockholder Matters	19

Item 6.	Selected Financial Data	19

Item 7.	Management's Discussion and Analysis of Financial Condition And Results of Operations	19

Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	36

	Special Note Regarding Forward-Looking Statements	36

Item 8.	Financial Statements and Supplementary Data	38

Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	75

Item 9A.	Controls and Procedures	75

Item 9B.	Other Information	76

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	76

Item 11.	Executive Compensation	84

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	104

Item 13.	Certain Relationships and Related Transactions, and Director Independence	107

Item 14.	Principal Accountant Fees and Services	108

PART IV

Item 15.	Exhibits and Financial Statement Schedules	109

		Total		% of Total
Customer	Year	Revenue		Revenue
Prologis Teterboro, LLC	2015	$	10,686,000		17.1%

	●	claims of employees, customers, or third parties for personal injury or property damage occurring in the course of our operations; and
	●	claims alleging negligence or professional errors or omissions in the planning or performance of our services.

Location	Square Footage	Expiration of Lease
Knoxville, TN (Safety and Ecology Corporation or "SEC")	20,850	May 31, 2018
Knoxville, TN (SEC)	5,000	September 30, 2017
Blaydon On Tyne, England (Perma-Fix UK Limited)	1,000	Monthly
Pittsburgh, PA (SEC)	640	Monthly
Newport, KY (SEC)	1,566	Monthly
Oak Ridge, TN (M&EC)	150,000	January 31, 2018
Atlanta, GA (Corporate)	6,499	February 28, 2018
Mobile, AL (PF Medical)	1,200	August 31, 2017

			2015				2014
			Low		High		Low		High
Common Stock	1^st Quarter	$	3.78	$	4.69	$	2.81	$	5.15
	2^nd Quarter		3.32		4.01		3.74		5.86
	3^rd Quarter		3.45		4.34		3.56		5.19
	4^th Quarter		3.65		4.37		3.65		5.01

(Consolidated)	2015			%			2014			%
Net revenues	$	62,383			100.0		$	57,065			91.5
Cost of goods sold		48,032			77.0			45,157			79.1
Gross Profit		14,351			23.0			11,908			20.9
Selling, general and administrative		10,996			17.6			11,973			21.0
Research and development		2,302			3.7			1,315			2.2
Impairment of goodwill		—			—			380			.7
Gain on disposal of property and equipment		(80	)		(.1	)		(41	)		—
Income (loss) from operations		1,133			1.8			(1,719	)		(3.0	)
Interest income		53			.1			27			—
Interest expense		(489	)		(.8	)		(616	)		(1.1	)
Interest expense – financing fees		(228	)		(.3	)		(192	)		(.3	)
Foreign exchange loss		(10	)		—			(24	)		—
Other		21			—			(51	)		(.1	)
Income (loss) from continuing operations before taxes		480			.8			(2,575	)		(4.5	)
Income tax expense		543			.9			417			.7
Loss from continuing operations	$	(63	)		(.1	)	$	(2,992	)		(5.2	)

(In thousands)	2015		% Revenue		2014		% Revenue		Change			% Change
Treatment
Government waste	$	30,130		48.2	$	29,787		52.2	$	343			1.2
Hazardous/non-hazardous		4,344		7.0		4,498		7.9		(154	)		(3.4	)
Other nuclear waste		6,844		11.0		8,058		14.1		(1,214	)		(15.1	)
Total		41,318		66.2		42,343		74.2		(1,025	)		(2.4	)

Services
Nuclear		18,743		30.0		9,917		17.4		8,826			89.0
Technical		2,322		3.8		4,805		8.4		(2,483	)		(51.7	)
Total		21,065		33.8		14,722		25.8		6,343			43.1

Total	$	62,383		100.0	$	57,065		100.0	$	5,318			9.3

	Current		Long-term		Total
	Accrual		Accrual
PFD	$	9	$	60	$	69
PFM		—		15		15
PFSG		—		816		816
Total liability	$	9	$	891	$	900

●	demand for our services;
●	reductions in the level of government funding in future years;
●	expect to meet our quarterly financial covenant requirements in 2016;
●	ability to achieve profitability;
●	continue to focus on expansion into both commercial and international markets to increase revenues and expect to continue into 2016;
●	may not have liquidity to repay debt if our lender accelerates payment of our borrowings;
●	our cash flows from operations and our available liquidity from our Credit Facility are sufficient to service our obligations;
●	manner in which the government will be required to spend funding to remediate federal sites;
●	reducing operating costs to bring them in line with revenue level, when necessary;
●	fund capital expenditures from cash from operations and/or financing;
●	subsidy grant is expected to be funded based on milestone completion of the Generator Project;
●	PF Medical expects to fund any capital requirements in excess of the subsidy grant for the Generator Project allocated by NCRD through the sale of equity;
●	fund the expenses to remediate these sites (PFSG, PFD, and PFM) from funds generated internally;
●	compliance with environmental regulations;
●	supply shortage of Tc-99m is expected to continue as one of the specialized reactors is expected to cease production and go off-line in the near future;
●	disposal site for our nuclear waste and negative effect if ownership of disposal site is in the hands of one owner; and
●	potential effect of being a PRP;

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

●	discovery of additional contamination or expanded contamination at any of the sites or facilities leased or owned by us or our subsidiaries which would result in a material increase in remediation expenditures;
●	delays at our third party disposal site can extend collection of our receivables greater than twelve months;
●	refusal of third party disposal sites to accept our waste;
●	changes in federal, state and local laws and regulations, especially environmental laws and regulations, or in interpretation of such;
●	requirements to obtain permits for TSD activities or licensing requirements to handle low level radioactive materials are limited or lessened;
●	potential increases in equipment, maintenance, operating or labor costs;
●	management retention and development;
●	financial valuation of intangible assets is substantially more/less than expected;
●	the requirement to use internally generated funds for purposes not presently anticipated;
●	inability to continue to be profitable on an annualized basis;
●	inability of the Company to maintain the listing of its Common Stock on the NASDAQ;
●	terminations of contracts with federal agencies or subcontracts involving federal agencies, or reduction in amount of waste delivered to the Company under the contracts or subcontracts;
●	renegotiation of contracts involving the federal government;
●	federal government’s inability or failure to provide necessary funding to remediate contaminated federal sites;
●	disposal expense accrual could prove to be inadequate in the event the waste requires re-treatment;
●	inability to raise capital on commercially reasonable terms;
●	inability to increase profitable revenue;
●	lender refuses to waive non-compliance or revises our covenant so that we are in compliance; and
●	Risk factors contained in Item 1A of this report.

Index to Consolidated Financial Statements

Consolidated Financial Statements			Page No.
Report of Independent Registered Public Accounting Firm			39

Consolidated Balance Sheets as of December 31, 2015 and 2014			40

Consolidated Statements of Operations for the years ended December 31, 2015 and 2014			42

Consolidated Statements of Comprehensive Loss for the years ended December 31, 2015 and 2014			43

Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2015 and 2014			44

Consolidated Statements of Cash Flows for the years ended December 31, 2015 and 2014			45

Notes to Consolidated Financial Statements			46