UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

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

For the quarterly period ended

March 31, 2021

[ ]

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

For the transition period from ______________________to _________________________

Commission File No.

111596

PERMA-FIX ENVIRONMENTAL SERVICES, INC.

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction

of incorporation or organization)

58-1954497

(IRS Employer
Identification Number)

8302 Dunwoody Place, Suite 250, Atlanta, GA

(Address of principal executive offices)

30350

(Zip Code)

(770) 587-9898

(Registrant’s telephone number)

N/A

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

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

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, $.001 Par Value

PESI

NASDAQ Capital Markets

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [ ]

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

Yes [X] No [ ]

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

Large accelerated filer [ ] Accelerated Filer [ ] Non-accelerated Filer [X] Smaller reporting company [X] Emerging growth company [ ]

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock, as of the close of the latest practical date.

Class		Outstanding at May 4, 2021
Common Stock, $.001 Par Value		12,180,324 shares

PERMA-FIX ENVIRONMENTAL SERVICES, INC.

INDEX

			Page No.
PART I	FINANCIAL INFORMATION

	Item 1.	Consolidated Financial Statements	3
		Consolidated Balance Sheets - March 31, 2021 and December 31, 2020	3
		Consolidated Statements of Operations - Three Months Ended March 31, 2021 and 2020	5
		Consolidated Statements of Comprehensive (Loss) Income - Three Months Ended March 31, 2021 and 2020	6
		Consolidated Statements of Stockholders’ Equity - Three Months Ended March 31, 2021 and 2020	7
		Consolidated Statements of Cash Flows - Three Months Ended March 31, 2021 and 2020	8
		Notes to Consolidated Financial Statements	9
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
	Item 4.	Controls and Procedures	37

PART II	OTHER INFORMATION

	Item 1.	Legal Proceedings	37
	Item 1A.	Risk Factors	37
	Item 6.	Exhibits	37

PART I - FINANCIAL INFORMATION

Item 1. – Financial Statements

PERMA-FIX ENVIRONMENTAL SERVICES, INC.

Consolidated Balance Sheets

	March 31,			December 31,
	2021			2020
(Amounts in Thousands, Except for Share and Per Share Amounts)	(Unaudited)			(Audited)

ASSETS
Current assets:
Cash	$	713		$	7,924
Accounts receivable, net of allowance for doubtful accounts of $387 and $404, respectively		20,121			9,659
Unbilled receivables		9,229			14,453
Inventories		593			610
Prepaid and other assets		3,810			3,967
Current assets related to discontinued operations		20			22
Total current assets		34,486			36,635

Property and equipment:
Buildings and land		20,123			20,139
Equipment		22,118			22,090
Vehicles		454			457
Leasehold improvements		23			23
Office furniture and equipment		1,425			1,413
Construction-in-progress		1,903			1,569
Total property and equipment		46,046			45,691
Less accumulated depreciation		(28,224	)		(27,908	)
Net property and equipment		17,822			17,783

Property and equipment related to discontinued operations		81			81

Operating lease right-of-use assets		2,220			2,287

Intangibles and other long term assets:
Permits		9,025			8,922
Other intangible assets - net		842			875
Finite risk sinking fund (restricted cash)		11,464			11,446
Other assets		870			890
Total assets	$	76,810		$	78,919

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

PERMA-FIX ENVIRONMENTAL SERVICES, INC.

Consolidated Balance Sheets, Continued

	March 31,			December 31,
	2021			2020
(Amounts in Thousands, Except for Share and per Share Amounts)	(Unaudited)			(Audited)

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	15,426		$	15,382
Accrued expenses		7,075			6,381
Disposal/transportation accrual		1,081			1,220
Deferred revenue		3,106			4,614
Accrued closure costs - current		74			75
Current portion of long-term debt		5,196			3,595
Current portion of operating lease liabilities		241			273
Current portion of finance lease liabilities		467			525
Current liabilities related to discontinued operations		817			898
Total current liabilities		33,483			32,963

Accrued closure costs		6,378			6,290
Deferred tax liabilities		471			471
Long-term debt, less current portion		1,461			3,134
Long-term operating lease liabilities, less current portion		2,044			2,070
Long-term finance lease liabilities, less current portion		609			662
Other long-term liabilities		626			626
Long-term liabilities related to discontinued operations		296			252
Total long-term liabilities		11,885			13,505

Total liabilities		45,368			46,468

Commitments and Contingencies (Note 9)

Stockholders’ Equity:
Preferred Stock, $.001 par value; 2,000,000 shares authorized, no shares issued and outstanding		—			—
Common Stock, $.001 par value; 30,000,000 shares authorized; 12,173,376 and 12,161,539 shares issued, respectively; 12,165,734 and 12,153,897 shares outstanding, respectively		12			12
Additional paid-in capital		109,055			108,931
Accumulated deficit		(75,578	)		(74,455	)
Accumulated other comprehensive loss		(187	)		(207	)
Less Common Stock in treasury, at cost; 7,642 shares		(88	)		(88	)
Total Perma-Fix Environmental Services, Inc. stockholders’ equity		33,214			34,193
Non-controlling interest		(1,772	)		(1,742	)
Total stockholders’ equity		31,442			32,451

Total liabilities and stockholders’ equity	$	76,810		$	78,919

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

PERMA-FIX ENVIRONMENTAL SERVICES, INC.

Consolidated Statements of Operations

(Unaudited)

	Three Months Ended March 31,
(Amounts in Thousands, Except for Per Share Amounts)	2021			2020

Revenues	$	23,133		$	24,860
Cost of goods sold		20,777			20,220
Gross profit		2,356			4,640

Selling, general and administrative expenses		3,205			2,928
Research and development		150			232
Loss on disposal of property and equipment		—			31
(Loss) income from operations		(999	)		1,449

Other income (expense):
Interest income		18			56
Interest expense		(67	)		(120	)
Interest expense-financing fees		(8	)		(68	)
Other		1			5
(Loss) income from continuing operations before taxes		(1,055	)		1,322
Income tax (benefit) expense		(17	)		14
(Loss) income from continuing operations, net of taxes		(1,038	)		1,308

Loss from discontinued operations (net of taxes of $0)		(115	)		(114	)
Net (loss) income		(1,153	)		1,194

Net loss attributable to non-controlling interest		(30	)		(26	)

Net (loss) income attributable to Perma-Fix Environmental Services, Inc. common stockholders	$	(1,123	)	$	1,220

Net (loss) income per common share attributable to Perma-Fix Environmental Services, Inc. stockholders - basic and diluted:

Continuing operations	$	(.08	)	$	.11
Discontinued operations		(.01	)		(.01	)
Net (loss) income per common share	$	(.09	)	$	.10


Number of common shares used in computing net (loss) income per share:
Basic		12,165			12,122
Diluted		12,165			12,346

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

PERMA-FIX ENVIRONMENTAL SERVICES, INC.

Consolidated Statements of Comprehensive (Loss) Income

(Unaudited)

	Three Months Ended March 31,
(Amounts in Thousands)	2021			2020

Net (loss) income	$	(1,153	)	$	1,194
Other comprehensive income (loss):
Foreign currency translation gain (loss)		20			(79	)
Total other comprehensive income (loss)		20			(79	)

Comprehensive (loss) income		(1,133	)		1,115
Comprehensive loss attributable to non-controlling interest		(30	)		(26	)
Comprehensive (loss) income attributable to Perma-Fix Environmental Services, Inc. stockholders	$	(1,103	)	$	1,141

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

PERMA-FIX ENVIRONMENTAL SERVICES, INC

Consolidated Statement of Stockholders’ Equity

(Unaudited)

(Amounts in thousands, except for share amounts)

	Common Stock				Additional Paid-In		Common Stock Held In			Accumulated Other Comprehensive			Non-controlling Interest in			Accumulated			Total Stockholders’
	Shares		Amount		Capital		Treasury			Loss			Subsidiary			Deficit			Equity
Balance at December 31, 2020		12,161,539	$	12	$	108,931	$	(88	)	$	(207	)	$	(1,742	)	$	(74,455	)	$	32,451
Net loss		—		—		—		—			—			(30	)		(1,123	)		(1,153	)
Foreign currency translation		—		—		—		—			20			—			—			20
Issuance of Common Stock for services		11,837		—		79		—			—			—			—			79
Stock-Based Compensation		—		—		45		—			—			—			—			45
Balance at March 31, 2021		12,173,376	$	12	$	109,055	$	(88	)	$	(187	)	$	(1,772	)	$	(75,578	)	$	31,442
Balance at December 31, 2019		12,123,520	$	12	$	108,457	$	(88	)	$	(211	)	$	(1,619	)	$	(77,315	)	$	29,236
Net Income (loss)		—		—		—		—			—			(26	)		1,220			1,194
Foreign currency translation		—		—		—		—			(79	)		—			—			(79	)
Issuance of Common Stock upon exercise of options		3,643		—		6		—			—			—			—			6
Issuance of Common Stock for services		5,128		—		48		—			—			—			—			48
Stock-Based Compensation		—		—		44		—			—			—			—			44
Balance at March 31, 2020		12,132,291	$	12	$	108,555	$	(88	)	$	(290	)	$	(1,645	)	$	(76,095	)	$	30,449

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

PERMA-FIX ENVIRONMENTAL SERVICES, INC.

Consolidated Statements of Cash Flows

(Unaudited)

	Three Months Ended
	March 31,
(Amounts in Thousands)	2021			2020
Cash flows from operating activities:
Net (loss) income	$	(1,153	)	$	1,194
Less: loss from discontinued operations, net of taxes of $0		(115	)		(114	)

(Loss) income from continuing operations, net of taxes		(1,038	)		1,308
Adjustments to reconcile (loss) income from continuing operations to cash provided by operating activities :
Depreciation and amortization		400			346
Interest on finance lease with purchase option		2			2
Amortization of debt issuance/debt discount costs		8			68
Deferred tax expense		—			3
Recovery of bad debt reserves		(17	)		(60	)
Loss on disposal of plant, property, and equipment		—			31
Issuance of common stock for services		79			48
Stock-based compensation		45			44
Changes in operating assets and liabilities of continuing operations:
Accounts receivable		(10,445	)		3,012
Unbilled receivables		5,224			(2,204	)
Prepaid expenses, inventories and other assets		557			(449	)
Accounts payable, accrued expenses and unearned revenue		(1,270	)		1,275
Cash (used in) provided by continuing operations		(6,455	)		3,424
Cash used in discontinued operations		(149	)		(151	)
Cash (used in) provided by operating activities		(6,604	)		3,273

Cash flows from investing activities:
Purchases of property and equipment		(361	)		(896	)
Proceeds from sale of plant, property, and equipment		1			1
Cash used in investing activities of continuing operations		(360	)		(895	)
Cash provided by investing activities of discontinued operations		—			13
Cash used in investing activities		(360	)		(882	)

Cash flows from financing activities:
Repayments of revolving credit borrowings		(14,780	)		(24,204	)
Borrowing on revolving credit		14,780			23,883
Proceeds from issuance of common stock upon exercise of option		—			6
Principal repayments of finance lease liabilities		(114	)		(101	)
Principal repayments of long term debt		(109	)		(418	)
Cash used in financing activities		(223	)		(834	)

Effect of exchange rate changes on cash		(6	)		(32	)

(Decrease) increase in cash and finite risk sinking fund (restricted cash)		(7,193	)		1,525
Cash and finite risk sinking fund (restricted cash) at beginning of period		19,370			11,697
Cash and finite risk sinking fund (restricted cash) at end of period	$	12,177		$	13,222

Supplemental disclosure:
Interest paid	$	54		$	112
Income taxes paid		—			30
Non-cash investing and financing activities:
Equipment purchase subject to finance lease		—			82
Equipment purchase subject to financing		29			—

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

PERMA-FIX ENVIRONMENTAL SERVICES, INC.

Notes to Consolidated Financial Statements

March 31, 2021

(Unaudited)

Reference is made herein to the notes to consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020.

1.	Basis of Presentation

The consolidated financial statements included herein have been prepared by the Company (which may be referred to as we, us or our), without an audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“the Commission”). Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations, although the Company believes the disclosures which are made are adequate to make the information presented not misleading. Further, the consolidated financial statements reflect, in the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position and results of operations as of and for the periods indicated. The results of operations for the three months ended March 31, 2021 are not necessarily indicative of results to be expected for the fiscal year ending December 31, 2021.

The Company suggests that these consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

The consolidated financial statements include our accounts, those of our wholly-owned subsidiaries, and our majority-owned Polish subsidiary, Perma-Fix Medical. Additionally, the Company’s financial statements include the account of a variable interest entity (“VIE”), Perma-Fix ERRG for which we are the primary beneficiary (See “Note 13 - VIE” for a discussion of this VIE).

2.	Summary of Significant Accounting Policies

Our accounting policies are as set forth in the notes to the December 31, 2020 consolidated financial statements referred to above.

Recently Adopted Accounting Standards

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,” which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The adoption of ASU No. 2019-12 by the Company effective January 1, 2021 did not have a material impact on the Company’s financial statements.

In January 2020, the FASB issued ASU 2020-01, “Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815), clarifying the Interactions between Topic 321, Topic 323, and Topic 815.” This guidance addresses accounting for the transition into and out of the equity method and provides clarification of the interaction of rules for equity securities, the equity method of accounting, and forward contracts and purchase options on certain types of securities. This standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2020. Early adoption is permitted. The adoption of ASU No. 2020-01 by the Company effective January 1, 2021 did not have a material impact on the Company’s financial statements.

In October 2020, the FASB issued ASU No 2020-10, “Codification Improvements.” ASU 2020-10 updates various codification topics by clarifying or improving disclosure requirements. ASU 2020-10 is effective for public entities for fiscal years beginning after December 15, 2020, with early adoption permitted. The adoption of ASU No. 2020-01 by the Company effective January 1, 2021 did not have a material impact on the Company’s financial statements or disclosures.

Recently Issued Accounting Standards – Not Yet Adopted

In June 2016, the FASB issued ASU No. 2016-13, “Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments and subsequent amendments to the initial guidance: ASU 2018-19 “Codification Improvements to Topic 326, Financial Instruments - Credit Losses,” ASU 2019-04 “Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments,” ASU 2019-05 “Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief,” ASU 2019-11 “Codification Improvements to Topic 326, Financial Instruments - Credit Losses” and ASU 2020-02, “Financial Instruments—Credit Losses (Topic 326) and Leases (Topic 842)” (collectively, “Topic 326”). Topic 326 introduces an approach, based on expected losses, to estimate credit losses on certain types of financial instruments and modifies the impairment model for available-for-sale debt securities. The new approach to estimating credit losses (referred to as the current expected credit losses model) applies to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables and loans. Entities are required to apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. These ASUs are effective January 1, 2023 for the Company as a smaller reporting company. The Company is currently evaluating the impact of this ASU on its consolidated financial statements.

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

3.	Revenue

Disaggregation of Revenue

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

Revenue by Contract Type
(In thousands)	Three Months Ended						Three Months Ended
	March 31, 2021						March 31, 2020
	Treatment		Services		Total		Treatment		Services		Total
Fixed price	$	7,495	$	2,581	$	10,076	$	9,563	$	1,392	$	10,955
Time and materials		—		13,057		13,057		—		13,905		13,905
Total	$	7,495	$	15,638	$	23,133	$	9,563	$	15,297	$	24,860

Revenue by generator
(In thousands)	Three Months Ended						Three Months Ended
	March 31, 2021						March 31, 2020
	Treatment		Services		Total		Treatment		Services		Total
Domestic government	$	4,598	$	12,661	$	17,259	$	7,690	$	13,798	$	21,488
Domestic commercial		2,265		590		2,855		1,873		462		2,335
Foreign government		534		2,364		2,898		—		1,014		1,014
Foreign commercial		98		23		121		—		23		23
Total	$	7,495	$	15,638	$	23,133	$	9,563	$	15,297	$	24,860

Contract Balances

The timing of revenue recognition, billings, and cash collections results in accounts receivable and unbilled receivables (contract assets). The Company’s contract liabilities consist of deferred revenues which represents advance payment from customers in advance of the completion of our performance obligation.

The following table represents changes in our contract assets and contract liabilities balances:

					Year-to-date			Year-to-date
(In thousands)	March 31, 2021		December 31, 2020		Change ($)			Change (%)
Contract assets
Account receivables, net of allowance	$	20,121	$	9,659	$	10,462			108.3	%
Unbilled receivables - current		9,229		14,453		(5,224	)		(36.1	)%

Contract liabilities
Deferred revenue	$	3,106	$	4,614	$	(1,508	)		(32.7	)%

During the three months ended March 31, 2021 and 2020, the Company recognized revenue of $4,311,000 and $4,023,000, respectively, related to untreated waste that was in the Company’s control as of the beginning of each respective year. Revenue recognized in each period related to performance obligations satisfied within the respective period.

Remaining Performance Obligations

The Company applies the practical expedient in paragraph 606-10-50-14 and does not disclose information about remaining performance obligations that have original expected durations of one year or less.

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

4.	Leases

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

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

The components of lease cost for the Company’s leases were as follows (in thousands):

	Three Months Ended
	March 31,
	2021		2020
Operating Lease:
Lease cost	$	111	$	114

Finance Leases:
Amortization of ROU assets		59		26
Interst on lease liablity		19		21
		78		47

Short-term lease rent expense		3		3

Total lease cost	$	192	$	164

The weighted average remaining lease term and the weighted average discount rate for operating and finance leases at March 31, 2021 were:

	Operating Leases			Finance Leases
Weighted average remaining lease terms (years)		7.8			3.4

Weighted average discount rate		7.8	%		6.8	%

The weighted average remaining lease term and the weighted average discount rate for operating and finance leases at March 31, 2020 were:

	Operating Leases			Finance Leases
Weighted average remaining lease terms (years)		8.6			1.6

Weighted average discount rate		8.0	%		12.1	%

The following table reconciles the undiscounted cash flows for the operating and finance leases at March 31, 2021 to the operating and finance lease liabilities recorded on the balance sheet (in thousands):

	Operating Leases			Finance Leases
2021 (Remaining)	$	296		$	458
2022		455			271
2023		463			150
2024		395			146
2025		304			146
2025 and thereafter		1,154			18
Total undiscounted lease payments		3,067			1,189
Less: Imputed interest		(782	)		(113	)
Present value of lease payments	$	2,285		$	1,076

Current portion of operating lease obligations	$	241		$	—
Long-term operating lease obligations, less current portion	$	2,044			—
Current portion of finance lease obligations	$	—		$	467
Long-term finance lease obligations, less current portion	$	—		$	609

Supplemental cash flow and other information related to our leases were as follows (in thousands):

	Three Months Ended
	March 31,
	2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flow from operating leases	$	101	$	110
Operating cash flow from finance leases	$	19	$	21
Financing cash flow from finance leases	$	114	$	101

ROU assets obtained in exchange for lease obligations for:
Finance liabilities	$	—	$	82
Operating liabilities	$	—	$	—

5.	Intangible Assets

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

			March 31, 2021							December 31, 2020
	Weighted Average Amortization		Gross					Net		Gross					Net
	Period		Carrying		Accumulated			Carrying		Carrying		Accumulated			Carrying
	(Years)		Amount		Amortization			Amount		Amount		Amortization			Amount
Intangibles (amount in thousands)
Patent		12.5	$	746	$	(339	)	$	407	$	742	$	(334	)	$	408
Software		3		431		(411	)		20		418		(411	)		7
Customer relationships		10		3,370		(2,955	)		415		3,370		(2,910	)		460
Total			$	4,547	$	(3,705	)	$	842	$	4,530	$	(3,655	)	$	875

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

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

		Amount
Year		(In thousands)

2021 (Remaining)		162
2022		172
2023		132
2024		11
2025		11

Amortization expenses relating to the definite-lived intangible assets as discussed above were $50,000 and $54,000 for the three months ended March 31, 2021 and 2020, respectively.

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

The Company has certain stock option plans under which it may award incentive stock options (“ISOs”) and/or non-qualified stock options (“NQSOs”) to employees, officers, outside directors, and outside consultants. No stock options were granted in the first quarter of 2021.

The Company granted a NQSO to Robert Ferguson on July 27, 2017 from the Company’s 2017 Stock Option Plan (“2017 Plan”) for the purchase of up to 100,000 shares of the Company’s Common Stock (“Ferguson Stock Option”) in connection with his work as a consultant to the Company’s Test Bed Initiative (“TBI”) at our Perma-Fix Northwest Richland, Inc. (“PFNWR”) facility at an exercise price of $3.65 per share, which was the fair market value of the Company’s Common Stock on the date of grant. The term of the Ferguson Stock Option is seven years from the grant date. The vesting of the Ferguson Stock Option is subject to the achievement of three separate milestones by certain dates. The 10,000 options under the first milestone were exercised by Robert Ferguson in 2018. The vesting date for the second and third milestones for the purchase of up to 30,000 and 60,000 shares of the Company’s Common Stock was previously extended to December 31, 2021 and December 31, 2022, respectively. The Company has not recognized compensation costs (fair value of approximately $262,000 at March 31, 2021) for the remaining 90,000 Ferguson Stock Option under the remaining two milestones since achievement of the performance obligation under each of the two remaining milestones is uncertain at March 31, 2021. All other terms of the Ferguson Stock Option remain unchanged.

The following table summarizes stock-based compensation recognized for the three months ended March 31, 2021 and 2020 for our employee and director stock options.

	Three Months Ended
Stock Options	March 31,
	2021		2020
Employee Stock Options	$	33,000	$	32,000
Director Stock Options		12,000		12,000
Total	$	45,000	$	44,000

At March 31, 2021, the Company has approximately $229,000 of total unrecognized compensation costs related to unvested options for employee and directors. The weighted average period over which the unrecognized compensation costs are expected to be recognized is approximately 2.0 years.

The summary of the Company’s total Stock Option Plans as of March 31, 2021 and March 31, 2020, and changes during the periods then ended, are presented below. The Company’s Plans consist of the 2010 Stock Option Plan, the 2017 Plan and the 2003 Outside Directors Stock Plan (“2003 Plan”):

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value ⁽³⁾
Options outstanding January 1, 2021		658,400	$	3.87
Granted		—		—
Exercised		—		—				—
Forfeited/expired		—		—
Options outstanding end of period ⁽¹⁾		658,400	$	3.87		3.2	$	2,279,267
Options exercisable at March 31, 2021⁽¹⁾		392,400	$	4.08		3.4	$	1,274,287

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value ⁽³⁾
Options outstanding January 1, 2020		681,300		$	3.84
Granted		6,000			7.00
Exercised		(12,000	)		3.48				14,600
Forfeited/expired		(20,000	)		3.45
Options outstanding end of period ⁽²⁾		655,300		$	3.88		4.0	$	962,189
Options exercisable at March 31, 2020⁽²⁾		306,800		$	4.20		3.9	$	392,614

⁽¹⁾Options with exercise prices ranging from $2.79 to $7.29

⁽²⁾Options with exercise prices ranging from $2.79 to $8.40

⁽³⁾The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the option.

During the three months ended March 31, 2021, the Company issued a total of 11,837 shares of its Common Stock under the 2003 Plan to its outside directors as compensation for serving on our Board of Directors (the “Board”). The Company recorded approximately $107,000 in compensation expenses (included in selling, general and administration (“SG&A”) expenses) in connection with the issuance of shares of its Common Stock to outside directors. See “Note 16 – Subsequent Events - 2003 Plan” for a discussion of a proposed amendment to the 2003 Plan as approved by the Company’s Board of Directors (the “Board”), subject to the approval by the Company’s Stockholder at the Company’s 2021 Annual Meeting of Stockholders to be held on July 20, 2021.

In connection with a $2,500,000 loan that the Company entered into with Mr. Robert Ferguson (the “Ferguson Loan”) on April 1, 2019, the Company issued a warrant to Mr. Ferguson for the purchase of up to 60,000 shares of our Common Stock at an exercise price of $3.51 per share. The warrant is exercisable six months from April 1, 2019 and expires on April 1, 2024 and remains outstanding at March 31, 2021. The Ferguson Loan was paid-in-full in December 2020.

7.	(Loss) Income Per Share

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

	Three Months Ended
	(Unaudited)
	March 31,
(Amounts in Thousands, Except for Per Share Amounts)	2021			2020
Net (loss) income attributable to Perma-Fix Environmental Services, Inc., common stockholders:
(Loss) income from continuing operations, net of taxes	$	(1,038	)	$	1,308
Net loss attributable to non-controlling interest		(30	)		(26	)
(Loss) income from continuing operations attributable to Perma-Fix Environmental Services, Inc. common stockholders		(1,008	)		1,334
Loss from discontinuing operations attributable to Perma-Fix Environmental Services, Inc. common stockholders		(115	)		(114	)
Net (loss) income attributable to Perma-Fix Environmental Services, Inc. common stockholders	$	(1,123	)	$	1,220

Basic (loss) income per share attributable to Perma-Fix Environmental Services, Inc. common stockholders	$	(.09	)	$	.10

Diluted (loss) income per share attributable to Perma-Fix Environmental Services, Inc. common stockholders	$	(.09	)	$	.10

Weighted average shares outstanding:
Basic weighted average shares outstanding		12,165			12,122
Add: dilutive effect of stock options		—			201
Add: dilutive effect of warrants		—			23
Diluted weighted average shares outstanding		12,165			12,346

Potential shares excluded from above weighted average share
calculations due to their anti-dilutive effect include:
Stock options		30			14
Warrant		—			—

8.	Long Term Debt

Long-term debt consists of the following:

(Amounts in Thousands)	March 31, 2021			December 31, 2020
Revolving Credit facility dated May 8, 2020, borrowings based upon eligible accounts receivable, subject to monthly borrowing base calculation, balance due on May 15, 2024. Effective interest rate for the first quarter of 2021 was 5.3%. ⁽¹⁾	$	—		$	—
Term Loan dated May 8, 2020, payable in equal monthly installments of principal, balance due on May 15, 2024. Effective interest rate for the first quarter of 2021 was 4.5%. ⁽¹⁾		1,290	⁽²⁾		1,388	⁽²⁾
Promissory Note dated April 14, 2020, balance subject to loan forgiveness. Interest accrues at annual rate of 1.0%. ⁽³⁾		5,318	⁽⁴⁾		5,318	⁽⁴⁾
Notes Payable to 2023 and 2025, annual interest rate of 5.6% and 9.1%.		49			23
Total debt		6,657			6,729
Less current portion of long-term debt		5,196			3,595
Long-term debt	$	1,461		$	3,134

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

⁽²⁾Net of debt issuance costs of ($97,000) and ($105,000) at March 31, 2021 and December 31, 2020, respectively.

⁽³⁾Uncollateralized note.

⁽⁴⁾Entered into with the Company’s credit facility lender under the PPP under the CARES Act (see “Paycheck Protection Program (“PPP”) Loan” below for further information on this loan and its terms).

Revolving Credit and Term Loan Agreement

The Company entered into a Second Amended and Restated Revolving Credit, Term Loan and Security Agreement, dated May 8, 2020 (“Loan Agreement”), with PNC National Association (“PNC”), acting as agent and lender. The Loan Agreement provides the Company with the following credit facility with a maturity date of March 15, 2024: (a) up to $18,000,000 revolving credit (“revolving credit”) and (b) a term loan (“term loan”) of approximately $1,742,000, requiring monthly installments of $35,547. The maximum that the Company can borrow under the revolving credit is based on a percentage of eligible receivables (as defined) at any one time reduced by outstanding standby letters of credit and borrowing reductions that our lender may impose from time to time.

Payment of annual rate of interest due on the revolving credit is at prime (3.25% at March 31, 2021) plus 2% or London InterBank Offer Rate (“LIBOR”) plus 3.00% and the term loan at prime plus 2.50% or LIBOR plus 3.50%. Under the LIBOR option of interest payment, a LIBOR floor of 0.75% applies in the event that LIBOR falls below 0.75% at any point in time.

Pursuant to the Loan Agreement, the Company may terminate the Loan Agreement upon 90 days’ prior written notice upon payment in full of our obligations under the Loan Agreement. The Company has agreed to pay PNC 1.0% of the total financing in the event we pay off our obligations on or before May 7, 2021 and 0.5% of the total financing if we pay off our obligations after May 7, 2021 but prior to or on May 7, 2022. No early termination fee will apply if we pay off our obligations under the New Loan Agreement after May 7, 2022.

At March 31, 2021, the borrowing availability under our revolving credit was approximately $10,280,000, based on our eligible receivables and includes a reduction in borrowing availability of approximately $3,026,000 from outstanding standby letters of credit.

The Company’s credit facility under its Loan Agreement with PNC contains certain financial covenants, along with customary representations and warranties. A breach of any of these financial covenants, unless waived by PNC, could result in a default under our credit facility allowing our lender to immediately require the repayment of all outstanding debt under our credit facility and terminate all commitments to extend further credit. The Company met its financial covenant requirements in the first quarter of 2021. The Company’s fixed charge coverage ratio (“FCCR”) calculation in the first quarter of 2021 included the add-back of approximately $5,318,000 in eligible expenses that were incurred and covered by the PPP Loan that the Company received in 2020. This add-back was permitted by an amendment to our Loan Agreement that the Company entered into with our lender in May 2021 and was applied retroactively to the second and third quarters of 2020 pursuant to the amendment (see “Note 16 – Subsequent Events – Credit Facility” for a discussion of this amendment).

Paycheck Protection Program (“PPP”) Loan

On April 14, 2020, the Company entered into a promissory note under the PPP with PNC, our credit facility lender, which has a balance of approximately $5,318,000 (the “PPP Loan”) at March 31, 2021. The PPP was established under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and is administered by the Small Business Administration (“SBA”). The CARES Act was subsequently amended by the Paycheck Protection Program Flexibility Act of 2020 (“Flexibility Act”). The note evidencing the PPP Loan contains events of default relating to, among other things, payment defaults, breach of representations and warranties, and provisions of the promissory note.

Under the terms of the Flexibility Act, the Company can apply for and be granted forgiveness for all or a portion of the PPP Loan. Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds by the Company for eligible payroll costs, mortgage interest, rent and utility costs and the maintenance of employee and compensation levels for the covered period (which is defined as a 24-week period, beginning April 14, 2020, the date in which proceeds from the PPP Loan was disbursed to the Company by PNC). On October 5, 2020, the Company applied for forgiveness on repayment of the loan balance as permitted under the program, which is subject to the review and approval of our lender and the SBA. If all or a portion of the PPP Loan is not forgiven, all or the remaining portion of the loan will be for a term of two years but can be prepaid at any time prior to maturity without any prepayment penalties. The annual interest rate on the PPP Loan is 1.0% and no payments of principal or interest are due until SBA remits the loan forgiveness amount to our lender. While the Company’s PPP Loan currently has a two year maturity, the Flexibility Act permits the Company to request a five year maturity with our lender. At March 31, 2021, the Company has not received a determination on potential forgiveness on any portion of the PPP Loan balance; therefore, the Company has classified approximately $4,786,000 of the PPP Loan balance as “Current portion of long-term debt,” on its Consolidated Balance Sheets, which was based on payment of the PPP Loan starting in July 2021 (10 months from end of our covered period) in accordance with the terms of our PPP Loan agreement.

9.	Commitments and Contingencies

Hazardous Waste

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

Legal Matters

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

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

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

The complaint alleges that the subject draft reports were prepared negligently and in a biased manner, made public, and caused damage to Tetra Tech’s reputation; triggering related lawsuits and costing it opportunities for both government and commercial contracts.

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

On January 7, 2021, Defendants’ motion to dismiss the complaint in its entirety was granted without prejudice, with leave to amend. Tetra Tech subsequently filed a First Amended Complaint (“FAC”) and Defendants filed a motion to dismiss Tetra Tech’s FAC. Tetra Tech filed an opposition to Defendant’s motion to dismiss Tetra Tech’s FAC. Defendants, subsequently filed a joint reply to Tetra Tech’s motion in opposition. A hearing on Defendants’ motion to dismiss is pending. At this time, the Company continues to believe it does not have any liability to Tetra Tech.

Insurance

The Company has a 25-year finite risk insurance policy entered into in June 2003 (“2003 Closure Policy”) with AIG Specialty Insurance Company (“AIG”), which provides financial assurance to the applicable states for our permitted facilities in the event of unforeseen closure. The 2003 Closure Policy, as amended, provides for a maximum allowable coverage of $28,177,000 which includes available capacity to allow for annual inflation and other performance and surety bond requirements. Total coverage under the 2003 Closure Policy, as amended, was $19,897,000 at March 31, 2021. At March 31, 2021 and December 31, 2020, finite risk sinking funds contributed by the Company related to the 2003 Closure Policy which is included in other long term assets on the accompanying Consolidated Balance Sheets totaled $11,464,000 and $11,446,000, respectively, which included interest earned of $1,993,000 and $1,975,000 on the finite risk sinking funds as of March 31, 2021 and December 31, 2020, respectively. Interest income for the three months ended March 31, 2021 and 2020 was approximately $18,000 and $56,000, respectively. If we so elect, AIG is obligated to pay us an amount equal to 100% of the finite risk sinking fund account balance in return for complete release of liability from both us and any applicable regulatory agency using this policy as an instrument to comply with financial assurance requirements.

Letter of Credits and Bonding Requirements

From time to time, the Company is required to post standby letters of credit and various bonds to support contractual obligations to customers and other obligations, including facility closures. At March 31, 2021, the total amount of standby letters of credit outstanding was approximately $3,026,000 and the total amount of bonds outstanding was approximately $42,973,000.

10.

Discontinued Operations

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

The Company’s discontinued operations had net losses of $115,000 and $114,000 for the three months ended March 31, 2021 and 2020 (net of taxes of $0 for each period). The losses were primarily due to costs incurred in the administration and continued monitoring of our discontinued operations. The Company’s discontinued operations had no revenues for each of the periods noted above.

The following table presents the major class of assets of discontinued operations as of March 31, 2021 and December 31, 2020. No assets and liabilities were held for sale at each of the periods noted.

	March 31,		December 31,
(Amounts in Thousands)	2021		2020
Current assets
Other assets	$	20	$	22
Total current assets		20		22
Long-term assets
Property, plant and equipment, net ⁽¹⁾		81		81
Other assets		—		—
Total long-term assets		81		81
Total assets	$	101	$	103
Current liabilities
Accounts payable	$	4	$	4
Accrued expenses and other liabilities		154		150
Environmental liabilities		659		744
Total current liabilities		817		898
Long-term liabilities
Closure liabilities		144		142
Environmental liabilities		152		110
Total long-term liabilities		296		252
Total liabilities	$	1,113	$	1,150

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

11.

Operating Segments

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

Our reporting segments are defined as below:

TREATMENT SEGMENT, which includes:

nuclear, low-level radioactive, mixed waste (containing both hazardous and low-level radioactive constituents), hazardous and non-hazardous waste treatment, processing and disposal services primarily through four uniquely licensed and permitted treatment and storage facilities; and

Research & Development (“R&D”) activities to identify, develop and implement innovative waste processing techniques for problematic waste streams.

SERVICES SEGMENT, which includes:

	-	Technical services, which include:

○

professional radiological measurement and site survey of large government and commercial installations using advanced methods, technology and engineering;

○

health physics services including health physicists, radiological engineers, nuclear engineers and health physics technicians support to government and private radioactive materials licensees

○

integrated Occupational Safety and Health services including industrial hygiene (“IH”) assessments; hazardous materials surveys, e.g., exposure monitoring; lead and asbestos management/abatement oversight; indoor air quality evaluations; health risk and exposure assessments; health & safety plan/program development, compliance auditing and training services; and Occupational Safety and Health Administration (“OSHA”) citation assistance;

○

global technical services providing consulting, engineering (civil, nuclear, mechanical, chemical, radiological and environmental), project management, waste management, environmental, and decontamination and decommissioning field, technical, and management personnel and services to commercial and government customers; and

○

waste management services to commercial and governmental customers.

	-	Nuclear services, which include:

○

decontamination and decommissioning (“D&D”) of government and commercial facilities impacted with radioactive material and hazardous constituents including engineering, technology applications, specialty services, logistics, transportation, processing and disposal;

	○	license termination support of radioactive material licensed and federal facilities over the entire cycle of the termination process: project management, planning, characterization, waste stream identification and delineation, remediation/demo, final status survey, compliance demonstration, reporting, transportation, disposal and emergency response.

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

A company owned gamma spectroscopy laboratory for the analysis of oil and gas industry solids and liquids.

MEDICAL SEGMENT, which is currently involved on a limited basis in the R&D of the Company’s medical isotope production technology, has not generated any revenue and has substantially reduced R&D costs and activities due to the need for capital to fund these activities. The Company anticipates that the Medical Segment will not resume full R&D activities until the necessary capital is obtained through its own credit facility or additional equity raise, or obtains partners willing to provide funding for its R&D.

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

The table below presents certain financial information of our operating segments for the three months ended March 31, 2021 and 2020 (in thousands):

Segment Reporting for the Quarter Ended March 31, 2021

		Treatment			Services		Medical			Segments Total			Corporate⁽¹⁾			Consolidated Total
Revenue from external customers	$	7,495		$	15,638		—		$	23,133		$	—		$	23,133
Intercompany revenues		660			7		—			667			—			—
Gross profit		925			1,431		—			2,356			—			2,356
Research and development		47			13		76			136			14			150
Interest income		—			—		—			—			18			18
Interest expense		(19	)		(8	)	—			(27	)		(40	)		(67	)
Interest expense-financing fees		—			—		—			—			(8	)		(8	)
Depreciation and amortization		310			85		—			395			5			400
Segment (loss) income before income taxes		(119	)		555		(76	)		360			(1,415	)		(1,055	)
Income tax benefit		(17	)		—		—			(17	)		—			(17	)
Segment (loss) income		(102	)		555		(76	)		377			(1,415	)		(1,038	)
Expenditures for segment assets		357			4		—			361			—			361	⁽²⁾

Segment Reporting for the Quarter Ended March 31, 2020

		Treatment			Services		Medical			Segments Total			Corporate⁽¹⁾			Consolidated Total
Revenue from external customers	$	9,563		$	15,297		—		$	24,860		$	—		$	24,860
Intercompany revenues		207			8		—			215			—			—
Gross profit		2,745			1,895		—			4,640			—			4,640
Research and development		94			66		66			226			6			232
Interest income		—			—		—			—			56			56
Interest expense		(18	)		(6	)	—			(24	)		(96	)		(120	)
Interest expense-financing fees		—			—		—			—			(68	)		(68	)
Depreciation and amortization		264			77		—			341			5			346
Segment income (loss) before income taxes		1,547			1,318		(66	)		2,799			(1,477	)		1,322
Income tax expense		14			—		—			14			—			14
Segment income (loss)		1,533			1,318		(66	)		2,785			(1,477	)		1,308
Expenditures for segment assets		679			214		—			893			3			896	⁽²⁾

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

⁽²⁾Net of financed amount of $29,000 and $82,000 for the three month ended March 31, 2021 and 2020, respectively.

12.

Income Taxes

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

The Company had income tax benefit of approximately $17,000 for continuing operations for the three months ended March 31, 2021 as compared to income tax expense of approximately $14,000 for the corresponding period of 2020. The Company’s effective tax rate was approximately 1.6% and 1.0% for the three months ended March 31, 2021 and the corresponding period of 2020, respectively. The Company’s tax rate for each of the periods discussed above was impacted by the Company’s full valuation on its net deferred tax assets.

13.

Variable Interest Entities (“VIE”)

The Company and Engineering/Remediation Resources Group, Inc. (“ERRG”) previously entered into an unpopulated joint venture agreement for project work bids within the Company’s Services Segment with the joint venture doing business as Perma-Fix ERRG, a general partnership. The Company has a 51% partnership interest in the joint venture and ERRG has a 49% partnership interest in the joint venture.

The Company determines whether joint ventures in which it has invested meet the criteria of a VIE at the start of each new venture and when a reconsideration event has occurred. A VIE is a legal entity that satisfies any of the following characteristics: (a) the legal entity does not have sufficient equity investment at risk; (b) the equity investors at risk as a group, lack the characteristics of a controlling financial interest; or (c) the legal entity is structured with disproportionate voting rights.

The Company consolidates a VIE if it is determined to be the primary beneficiary of the VIE. The primary beneficiary has both the power to direct the activities of the VIE that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.

Based on the Company’s evaluation of Perma-Fix ERRG and related agreements with Perma-Fix ERRG, the Company determined that Perma-Fix ERRG continues to be a VIE in which we are the primary beneficiary. At March 31, 2021, Perma-Fix ERRG had total assets of $4,865,000 and total liabilities of $4,865,000 which are all recorded as current.

14.

Deferral of Employment Tax Deposits

The Flexibility Act provides employers the option to defer the payment of an employer’s share of social security taxes beginning on March 27, 2020 through December 31, 2020 with 50% of the amount of social security taxes deferred to become due on December 31, 2021 with the remaining 50% due on December 31, 2022. The Company elected to defer such taxes starting in mid-April 2020. At March 31, 2021, the Company has deferred payment of approximately $1,252,000 in its share of social security taxes, of which approximately $626,000 is included in “Other long-term liabilities,” with the remaining balance included in “Accrued expenses” within current liabilities in the Company’s Consolidated Balance Sheets.

15.

Executive Officer and Board of Director Compensation

Management Incentive Plans (“MIP”)

On January 21, 2021, the Company’s Compensation and Stock Option Committee (the “Compensation Committee”) and the Board approved individual MIP for the calendar year 2021 for each Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”), Executive Vice President (“EVP”) of Strategic Initiatives, EVP of Nuclear and Technical Services and EVP of Waste Treatment Operations. Each of the MIPs is effective January 1, 2021 and applicable for year 2021. Each MIP provides guidelines for the calculation of annual cash incentive-based compensation, subject to Compensation Committee oversight and modification. Each MIP awards cash compensation based on achievement of performance thresholds, with the amount of such compensation established as a percentage of the executive’s 2021 annual base salary at the time of the approval of the MIP. The potential target performance compensation ranges from 5% to 150% of the base salary for the CEO ($17,220 to $516,600), 5% to 100% of the base salary for the CFO ($14,000 to $280,000), 5% to 100% of the base salary for the EVP of Strategic Initiatives ($11,667 to $233,336), 5% to 100% of the base salary for the EVP of Nuclear and Technical Services ($14,000 to $280,000) and 5% to 100% ($12,000 to $240,000) of the base salary for the EVP of Waste Treatment Operations. Subsequent to the approval of the MIPs for fiscal year 2021 on January 21, 2021 as described above, in February 2021, the Compensation Committee approved a cost of living adjustment of approximately 2.3% to each executive officer’s base salary, effective April 1, 2021. As such, compensation payable, if any, under each of the MIPs for fiscal year 2021 as discussed above for our executives will be adjusted accordingly to reflect this cost of living adjustment.

Board Compensation

On January 21, 2021, the Company’s Compensation Committee and the Board approved the following revision to the annual compensation of each non-employee Board member and the Board Committee(s) for which the Board member serves, effective January 1, 2021.

●	each director is to be paid a quarterly fee of $11,500, compared to the previous quarterly fee of $8,000;
●	the Chairman of the Board is to be paid an additional quarterly fee of $8,750, compared to the Chairman’s previous additional quarterly fee of $7,500;
●	the Chairman of the Audit Committee is to be paid an additional quarterly fee of $6,250, compared to the Audit Chairman’s previous additional quarterly fee of $5,500;
●	the Chairman of each of the Compensation Committee, the Corporate Governance and Nominating Committee (the “Nominating Committee”), and the Strategic Advisory Committee (the “Strategic Committee”) is to receive $3,125 in additional quarterly fees. No additional quarterly fees were previously paid to the Chairman of such committees. The Chairman of the Board is not eligible to receive a quarterly fee for serving as the Chairman of any the aforementioned committees ;
●	each Audit Committee member (excluding the Chairman of the Audit Committee) is to receive an additional quarterly fee of $1,250; and
●	each member of the Compensation Committee, the Nominating Committee, and the Strategic Committee is to receive a quarterly fee of $500. Such fee is payable only if the member does not serve as the Chairman of the Audit Committee, the Nominating Committee, the Strategic Committee or as the Chairman of the Board.

Each non-employee Board member will continue to receive $1,000 for each board meeting attendance and a $500 fee for meeting attendance via conference call. Also, each director will continue to receive an option to purchase up to 2,400 shares of the Company’s Common Stock on the date of his re-election to the Board at the Company’s Annual Meeting of Stockholders, with each option having a 10-year term and becoming fully vested after six months from grant date.

Each director may continue to elect to have either 65% or 100% of such fees payable in Common Stock under the 2003 Plan, with the balance, if any, payable in cash.

See below “Note 16 – Subsequent Events - 2003 Plan” for a discussion of a proposed amendment to the 2003 Plan as approved by the Board, subject to the approval by the Company’s Stockholder at the Company’s 2021 Annual Meeting of Stockholders to be held on July 20, 2021.

16.

Subsequent Events

Management evaluated events occurring subsequent to March 31, 2021 through May 6, 2021, the date these consolidated financial statements were available for issuance, and other than as noted below determined that no material recognizable subsequent events occurred.

Credit Facility

On May 4, 2021, the Company entered into an amendment to our Loan Agreement with our lender which provided the following, among other things:

●

revised the Company’s FCCR calculation requirement which allows for the add-back of approximately $5,318,000 in eligible expenses that were incurred and covered by the PPP Loan that the Company received in 2020. The add-back is to be applied retroactively to the second and third quarters of 2020. (see “Note 8 – Long Term Debt – Paycheck Protection Program (“PPP”) Loan” for a discussion of the PPP Loan); and

●

a capital expenditure line of up to $1,000,000 with advances on the line, subject to certain limitations, permitted for up to twelve months starting May 4, 2021 (the “Borrowing Period”). Only interest is payable on advances during the Borrowing Period at annual rate of prime plus 2.50% or LIBOR (with minimum floor rate of 0.75%) plus 3.50%. At the end of the Borrowing Period, the total amount advanced under the line will amortize equally based on a five-year amortization schedule with principal payment due monthly plus interest. At the maturity date of the Loan Agreement, any unpaid principal balance plus interest, if any, will become due.

In connection with the amendment, the Company paid our lender a fee of $15,000. All other terms of the Loan Agreement remains principally unchanged.

2003 Plan

During April 2021, the Company’s Board approved, subject to the Company’s Shareholder approval, a proposed amendment to the 2003 Plan that provides, among other things, the following:

	●	The number of shares of Common Stock available for issuance under the 2003 Plan be increased by an additional 500,000 shares;
	●	Each outside director be granted an option to purchase up to 10,000 shares of Common Stock on each date the director is reelected to the Board;
	●	Each newly-elected outside director be granted an option to purchase up to 20,000 shares of Common Stock upon initial election to the Board; and
	●	Changes to the vesting schedule of each option granted under the 2003 Plan to outside directors subsequent to the amendment becoming effective.

Preferred Share Rights Plan (“Rights Plan”)

The Company’s Rights Plan had a termination date of May 2, 2021. As previously reported, during April 2021, the Company’s Board decided not to renew or extend the Rights Plan and, as a result, such Rights Plan terminated as of May 2, 2021.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-looking Statements

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

●	demand for our services;
●	reductions in the level of government funding in future years;
●	R&D activity and necessary capital of our Medical Segment;
●	reducing operating costs and non-essential expenditures;
●	ability to meet loan agreement covenant requirements;
●	cash flow requirements;
●	accounts receivable impact;
●	sufficient liquidity to continue business;
●	PPP Loan forgiveness;
●	future results of operations and liquidity;
●	effect of economic disruptions on our business;
●	curtail capital expenditures;
●	government funding for our services;
●	may not have liquidity to repay debt if our lender accelerates payment of our borrowings;
●	manner in which the applicable government will be required to spend funding to remediate various sites;
●	funding operations;

●	fund capital expenditures from cash from operations and/or financing;
●	impact from COVID-19;
●	delays in procurement actions and contract awards;
●	gradual return in waste shipments;
●	fund remediation expenditures for sites from funds generated internally;
●	collection of accounts receivables;
●	compliance with environmental regulations;
●	potential effect of being a PRP;
●	potential sites for violations of environmental laws and remediation of our facilities;
●	continuation of contracts with federal government;
●	partial or full shutdown of any of our facilities;
●	continued waste shipments delays by clients; and
●	R&D costs.

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

●	general economic conditions;
●	contract bids, including international markets;
●	material reduction in revenues;
●	inability to meet PNC covenant requirements;
●	inability to collect in a timely manner a material amount of receivables;
●	increased competitive pressures;
●	inability to maintain and obtain required permits and approvals to conduct operations;
●	public not accepting our new technology;
●	inability to develop new and existing technologies in the conduct of operations;
●	inability to maintain and obtain closure and operating insurance requirements;
●	inability to retain or renew certain required permits;
●	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 government agencies (domestic and foreign) or subcontracts involving government agencies (domestic or foreign), or reduction in amount of waste delivered to the Company under the contracts or subcontracts;
●	renegotiation of contracts involving government agencies (domestic and foreign);
●	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;
●	impact of the COVID-19;
●	audit of our PPP Loan;
●	new governmental regulations;
●	lender refuses to waive non-compliance or revise our covenant so that we are in compliance; and
●	risk factors and other factors set forth in “Special Note Regarding Forward-Looking Statements” contained in the Company’s 2020 Form 10-K and the “Forward-Looking Statements” contained in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”) of this first quarter 2021 Form 10-Q..

COVID-19 Impact

Our management team continues to proactively update our ongoing business operations and safety plans. We continue to remain focused on protecting the health and well-being of our employees and the communities in which we operate while assuring the continuity of our business operations. Similar to most of the U.S., we are beginning to relax the COVID-19-related precautions associated with ongoing operations as more staff is vaccinated and the new cases continue to decline in our locations. However, our Treatment Segment continues to see delays in waste shipments from certain customers due to continued impacts of COVID-19. We expect to see a gradual return in waste receipts from these customers in the first half of 2021. Within our Services Segment, we are realizing delays in procurement actions and contract awards resulting from the impact of COVID-19. As the situations surrounding COVID-19 continues to remain fluid, the full impact and extent of the pandemic on our financial results and liquidity cannot be estimated with any degree of certainty but appear to be subsiding towards the end of the second quarter of 2021. We are realizing pent-up demands in both segments, which have been reflected in the large increase in proposal requests throughout the first quarter of 2021 and into the second quarter of 2021.

We continue to closely monitor the impact of the COVID-19 pandemic on all aspects of our business, including our customers’ payment performance. However, since a significant portion of our revenues is derived from government related contracts, we do not expect our accounts receivable collections to be materially impacted due to COVID-19.

At this time, we believe we have sufficient liquidity on hand to continue business operations during the next twelve months. At March 31, 2021, our borrowing availability under our revolving credit facility was approximately $10,280,000 which was based on a percentage of eligible receivables and subject to certain reserves. We continue to assess the need in reducing operating costs during this volatile time, which may include curtailing capital expenditures, eliminating non-essential expenditures and implementing a hiring freeze as needed.

Overview

Revenue decreased by $1,727,000 or 6.9% to $23,133,000 for the three months ended March 31, 2021 from $24,860,000 for the corresponding period of 2020. The decrease was entirely within our Treatment Segment where revenue decreased $2,068,000 or 21.6% which was attributed primarily to lower waste volume resulting from continued delays in waste shipment from certain customers from the impact of COVID-19 as discussed above. Also, lower averaged price waste from revenue mix contributed to the decrease in revenue within the Treatment Segment. Revenue from our Services Segment increased by approximately $341,000 or 2.2%. Gross profit decreased $2,284,000 or 49.2% primarily due to the decrease in revenues in the Treatment Segment. Selling, General, and Administrative (“SG&A”) expenses increased $277,000 or 9.5% for the three months ended March 31, 2021 as compared to the corresponding period of 2020.

Business Environment

Our Treatment and Services Segments’ business continues to be heavily dependent on services that we provide to governmental clients, primarily as subcontractors for others who are prime contractors to government entities or directly as the prime contractor. We believe demand for our services will continue to be subject to fluctuations due to a variety of factors beyond our control, including, without limitation, the economic conditions, the manner in which the applicable government will be required to spend funding to remediate various sites, and/or the impact resulting from COVID-19 as discussed above. In addition, our governmental contracts and subcontracts relating to activities at governmental sites in the United States are generally subject to termination or renegotiation on 30 days’ notice at the government’s option, and our governmental contracts/task orders with the Canadian government authorities allow the authorities to terminate the contract/task orders at any time for convenience. 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. As previously disclosed, our Medical Segment has not generated any revenues and has substantially reduced its R&D costs and activities due to the need for capital to fund such activities. We anticipate that our Medical Segment will not resume full R&D activities until it obtains the necessary funding through obtaining its own credit facility or additional equity raise or obtaining new partners willing to fund its R&D activities. If the Medical Segment is unable to raise the necessary capital, the Medical Segment could be required to further reduce, delay or eliminate its R&D program.

We are continually reviewing methods to raise additional capital to supplement our liquidity requirements, when needed, and reducing our operating costs. We continue to aggressively bid on various contracts, including potential contracts within the international markets.

Results of Operations

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

Summary – Three Months Ended March 31, 2021 and 2020

				Three Months Ended
				March 31,
Consolidated (amounts in thousands)	2021			%			2020			%
Revenues	$	23,133			100.0		$	24,860			100.0
Cost of good sold		20,777			89.8			20,220			81.3
Gross profit		2,356			10.2			4,640			18.7
Selling, general and administrative		3,205			13.9			2,928			11.8
Research and development		150			.6			232			.9
Loss on disposal of property and equipment		—			—			31			.1
(Loss) income from operations	$	(999	)		(4.3	)	$	1,449			5.9
Interest income		18			—			56			.2
Interest expense		(67	)		(.2	)		(120	)		(.5	)
Interest expense-financing fees		(8	)		—			(68	)		(.3	)
Other		1			—			5			—
(Loss) income from continuing operations before taxes		(1,055	)		(4.5	)		1,322			5.3
Income tax (benefit) expense		(17	)		—			14			—
(Loss) income from continuing operations	$	(1,038	)		(4.5	)