UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

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

For the quarterly period ended

June 30, 2021

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

For the transition period from

Commission File No.

001-11596

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 ☒ 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 ☒ 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 ☒ Smaller reporting company ☒ 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 ☒

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 July 30, 2021
Common Stock, $.001 Par Value		12,196,623 shares

PERMA-FIX ENVIRONMENTAL SERVICES, INC.

INDEX

			Page No.
PART I		FINANCIAL INFORMATION
	Item 1.	Consolidated Financial Statements
		Consolidated Balance Sheets - June 30, 2021 and December 31, 2020	1
		Consolidated Statements of Operations - Three and Six Months Ended June 30, 2021 and 2020	3
		Consolidated Statements of Comprehensive Income - Three and Six Months Ended June 30, 2021 and 2020	4
		Consolidated Statements of Stockholders’ Equity - Six Months Ended June 30, 2021 and 2020	5
		Consolidated Statements of Cash Flows - Six Months Ended June 30, 2021 and 2020	6
		Notes to Consolidated Financial Statements	7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
	Item 4.	Controls and Procedures	36

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

	June 30,			December 31,
	2021			2020
(Amounts in Thousands, Except for Share and Per Share Amounts)	(Unaudited)			(Audited)

ASSETS
Current assets:
Cash	$	7,312		$	7,924
Accounts receivable, net of allowance for doubtful accounts of $27 and $404, respectively		9,244			9,659
Unbilled receivables		7,332			14,453
Inventories		701			610
Prepaid and other assets		2,926			3,967
Current assets related to discontinued operations		17			22
Total current assets		27,532			36,635

Property and equipment:
Buildings and land		20,123			20,139
Equipment		22,132			22,090
Vehicles		454			457
Leasehold improvements		23			23
Office furniture and equipment		1,425			1,413
Construction-in-progress		2,227			1,569
Total property and equipment		46,384			45,691
Less accumulated depreciation		(28,574	)		(27,908	)
Net property and equipment		17,810			17,783

Property and equipment related to discontinued operations		81			81

Operating lease right-of-use assets		2,317			2,287

Intangibles and other long term assets:
Permits		9,118			8,922
Other intangible assets - net		885			875
Finite risk sinking fund (restricted cash)		11,467			11,446
Other assets		849			890
Total assets	$	70,059		$	78,919

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

PERMA-FIX ENVIRONMENTAL SERVICES, INC.

Consolidated Balance Sheets, Continued

	June 30,			December 31,
	2021			2020
(Amounts in Thousands, Except for Share and per Share Amounts)	(Unaudited)			(Audited)

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	11,511		$	15,382
Accrued expenses		5,637			6,381
Disposal/transportation accrual		1,055			1,220
Deferred revenue		3,932			4,614
Accrued closure costs - current		74			75
Current portion of long-term debt		404			3,595
Current portion of operating lease liabilities		275			273
Current portion of finance lease liabilities		433			525
Current liabilities related to discontinued operations		817			898
Total current liabilities		24,138			32,963

Accrued closure costs		6,465			6,290
Deferred tax liabilities		474			471
Long-term debt, less current portion		819			3,134
Long-term operating lease liabilities, less current portion		2,119			2,070
Long-term finance lease liabilities, less current portion		555			662
Other long-term liabilities		626			626
Long-term liabilities related to discontinued operations		256			252
Total long-term liabilities		11,314			13,505

Total liabilities		35,452			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;12,188,256 and 12,161,539 shares issued, respectively;12,180,614 and 12,153,897 shares outstanding, respectively		12			12
Additional paid-in capital		109,206			108,931
Accumulated deficit		(72,555	)		(74,455	)
Accumulated other comprehensive loss		(167	)		(207	)
Less Common Stock in treasury, at cost; 7,642 shares		(88	)		(88	)
Total Perma-Fix Environmental Services, Inc. stockholders’ equity		36,408			34,193
Non-controlling interest		(1,801	)		(1,742	)
Total stockholders’ equity		34,607			32,451

Total liabilities and stockholders’ equity	$	70,059		$	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						Six Months Ended
	June 30,						June 30,
(Amounts in Thousands, Except for Per Share Amounts)	2021			2020			2021			2020

Net revenues	$	16,145		$	22,047		$	39,278		$	46,907
Cost of goods sold		15,179			18,737			35,956			38,957
Gross profit		966			3,310			3,322			7,950

Selling, general and administrative expenses		2,997			2,700			6,202			5,627
Research and development		144			209			295			441
(Gain) loss on disposal of property and equipment		—			(4)			—			27
(Loss) income from operations		(2,175	)		405			(3,175	)		1,855

Other income (expense):
Interest income		2			28			21			84
Interest expense		(65	)		(99	)		(132	)		(219	)
Interest expense-financing fees		(9	)		(60	)		(17	)		(129	)
Other		—			4			1			9
Gain (loss) on extinguishment of debt		5,381			(27	)		5,381			(27	)
Income from continuing operations before taxes		3,134			251			2,079			1,573
Income tax expense (benefit)		13			(9	)		(4	)		5
Income from continuing operations, net of taxes		3,121			260			2,083			1,568

Loss from discontinued operations (net of taxes of $0)		(127	)		(85	)		(242	)		(199	)
Net income		2,994			175			1,841			1,369

Net loss attributable to non-controlling interest		(29	)		(29	)		(59	)		(55	)

Net income attributable to Perma-Fix Environmental Services, Inc. common stockholders	$	3,023		$	204		$	1,900		$	1,424

Net income (loss) per common share attributable to Perma-Fix Environmental Services, Inc. stockholders - basic:
Continuing operations	$	.26		$	.02		$	.18		$	.13
Discontinued operations		(.01	)		—			(.02	)		(.01	)
Net income per common share	$	.25		$	.02		$	.16		$	.12

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

Continuing operations	$	.25		$	.02		$	.17		$	.13
Discontinued operations		(.01	)		—			(.02	)		(.01)
Net income per common share	$	.24		$	.02		$	.15		$	.12

Number of common shares used in computing net income per share:
Basic		12,180			12,135			12,173			12,129
Diluted		12,440			12,286			12,420			12,320

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

PERMA-FIX ENVIRONMENTAL SERVICES, INC.

Consolidated Statements of Comprehensive Income

(Unaudited)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
(Amounts in Thousands)	2021			2020			2021			2020

Net income	$	2,994		$	175		$	1,841		$	1,369
Other comprehensive income (loss):
Foreign currency translation gain (loss)		20			28			40			(51	)

Comprehensive income		3,014			203			1,881			1,318
Comprehensive loss attributable to non-controlling interest		(29	)		(29	)		(59	)		(55	)
Comprehensive income attributable to Perma-Fix Environmental Services, Inc. stockholders	$	3,043		$	232		$	1,940		$	1,373

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	)
Net Income (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
Net Income (loss)		—		—		—		—			—			(29	)		3,023			2,994
Foreign currency translation		—		—		—		—			20			—			—			20
Issuance of Common Stock upon exercise of options		290		—		—		—			—			—			—			—
Issuance of Common Stock for services		14,590		—		109		—			—			—			—			109
Stock-Based Compensation		—		—		42		—			—			—			—			42
Balance at June 30, 2021		12,188,256	$	12	$	109,206	$	(88	)	$	(167	)	$	(1,801	)	$	(72,555	)	$	34,607

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
Net Income (loss)		—		—		—		—			—			(29	)		204			175
Foreign currency translation		—		—		—		—			28			—			—			28
Issuance of Common Stock upon exercise of options		241		—		—		—			—			—			—			—
Issuance of Common Stock for services		10,239		—		56		—			—			—			—			56
Stock-Based Compensation		—		—		48		—			—			—			—			48
Balance at June 30, 2020		12,142,771	$	12	$	108,659	$	(88	)	$	(262	)	$	(1,674	)	$	(75,891	)	$	30,756

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

PERMA-FIX ENVIRONMENTAL SERVICES, INC.

Consolidated Statements of Cash Flows

(Unaudited)


	Six Months Ended
	June 30,
(Amounts in Thousands)	2021			2020
Cash flows from operating activities:
Net income	$	1,841		$	1,369
Less: loss from discontinued operations, net of taxes of $0		(242	)		(199	)

Income from continuing operations, net of taxes		2,083			1,568
Adjustments to reconcile income from continuing operations to cash provided by operating activities:
Depreciation and amortization		799			711
Interest on finance lease with purchase option		4			4
(Gain) loss on extinguishment of debt		(5,381	)		27
Amortization of debt discount/debt issuance costs		17			129
Deferred tax expense		3			5
Recovery of bad debt reserves		(17	)		(107	)
Loss on disposal of property and equipment		—			27
Issuance of common stock for services		188			104
Stock-based compensation		87			92
Changes in operating assets and liabilities of continuing operations
Accounts receivable		432			2,479
Unbilled receivables		7,121			(3,085	)
Prepaid expenses, inventories and other assets		1,076			714
Accounts payable, accrued expenses and unearned revenue		(5,609	)		289
Cash provided by continuing operations		803			2,957
Cash used in discontinued operations		(315	)		(259	)
Cash provided by operating activities		488			2,698

Cash flows from investing activities:
Purchases of property and equipment		(650	)		(1,366	)
Proceeds from sale of property and equipment		1			4
Cash used in investing activities of continuing operations		(649	)		(1,362	)
Cash provided by investing activities of dicontinued operations		—			13
Cash used in investing activities		(649	)		(1,349	)

Cash flows from financing activities:
Repayments of revolving credit borrowings		(41,834	)		(47,058	)
Borrowing on revolving credit		41,834			46,737
Proceeds from issuance of long-term debt		—			5,666
Principal repayments of finance lease liabilities		(205	)		(229	)
Principal repayments of long term debt		(219	)		(1,045	)
Payment of debt issuance costs		(15	)		(85	)
Proceeds from issuance of common stock upon exercise of options		—			6
Cash (used in) provided by financing activities of continuing operations		(439	)		3,992

Effect of exchange rate changes on cash		9			(18	)

(Decrease) increase in cash and finite risk sinking fund (restricted cash)		(591	)		5,323
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	$	18,779		$	17,020

Supplemental disclosure:
Interest paid	$	106		$	207
Income taxes paid		15			30
Non-cash financing activities:
Equipment purchase subject to finance lease		—			132
Equipment purchase subject to finance		29			—

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

PERMA-FIX ENVIRONMENTAL SERVICES, INC.

Notes to Consolidated Financial Statements

June 30, 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 six months ended June 30, 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 various subsequent amendments to the initial guidance (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. In November 2019, FASB issued ASU 2019-10, “Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842),” which defers the effective date of ASU 2016-13 for public companies that are considered smaller reporting companies as defined by the Commission to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. These ASUs are effective January 1, 2023 for the Company as a smaller reporting company (“SRC”). Under new guidance issued by the Commission in March 2020, the Company will continue to qualify as a smaller reporting company but will also be an accelerated filer for all filings with the Commission after January 1, 2022. The Company is currently evaluating the impact of these 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.

In May 2021, the FASB issued ASU No. 2021-04, “Earnings Per Share (Topic 206), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force).” ASU 2021-04 addresses issuer’s accounting for certain modifications or exchanges of freestanding equity-classified written call options. This ASU is effective for all entities, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of this ASU on its consolidated financial statements.

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:

Schedule of Disaggregation of Revenue

Revenue by Contract Type
(In thousands)	Three Months Ended						Three Months Ended
	June 30, 2021						June 30, 2020
	Treatment		Services		Total		Treatment		Services		Total
Fixed price	$	7,706	$	1,482	$	9,188	$	7,840	$	2,329	$	10,169
Time and materials		—		6,957		6,957		—		11,878		11,878
Total	$	7,706	$	8,439	$	16,145	$	7,840	$	14,207	$	22,047

Revenue by Contract Type
(In thousands)	Six Months Ended						Six Months Ended
	June 30, 2021						June 30, 2020
	Treatment		Services		Total		Treatment		Services		Total
Fixed price	$	15,201	$	4,063	$	19,264	$	17,403	$	3,721	$	21,124
Time and materials		—		20,014		20,014		—		25,783		25,783
Total	$	15,201	$	24,077	$	39,278	$	17,403	$	29,504	$	46,907

Revenue by generator
(In thousands)	Three Months Ended						Three Months Ended
	June 30, 2021						June 30, 2020
	Treatment		Services		Total		Treatment		Services		Total
Domestic government	$	5,639	$	6,764	$	12,403	$	6,055	$	12,791	$	18,846
Domestic commercial		2,060		391		2,451		1,785		431		2,216
Foreign government		7		1,261		1,268		—		965		965
Foreign commercial