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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

 

Or

 

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

 

For the transition period from   to  

 

Commission File No.   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.

 

1

 

 

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.

 

2

 

 

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.

 

3

 

 

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.

 

4

 

 

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 
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.

 

5

 

 

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.

 

6

 

 

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.

 

7

 

 

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.

 

8

 

 

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 
   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