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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, 2022  

 

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

 

8302 Dunwoody Place, Suite 250, Atlanta, GA   30350
(Address of principal executive offices)   (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 29, 2022
Common Stock, $.001 Par Value   13,295,708 shares

 

 

 

 

 

 

PERMA-FIX ENVIRONMENTAL SERVICES, INC.

 

INDEX

 

    Page No.
PART I    FINANCIAL INFORMATION
     
  Item 1. Consolidated Financial Statements 1
       
   

Consolidated Balance Sheets - June 30, 2022 and December 31, 2021

1
       
   

Consolidated Statements of Operations - Three and Six Months Ended June 30, 2022 and 2021

3
       
   

Consolidated Statements of Comprehensive (Loss) Income - Three and Six Months Ended June 30, 2022 and 2021

4
       
   

Consolidated Statements of Stockholders’ Equity - Six Months Ended June 30, 2022 and 2021

5
       
   

Consolidated Statements of Cash Flows - Six Months Ended June 30, 2022 and 2021

6
       
   

Notes to Consolidated Financial Statements

7
       
  Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 22
       
  Item 3. Quantitative and Qualitative Disclosures About Market Risk 35
       
  Item 4. Controls and Procedures 35
       
PART II    OTHER INFORMATION  
     
  Item 1. Legal Proceedings 36
       
  Item 1A. Risk Factors 36
       
  Item 6. Exhibits 37

 

 
 

 

PART I - FINANCIAL INFORMATION

 

Item 1. – Financial Statements

 

PERMA-FIX ENVIRONMENTAL SERVICES, INC.

Consolidated Balance Sheets

 

   June 30,   December 31, 
   2022   2021 
(Amounts in Thousands, Except for Share and Per Share Amounts)  (Unaudited)   (Audited) 
         
ASSETS          
Current assets:          
Cash  $163   $4,440 
Accounts receivable, net of allowance for doubtful accounts of $30 and $85, respectively   12,956    11,372 
Unbilled receivables   6,348    8,995 
Inventories   1,013    680 
Prepaid and other assets   3,184    4,472 
Current assets related to discontinued operations   17    15 
Total current assets   23,681    29,974 
           
Property and equipment:          
Buildings and land   23,281    20,631 
Equipment   22,933    22,131 
Vehicles   439    443 
Leasehold improvements   23    23 
Office furniture and equipment   1,318    1,316 
Construction-in-progress   580    2,997 
Total property and equipment   48,574    47,541 
Less accumulated depreciation   (29,583)   (28,932)
Net property and equipment   18,991    18,609 
           
Property and equipment related to discontinued operations   81    81 
           
Operating lease right-of-use assets   2,202    2,460 
           
Intangibles and other long term assets:          
Permits   9,493    9,476 
Other intangible assets - net   814    894 
Finite risk sinking fund (restricted cash)   11,511    11,471 
Deferred tax assets   3,933    3,527 
Other assets   442    809 
Total assets  $71,148   $77,301 

 

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 
   2022   2021 
(Amounts in Thousands, Except for Share and per Share Amounts)  (Unaudited)   (Audited) 
         
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current liabilities:          
Accounts payable  $10,725   $11,975 
Accrued expenses   4,514    5,078 
Disposal/transportation accrual   1,279    1,065 
Deferred revenue   3,574    5,580 
Accrued closure costs - current   425    578 
Current portion of long-term debt   489    393 
Current portion of operating lease liabilities   421    406 
Current portion of finance lease liabilities   219    333 
Current liabilities related to discontinued operations   914    506 
Total current liabilities   22,560    25,914 
           
Accrued closure costs   7,136    6,613 
Long-term debt, less current portion   806    600 
Long-term operating lease liabilities, less current portion   1,784    2,029 
Long-term finance lease liabilities, less current portion   394    884 
Long-term liabilities related to discontinued operations   265    677 
Total long-term liabilities   10,385    10,803 
           
Total liabilities   32,945    36,717 
           
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; 13,280,265 and 13,222,552 shares issued, respectively; 13,272,623 and 13,214,910 shares outstanding, respectively   13    13 
Additional paid-in capital   114,755    114,307 
Accumulated deficit   (76,408)   (73,620)
Accumulated other comprehensive loss   (69)   (28)
Less Common Stock in treasury, at cost; 7,642 shares   (88)   (88)
Total stockholders’ equity   38,203    40,584 
           
Total liabilities and stockholders’ equity  $71,148   $77,301 

 

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

 

2
 

 

PERMA-FIX ENVIRONMENTAL SERVICES, INC.

Consolidated Statements of Operations

(Unaudited)

 

(Amounts in Thousands, Except for Per Share Amounts)    2022     2021     2022     2021 
   Three Months Ended   Six Months Ended 
   June 30,   June 30, 
(Amounts in Thousands, Except for Per Share Amounts)  2022   2021   2022   2021 
                 
Net revenues  $19,455   $16,145   $35,370   $39,278 
Cost of goods sold   16,571    15,179    30,850    35,956 
Gross profit   2,884    966    4,520    3,322 
                     
Selling, general and administrative expenses   3,684    2,997    7,106    6,202 
Research and development   80    144    176    295 
Loss on disposal of property and equipment   

    

    1    

 
Loss from operations   (880)   (2,175)   (2,763)   (3,175)
                     
Other income (expense):                    
Interest income   29    2    40    21 
Interest expense   (41)   (65)   (76)   (132)
Interest expense-financing fees   (15)   (9)   (28)   (17)
Other   (3)   

    (5)   1 
Gain on extinguishment of debt   

    5,381    

    5,381 
(Loss) income from continuing operations before taxes   (910)   3,134    (2,832)   2,079 
Income tax expense (benefit)   347    13    (326)   (4)
(Loss) income from continuing operations, net of taxes   (1,257)   3,121    (2,506)   2,083 
                     
Loss from discontinued operations, net of taxes (Note 10)   (188)   (127)   (282)   (242)
Net (loss) income   (1,445)   2,994    (2,788)   1,841 
                     
Net loss attributable to non-controlling interest   

    (29)   

    (59)
                     
Net (loss) income attributable to Perma-Fix Environmental Services, Inc. common stockholders  $(1,445)  $3,023   $(2,788)  $1,900 
                     
Net (loss) income per common share attributable to Perma-Fix Environmental Services, Inc. stockholders - basic:                    
Continuing operations  $(.10)  $.26   $(.19)  $.18 
Discontinued operations   (.01)   (.01)   (.02)   (.02)
Net (loss) income per common share  $(.11)  $.25   $(.21)  $.16 
                     
Net (loss) income per common share attributable to Perma-Fix Environmental Services, Inc. stockholders - diluted:                    
Continuing operations  $(.10)  $.25   $(.19)  $.17 
Discontinued operations   (.01)   (.01)   (.02)   (.02)
Net (loss) income per common share  $(.11)  $.24   $(.21)  $.15 
                     
Number of common shares used in computing net (loss) income per share:                    
Basic   13,264    12,180    13,249    12,173 
Diluted   13,264    12,440    13,249    12,420 

 

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

 

3
 

 

PERMA-FIX ENVIRONMENTAL SERVICES, INC.

Consolidated Statements of Comprehensive (Loss) Income

(Unaudited)

 

(Amounts in Thousands)    2022     2021     2022     2021 
   Three Months Ended   Six Months Ended 
   June 30,   June 30, 
(Amounts in Thousands)  2022   2021   2022   2021 
                 
Net (loss) income  $(1,445)  $2,994   $(2,788)  $1,841 
Other comprehensive (loss) income:                    
Foreign currency translation (loss) gain   (67)   20    (41)   40 
                     
Comprehensive (loss) income   (1,512)   3,014    (2,829)   1,881 
Comprehensive loss attributable to non-controlling interest   

    (29)   

    (59)
Comprehensive (loss) income attributable to Perma-Fix Environmental Services, Inc. stockholders  $(1,512)  $3,043   $(2,829)  $1,940 

 

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)

 

   Shares   Amount   Capital   InTreasury   Loss   Subsidiary   Deficit   Equity 
   Common Stock  

Additional

Paid-In

  

Common

Stock Held

  

Accumulated Other

Comprehensive

  

Non-controlling

Interest in

   Accumulated    Total Stockholders’  
   Shares   Amount   Capital   In Treasury   Loss   Subsidiary   Deficit   Equity 
Balance at December 31, 2021   13,222,552   $13   $114,307   $(88)  $(28)  $   $(73,620)  $40,584 
Net loss                           (1,343)   (1,343)
Foreign currency translation                   26            26 
Issuance of Common Stock for services   19,520        123                    123 
Stock-Based Compensation           102                    102 
Balance at March 31, 2022   13,242,072   $13   $114,532   $(88)  $(2)  $   $(74,963)  $39,492 
Net loss                           (1,445)   (1,445)
Foreign currency translation                   (67)           (67)
Issuance of Common Stock upon exercise of options (cashless)   16,526                             
Issuance of Common Stock for services   21,667        120                    120 
Stock-Based Compensation           103                    103 
Balance at June 30, 2022   13,280,265   $13   $114,755   $(88)  $(69)  $   $(76,408)  $38,203 
                                         
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

 

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)

 

(Amounts in Thousands)  2022   2021 
   Six Months Ended 
   June 30, 
(Amounts in Thousands)  2022   2021 
Cash flows from operating activities:          
Net (loss) income  $(2,788)  $1,841 
Less: loss from discontinued operations, net of taxes (Note 10)   (282)   (242)
           
(Loss) income from continuing operations, net of taxes   (2,506)   2,083 
Adjustments to reconcile (loss) income from continuing operations to cash (used in) provided by operating activities:          
Depreciation and amortization   936    799 
Interest on finance lease with purchase option       4 
Gain on extinguishment of debt       (5,381)
Amortization of debt issuance costs   28    17 
Deferred tax (benefit) expense   (326)   3 
Recovery of bad debt reserves   (50)   (17)
Loss on disposal of property and equipment   1     
Issuance of common stock for services   243    188 
Stock-based compensation   205    87 
Changes in operating assets and liabilities of continuing operations          
Accounts receivable   (1,534)   432 
Unbilled receivables   2,647    7,121 
Prepaid expenses, inventories and other assets   1,988    1,076 
Accounts payable, accrued expenses and unearned revenue   (4,322)   (5,609)
Cash (used in) provided by continuing operations   (2,690)   803 
Cash used in discontinued operations   (367)   (315)
Cash (used in) provided by operating activities   (3,057)   488 
           
Cash flows from investing activities:          
Purchases of property and equipment   (758)   (650)
Proceeds from sale of property and equipment   25    1 
Cash used in investing activities of continuing operations   (733)   (649)
           
Cash flows from financing activities:          
Repayments of revolving credit borrowings   (33,545)   (41,834)
Borrowing on revolving credit   33,545    41,834 
Proceeds from capital line   524     
Principal repayments of finance lease liabilities   (718)   (205)
Principal repayments of long term debt   (229)   (219)
Payment of debt issuance costs   (21)   (15)
Cash used in financing activities of continuing operations   (444)   (439)
           
Effect of exchange rate changes on cash   (3)   9 
           
Decrease in cash and finite risk sinking fund (restricted cash)   (4,237)   (591)
Cash and finite risk sinking fund (restricted cash) at beginning of period   15,911    19,370 
Cash and finite risk sinking fund (restricted cash) at end of period  $11,674   $18,779 
           
Supplemental disclosure:          
Interest paid  $79   $106 
Income taxes paid   6    15 
Non-cash financing activities:          
Equipment purchase subject to finance lease   114     
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, 2022

(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, 2021.

 

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, 2022 are not necessarily indicative of results to be expected for the fiscal year ending December 31, 2022.

 

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, 2021.

 

The consolidated financial statements include the accounts of our wholly-owned subsidiaries and the account of a variable interest entity (“VIE”), Perma-Fix ERRG, for which we are the primary beneficiary (See “Note 14 - VIE” for a discussion of this VIE). The consolidated financial statements for 2021 also included the accounts of the Company’s majority-owned Polish subsidiary, Perma-Fix Medical S.A (“PFM Poland”) and PFM Poland’s wholly-owned subsidiary, Perma-Fix Medical Corporation (“PFMC”), which comprised of the Company’s Medical Segment. As previously discussed, the Company made the strategic decision to cease all research and development (“R&D”) activities under the Medical Segment and sold 100% of its interest in PFM Poland in December 2021. As a condition precent to the sale of PFM Poland, the Company acquired PFMC after its conversion to a Delaware limited liability company. As a result of the sale of PFM Poland, the Company deconsolidated PFM Poland from its consolidated financial statements in December 2021. The Company’s Medical Segment had not generated any revenue.

 

Information for the Medical Segment is presented for the quarter and six months ended June 30, 2021. The Medical Segment was disposed of as of December 31, 2021 and is not relevant for the quarter and six month ended June 30, 2022. Prior period segment information is not required to be restated for the disposal of the segment.

 

2. Summary of Significant Accounting Policies

 

Our accounting policies are as set forth in the notes to the December 31, 2021 consolidated financial statements referred to above.

 

Recently Adopted Accounting Standards

 

In May 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 adoption of this ASU by the Company effective January 1, 2022 did not have a material impact on its financial statements.

 

7
 

 

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 (“SRC”) 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 an SRC. Under new guidance issued by the Commission in March 2020, the Company continued to qualify as a SRC but became an accelerated filer for its 2021 Form 10-K and its 2022 quarterly 10-Q filings. The Company will remain a SRC but will become a non-accelerated filer for its 2022 Form 10-K and subsequent filings. The Company is currently evaluating the impact of these ASU on its consolidated financial statements.

 

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting,” which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by the discontinuation of the London Interbank Offered Rate (“LIBOR”) or by another reference rate expected to be discontinued because of reference rate reform. The guidance was effective beginning March 12, 2020 and can be applied prospectively through December 31, 2022. In January 2021, the FASB issued ASU No. 2021-01, “Reference Rate Reform (Topic 848): Scope,” which clarified the scope and application of the original guidance. The Company plans to adopt both ASUs when LIBOR is discontinued. The Company is currently evaluating the impact of the new ASUs on its condensed consolidated financial statements. As of the date of this report, the Company has determined that only its obligations under the credit facility as described in “Note 8 – Long Term Debt” would be impacted by these ASUs. The Company’s obligations under its credit facility permit for payment of annual rate of interests on its obligations using prime rate or LIBOR.

 

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 an SRC. 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.

 

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, 2022   June 30, 2021 
   Treatment   Services   Total   Treatment   Services   Total 
Fixed price  $8,393   $7,916   $16,309   $7,706   $1,482   $9,188 
Time and materials       3,146    3,146        6,957    6,957 
Total  $8,393   $11,062   $19,455   $7,706   $8,439   $16,145 

 

Revenue by Contract Type
(In thousands)
  Six Months Ended   Six Months Ended 
   June 30, 2022   June 30, 2021 
   Treatment   Services   Total   Treatment   Services   Total 
Fixed price  $15,872   $13,677   $29,549   $15,201   $4,063   $19,264 
Time and materials       5,821    5,821        20,014    20,014 
Total  $15,872   $19,498   $35,370   $15,201   $24,077   $39,278 

 

Revenue by generator
(In thousands)
  Three Months Ended   Three Months Ended 
   June 30, 2022   June 30, 2021 
   Treatment   Services   Total   Treatment   Services   Total 
Domestic government  $6,243   $10,649   $16,892   $5,639   $6,764   $12,403 
Domestic commercial   1,803    384    2,187    2,060    391    2,451 
Foreign government   153    8    161    7    1,261    1,268 
Foreign commercial   194    21    215        23    23 
Total  $8,393   $11,062   $19,455   $7,706   $8,439   $16,145 

 

Revenue by generator
(In thousands)
  Six Months Ended   Six Months Ended 
   June 30, 2022   June 30, 2021 
   Treatment   Services   Total   Treatment   Services   Total 
Domestic government  $12,058   $18,894   $30,952   $10,237   $19,425   $29,662 
Domestic commercial   3,239    546    3,785    4,328    981    5,309 
Foreign government   245    14    259    541    3,625    4,166 
Foreign commercial   330    44    374    95    46    141 
Total  $15,872   $19,498   $35,370   $15,201   $24,077   $39,278 

 

Contract Balances

 

The Company’s contract liabilities consist of deferred revenues which represent advance payment from customers in advance of the completion of our performance obligation. The following table represents changes in our contract liabilities balances:

 

           Year-to-date   Year-to-date 
(In thousands)  June 30, 2022   December 31, 2021   Change ($)   Change (%) 
Contract liabilities                    
Deferred revenue  $3,574   $5,580   $(2,006)   (35.9)%

 

The decrease was attributed primarily due to revenue recognized in connection with a Services Segment contract.

 

During the three and six months ended June 30, 2022, the Company recognized revenue of $2,123,000 and $5,644,000, respectively, related to untreated waste that was in the Company’s control as of the beginning of each respective year. During the three and six months ended June 30, 2021, the Company recognized revenue of $1,763,000 and $6,074,000, 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.

 

9
 

 

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.

 

The Company’s contracts and subcontracts relating to activities at governmental sites generally allow for termination for convenience at any time at the government’s option without payment of a substantial penalty. The Company does not disclose remaining performance obligations on these 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.

 

The components of lease cost for the Company’s leases for the three and six months ended June 30, 2022 and 2021 were as follows (in thousands):

 

   2022   2021   2022   2021 
   Three Months Ended   Six Months Ended 
   June 30,   June 30, 
   2022   2021   2022   2021 
                 
Operating Leases:                    
Lease cost  $157   $115   $314   $226 
                     
Finance Leases:                    
Amortization of ROU assets   44    58    91    117 
Interest on lease liability   10    18    21    37 
Finance Leases   54    76    112    154 
                     
Short-term lease rent expense   3    3    7    6 
                     
Total lease cost   214    194    433    386 

 

The weighted average remaining lease term and the weighted average discount rate for operating and finance leases at June 30, 2022 were:

 

   Operating Leases   Finance Leases 
Weighted average remaining lease terms (years)   6.5    3.1 
           
Weighted average discount rate   7.7%   6.0%

 

10
 

 

The following table reconciles the undiscounted cash flows for the operating and finance leases at June 30, 2022 to the operating and finance lease liabilities recorded on the balance sheet (in thousands):

 

   Operating Leases   Finance Leases 
2022 (Remaining)  $287   $157 
2023   556    174 
2024   416    170 
2025   324    147 
2026   301    18 
2027 and thereafter   942     
Total undiscounted lease payments   2,826    666 
Less: Imputed interest   (621)   (53)
Present value of lease payments  $2,205   $613 
           
Current portion of operating lease obligations  $421   $ 
Long-term operating lease obligations, less current portion  $1,784   $ 
Current portion of finance lease obligations  $   $219 
Long-term finance lease obligations, less current portion  $   $394 

 

Supplemental cash flow and other information related to our leases were as follows for the three and six months ended June 30, 2022 and 2021 (in thousands):

 

   2022   2021   2022   2021 
   Three Months Ended   Six Months Ended 
   June 30,   June 30, 
   2022   2021   2022   2021 
Cash paid for amounts included in the measurement of lease liabilities:                    
Operating cash flow used in operating leases  $143   $103   $286   $204 
Operating cash flow used in finance leases  $10   $18   $21   $37 
Financing cash flow used in finance leases  $661   $91   $718   $205 
                     
ROU assets obtained in exchange for lease obligations for:                    
Finance liabilities  $   $   $147   $ 
Operating liabilities  $   $166   $   $166 

 

5. Intangible Assets

 

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

 

       June 30, 2022    December 31, 2021 
   Weighted Average Amortization   Gross       Net   Gross       Net 
Other Intangibles   Period   Carrying   Accumulated   Carrying   Carrying   Accumulated   Carrying 
(amount in thousands)  (Years)   Amount   Amortization   Amount   Amount   Amortization   Amount 
Patent  8.3   $798   $(357)  $441   $787   $(351)  $436 
Software  3    612    (440)   172    592    (415)   177 
Customer relationships  10    3,370    (3,169)   201    3,370    (3,089)   281 
Total      $4,780   $(3,966)  $814   $4,749   $(3,855)  $894 

 

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.

 

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

 

   Amount 
Year  (In thousands) 
     
2022 (Remaining)  $110 
2023   180 
2024   48 
2025   12 
2026   11 

 

Amortization expenses relating to the definite-lived intangible assets as discussed above were $55,000 and $111,000 for the three and six months ended June 30, 2022, respectively, and $50,000 and $100,000 for the three and six months ended June 30, 2021, respectively.

 

6. Capital Stock, Stock Plans 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 six months of 2022.

 

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 first milestone was met and the shares under the first milestone were issued to Robert Ferguson in May 2018. The Company had previously entered into amendments whereby the vesting dates for the second and third milestones for the purchase of up to 30,000 and 60,000 shares of the Company’s Common Stock were extended to December 31, 2021 and December 31, 2022, respectively. On January 20, 2022, the Company’s Compensation and Stock Option Committee (“Compensation Committee”) and the Board of Directors (“Board”) further amended the vesting dates of the second and third milestones to December 31, 2022 and December 31, 2023, respectively. This amendment was approved by the Compensation Committee and the Board to take effect December 31, 2021. The Company has not recognized compensation costs (fair value of approximately $289,000 at June 30, 2022) 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 June 30, 2022. All other terms of the Ferguson Stock Option remain unchanged.

 

The following table summarizes stock-based compensation recognized for the three and six months ended June 30, 2022 and 2021 for our employee and director stock options.

 

   2022   2021   2022   2021 
   Three Months Ended   Six Months Ended 
Stock Options  June 30,   June 30, 
   2022   2021   2022   2021 
Employee Stock Options  $86,000   $33,000   $172,000   $66,000 
Director Stock Options   17,000    9,000    33,000    21,000 
Total  $103,000   $42,000   $205,000   $87,000 

 

At June 30, 2022, the Company has approximately $1,184,000 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 3.9 years.

 

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The summary of the Company’s total Stock Option Plans as of June 30, 2022 and June 30, 2021, and changes during the periods then ended, are presented below. The Company’s Plans consist of the 2010 Stock Option Plan, the 2017 Plans and the 2003 Outside Directors Stock Plan, as amended (“2003 Plan”):

 

   Shares   Weighted
Average
Exercise
Price
   Weighted
Average
Remaining
Contractual
Term
(years)
   Aggregate
Intrinsic
Value (3)
 
Options outstanding January 1, 2022   1,019,400   $4.91          
Granted       $            
Exercised   (50,000)  $3.97        $98,000 
Forfeited/expired       $            
Options outstanding end of period (1)   969,400   $4.96    3.7   $883,991 
Options exercisable at June 30, 2022(1)   405,900   $3.91    2.5   $577,276 

 

   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   6,000   $7.50           
Exercised   (500)  $3.15        $2,175 
Forfeited/expired   (1,500)  $3.15           
Options outstanding end of period (1)   662,400   $3.90    3.1   $2,153,595 
Options exercisable at June 30, 2021(2)   391,900   $4.08    3.1   $1,202,495 

 

(1) Options with exercise prices ranging from $2.79 to $7.50
(2) Options with exercise prices ranging from $2.79 to $7.29
(3) The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price.

 

During the six months ended June 30, 2022, the Company issued a total of 41,187 shares of its Common Stock under the 2003 Plan to its outside directors as compensation for serving on our Board. The Company has recorded approximately $240,000 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.

 

During the six months ended June 30, 2022, the Company issued 16,526 shares of its Common Stock from a cashless exercise of an option for the purchase of 50,000 shares of the Company’s Common Stock at $3.97 per share.

 

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 expires on April 1, 2024 and remains outstanding at June 30, 2022. The Ferguson Loan was paid-in-full in December 2020.

 

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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 earnings per share. The following table reconciles the (loss) income and average share amounts used to compute both basic and diluted (loss) income per share:

 

(Amounts in Thousands, Except for Per Share Amounts)    2022     2021     2022     2021 
   Three Months Ended   Six Months Ended 
   June 30,   June 30, 
   (Unaudited)   (Unaudited) 
(Amounts in Thousands, Except for Per Share Amounts)  2022   2021   2022   2021 
Net (loss) income attributable to Perma-Fix Environmental Services, Inc., common stockholders:                    
(Loss) income from continuing operations, net of taxes  $(1,257)  $3,121   $(2,506)  $2,083 
Net loss attributable to non-controlling interest        (29)        (59)
(Loss) income from continuing operations attributable to Perma-Fix Environmental Services, Inc. common stockholders   (1,257)   3,150    (2,506)   2,142 
Loss from discontinuing operations attributable to Perma-Fix Environmental Services, Inc. common stockholders   (188)   (127)   (282)   (242)
Net (loss) income attributable to Perma-Fix Environmental Services, Inc. common stockholders  $(1,445)  $3,023   $(2,788)  $1,900 
                     
Basic (loss) income per share attributable to Perma-Fix Environmental Services, Inc. common stockholders  $(.11)  $.25   $(.21)  $.16 
                     
Diluted (loss) income per share attributable to Perma-Fix Environmental Services, Inc. common stockholders  $(.11)  $.24   $(.21)  $.15 
                     
Weighted average shares outstanding:                    
Basic weighted average shares outstanding   13,264    12,180    13,249    12,173 
Add: dilutive effect of stock options       229        217 
Add: dilutive effect of warrants       31        30 
Diluted weighted average shares outstanding   13,264    12,440    13,249    12,420 
                     
Potential shares excluded from above weighted average share calcualtions due to their anti-dilutive effect include:                    
Stock options   405    12    405    36 
Warrant                

 


8.
Long Term Debt

 

Long-term debt consists of the following:

 

(Amounts in Thousands)  June 30,  2022   December 31, 2021 
  $   $ 
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 first six month of 2022 was 0%. (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 six month of 2022 was 4.5%. (1)    748(2)   954(2)
Capital Line dated May 4, 2021, payable in equal monthly installments of principal, balance due on May 15, 2024. Effective interest rate for the first six month of 2022 was 4.6%. (1)    515     
Notes Payable to 2023 and 2025, annual interest rate of 5.6% and 9.1%.   32    39 
Total debt   1,295    993 
Less current portion of long-term debt   489    393 
Long-term debt  $806   $600 

 

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

 

(2)Net of debt issuance costs of ($105,000) and ($112,000) at June 30, 2022 and December 31, 2021, respectively.

 

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Revolving Credit, Term Loan and Capital Line 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. The Loan Agreement, as amended, also provides 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 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, as amended, any unpaid principal balance plus interest, if any, will become due. During the second quarter of 2022, the Company advanced approximately $524,000 under the capital line which requires monthly installments in principal of approximately $8,700 plus interest, starting June 1, 2022. The advance was used to purchase the underlying asset under a previous finance lease.

 

On March 29, 2022, the Company entered into an amendment to its Loan Agreement with its lender which provided, among other things, the following:

 

  waived the Company’s failure to meet the minimum quarterly fixed charge coverage ratio (“FCCR”) requirement for the fourth quarter of 2021;
  removes the quarterly FCCR testing requirement for the first quarter of 2022;
  reinstates the quarterly FCCR testing requirement starting for the second quarter of 2022 and revises the methodology to be used in calculating the FCCR for the quarters ending June 30, 2022, September 30, 2022, and December 31, 2022 (with no change to the minimum 1.15:1 ratio requirement for each quarter);
  requires maintenance of a minimum of $3,000,000 in borrowing availability under the revolving credit until the minimum FCCR requirement for the quarter ended June 30, 2022 has been met and certified to the lender; and
  revises the annual rate used to calculate the Facility Fee (as defined in the Loan Agreement) on the revolving credit, with addition of the capital expenditure line, from 0.375% to 0.500%. Upon meeting the minimum FCCR requirement of 1.15:1 on a twelve months trailing basis, the Facility Fee rate of 0.375% will be reinstated.

 

In connection with the amendment, we paid PNC a fee of $15,000 which is being amortized over the remaining term of the Loan Agreement, as amended, as interest expense-financing fees.

 

The Company’s credit facility under its Loan Agreement, as amended, 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 was not required to perform testing of the FCCR requirement in the first quarter of 2022 pursuant to the March 29, 2022 amendment as discussed above, otherwise, it met all of its other financial covenant requirements in the first quarter of 2022. The Company failed to meet it FCCR requirement in the second quarter of 2022; however, this non-compliance was waived by the Company’s lender pursuant to an amendment to our Loan Agreement dated August 2, 2022 (See “Note 15 – Subsequent Event – Credit Facility” for a discussion of this waiver and additional provisions of this amendment). Other than the FCCR, the Company met all of its other financial covenant requirements in the second quarter of 2022.

 

15
 

 

Pursuant to the Loan Agreement, as amended, payment of annual rate of interest due on the revolving credit is at prime (4.75% at June 30, 2022) plus 2% or LIBOR plus 3.00% and the term loan and the capital expenditure line 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.

 

The Company may terminate its Loan Agreement, as amended, upon 90 days’ prior written notice upon payment in full of our obligations under the Loan Agreement. No early termination fee will apply if the Company pays off its obligations under the Loan Agreement after May 7, 2022.

 

At June 30, 2022, the borrowing availability under the Company’s revolving credit was approximately $4,754,000 based on our eligible receivables and includes a reduction in borrowing availability of approximately $3,020,000 from outstanding standby letters of credit.