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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, 2023

 

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

of incorporation or organization)

 

(IRS Employer

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 28, 2023
Common Stock, $.001 Par Value   13,565,813 shares

 

 

 

 

 

 

PERMA-FIX ENVIRONMENTAL SERVICES, INC.

 

INDEX

 

      Page No.
PART I FINANCIAL INFORMATION  
       
 

Item 1.

Condensed Consolidated Financial Statements

   
         

Condensed Consolidated Balance Sheets - June 30, 2023 and December 31, 2022

  1
         
   

Condensed Consolidated Statements of Operations - Three and Six Months Ended June 30, 2023 and 2022

  3
         
   

Condensed Consolidated Statements of Comprehensive Income (Loss) - Three and Six Months Ended June 30, 2023 and 2022

  4
         

Condensed Consolidated Statements of Stockholders’ Equity -Six Months Ended June 30, 2023 and 2022

  5
         
   

Condensed Consolidated Statements of Cash Flows - Six Months Ended June 30, 2023 and 2022

  6
         
   

Notes to Condensed 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

  33
         
  Item 4. Controls and Procedures   33
         

PART II

OTHER INFORMATION    
       

 

Item 1.

Legal Proceedings

  33
         
 

Item 1A.

Risk Factors

  34
         
 

Item 6.

Exhibits

  34

 

 

 

 

PART I - FINANCIAL INFORMATION

Item 1. – Financial Statements

 

PERMA-FIX ENVIRONMENTAL SERVICES, INC.

Condensed Consolidated Balance Sheets

 

           
(Amounts in Thousands, Except for Share and Per Share Amounts) 

June 30, 2023

(Unaudited)
   December 31, 2022 
         
ASSETS          
Current assets:          
Cash  $4,750   $1,866 
Accounts receivable, net of allowance for credit losses of $13 and $57, respectively   11,930    9,364 
Unbilled receivables   7,121    6,062 
Inventories   1,032    814 
Prepaid and other assets   2,735    5,405 
Current assets related to discontinued operations   17    15 
Total current assets   27,585    23,526 
           
Property and equipment:          
Buildings and land   24,069    24,021 
Equipment   21,922    21,242 
Vehicles   442    442 
Leasehold improvements   23    23 
Office furniture and equipment   1,129    1,299 
Construction-in-progress   1,143    727 
Total property and equipment   48,728    47,754 
Less accumulated depreciation   (29,896)   (28,797)
Net property and equipment   18,832    18,957 
           
Property and equipment related to discontinued operations   81    81 
           
Operating lease right-of-use assets   1,732    1,971 
           
Intangibles and other long term assets:          
Permits   9,629    9,610 
Other intangible assets - net   529    629 
Finite risk sinking fund (restricted cash)   11,780    11,570 
Deferred tax assets   4,007    4,116 
Other assets   405    438 
Total assets  $74,580   $70,898 

 

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

 

1

 

 

PERMA-FIX ENVIRONMENTAL SERVICES, INC.

Condensed Consolidated Balance Sheets, Continued

 

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

June 30, 2023

(Unaudited)
   December 31, 2022 
         
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current liabilities:          
Accounts payable  $13,896   $10,325 
Accrued expenses   4,086    4,593 
Disposal/transportation accrual   1,179    887 
Deferred revenue   4,852    4,813 
Accrued closure costs - current   548    682 
Current portion of long - term debt   456    476 
Current portion of operating lease liabilities   385    416 
Current portion of finance lease liabilities   199    154 
Current liabilities related to discontinued operations   280    362 
Total current liabilities   25,881    22,708 
           
Accrued closure costs   7,491    7,284 
Long-term debt, less current portion   316    563 
Long-term operating lease liabilities, less current portion   1,399    1,584 
Long-term finance lease liabilities, less current portion   350    318 
Long-term liabilities related to discontinued operations   913    908 
Total long-term liabilities   10,469    10,657 
           
Total liabilities   36,350    33,365 
           
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; 13,562,743 and 13,332,398 shares issued, respectively; 13,555,101 and 13,324,756 shares outstanding, respectively

   14    13 
Additional paid-in capital   115,789    115,209 
Accumulated deficit   (77,373)   (77,436)
Accumulated other comprehensive loss   (112)   (165)
Less Common Stock in treasury, at cost; 7,642 shares   (88)   (88)
Total stockholders’ equity   38,230    37,533 
           
Total liabilities and stockholders’ equity  $74,580   $70,898 

 

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

 

2

 

 

PERMA-FIX ENVIRONMENTAL SERVICES, INC.

Condensed Consolidated Statements of Operations

(Unaudited)

 

                     
   Three Months Ended   Six Months Ended 
   June 30,   June 30, 
(Amounts in Thousands, Except for Per Share Amounts)  2023   2022   2023   2022 
                 
Net revenues  $25,032   $19,455   $45,139   $35,370 
Cost of goods sold   20,516    16,571    37,614    30,850 
Gross profit   4,516    2,884    7,525    4,520 
                     
Selling, general and administrative expenses   3,551    3,684    7,036    7,106 
Research and development   121    80    220    176 
Loss on disposal of property and equipment               1 
Income (loss) from operations   844    (880)   269    (2,763)
                     
Other income (expense):                    
Interest income   172    29    298    40 
Interest expense   (47)   (41)   (100)   (76)
Interest expense-financing fees   (24)   (15)   (44)   (28)
Other   6    (3)   7    (5)
Income (loss) from continuing operations before taxes   951    (910)   430    (2,832)
Income tax expense (benefit)   432    347    228    (326)
Income (loss) from continuing operations, net of taxes   519    (1,257)   202    (2,506)
                     
Loss from discontinued operations, net of taxes (Note 10)   (45)   (188)   (139)   (282)
Net income (loss)  $474   $(1,445)  $63   $(2,788)
                     
Net income (loss) per common share - basic:                    
Continuing operations  $.04   $(.10)  $.01   $(.19)
Discontinued operations       (.01)   (.01)   (.02)
Net income (loss) per common share  $.04   $(.11)  $   $(.21)
                     
Net income (loss) per common share - diluted:                    
Continuing operations  $.03   $(.10)  $.01   $(.19)
Discontinued operations       (.01)   (.01)   (.02)
Net income (loss) per common share  $.03   $(.11)  $   $(.21)
                     
Number of common shares used in computing net income (loss) per share:                    
Basic   13,474    13,264    13,417    13,249 
Diluted   13,848    13,264    13,657    13,249 

 

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

 

3

 

 

PERMA-FIX ENVIRONMENTAL SERVICES, INC.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

 

                     
   Three Months Ended   Six Months Ended 
   June 30,   June 30, 
(Amounts in Thousands)  2023   2022   2023   2022 
                 
Net income (loss)  $474   $(1,445)  $63   $(2,788)
Other comprehensive income (loss):                    
Foreign currency translation gain (loss)   46    (67)   53    (41)
Total other comprehensive income (loss)   46    (67)   53    (41)
                     
Comprehensive income (loss)  $520   $(1,512)  $116   $(2,829)

 

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

 

4

 

 

PERMA-FIX ENVIRONMENTAL SERVICES, INC

Condensed 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

   Accumulated  

Total

Stockholders’

 
   Shares   Amount   Capital   Treasury   Loss   Deficit   Equity 
                             
Balance at December 31, 2022   13,332,398   $    13   $115,209   $(88)  $        (165)  $(77,436)  $  37,533 
Net loss                       (411)   (411)
Foreign currency translation                   7        7 
Issuance of Common Stock for services   33,319        118                118 
Issuance of Common Stock upon exercise of options   31,719        7                7 
Stock-Based Compensation           118                118 
Balance at March 31, 2023   13,397,436   $13   $115,452   $(88)  $(158)  $(77,847)  $37,372 
Net income                       474    474 
Foreign currency translation                   46        46 
Issuance of Common Stock for services   10,171        119                119 
Issuance of Common Stock upon exercise of options   155,136    1    93                94 
Stock-Based Compensation           125                125 
Balance at June 30, 2023   13,562,743   $14   $115,789   $(88)  $(112)  $(77,373)  $38,230 
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 

 

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

 

5

 

 

PERMA-FIX ENVIRONMENTAL SERVICES, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

           
   Six Months Ended 
   June 30, 
(Amounts in Thousands)  2023   2022 
Cash flows from operating activities:          
Net income (loss)  $63   $(2,788)
Less: loss from discontinued operations, net of taxes (Note 10)   (139)   (282)
           
Income (loss) from continuing operations, net of taxes   202    (2,506)
Adjustments to reconcile income (loss) from continuing operations to cash provided by (used in) operating activities:          
Depreciation and amortization   1,439    936 
Amortization of debt issuance costs   43    28 
Deferred tax expense (benefit)   228    (326)
Provision for (recovery of) credit losses on accounts receivable   24    (50)
Loss on disposal of property and equipment       1 
Issuance of common stock for services   237    243 
Stock-based compensation   243    205 
Changes in operating assets and liabilities of continuing operations          
Accounts receivable   (2,590)   (1,534)
Unbilled receivables   (1,059)   2,647 
Prepaid expenses, inventories and other assets   3,160    1,988 
Accounts payable, accrued expenses and unearned revenue   2,835    (4,322)
Cash provided by (used in) continuing operations   4,762    (2,690)
Cash used in discontinued operations   (336)   (367)
Cash provided by (used in) operating activities   4,426    (3,057)
           
Cash flows from investing activities:          
Purchases of property and equipment   (1,047)   (758)
Proceeds from sale of property and equipment       25 
Cash used in investing activities of continuing operations   (1,047)   (733)
           
Cash flows from financing activities:          
Repayments of revolving credit borrowings   (44,130)   (33,545)
Borrowing on revolving credit   44,130    33,545 
Proceeds from issuance of Common Stock upon exercise of options   101     
Proceeds from capital line       524 
Principal repayments of finance lease liabilities   (81)   (718)
Principal repayments of long term debt   (273)   (229)
Payment of debt issuance costs   (37)   (21)
Cash used in financing activities of continuing operations   (290)   (444)
           
Effect of exchange rate changes on cash   5    (3)
           
Increase (decrease) in cash and finite risk sinking fund (restricted cash)   3,094    (4,237)
Cash and finite risk sinking fund (restricted cash) at beginning of period   13,436    15,911 
Cash and finite risk sinking fund (restricted cash) at end of period  $16,530   $11,674 
           
Supplemental disclosure:          
Interest paid  $103   $79 
Income taxes paid       6 
Non-cash financing activities:          
Equipment purchase subject to finance lease   157    114 

 

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

 

6

 

 

PERMA-FIX ENVIRONMENTAL SERVICES, INC.

Notes to Condensed Consolidated Financial Statements

June 30, 2023

(Unaudited)

 

1. Basis of Presentation

 

The condensed 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 condensed 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, 2023, are not necessarily indicative of results to be expected for the fiscal year ending December 31, 2023.

 

The Company suggests that these condensed 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, 2022.

 

The condensed consolidated financial statements include the accounts of our wholly-owned subsidiaries. The Company’s continuing operations also consisted of Perma-Fix ERRG, a variable interest entity (“VIE”) for which we were the primary beneficiary. During the fourth quarter of 2022, project work under the joint venture was completed.

 

2. Summary of Significant Accounting Policies

 

Our accounting policies are as set forth in the notes to the December 31, 2022 consolidated financial statements referred to above.

 

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  Three Months Ended   Three Months Ended 
(In thousands)  June 30, 2023   June 30, 2022 
   Treatment   Services   Total   Treatment   Services   Total 
Fixed price  $12,834   $11,161   $23,995   $8,393   $7,916   $16,309 
Time and materials       1,037    1,037        3,146    3,146 
Total  $12,834   $12,198   $25,032   $8,393   $11,062   $19,455 

 

7

 

 

                               
Revenue by Contract Type  Six Months Ended   Six Months Ended 
(In thousands)  June 30, 2023   June 30, 2022 
   Treatment   Services   Total   Treatment   Services   Total 
Fixed price  $22,428   $19,808   $42,236   $15,872   $13,677   $29,549 
Time and materials       2,903    2,903        5,821    5,821 
Total  $22,428   $22,711   $45,139   $15,872   $19,498   $35,370 

 

                               
 Revenue by generator Three Months Ended   Three Months Ended 
 (In thousands) June 30, 2023   June 30, 2022 
   Treatment   Services   Total   Treatment   Services   Total 
Domestic government  $9,808   $11,441   $21,249   $6,243   $10,649   $16,892 
Domestic commercial   2,269    742    3,011    1,803    384    2,187 
Foreign government   657    (7)   650    153    8    161 
Foreign commercial   100    22    122    194    21    215 
Total  $12,834   $12,198   $25,032   $8,393   $11,062   $19,455 

 

                               
Revenue by generator  Six Months Ended   Six Months Ended 
 (In thousands)   June 30, 2023   June 30, 2022 
   Treatment   Services   Total   Treatment   Services   Total 
Domestic government  $17,065   $21,159   $38,224   $12,058   $18,894   $30,952 
Domestic commercial   4,475    1,339    5,814    3,239    546    3,785 
Foreign government   752    170    922    245    14    259 
Foreign commercial   136    43    179    330    44    374 
Total  $22,428   $22,711   $45,139   $15,872   $19,498   $35,370 

 

Contract Balances

 

The timing of revenue recognition and billings results in unbilled receivables (contract assets). The Company’s contract liabilities consist of deferred revenues which represent payment from customers in advance of the completion of our performance obligation. The following table represents changes in our contract asset and contract liabilities balances:

 

           Year-to-date    Year-to-date  
(In thousands)  June 30, 2023   December 31, 2022   Change ($)   Change (%) 
Contract assets                    
Unbilled receivables - current  $7,121   $6,062   $1,059    17.5%
                     
Contract liabilities                    
Deferred revenue  $4,852   $4,813   $39    0.8%

 

During the three and six months ended June 30, 2023, the Company recognized revenue of $1,098,000 and $4,593,000, 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, 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. Revenue recognized in each period related to performance obligations satisfied within the respective period.

 

Remaining Performance Obligations

 

The Company applies the practical expedient in Accounting Standards Codification (“ASC”) 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.

 

8

 

 

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 include primarily leases for office and warehouse spaces used to conduct our business. The Company’s operating leases also include a building with land utilized for our waste treatment operations which includes a purchase option. 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, 2023 and 2022 were as follows (in thousands):

 

                     
   Three Months Ended   Six Months Ended 
   June 30,   June 30, 
   2023   2022   2023   2022 
                 
Operating Leases:                    
Lease cost  $156   $157   $313   $314 
                     
Finance Leases:                    
Amortization of ROU assets   38    44    76    91 
Interest on lease liability   7    10    13    21 
 Finance leases   45    54    89    112 
                     
Short-term lease rent expense   1    3    1    7 
                     
Total lease cost   202    214    403    433 

 

The weighted average remaining lease term and the weighted average discount rate for operating and finance leases at June 30, 2023 were:

 

   Operating Leases   Finance Leases 
Weighted average remaining lease terms (years)   6.0    2.2 
           
Weighted average discount rate   7.9%   6.0%

 

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%

 

9

 

 

The following table reconciles the undiscounted cash flows for the operating and finance leases at June 30, 2023 to the operating and finance lease liabilities recorded on the balance sheet (in thousands):

 

   Operating Leases   Finance Leases 
2023  $267   $115 
2024   416    222 
2025   324    200 
2026   301    47 
2027   286    12 
2028 and thereafter   656    2 
Total undiscounted lease payments   2,250    598 
Less: Imputed interest   (466)   (49)
Present value of lease payments  $1,784   $549 
           
Current portion of operating lease obligations  $385   $ 
Long-term operating lease obligations, less current portion  $1,399   $ 
Current portion of finance lease obligations  $   $199 
Long-term finance lease obligations, less current portion  $   $350 

 

Supplemental cash flow and other information related to our leases were as follows for the three and six months ended June 30, 2023 and 2022 (in thousands):

 

                     
   Three Months Ended   Six Months Ended 
   June 30,   June 30, 
   2023   2022   2023   2022 
Cash paid for amounts included in the measurement of lease liabilities:                    
Operating cash flow used in operating leases  $146   $143   $290   $286 
Operating cash flow used in finance leases  $7   $10   $13   $21 
Financing cash flow used in finance leases  $40   $661   $81   $718 
ROU assets obtained in exchange for lease obligations for:                    
Finance liabilities  $107   $   $157   $147 

 

5. Intangible Assets

 

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

 

       June 30, 2023   December 31, 2022 
  

Weighted

Average

 Amortization

   Gross      Net   Gross      Net 
Other Intangibles (amount in thousands) 

Period

(Years)

  

Carrying

Amount

  

Accumulated

Amortization

  

Carrying

Amount

  

Carrying

Amount

  

Accumulated

Amortization

  

Carrying

Amount

 
                            
Patent  8.3   $700   $(380)  $320   $711   $(374)  $337 
Software  3    661    (500)   161    640