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

☐	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.

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.

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.

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.

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
Balance		13,242,072	$	13	$	114,532	$	(88	)	$	(2	)	$	(74,963	)	$	39,492
Net loss		—		—		—		—			—			(1,445	)		(1,445	)
Net income 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		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.

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.

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:

Schedule of Disaggregation of Revenue

												\
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


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	$	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
Revenue	$	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:

Schedule of Contract Liabilities

					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.

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):

Schedule of Components of Lease Cost


	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:

Schedule of Weighted Average Lease

	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	%

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