NOTE 13

COMMITMENTS AND CONTINGENCIES

Hazardous Waste

In connection with our waste management services, the Company processes hazardous, non-hazardous, low-level radioactive and mixed (containing both hazardous and low-level radioactive) waste, which we transport to our own, or other, facilities for destruction or disposal. As a result of disposing of hazardous substances, in the event any cleanup is required at the disposal site, the Company could be a potentially responsible party for the costs of the cleanup notwithstanding any absence of fault on our part.

Legal Matters

In the normal course of conducting our business, the Company may be involved in various litigation. The Company is not a party to any litigation or governmental proceeding which our management believes could result in any judgments or fines against us that would have a material adverse effect on our financial position, liquidity or results of future operations.

Michael O’Neill

On November 25, 2024, purported shareholder Michael O’Neill filed a complaint in the Court of Chancery of the State of Delaware against the Company and all current directors of the Company (the “Defendants”), asserting individual and class action claims for alleged breach of contract and breach of fiduciary duty. The case is styled Michael O’Neill v. Perma-Fix Environmental Services, Inc., et al., C.A. No. 2024-1211-PAF.

The complaint purports to be brought by the named plaintiff individually and on behalf of all “similarly situated Perma-Fix stockholders.” The complaint alleged that a proposal submitted to the Company’s stockholders at the Annual Meeting of Stockholders on July 20, 2023, with respect to the Second Amendment to the Company’s 2017 Stock Plan, to increase the number of shares available to be issued thereunder by 600,000 shares (the “Share Increase Proposal”), failed to pass, despite the Company reporting on its Current Report on Form 8-K filed with the Securities and Exchange Commission on July 24, 2023, that the Share Increase Proposal had in fact passed. Although the Company calculated the vote in accordance with the vote requirement disclosed in the Company’s proxy statement relating to, among other matters, the Share Increase Proposal, the putative class action asserted that a vote requirement set forth in Article II, Section 6 of the Bylaws compelled a different result, specifically, that broker non-votes should have been counted as votes against the proposal, despite the fact that (i) the Company had consistently excluded broker non-votes as being considered voting present with respect to a proposal on which the broker is not permitted to vote if not given instruction by the beneficial owner of the shares held of record by the broker, (ii) the vote requirement set forth in Article II, Section 6 of the Bylaws was explicitly stated as being subject to law, the Certificate of Incorporation or the Bylaws, and (iii) the more specific voting requirement set forth in Article II, Section 12 of the Bylaws clearly expressed that the voting requirement for all matters other than the election of Directors was “a majority of the votes that could be cast at the meeting upon a given question.” Since broker non-votes represent shares that could not be cast on the Share Increase Proposal, the Company believes that it appropriately excluded such shares from the calculation of the vote on the Share Increase Proposal.

However, after the Delaware Court of Chancery’s denial of the Company’s motion to dismiss, finding that the Bylaws could be read in more than one way, the Board acted to eliminate any uncertainty as to the intent of the Bylaws regarding the counting of broker non-votes and as to the effectiveness of the approval of the Share Increase Proposal. On November 13, 2025, the Board approved to rescind the Share Increase Proposal approved on July 20, 2023, and to amend the Bylaws. Additionally, the Board’s Compensation Committee recommended, and the Board approved, a new amendment to the Company’s 2017 Plan to increase the number of shares authorized under the 2017 Stock Plan by 600,000 shares (the “New Amendment”). The New Amendment, which essentially replaces the rescinded Share Increase Proposal, is subject to approval by the Company’s stockholders either at a special meeting of the Company’s stockholders or at the 2026 Annual Meeting of Stockholders, provided any such approval must be obtained within 12 months of the Board’s approval of the New Amendment. No options were granted pursuant to the rescinded Share Increase Proposal.

The Defendants continue to vigorously defend against the complaint.

The Company’s insurance carrier is providing a defense in connection with this lawsuit, subject to a $1,000,000 self-insured retention and the terms and limitations contained in the insurance policy.

Insurance

The Company has a 25-year finite risk insurance policy entered into in June 2003 (“2003 Closure Policy”) with AIG, which provides financial assurance to the applicable states for our permitted facilities in the event of unforeseen closure. The 2003 Closure Policy, as amended, provides for a maximum allowable coverage of $28,177,000 which includes available capacity to allow for annual inflation and other performance and surety bond requirements. Total coverage under the 2003 Closure Policy, as amended, was $23,951,000 as of December 31, 2025. As of December 31, 2025, and 2024, finite risk sinking funds contributed by the Company related to the 2003 Closure Policy which is included in other long term assets on the accompanying Consolidated Balance Sheets totaled $13,216,000 and $12,680,000, respectively, which included interest earned of $3,745,000 and $3,209,000 on the finite risk sinking funds as of December 31, 2025 and 2024, respectively. Interest income for the year ended 2025 and 2024 was approximately $536,000 and $606,000, respectively. If the Company so elects, AIG is obligated to pay the Company an amount equal to 100% of the finite risk sinking fund account balance in return for complete release of liability from both the Company and any applicable regulatory agency using this policy as an instrument to comply with financial assurance requirements.

Letter of Credits and Bonding Requirements

From time to time, the Company is required to post standby letters of credit and various bonds to support contractual obligations to customers and other obligations, including facility closures. As of December 31, 2025, the total amount of standby letters of credit outstanding was approximately $3,350,000 and the total amount of bonds outstanding was approximately $11,556,000.