Quarterly report pursuant to Section 13 or 15(d)

Operating Segments

Operating Segments

6 Months Ended

Jun. 30, 2018

11.

Operating Segments

In accordance with ASC 280, “Segment Reporting”, the Company defines an operating segment as a business activity: (a) from which we may earn revenue and incur expenses; (2) whose operating results are regularly reviewed by the chief operating decision makers (“CODM”) to make decisions about resources to be allocated to the segment and assess its performance; and (3) for which discrete financial information is available.

Our reporting segments are defined as below:

TREATMENT SEGMENT, which includes:

	-	nuclear, low-level radioactive, mixed waste (containing both hazardous and low-level radioactive constituents), hazardous and non-hazardous waste treatment, processing and disposal services primarily through three uniquely licensed and permitted treatment and storage facilities; and
	-	research and development (“R&D”) activities to identify, develop and implement innovative waste processing techniques for problematic waste streams.

SERVICES SEGMENT, which includes:

Technical services, which include:

	o	professional radiological measurement and site survey of large government and commercial installations using advanced methods, technology and engineering;
	o	integrated Occupational Safety and Health services including industrial hygiene (“IH”) assessments; hazardous materials surveys, e.g., exposure monitoring; lead and asbestos management/abatement oversight; indoor air quality evaluations; health risk and exposure assessments; health & safety plan/program development, compliance auditing and training services; and Occupational Safety and Health Administration (“OSHA”) citation assistance;
	o	global technical services providing consulting, engineering, project management, waste management, environmental, and decontamination and decommissioning field, technical, and management personnel and services to commercial and government customers; and
	o	on-site waste management services to commercial and governmental customers.

Nuclear services, which include:

	o	technology-based services including engineering, decontamination and decommissioning (“D&D”), specialty services, logistics, transportation, processing and disposal;
	o	remediation of nuclear licensed and federal facilities and the remediation cleanup of nuclear legacy sites. Such services capability includes: project investigation; radiological engineering; partial and total plant D&D; facility decontamination, dismantling, demolition, and planning; site restoration; logistics; transportation; and emergency response; and

A company owned equipment calibration and maintenance laboratory that services, maintains, calibrates, and sources (i.e., rental) health physics, IH and customized nuclear, environmental, and occupational safety and health (“NEOSH”) instrumentation.

MEDICAL SEGMENT reporting includes: R&D costs for the new medical isotope production technology from our majority-owned Polish subsidiary, PF Medical. The Medical Segment has not generated any revenue as it continues to be primarily in the R&D stage. All costs incurred for the Medical Segment are reflected within R&D in the accompanying Consolidated Statements of Operations. As previously disclosed, during 2016, the Medical Segment ceased a substantial portion of its R&D activities for the medical isotope production technology due to the need for substantial capital to fund such activities. The Company does not anticipate that the Medical Segment will restart such activities until it obtains such funding.

Our reporting segments exclude our corporate headquarters and our discontinued operations (see “Note 10 – Discontinued Operations”) which do not generate revenues.

The table below presents certain financial information of our operating segments for the three and six months ended June 30, 2018 and 2017 (in thousands).

Segment Reporting for the Quarter Ended June 30, 2018

	Treatment			Services		Medical			Segments Total			Corporate ⁽¹⁾			Consolidated Total
Revenue from external customers	$	9,146		$	4,014		—		$	13,160		$	—		$	13,160
Intercompany revenues		77			26		—			103			—			—
Gross profit		1,523			520		—			2,043			—			2,043
Research and development		115			—		71			186			33			219
Interest income		—			—		—			—			81			81
Interest expense		(8	)		—		—			(8	)		(54	)		(62	)
Interest expense-financing fees		—			—		—			—			(9	)		(9	)
Depreciation and amortization		227			123		—			350			9			359
Segment income (loss) before income taxes		2,028	⁽²⁾		116		(71	)		2,073			(1,266	)		807
Income tax expense		14			—		—			14			5			19
Segment income (loss)		2,014			116		(71	)		2,059			(1,271	)		788
Expenditures for segment assets		271			35		—			306			—			306

Segment Reporting for the Quarter Ended June 30, 2017

	Treatment			Services			Medical			Segments Total			Corporate ⁽¹⁾			Consolidated Total
Revenue from external customers	$	9,630		$	3,085			—		$	12,715		$	—		$	12,715
Intercompany revenues		97			7			—			104			—			—
Gross profit		2,174			180			—			2,354			—			2,354
Research and development		62			—			550			612			7			619
Interest income		—			—			—			—			36			36
Interest expense		(18	)		—			—			(18	)		(72	)		(90	)
Interest expense-financing fees		—			—			—			—			(9	)		(9	)
Depreciation and amortization		988			135			—			1,123			10			1,133
Segment income (loss) before income taxes		1,238			(553	)		(550	)		135			(1,295	)		(1,160	)
Income tax expense		65			—			—			65			1			66
Segment income (loss)		1,173			(553	)		(550	)		70			(1,296	)		(1,226	)
Expenditures for segment assets		91			3			—			94			—			94

Segment Reporting for the Six Months Ended June 30, 2018

	Treatment			Services			Medical			Segments Total			Corporate ⁽¹⁾			Consolidated Total
Revenue from external customers	$	18,105		$	7,712			—		$	25,817		$	—		$	25,817
Intercompany revenues		289			39			—			328			—			—
Gross profit		4,303			1,060			—			5,363			—			5,363
Research and development		228			—			172			400			51			451
Interest income		—			—			—			—			130			130
Interest expense		(8	)		(1	)		—			(9	)		(106	)		(115	)
Interest expense-financing fees		—			—			—			—			(18	)		(18	)
Depreciation and amortization		467			246			—			713			18			731
Segment income (loss) before income taxes		3,772	⁽²⁾		31			(172	)		3,631			(2,521	)		1,110
Income tax expense		65			—			—			65			5			70
Segment income (loss)		3,707			31			(172	)		3,566			(2,526	)		1,040
Expenditures for segment assets		491			60			—			551			3			554

Segment Reporting for the Six Months Ended June 30, 2017

	Treatment			Services			Medical			Segments Total			Corporate ⁽¹⁾			Consolidated Total
Revenue from external customers	$	19,665		$	5,757			—		$	25,422		$	—		$	25,422
Intercompany revenues		113			10			—			123			—			—
Gross profit		4,861			212			—			5,073			—			5,073
Research and development		243			—			750			993			15			1,008
Interest income		—			—			—			—			71			71
Interest expense		(26	)		(1	)		—			(27	)		(162	)		(189	)
Interest expense-financing fees		—			—			—			—			(18	)		(18	)
Depreciation and amortization		1,997			271			—			2,268			20			2,288
Segment income (loss) before income taxes		2,840			(1,260	)		(750	)		830			(2,584	)		(1,754	)
Income tax expense		145			—			—			145			2			147
Segment income (loss)		2,695			(1,260	)		(750	)		685			(2,586	)		(1,901	)
Expenditures for segment assets		106			10			—			116			—			116

⁽¹⁾Amounts reflect the activity for corporate headquarters not included in the segment information.

⁽²⁾Amounts included a net gain of $1,596,000 recorded resulting from the exchange offer of the Series B Preferred Stock of our M&EC subsidiary (see “Note 13 – M&EC Series B Preferred Stock” below).