Quarterly report pursuant to Section 13 or 15(d)

Operating Segments

Operating Segments

9 Months Ended

Sep. 30, 2019

12.

Operating Segments

In accordance with ASC 280, “Segment Reporting”, the Company defines an operating segment as a business activity: (1) from which we may earn revenue and incur expenses; (2) whose operating results are regularly reviewed by the chief operating decision maker (“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
	-	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 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 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 and construction, 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 NIOSH instrumentation.
	-	A company owned gamma spectroscopy laboratory for the analysis of oil and gas industry solids and liquids.

MEDICAL SEGMENT, which includes: Research and Development (“R&D”) of the Company’s medical isotope production technology by our majority-owned Polish subsidiary, Perma-Fix Medical S.A. and its wholly-owned subsidiary Perma-Fix Medical Corporation (“PFM Corporation”) (together known as “PF Medical” or the Medical Segment). The Company’s Medical Segment has not generated any revenue as it remains in the R&D stage. The Medical Segment has substantially reduced its R&D activities due to the need for capital to fund these activities. The Company anticipates that the Medical Segment will not resume full R&D activities until the necessary capital is obtained through its own credit facility or additional equity raise or obtains partners willing to provide funding for its R&D. All costs incurred by the Medical Segment are reflected within R&D in the accompanying consolidated financial statements.

Our reporting segments exclude our corporate headquarters and our discontinued operations (see “Note 11 – Discontinued Operations”) which do not generate revenues.

The table below presents certain financial information of our operating segments for the three and nine months ended September 30, 2019 and 2018 (in thousands).

Segment Reporting for the Quarter Ended September 30, 2019

	Treatment			Services			Medical			Segments Total			Corporate ⁽¹⁾			Consolidated Total
Revenue from external customers	$	10,081		$	12,454			—		$	22,535		$	—		$	22,535
Intercompany revenues		75			38			—			113			—			—
Gross profit		3,338			1,819			—			5,157			—			5,157
Research and development		85			—			74			159			6			165
Interest income		—			—			—			—			77			77
Interest expense		(19	)		(5	)		—			(24	)		(75	)		(99	)
Interest expense-financing fees		—			—			—			—			(69	)		(69	)
Depreciation and amortization		243			79			—			322			6			328
Segment income (loss) before income taxes		2,244			1,193			(74	)		3,363			(1,413	)		1,950
Income tax expense		55			—			—			55			—			55
Segment income (loss)		2,189			1,193			(74	)		3,308			(1,413	)		1,895
Expenditures for segment assets		470			31			—			501			—			501

Segment Reporting for the Quarter Ended September 30, 2018

	Treatment			Services			Medical			Segments Total			Corporate ⁽¹⁾			Consolidated Total
Revenue from external customers	$	9,103		$	2,881			—		$	11,984		$	—		$	11,984
Intercompany revenues		174			16			—			190			—			—
Gross profit		1,564			261			—			1,825			—			1,825
Research and development		126			—			88			214			15			229
Interest income		—			—			—			—			82			82
Interest expense		(8	)		(1	)		—			(9	)		(53	)		(62	)
Interest expense-financing fees		—			—			—			—			(10	)		(10	)
Depreciation and amortization		234			122			—			356			8			364
Segment income (loss) before income taxes		506			(224	)		(88	)		194			(1,219	)		(1,025	)
Income tax (benefit) expense		(1,342	)⁽³⁾		—			—			(1,342	)		—			(1,342	)
Segment income (loss)		1,848			(224	)		(88	)		1,536			(1,219	)		317
Expenditures for segment assets		525			22			—			547			1			548

Segment Reporting for the Nine Months Ended September 30, 2019

	Treatment			Services			Medical			Segments Total			Corporate ⁽¹⁾			Consolidated Total
Revenue from external customers	$	30,079		$	21,299			—		$	51,378		$	—		$	51,378
Intercompany revenues		83			101			—			184			—			—
Gross profit		8,921			2,008			—			10,929			—			10,929
Research and development		367			—			228			595			20			615
Interest income		—			—			—			—			265			265
Interest expense		(66	)		(18	)		—			(84	)		(209	)		(293	)
Interest expense-financing fees		—			—			—			—			(139	)		(139	)
Depreciation and amortization		713			236			—			949			19			968
Segment income (loss) before income taxes		5,731			318			(228	)		5,821			(4,003	)		1,818
Income tax expense		99			—			—			99			—			99
Segment income (loss)		5,632			318			(228	)		5,722			(4,003	)		1,719
Expenditures for segment assets		764			49			—			813			—			813

Segment Reporting for the Nine Months Ended September 30, 2018

	Treatment			Services			Medical			Segments Total			Corporate ⁽¹⁾			Consolidated Total
Revenue from external customers	$	27,207		$	10,594			—		$	37,801		$	—		$	37,801
Intercompany revenues		463			55			—			518			—			—
Gross profit		5,867			1,322			—			7,189			—			7,189
Research and development		355			—			259			614			66			680
Interest income		—			—			—			—			212			212
Interest expense		(16	)		(2	)		—			(18	)		(159	)		(177	)
Interest expense-financing fees		—			—			—			—			(27	)		(27	)
Depreciation and amortization		702			367			—			1,069			26			1,095
Segment income (loss) before income taxes		4,279	⁽²⁾		(194	)		(259	)		3,826			(3,740	)		86
Income tax (benefit) expense		(1,277	)⁽³⁾		—			—			(1,277	)		5			(1,272	)
Segment income (loss)		5,556			(194	)		(259	)		5,103			(3,745	)		1,358
Expenditures for segment assets		1,016			82			—			1,098			4			1,102

⁽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 which was consummated on May 30, 2018.

⁽³⁾Amounts included a tax benefit recorded in the amount of approximately $1,380,000 during the third quarter. (see “Note 13 – Income Taxes” below).