NOTE 3

COVID-19 IMPACT

The COVID-19 pandemic that started in early part of 2020 continues to present potential new risks to our business and continues to result in significant volatility in the U.S. and international markets. The Company continues to closely monitor the impact of the COVID-19 pandemic on all aspects of our business. Starting in late March 2020, the Company’s operations were impacted by the shutdown of a number of projects and the delays of certain waste shipments. Since the latter part of the second quarter of 2020, all of the projects that were previously shutdown within our Services Segment restarted as stay-at-home orders and certain other restrictions resulting from the pandemic were lifted. Despite the shutdown of certain projects for part of 2020, revenues generated within our Services Segment in 2020 exceeded our revenue generated in 2019 by approximately $42,188,000. The Company continues to experience delays in waste shipments from certain customers within our Treatment Segment directly related to the impact of COVID-19 including generator shutdowns and limited sustained operations, along with other factors. However, the Company expects to see a gradual return in waste receipts from these customers starting in the first half of 2021 as they accelerate operations. As the impact of COVID-19 remains fluid, the uncertainty in waste receipt shipments may impact our results of operations for the first quarter of 2021 and potentially the second quarter of 2021. The potential for a material impact on the Company’s business increases the longer COVID-19 impacts the level of economic activities in the United States and globally as our customers may continue to delay waste shipments and project work may shut down again. For this reason, we cannot reasonably estimate with any degree of certainty the future impact COVID-19 may have on our results of operations, financial position, and liquidity which may impact our ability to meet our financial covenant requirements under our credit facility.

The Company’s cash flow requirements during 2020 were primarily financed by our operations, credit facility availability, and proceeds from the PPP Loan (established under the CARES Act) that the Company entered into with its credit facility lender in April 2020 (see “Note 10 – Long Term Debt – PPP Loan” for further detail of this loan). At December 31, 2020, the Company had borrowing availability under its revolving credit facility of approximately $14,220,000 which was based on a percentage of eligible receivables and subject to certain reserves and included its cash on hand of approximately $7,924,000. The Company’s working capital at December 31, 2020 was approximately $3,672,000 as compared to working capital of $26,000 at December 31, 2019. Our working capital at December 31, 2020 included the classification of approximately $3,191,000 of the outstanding PPP Loan balance of $5,318,000 at December 31, 2020 as “Current portion of long-term debt” on our Consolidated Balance Sheets. We have applied for forgiveness on repayment of the entire PPP Loan balance which is subject to the review and approval of our lender and the SBA.

At this time, the Company believes it has sufficient liquidity on hand to fund cash flow requirements for the next twelve months which consist primarily of general working capital needs, scheduled principal payments on our debt obligations, remediation projects, and planned capital expenditures. The Company plans to fund these requirements from our operations, credit facility availability, and cash on hand. The Company is continually reviewing operating costs during this volatile time and is committed to further reducing operating costs to bring them in line with revenue levels, when necessary. These measures include curtailing capital expenditures, eliminating non-essential expenditures and implementing a hiring freeze as needed.

The Company is closely monitoring our customers’ payment performance. However, as a significant portion of our revenues is derived from government related contracts, the Company does not expect its accounts receivable collections to be materially impacted due to COVID-19.

As previously disclosed, the Company’s Medical Segment has not generated any revenue. The Company anticipates that its Medical Segment will not resume full R&D activities until it obtains the necessary funding through obtaining its own credit facility or additional equity raise or obtaining new partners willing to fund its R&D activities. If the Medical Segment is unable to raise the necessary capital, the Medical Segment could be required to further reduce, delay or eliminate its R&D program.