NOTE 1 DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Perma-Fix Environmental Services, Inc. (the Company, which may be referred to as we, us, or our), an environmental and technology know-how company, is a Delaware corporation, engaged through its subsidiaries, in three reportable segments:

TREATMENT SEGMENT, which includes:

SERVICES SEGMENT, which includes:

The Company’s continuing operations consist of the operations of our subsidiaries/facilities as follow: Diversified Scientific Services, Inc. (“DSSI”), Perma-Fix of Florida, Inc. (“PFF”), Perma-Fix of Northwest Richland, Inc. (“PFNWR”), Safety & Ecology Corporation (“SEC”), Perma-Fix Environmental Services UK Limited (“PF UK Limited”), Perma-Fix of Canada, Inc. (“PF Canada”) and Oak Ridge Environmental Waste Operations Center (“EWOC”).

The Company’s continuing operations also consisted of Perma-Fix ERRG, a variable interest entity (“VIE”) for which we were the primary beneficiary. The VIE was an unpopulated joint venture (“JV”) entered between the Company and Engineering/Remediation Resources Group, Inc. (“ERRG”) for a specific project under the Services Segment in which the Company and ERRG had a 51% and 49% partnership interest in the joint venture, respectively. During the fourth quarter of 2022, project work under the JV was completed As of December 31, 2022, total assets and liabilities under the VIE were each $0.

The Company’s discontinued operations (see “Note 9 – Discontinued Operations”) consist of operations of all our subsidiaries included in our Industrial Segment which encompasses subsidiaries divested in 2011 and prior and three previously closed locations.

For 2021, the Company’s segment also included the Medical Segment. The Medical Segment entailed the R&D of the Company’s medical isotope production technology by the Company’s majority-owned Polish subsidiary, Perma-Fix Medical S.A (“PFM Poland”), and PFM Poland’s wholly-owned subsidiary, Perma-Fix Medical Corporation (“PFMC”). The Company’s Medical Segment (or “PF Medical”) had not generated any revenue. During the fourth quarter of 2021, the Company made the strategic decision to cease all R&D activities under the Medical Segment which resulted in the sale of 100% of PFM Poland (See “Note 15 – PF Medical” for a discussion of this sale).

Financial Positions and Liquidity

The Company’s 2022 financial results continued to be impacted by COVID-19, among other things. The Company’s Treatment Segment began to see steady improvements in waste receipts starting in the second quarter of 2022 from certain customers who had previously delayed waste shipments due, in part, from the impact of COVID-19. This positive trend was negatively impacted by occurrences of severe weather conditions which resulted in temporary delays in waste shipments from certain customers and a temporary shortage in skilled production personnel which peaked through the fourth quarter of 2022 at one of the Company’s facilities. In early part of 2022, the Company’s Services Segment continued to experience delays/curtailments in project work by certain customers since the award of projects to us late in the second quarter of 2021 due to COVID-19 impact and/or administrative delays. However, starting in the second quarter of 2022, work under these projects had resumed/increased as the pandemic impacts began to subside and has since reached full operational status.

In 2022, the Company continued to realize delays in procurement and planning on behalf of our government clients that saw easing through the second half of the year. Heading into 2023, the Company expects to see continued improvements in waste receipts and continued increases in project work from contracts recently won and bids submitted in both segments that are awaiting awards, subject to potential impact of COVID-19 and economic impacts.

The Company’s cash flow requirements during the twelve months ended December 31, 2022 were primarily financed by its operations, cash on hand and credit facility availability. The Company’s cash flow requirements for the next twelve months will consist primarily of general working capital needs, scheduled principal payments on its debt obligations, remediation projects, and planned capital expenditures. The Company plans to fund these requirements from its operations, credit facility availability, cash on hand and a refund that it expects to receive under the Employee Retention Credit program under the CARES Act (see a discussion of this expected refund in “Note 11 – The Coronavirus Aid, Relief, and Economic Security Act (“CARES ACT) – Employee Retention Credit (“ERC”)”). The Company continues to explore all sources of increasing its capital and/or liquidity and to improve its revenue and working capital, including either amending our existing lines of credit, obtaining new term loans or entering into equity transactions. There are no assurances that we will be successful in increasing our liquidity though these efforts. The Company is continually reviewing operating costs and reviewing the possibility of further reducing operating costs and non-essential expenditures to bring them in line with revenue levels, when necessary. At this time, the Company believes that its cash flows from operations, available liquidity from its credit facility, cash on hand and the expected refund from the ERC program should be sufficient to fund its operations for the next twelve months. The Company continues to closely monitor any potential impact from the countries’ economic conditions and COVID-19 pandemic on all aspects of our business.