Quarterly report pursuant to Section 13 or 15(d)

Operating Segments

Operating Segments

6 Months Ended

Jun. 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:

	○	professional radiological measurement and site survey of large government and commercial installations using advanced methods, technology and engineering;
		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;
	○	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
	○	on-site waste management services to commercial and governmental customers.

Nuclear services, which include:

	○	technology-based services including engineering, decontamination and decommissioning (“D&D”), specialty services and construction, logistics, transportation, processing and disposal;
	○	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 six months ended June 30, 2019 and 2018 (in thousands).

Segment Reporting for the Quarter Ended June 30, 2019
	Treatment			Services			Medical			Segments Total			Corporate⁽¹⁾			Consolidated Total
Revenue from external customers	$	10,094		$	7,041			—		$	17,135		$	—		$	17,135
Intercompany revenues		7			42			—			49			—			—
Gross profit		2,627			644			—			3,271			—			3,271
Research and development		136			—			80			216			7			223
Interest income		—			—			—			—			107			107
Interest expense		(30	)		(4	)		—			(34	)		(73	)		(107	)
Interest expense-financing fees		—			—			—			—			(60	)		(60	)
Depreciation and amortization		233			79			—			312			5			317
Segment income (loss) before income taxes		1,611			137			(80	)		1,668			(1,289	)		379
Income tax expense		6			—			—			6			—			6
Segment income (loss)		1,605			137			(80	)		1,662			(1,289	)		373
Expenditures for segment assets		73			15			—			88			—			88

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 Six Months Ended June 30, 2019
	Treatment			Services			Medical			Segments Total			Corporate⁽¹⁾			Consolidated Total
Revenue from external customers	$	19,999		$	8,844			—		$	28,843		$	—		$	28,843
Intercompany revenues		9			63			—			72			—			—
Gross profit		5,584			188			—			5,772			—			5,772
Research and development		283			—			154			437			13			450
Interest income		—			—			—			—			188			188
Interest expense		(47	)		(13	)		—			(60	)		(134	)		(194	)
Interest expense-financing fees		—			—			—			—			(70	)		(70	)
Depreciation and amortization		470			157			—			627			14			641
Segment income (loss) before income taxes		3,487			(875	)		(154	)		2,458			(2,590	)		(132	)
Income tax expense		45			—			—			45			—			45
Segment income (loss)		3,442			(875	)		(154	)		2,413			(2,590	)		(177	)
Expenditures for segment assets		294			18			—			312			—			312

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		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 which was consummated on May 30, 2018.