# Perma Fix Environmental Services Inc: Form 10-Q for the period ended Mar 31, 2023

- Company: [Perma Fix Environmental Services Inc](/companies/pesi.md) (CIK 891532)
- Form: 10-Q
- Filed: 2023-05-10
- Accepted by EDGAR: May 10, 2023, 12:39 ET
- Period: 2023-03-31
- Accession: 0001493152-23-016118
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/891532/000149315223016118/form10-q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/891532/000149315223016118/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-01-01 to 2023-03-31 | $20.1m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-01-01 to 2023-03-31 | $17.1m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2023-01-01 to 2023-03-31 | $3.0m | us-gaap:GrossProfit |
| Research and development | 3 months, 2023-01-01 to 2023-03-31 | $99.0k | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2023-01-01 to 2023-03-31 | $3.5m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-01-01 to 2023-03-31 | −$576.0k | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-01-01 to 2023-03-31 | $53.0k | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-01-01 to 2023-03-31 | −$204.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-01-01 to 2023-03-31 | −$411.0k | us-gaap:NetIncomeLoss |
| Basic EPS | 3 months, 2023-01-01 to 2023-03-31 | −$0.03 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-01-01 to 2023-03-31 | 13,358,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2023-01-01 to 2023-03-31 | $1.6m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2023-01-01 to 2023-03-31 | $748.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2023-03-31 | $2.4m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-03-31 | $24.9m | us-gaap:AssetsCurrent |
| Total assets | at 2023-03-31 | $72.5m | us-gaap:Assets |
| Current liabilities | at 2023-03-31 | $24.6m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-03-31 | $35.1m | us-gaap:Liabilities |
| Long-term debt | at 2023-03-31 | $443.0k | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2023-03-31 | $446.0k | us-gaap:LongTermDebtCurrent |

## Management's discussion and analysis

As filed, 36,156 characters.

### Forward-looking Statements

Certain statements contained within this report may be deemed “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (collectively, the “Private Securities Litigation Reform Act of 1995”). All statements in this report other than a statement of historical fact are forward-looking statements that are subject to known and unknown risks, uncertainties and other factors, which could cause actual results and performance of the Company to differ materially from such statements. The words “believe,” “expect,” “anticipate,” “intend,” “will,” and similar expressions identify forward-looking statements. Forward-looking statements contained herein relate to, among other things,

- demand for our services;
- reductions in the level of government funding in future years;
- reducing operating costs and non-essential expenditures;
- ability to meet loan agreement quarterly covenant requirements;
- cash flow requirements;
- maintain satisfactory margins;
- Canadian receivable;
- sufficient liquidity to fund operations for the next twelve months;
- future results of operations and liquidity;
- effect of macroeconomic concerns, such as inflation and higher interest rates, on our business;
- manner in which the applicable government will be required to spend funding to remediate various sites;
- finalization of partnership agreement with Springfields Fuels Limited;
- continued increases in operating costs;
- fund capital expenditures from cash from operations and/or financing;
- steady improvement in waste shipments and work under projects during balance of 2023;
- fund remediation expenditures for sites from funds generated internally;
- compliance with environmental regulations;
- potential effect of being a PRP;
- potential sites for violations of environmental laws and remediation of our facilities; and
- increase our sales price.

23

While the Company believes the expectations reflected in such forward-looking statements are reasonable, it can give no assurance such expectations will prove to be correct. There are a variety of factors, which could cause future outcomes to differ materially from those described in this report, including, but not limited to:

- general economic conditions;
- contract bids, including international markets;
- material reduction in revenues;
- inability to meet PNC covenant requirements;
- inability to collect in a timely manner a material amount of receivables;
- increased competitive pressures;
- inability to maintain and obtain required permits and approvals to conduct operations;
- public not accepting our new technology;
- inability to develop new and existing technologies in the conduct of operations;
- inability to maintain and obtain closure and operating insurance requirements;
- inability to retain or renew certain required permits;
- discovery of additional contamination or expanded contamination at any of the sites or facilities leased or owned by us or our subsidiaries which would result in a material increase in remediation expenditures;
- delays at our third-party disposal site can extend collection of our receivables greater than twelve months;
- refusal of third-party disposal sites to accept our waste;
- changes in federal, state and local laws and regulations, especially environmental laws and regulations, or in interpretation of such;
- requirements to obtain permits for TSD activities or licensing requirements to handle low level radioactive materials are limited or lessened;
- management retention and development;
- financial valuation of intangible assets is substantially more/less than expected;
- the requirement to use internally generated funds for purposes not presently anticipated;
- inability of the Company to maintain the listing of its Common Stock on the NASDAQ;
- terminations of contracts with government agencies or subcontracts involving government agencies or reduction in amount of waste delivered to the Company under the contracts or subcontracts;
- renegotiation of contracts involving government agencies;
- disposal expense accrual could prove to be inadequate in the event the waste requires re-treatment;
- inability to raise capital on commercially reasonable terms;
- inability to increase profitable revenue;
- impact of COVID-19 and economic uncertainties;
- new governmental regulations; and
- risk factors and other factors set forth in “Special Note Regarding Forward-Looking Statements” contained in the Company’s 2022 Form 10-K and the “Forward-Looking Statements” contained in the Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”) of this first quarter 2023 10-Q.

24

### Overview

Revenue increased by $4,192,000 or 26.3% to $20,107,000 for the three months ended March 31, 2023 from $15,915,000 for the corresponding period of 2022. We saw increases in both segments where Treatment Segment revenue increased by $2,115,000 to $9,594,000 or 28.3% from $7,479,000 and Services Segment revenue increased by $2,077,000 or 24.6% to $10,513,000 from $8,436,000. The increase in revenue in the Treatment Segment was primarily due to overall higher waste volume which was offset by lower averaged price waste due to revenue mix. The increase in revenue in the Services Segment was due to achievement of full operational status on certain projects which had been curtailed/delayed primarily in the early part of 2022 due, in part, from the lingering effects of the COVID-19 pandemic. As previously disclosed, the lingering effects of COVID-19 impacted our revenue in 2022 as work under projects and waste shipments continued to be delayed by certain customers into the first half of 2022. Additionally, in 2022, procurement and planning on behalf of our government clients continued to be delayed which did not ease until the second half of 2022. Total gross profit for the first quarter of 2023 increased $1,373,000 or 83.9% due to increased revenue generated in both segments. Selling, General, and Administrative (“SG&A”) expenses increased $64,000 or 1.9% for the three months ended March 31, 2023 as compared to the corresponding period of 2022.

We expect to see continued steady improvements in waste receipts and increase in project work from existing contracts, contracts recently won, and bids submitted in both segments that are awaiting awards. We expect this positive trend to continue during the balance of 2023 as the lingering effects of the COVID-19 pandemic continue to subside.

In March 2023, we received the Employee Retention Credit (“ERC”) of $1,975,000 that we applied for during the third quarter of 2022 as permitted under the CARES Act. In addition to the $1,975,000, we also received approximately $60,000 in interest (recorded within “Interest Income” on our Condensed Consolidated Statements of Operations).

### Business Environment

Our Treatment and Services Segments’ business continues to be heavily dependent on services that we provide to governmental clients, primarily as subcontractors for others who are prime contractors to government entities or directly as the prime contractor. We believe demand for our services will continue to be subject to fluctuations due to a variety of factors beyond our control, including, without limitation, the economic conditions, the manner in which the applicable government will be required to spend funding to remediate various sites, and/or potential further impact from COVID-19. In addition, our governmental contracts and subcontracts relating to activities at governmental sites in the United States are generally subject to termination for convenience at any time at the government’s option, and our governmental contracts/TOAs with the Canadian government authorities also allow the authorities to terminate the contract/task orders at any time for convenience. Work under all of our contracts/TOAs with Canadian government authorities has substantially been completed. A significant account receivable due to PF Canada is subject to continuing negotiations. See “Known Trends and Uncertainties – Perma-Fix Canada, Inc. (“PF Canada”)” within this MD&A for additional discussion as to a terminated Canadian TOA. Significant reductions in the level of governmental funding or specifically mandated levels for different programs that are important to our business could have a material adverse impact on our business, financial position, results of operations, and cash flows.

We are continually reviewing methods to raise additional capital to supplement our liquidity requirements, when needed (see “Liquidity and Capital Resources” below for a discussion of our liquidity). We continue to aggressively bid on various contracts, including potential contracts within the international markets.

### Results of Operations

The reporting of financial results and pertinent discussions are tailored to our two reportable segments: The Treatment and Services.

### Summary – Three Months Ended March 31, 2023 and 2022

|  | Three Months Ended March 31, |  |
| --- | ---: | ---: |
| Consolidated (amounts in thousands) | 2023% | 2022% |
| Revenues | $20,107 100.0 | $15,915 100.0 |
| Cost of good sold | 17,098 85.0 | 14,279 89.7 |
| Gross profit | 3,009 15.0 | 1,636 10.3 |
| Selling, general and administrative | 3,486 17.3 | 3,422 21.5 |
| Research and development | 99 .5 | 96 .6 |
| Loss on disposal of property and equipment | — — | 1 — |
| Loss from operations | $(576) (2.8) | $(1,883) (11.8) |
| Interest income | 127 .6 | 11 — |
| Interest expense | (53) (.3) | (35) (.2) |
| Interest expense-financing fees | (20) (.1) | (13) (.1) |
| Other | — — | (2) — |
| Loss from continuing operations before taxes | (522) (2.6) | (1,922) (12.1) |
| Income tax benefit | (204) (1.0) | (673) (4.3) |
| Loss from continuing operations | $(318) (1.6) | $(1,249) (7.8) |

#### Revenues

Consolidated revenues increased $4,192,000 for the three months ended March 31, 2023, compared to the three months ended March 31, 2022, as follows:

*(In thousands)*

| Treatment | 2023 | % Revenue | 2022 | % Revenue | Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Government waste | $6,642 | 33.0 | $5,437 | 34.2 | $1,205 | 22.2 |
| Hazardous/non-hazardous (1) | 1,511 | 7.5 | 1,001 | 6.3 | 510 | 50.9 |
| Other nuclear waste | 1,441 | 7.2 | 1,041 | 6.5 | 400 | 38.4 |
| Total | 9,594 | 47.7 | 7,479 | 47.0 | 2,115 | 28.3 |
| Services |  |  |  |  |  |  |
| Nuclear services | 10,082 | 50.2 | 8,281 | 52.0 | 1,801 | 21.7 |
| Technical services | 431 | 2.1 | 155 | 1.0 | 276 | 178.1 |
| Total | 10,513 | 52.3 | 8,436 | 53.0 | 2,077 | 24.6 |
| Total | $20,107 | 100.0 | $15,915 | 100.0 | $4,192 | 26.3 |

(1) Includes wastes generated by government clients of $710,000 and $470,000 for the three months ended March 31, 2023 and the corresponding period of 2022, respectively.

Treatment Segment revenue increased by $2,115,000 or 28.3% for the three months ended March 31, 2023 over the same period in 2022. The overall increase was primarily due to higher waste volume offset by lower averaged price waste from revenue mix. As previously disclosed, starting in the latter part of the second quarter of 2022, our Treatment Segment began to see steady improvements in waste receipts from certain customers who had previously delayed waste shipments due, in part, from the lingering effects of COVID-19 which continue to subside. Services Segment revenue increased by approximately $2,077,000 or 24.6%. The increase in revenue in the Services Segment was primarily due to achievement of full operational status on certain projects which had been curtailed/delayed in the early part of 2022 due, in part, from the lingering effects of the COVID-19 pandemic. Our Services Segment revenues are project based; as such, the scope, duration, and completion of each project vary. As a result, our Services Segment revenues are subject to differences relating to timing and project value. Revenue from both of our Segments were also positively impacted from contracts recently won as procurement and planning on behalf of our government clients continue to progress as the lingering effects of COVID-19 pandemic continue to subside.

#### Cost of Goods Sold

Cost of goods sold increased $2,819,000 for the quarter ended March 31, 2023, compared to the quarter ended March 31, 2022, as follows:

*(In thousands)*

|  | 2023 | %% Revenue | 2022 | Revenue | Change |
| --- | ---: | ---: | ---: | ---: | ---: |
| Treatment | $8,342 | 87.0 | $6,841 | 91.5 | $1,501 |
| Services | 8,756 | 83.3 | 7,438 | 88.2 | 1,318 |
| Total | $17,098 | 85.0 | $14,279 | 89.7 | $2,819 |

Cost of goods sold for the Treatment Segment increased by approximately $1,501,000 or 21.9%. Treatment Segment’s variable costs increased by approximately $816,000 primarily due to higher material and supplies, disposal, transportation, and lab costs. Treatment Segment’s overall fixed costs were higher by approximately $685,000 resulting from the following: general expenses were higher by $266,000 primarily due to higher utility costs; depreciation expenses were higher by approximately $198,000 due to depreciation for asset retirement obligations in connection with our EWOC facility; regulatory expenses were higher by approximately $63,000; maintenance costs were higher by approximately $60,000; and salaries and payroll related expenses were higher by $98,000. Services Segment cost of goods sold increased $1,318,000 or 17.7% primarily due to higher revenue. The increase in cost of goods sold was primarily due to higher salaries/payroll related, outside services, and travel costs totaling approximately $1,193,000; higher material and supplies, lab and regulatory expenses totaling approximately $24,000; higher depreciation expense totaling approximately $89,000 from additional equipment; and slightly higher general expenses by approximately $12,000 in various categories. Included within cost of goods sold is depreciation and amortization expense of $726,000 and $439,000 for the three months ended March 31, 2023, and 2022, respectively.

#### Gross Profit

Gross profit for the quarter ended March 31, 2023 increased $1,373,000 over the corresponding period of 2022, as follows:

*(In thousands)*

|  | 2023 | %% Revenue | 2022 | Revenue | Change |
| --- | ---: | ---: | ---: | ---: | ---: |
| Treatment | $1,252 | 13.0 | $638 | 8.5 | $614 |
| Nuclear Services |  |  |  |  |  |
| Services | 1,757 | 16.7 | 998 | 11.8 | 759 |
| Total | $3,009 | 15.0 | $1,636 | 10.3 | $1,373 |

Treatment Segment gross profit increased by $614,000 or approximately 96.2% and gross margin increased to 13.0% from 8.5% primarily due to higher revenue from higher waste volume. Services Segment gross profit increased by $759,000 or 76.1% and gross margin increased to 16.7% from 11.8% primarily due to higher margin projects. Our overall Services Segment gross margin is impacted by our current projects which are competitively bid on and will therefore, have varying margin structures.

#### SG&A

SG&A expenses increased $64,000 for the three months ended March 31, 2023, as compared to the corresponding period for 2022, as follows:

*(In thousands)*

|  | 2023 | % Revenue | 2022 | % Revenue | Change |
| --- | ---: | ---: | ---: | ---: | ---: |
| Administrative | $1,670 | — | $1,687 | — | $(17) |
| Treatment | 1,006 | 10.5 | 1,040 | 13.9 | (34) |
| Services | 810 | 7.7 | 695 | 8.2 | 115 |
| Total | $3,486 | 17.3 | $3,422 | 21.5 | $64 |

27

Administrative SG&A expenses were lower primarily due to lower outside services expenses by approximately $71,000 resulting from fewer consulting/audit/outside services matters. This overall lower expense was offset primarily by higher payroll related expenses. Treatment Segment SG&A expenses were lower primarily due to lower salaries and payroll related expenses by approximately $62,000 which was offset by overall higher general expenses in various categories. The increase in Services Segment SG&A was primarily due to the following: credit losses on accounts receivable were higher by approximately $44,000, as in the first quarter of 2022, our Services Segment collected on certain accounts that were previously deemed to be uncollectible; travel expenses were higher by approximately $10,000; outside services expense were slightly higher by approximately $6,000; and salaries and payroll related expenses were higher by approximately $55,000 due to more administrative support functions resulting from higher revenue. Included in SG&A expenses is depreciation and amortization expense of $21,000 and $17,000 for the three months ended March 31, 2023 and 2022, respectively.

#### Interest Income

Interest income increased by approximately $116,000 in the first quarter of 2023 as compared to the corresponding period of 2022 due to higher interest earned from our finite risk sinking fund and interest received in connection with the refund that we received in March 2023 from the ERC program under the CARES Act (see a discussion of this refund, along with interest in “Overview” within this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”).

#### Interest Expense

Interest expense increased approximately $18,000 in the first quarter of 2023 as compared to the corresponding period of 2022 primarily due to higher interest rates on our term loan balance and revolver under our credit facility. Also, we incurred interest from advances made in May of 2022 from the capital line under our credit facility.

#### Income Taxes

We had income tax benefits of approximately $204,000 and $673,000 for continuing operations for the three months ended March 31, 2023 and 2022, respectively. Our effective tax rate was approximately 39.1% and 35.0% for the three months ended March 31, 2023 and the corresponding period of 2022, respectively. Our tax rates for the three months ended March 31, 2023 and 2022 were impacted by non-deductible expenses and state taxes.

### Liquidity and Capital Resources

Our cash flow requirements during the three months ended March 31, 2023 were primarily financed by our operations, cash on hand (which included the ERC, along with interest, that we received in March 2023), and credit facility availability. Our cash flow requirements for the next twelve months will consist primarily of general working capital needs, scheduled principal payments on our debt obligations, remediation projects, and planned capital expenditures. We plan to fund these requirements from our operations, credit facility availability, and cash on hand. We are 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 March 31, 2023, we had borrowing availability under our revolving credit facility of approximately $7,133,000 which was based on a percentage of eligible receivables and subject to certain reserves. Our borrowing availability of $7,133,000 at March 31, 2023 included a requirement from our lender that we maintain a minimum of $3,000,000 in borrowing availability under our revolving credit until the minimum fixed FCCR requirement for the quarter ended June 30, 2023 has been met and certified to our lender. Although we believe that our cash flows from operations, our available liquidity from our credit facility, and our cash on hand should be sufficient to fund our operations for the next twelve months, we continue to work toward improving our liquidity by 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 through these efforts.

The following table reflects the cash flow activities during the first three months of 2023:

*(In thousands)*

|  |  |
| --- | ---: |
| Cash provided by operating activities of continuing operations | $1,762 |
| Cash used in operating activities of discontinued operations | (198) |
| Cash used in investing activities of continuing operations | (748) |
| Cash used in financing activities of continuing operations | (204) |
| Increase in cash and finite risk sinking fund (restricted cash) | $612 |

At March 31, 2023, we were in a positive cash position with no revolving credit balance. At March 31, 2023, we had cash on hand of approximately $2,411,000.

#### Operating Activities

Accounts receivable, net of credit losses, totaled $10,881,000 at March 31, 2023, an increase of $1,517,000 from the December 31, 2022 balance of $9,364,000. The increase was attributed to increased revenue, timing of invoicing, and our accounts receivable collection. Our contracts with our customers are subject to various payment terms and conditions. Our accounts receivable at March 31, 2023 include invoices for work performed for a certain Canadian project that remain outstanding and subject to negotiations (See discussion under “Known Trends and Uncertainties – Perma-Fix Canada, Inc. (“PF Canada”) for a discussion as to this certain account receivable.

Prepaid and other assets totaled $3,800,000 at March 31, 2023, a decrease of $1,605,000 from the December 31, 2022 balance of $5,405,000. The decrease was primarily due to the receipt of the ERC of $1,975,000 in March 2023 that we applied for during the third quarter of 2022.

Accounts payable, totaled $11,812,000 at March 31, 2023, an increase of $1,487,000 from the December 31, 2022 balance of $10,325,000. Our accounts payable are impacted by the timing of payments as we are continually managing payment terms with our vendors to maximize our cash position throughout all segments.

We had working capital of $339,000 (which included working capital of our discontinued operations) at March 31, 2023, as compared to working capital of $818,000 at December 31, 2022. The decrease in our working capital was primarily due to increases in our accounts payable and accruals which were mostly offset by increases in our accounts and unbilled receivables.

#### Investing Activities

For the three months ended March 31, 2023, our purchases of capital equipment totaled approximately $798,000, of which $50,000 was subject to financing, with the remaining funded from cash from operations and our credit facility. We have budgeted approximately $2,000,000 for 2023 capital expenditures primarily for our Treatment and Services Segments to maintain operations and regulatory compliance requirements and support revenue growth. Certain of these budgeted projects may either be delayed until later years or deferred altogether. We plan to fund our capital expenditures from cash from operations and/or financing. The initiation and timing of projects are also determined by financing alternatives or funds available for such capital projects.

During March 2022, we signed a joint venture term sheet addressing plans to partner with Springfields Fuels Limited (“SFL”), an affiliate of Westinghouse Electric Company LLC, to develop and manage a nuclear waste-materials treatment facility (the “Facility”) in the United Kingdom. The Facility is for the purpose of expanding the partners’ waste treatment capabilities for the European nuclear market. It is expected that upon finalization of a partnership agreement, SFL will have an ownership interest of fifty-five (55) percent and our interest will be forty-five (45) percent. The finalization, form and capitalization of this unpopulated partnership is subject to numerous conditions, including but not limited to, winning a certain contract, completion and execution of a definitive agreement and facility design, granting of required regulatory, lender or permitting approvals and updated cost and profitability analysis based on current and forecast future economic conditions. Upon finalization of this venture, we will be required to make an investment in this venture. The amount of our investment, the period of which it is to be made and the method of funding are to be determined.

#### Financing Activities

We entered into a Second Amended and Restated Revolving Credit, Term Loan and Security Agreement, dated May 8, 2020 (“Loan Agreement”), with PNC National Association (“PNC”), acting as agent and lender. The Loan Agreement, as amended, provides us with the following credit facility with a maturity date of May 15, 2024: (a) up to $12,500,000 revolving credit (“revolving credit”) (see a discussion of an amendment that we entered into with our lender on March 21, 2023 which reduced the maximum revolving credit to $12,500,000 from the previous amount of $18,000,000). The maximum that we can borrow under the revolving credit is based on a percentage of eligible receivables (as defined) at any one time reduced by outstanding standby letters of credit and borrowing reductions that our lender may impose from time to time; (b) a term loan (“term loan”) of approximately $1,742,000, requiring monthly installments of $35,547; and (c) a capital expenditure line (“capital loan”) of up to $1,000,000 with advances on the line, subject to certain limitations, permitted for up to twelve months starting May 4, 2021 (the “Borrowing Period”). Only interest was payable on advances during the Borrowing Period. Amount advanced under the capital line at the end of the Borrowing Period totaled approximately $524,000 which requires monthly installments in principal of approximately $8,700 plus interest, starting June 1, 2022. At March 31, 2023, balance on the capital line was approximately $437,000. At the maturity date of the Loan Agreement, as amended, any unpaid principal balance plus interest, if any, will become due.

On March 21, 2023, we entered into an amendment to our Loan Agreement, as amended, with our lender which provides, among other things, the following:

- removed the FCCR testing requirement for the fourth quarter of 2022 and removes the FCCR testing requirement the first quarter of 2023;
- reduced the maximum revolving credit line under the credit facility from $18,000,000 to $12,500,000;
- reinstates the quarterly FCCR testing requirement starting in the second quarter of 2023 using a trailing twelve-month period (with no change to the minimum 1.15:1 ratio requirement for each quarter); and
- requires maintenance of a minimum of $3,000,000 in borrowing availability under the revolving credit until the minimum FCCR requirement for the quarter ended June 30, 2023 has been met and certified to the lender.

In connection with the amendment, we paid our lender a fee of $25,000 which is being amortized over the remaining term of the Loan Agreement, as amended, as interest expense-financing fees.

Pursuant to the Loan Agreement, as amended, payment of annual rate of interest due on the revolving credit is at prime (8.00% at March 31, 2023) plus 2% or Term Secured Overnight Finance Rate (“SOFR”) (as defined in the Loan Agreement, as amended) plus 3.00% plus an SOFR Adjustment applicable for an interest period selected by us and payment of annual rate of interest due on the term loan and the capital expenditure line is at prime plus 2.50% or Term SOFR Rate plus 3.50% plus an SOFR Adjustment applicable for an interest period selected by us. A SOFR Adjustment rates of 0.10% and 0.15% are applicable for a one-month interest period and three-month period, respectively, that may be selected by us.

After May 7, 2022, the Company may terminate its Loan Agreement, as amended, upon 90 days’ prior written notice upon payment in full of our obligations under the Loan Agreement, as amended, with no early termination fees.

Our credit facility under our Loan Agreement, as amended, with PNC contains certain financial covenants, along with customary representations and warranties. A breach of any of these financial covenants, unless waived by PNC, could result in a default under our credit facility allowing our lender to immediately require the repayment of all outstanding debt under our credit facility and terminate all commitments to extend further credit. We were not required to perform testing of the FCCR requirement in the first quarter of 2023 pursuant to the March 21, 2023 amendment as discussed above, otherwise, we met all of our other financial covenant requirements. We expect to meet our quarterly financial covenant requirements for the next twelve months under our Loan Agreement, as amended.

### Off Balance Sheet Arrangements

From time to time, we are required to post standby letters of credit and various bonds to support contractual obligations to customers and other obligations, including facility closures. At March 31, 2023, the total amount of standby letters of credit outstanding totaled approximately $3,016,000 and the total amount of bonds outstanding totaled approximately $27,321,000. We also provide closure and post-closure requirements through a financial assurance policy for certain of our Treatment Segment facilities through AIG. At March 31, 2023, the closure and post-closure requirements for these facilities were approximately $22,454,000.

### Critical Accounting Policies and Estimates

There were no significant changes in our accounting policies or critical accounting estimates that are discussed in our Annual Report on Form 10-K for the year ended December 31, 2022.

### Recent Accounting Pronouncements

See “Note 2 – Summary of Significant Accounting Policies” in the “Notes to Condensed Consolidated Financial Statements” for the recent accounting pronouncements that will be adopted in future periods.

### Known Trends and Uncertainties

*Significant Customers*. Our Treatment and Services Segments have significant relationships with the U.S governmental authorities through contracts entered into indirectly as subcontractors for others who are prime contractors or directly as the prime contractor to government authorities. We also had significant relationships with Canadian government authorities primarily through TOAs entered into with Canadian government authorities. Project work under all TOAs with Canadian government authorities has substantially been completed. The contracts that we are a party to with others as subcontractors to the U.S federal government or directly with the U.S federal government generally provide that the government may terminate the contract at any time for convenience at the government’s option. The contracts/TOAs that we are/were a party to with Canadian governmental authorities also generally provide that the government authorities may terminate the contracts/TOAs at any time for any reason for convenience. Our inability to continue under existing contracts that we have with the U.S government (directly or indirectly as a subcontractor) or significant reductions in the level of governmental funding in any given year could have a material adverse impact on our operations and financial condition. We performed services relating to waste generated by government clients (domestic and foreign (primarily Canadian)), either indirectly as a subcontractor or directly as a prime contractor to government entities, representing approximately $17,247,000 or 85.8% of our total revenue during the three months ended March 31, 2023, as compared to $14,158,000 or 89.0% of our total revenue during the corresponding period of 2022.

#### Perma-Fix Canada, Inc. (“PF Canada”)

During the fourth quarter of 2021, PF Canada received a Notice of Termination (“NOT”) from Canadian Nuclear Laboratories, LTD. (“CNL”) on a TOA that PF Canada entered into with CNL in May 2019 for remediation work within Ontario, Canada (“Agreement”). The NOT was received after work under the TOA was substantially completed and work under the TOA has since been completed. CNL may terminate the TOA at any time for convenience. As of March 31, 2023, PF Canada has approximately $1,855,000 in unpaid receivables due from CNL as a result of work performed under the TOA. Additionally, CNL has approximately $1,061,000 in contractual holdback under the TOA that is payable to PF Canada. CNL also established a bond securing approximately $1,900,000 (CAD) to cover certain issues raised in connection with the TOA. Under the TOA, CNL may be entitled to set off certain costs and expenses incurred by CNL in connection with the termination of the TOA, including the bond as discussed above, against amounts owed to PF Canada for work performed by PF Canada or its subcontractors. PF Canada continues to be in discussions with CNL to finalize the amounts due to PF Canada under the TOA and continues to believe these amounts are due and payable to PF Canada.

*Potential Partnership with Springfields Fuels Limited.* As discussed above, we have signed a term sheet addressing plans to partner with Springfields Fuels Limited, an affiliate of Westinghouse Electric Company LLC, to develop and manage a nuclear waste-materials treatment facility in the United Kingdom. See “Liquidity and Capital Resources – Investing Activities” of this MD&A for a discussion of this transaction.

*Inflation and Supply Chain.* Our financial results have been negatively impacted from the effects of inflation, supply chain issues, labor shortage, and higher interest rates from the countries’ macroeconomic concerns due, in part, from the impact of COVID-19. Continued increases in any of our operating costs, including utility, transportation, wage rates, and supply costs, may further increase our overall cost of goods sold or operating expenses. Additionally, as previously disclosed, labor shortages and supply chain issues had previously impacted production at certain of our facilities which impacted our financial results. We may attempt to increase our sales prices in order to maintain satisfactory margin from the effect of these factors is discussed above; however, competitive pressures in our industry may have the effect of inhibiting our ability to reflect these increased costs in the prices of our services that we provide to our customers and therefore reduce our profitability.

### Environmental Contingencies

We are engaged in the waste management services segment of the pollution control industry. As a participant in the on-site treatment, storage and disposal market and the off-site treatment and services market, we are subject to rigorous federal, state and local regulations. These regulations mandate strict compliance and therefore are a cost and concern to us. Because of their integral role in providing quality environmental services, we make every reasonable attempt to maintain complete compliance with these regulations; however, even with a diligent commitment, we, along with many of our competitors, may be required to pay fines for violations or investigate and potentially remediate our waste management facilities.

We routinely use third party disposal companies, who ultimately destroy, or secure landfill residual materials generated at our facilities or at a client’s site. In the past, numerous third-party disposal sites have improperly managed waste and consequently require remedial action; consequently, any party utilizing these sites may be liable for some or all of the remedial costs. Despite our aggressive compliance and auditing procedures for disposal of wastes, we could further be notified, in the future, that we are a potentially responsible party (“PRP”) at a remedial action site, which could have a material adverse effect.

We have three environmental remediation projects, all within our discontinued operations, which principally entail the removal/remediation of contaminated soil, and, in most cases, the remediation of surrounding ground water. We expect to fund the expenses to remediate these sites from funds generated from operations. At March 31, 2023, we had total accrued environmental remediation liabilities of $861,000 with no change from the December 31, 2022 balance. At March 31, 2023, $112,000 of the total accrued environmental liabilities was recorded as current.

## Market risk

As filed, 1,424 characters.

Not required for smaller reporting companies.

| Item 4. | Controls and Procedures |
| --- | --- |
| (a) | Evaluation of disclosure controls, and procedures. |
|  | We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic reports filed with the Securities and Exchange Commission is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and that such information is accumulated and communicated to our management. As of the end of the period covered by this report, we carried out an evaluation with the participation of our Principal Executive Officer and Principal Financial Officer. Based on this recent assessment, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) were effective as of March 31, 2023. |
| (b) | Changes in internal control over financial reporting |

There was no other change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 9,068 characters.

There has been no other material change from the risk factors previously disclosed in our Form 10-K for the year ended December 31, 2022, except for the following under “Risks Relating to our Business Operations.”

**Climate change could have a negative impact to the Company’s result of operations and financial condition.**

Climate change may present both immediate and long-term risks to the Company and our customers and the risks may increase over time. Climate risks can arise from both physical risks (those risks related to the physical effects of climate change) and transition risks (risks related to governmental regulatory requirements, legal technology, market and reputational changes from a transition to a low carbon economy). Climate change could have a material, adverse effect on environmental companies like ours that are involved in the treatment, disposal and other services related to hazardous waste, radioactive waste and/or mixed (waste that contain both hazardous and radioactive) waste by changing or restricting how we perform our services or what services we can perform or taking action that materially increases our costs to do business in order to regulate or reduce climate change.

**The collapse of certain U.S. banks and potentially other financial institutions could adversely affect our business, financial condition and results of operations.**

Recent negative developments affecting the banking industry, and resulting media coverage, have eroded confidence in the banking system. Concerns regarding the financial systems could result in less favorable commercial financing terms, including higher interest rates, costs, tighter financial and operating covenants, and systemic limitations on access to credit and liquidity sources, thereby making it more difficult for us to acquire capital on acceptable terms, when needed. Additionally, recent developments affecting the banking industry have generated significant market volatility and consumer confidence which in turn, could result in reduced demands for our services which could negatively impact our business operations, financial condition, and results of operations.

| Item 6. | Exhibits |
| --- | --- |
| (a) | **Exhibits** |

|  |  |
| ---: | --- |
| 3(ii) | Second Amended and Restated Bylaws of Perma-Fix Environmental Services, Inc., as amended effective April 20, 2023, as incorporated by reference from Exhibit 3(ii) to the Company’s Form 8-K filed on April 26, 2023. |
| 4.1 | Sixth Amendment to Second Amended and Restated Revolving Credit, Term Loan and Security Agreement dated March 21, 2023, between Perma-Fix Environmental Services, Inc. and PNC Bank, National Association, as incorporated by reference from Exhibit 4.3 to the Company’s 2022 Form 10-K filed on March 23, 2023. |
| 10.1 | 2023 Incentive Compensation Plan for Chief Executive Officer, effective January 1, 2023, as incorporated by reference from Exhibit 99.1 to the Company’s Form 8-K filed on January 23, 2023. CERTAIN INFORMATION WITHIN THIS EXHIBIT HAS BEEN EXCLUDED BECAUSE IT IS NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE COMPANY IF PUBLICLY DISCLOSED. |
| 10.2 | 2023 Incentive Compensation Plan for Chief Financial Officer, effective January 1, 2023, as incorporated by reference from Exhibit 99.2 to the Company’s Form 8-K filed on January 23, 2023. CERTAIN INFORMATION WITHIN THIS EXHIBIT HAS BEEN EXCLUDED BECAUSE IT IS NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE COMPANY IF PUBLICLY DISCLOSED. |
| 10.3 | 2023 Incentive Compensation Plan for Executive Vice President of Strategic Initiatives, effective January 1, 2023, as incorporated by reference from Exhibit 99.3 to the Company’s Form 8-K filed on January 23, 2023. CERTAIN INFORMATION WITHIN THIS EXHIBIT HAS BEEN EXCLUDED BECAUSE IT IS NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE COMPANY IF PUBLICLY DISCLOSED. |
| 10.4 | 2023 Incentive Compensation Plan for Executive Vice President of Nuclear and Technical Services, effective January 1, 2023, as incorporated by reference from Exhibit 99.4 to the Company’s Form 8-K filed on January 23, 2023. CERTAIN INFORMATION WITHIN THIS EXHIBIT HAS BEEN EXCLUDED BECAUSE IT IS NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE COMPANY IF PUBLICLY DISCLOSED. |
| 10.5 | 2023 Incentive Compensation Plan for Executive Vice President of Waste Treatment Operations, effective January 1, 2023, as incorporated by reference from Exhibit 99.5 to the Company’s Form 8-K filed on January 23, 23. CERTAIN INFORMATION WITHIN THIS EXHIBIT HAS BEEN EXCLUDED BECAUSE IT IS NOT MATERIAL AND WOULD LLIKELY CAUSE COMPETITIVE HARM TO THE COMPANY IF PUBLICLY DISCLOSED. |
| 10.6 | Incentive Stock Option Agreement between Perma-Fix Environmental Services, Inc. and Chief Executive Officer, dated January 19, 2023, as incorporated by reference from Exhibit 99.6 to the Company’s Form 8-K filed on January 23, 2023. |
| 10.7 | Incentive Stock Option Agreement between Perma-Fix Environmental Services, Inc. and Chief Financial Officer, dated January 19, 2023, as incorporated by reference from Exhibit 99.7 to the Company’s Form 8-K filed on January 23, 2023. |
| 10.8 | Incentive Stock Option Agreement between Perma-Fix Environmental Services, Inc. and EVP of Strategic Initiatives, dated January 19, 2023, as incorporated by reference from Exhibit 99.8 to the Company’s Form 8-K filed on January 23, 2023. |
| 10.9 | Incentive Stock Option Agreement between Perma-Fix Environmental Services, Inc. and EVP of Nuclear and Technical Services, dated January 19, 2023, as incorporated by reference from Exhibit 99.9 to the Company’s Form 8-K filed on January 23, 2023. |
| 10.10 | Incentive Stock Option Agreement between Perma-Fix Environmental Services, Inc. and EVP of Waste Treatment Operations, dated January 19, 2023, as incorporated by reference from Exhibit 99.10 to the Company’s Form 8-K filed on January 23, 2023. |
| 10.11 | Employment Agreement dated April 20, 2023 between Mark Duff, Chief Executive Officer and Perma-Fix Environmental Services, Inc., as incorporated by reference from Exhibit 99.1 to the Company’s Form 8-K filed on April 26, 2023. |

34

|  |  |
| ---: | --- |
| 10.12 | Employment Agreement dated April 20, 2023 between Ben Naccarato, Chief Financial Officer and Perma-Fix Environmental Services, Inc., as incorporated by reference from Exhibit 99.2 to the Company’s Form 8-K filed on April 26, 2023. |
| 10.13 | Employment Agreement dated April 20, 2023 between Dr. Louis Centofanti, EVP of Strategic Initiatives and Perma-Fix Environmental Services, Inc., as incorporated by reference from Exhibit 99.3 to the Company’s Form 8-K filed on April 26, 2023. |
| 10.14 | Employment Agreement dated April 20, 2023 between Andrew Lombardo, EVP of Nuclear and Technical Services and Perma-Fix Environmental Services, Inc., as incorporated by reference from Exhibit 99.4 to the Company’s Form 8-K filed on April 26, 2023. |
| 10.15 | Employment Agreement dated April 20, 2023 between Richard Grondin, EVP of Waste Treatment Operations and Perma-Fix Environmental Services, Inc., as incorporated by reference from Exhibit 99.5 to the Company’s Form 8-K filed on April 26, 2023. |
| 31.1 | Certification by Mark Duff, Chief Executive Officer of the Company pursuant to Rule 13a-14(a) or 15d-14(a). |
| 31.2 | Certification by Ben Naccarato, Chief Financial Officer of the Company pursuant to Rule 13a-14(a) or 15d-14(a). |
| 32.1 | Certification by Mark Duff, Chief Executive Officer of the Company furnished pursuant to 18 U.S.C. Section 1350. |
| 32.2 | Certification by Ben Naccarato, Chief Financial Officer of the Company furnished pursuant to 18 U.S.C. Section 1350. |
| 101.INS | Inline XBRL Instance Document\* |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document\* |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document\* |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document\* |
| 101.LAB | Inline XBRL Taxonomy Extension Labels Linkbase Document\* |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document\* |

\* Pursuant to Rule 406T of Regulation S-T, the Interactive Data File in Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purpose of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

### SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

|  |  |  |
| --- | --- | --- |
|  | PERMA-FIX ENVIRONMENTAL SERVICES |  |
| Date: May 10, 2023 | By: | /s/ Mark Duff |
|  |  | Mark Duff |
|  |  | President and Chief (Principal) Executive Officer |
| Date: May 10, 2023 | By: | /s/ Ben Naccarato |
|  |  | Ben Naccarato |
|  |  | Chief (Principal) Financial Officer |

36

Filed May 10, 2023.
Source: SEC EDGAR, the filing index for accession 0001493152-23-016118. Last ingested by Listed: Nov 5, 2026, 13:52 ET. No prices; not investment advice.