# Perma Fix Environmental Services Inc: Form 10-Q for the period ended Sep 30, 2024

- Company: [Perma Fix Environmental Services Inc](/companies/pesi.md) (CIK 891532)
- Form: 10-Q
- Filed: 2024-11-13
- Accepted by EDGAR: Nov 13, 2024, 16:04 ET
- Period: 2024-09-30
- Accession: 0001493152-24-045114
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/891532/000149315224045114/form10-q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/891532/000149315224045114/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-30 | $16.8m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2024-01-01 to 2024-09-30 | $44.4m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-07-01 to 2024-09-30 | $15.5m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2024-01-01 to 2024-09-30 | $45.0m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2024-07-01 to 2024-09-30 | $1.3m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2024-01-01 to 2024-09-30 | −$592.0k | us-gaap:GrossProfit |
| Research and development | 3 months, 2024-07-01 to 2024-09-30 | $303.0k | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2024-01-01 to 2024-09-30 | $872.0k | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2024-07-01 to 2024-09-30 | $3.6m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2024-01-01 to 2024-09-30 | $10.6m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-07-01 to 2024-09-30 | −$2.6m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-01-01 to 2024-09-30 | −$12.1m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-07-01 to 2024-09-30 | $121.0k | us-gaap:InterestExpense |
| Interest expense | 9 months, 2024-01-01 to 2024-09-30 | $346.0k | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-07-01 to 2024-09-30 | $6.4m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-01-01 to 2024-09-30 | $4.3m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | −$9.0m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | −$16.5m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-07-01 to 2024-09-30 | −$0.57 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-01-01 to 2024-09-30 | −$1.12 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | −$0.57 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-01-01 to 2024-09-30 | −$1.12 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-30 | 15,803,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-01-01 to 2024-09-30 | 14,695,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | −$11.4m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-01-01 to 2024-09-30 | $2.2m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2024-09-30 | $10.6m | us-gaap:Cash |
| Current assets | at 2024-09-30 | $32.1m | us-gaap:AssetsCurrent |
| Total assets | at 2024-09-30 | $78.2m | us-gaap:Assets |
| Current liabilities | at 2024-09-30 | $22.7m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-09-30 | $35.8m | us-gaap:Liabilities |
| Long-term debt | at 2024-09-30 | $1.9m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2024-09-30 | $554.0k | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2024-09-30 | $42.4m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 57,983 characters.

### Forward-looking Statements

Certain statements contained within this report may be deemed “forward-looking statements” within the meaning of 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;
- accelerated investments;
- base business is positioned for improvement in 2025;
- results of operations improvement in 2025;
- advancement of initiatives to be more fully realized in 2025;
- reducing operating costs and non-essential expenditures;
- ability to meet loan agreement quarterly financial covenant requirements;

23

- government shutdown or Continuing Resolution (“CR”) impact;
- cash flow requirements;
- sufficient Liquidity to fund operations for the next twelve months;
- revenue under the Italian project;
- manner in which the applicable government will be required to spend funding to remediate various sites;
- successful on international bids;
- funding of operating and capital expenditures from cash from operations, Liquidity under our Credit Facility, and/or financing;
- our PFAS technology process will exceed current treatment options available;
- receipt of an additional 20,000 AFFF liquid;
- advancement of our PFAS technology by mid-2025;
- strategy for our System;
- funding of remediation expenditures for sites from funds generated internally;
- compliance with environmental regulations;
- positioning for procurements from DOE and other government agencies;
- potential effect of being a potentially responsible party (“PRP”); and
- potential violations of environmental laws and attendant remediation at our facilities.

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;
- 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;
- inability of the federal government to adopt a budget in a timely manner or additional CRs;
- requirements to obtain permits for treatment, storage and disposal (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 need to use internally generated funds for purposes not presently anticipated;
- shutdown of the federal government;

24

- change in government priorities;
- 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;
- failure of partner to perform its requirements in connection with the Italian project;
- changes in the scope of work relating to existing contracts;
- occurrence of an event similar to COVID-19 having adverse effects on the U.S. and world economics;
- 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;
- economic uncertainties;
- non-acceptance of our new technology;
- adjustments to our valuation allowance;
- new governmental regulations; and
- risk factors and other factors set forth in “Special Note Regarding Forward-Looking Statements” contained in the Company’s 2023 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”) for the first and second quarters of 2024 and this third quarter 2024 10-Q.

### Overview

Our third quarter financial results were impacted by continued acceleration of our investments and a number of unexpected events/factors which included the following:

- certain waste shipments that were expected to occur in the third quarter of 2024 were pushed into the fourth quarter of 2024 by certain government related customers;
- unexpected equipment breakdowns that occurred in the latter part of June and during the third quarter of 2024 which required replacement or repair in certain of our Treatment Segment facilities delayed revenue production. All of the equipment is now back in service;
- weather conditions caused by Hurricane Helene resulted in waste shipment delays by certain customers at our Florida facility and temporary demobilization of a Services Segment project mandated by the customer. This project resumed in early October. Additionally, Hurricane Helene caused a temporary shutdown of our Florida facility for approximately one week which impacted revenue production;
- continued acceleration in investment of our new PFAS (Per- and polyfluoroalkyl substances) technology which requires significant management and operation support, including the installation of our first full scale commercial system in treating PFAS. This system installation also caused production delays (see “Known Trends and Uncertainties – New Processing Technology” within this MD&A for a discussion of this technology); and
- the completion of two large projects in the Services Segment in late 2023 were not replaced by new projects of similar value. Together, these two large projects had generated significant amount of revenue in the third quarter of 2023 when they were in full operational status.

In addition to the aforementioned factors, we continue to experience delays in procurements and contract awards from government clients in the first nine months of 2024. Although we are disappointed with our 2024 financial results for the first nine months of 2024, we believe our base business is positioned for improvement in 2025 and that our results of operations should improve in 2025. As previously disclosed, we continue to advance a variety of additional initiatives that are expected to be more fully realized in 2025. These initiatives include, among other things, positioning ourselves for large and mid-size procurements within the U.S. Department of Energy (“DOE”) and U.S. Navy and waste treatment in support of DOE’s Hanford closure strategy, continued investments in our facilities and capabilities to allow for broader waste treatment (including PFAS), and continued expansion of our waste treatment offerings within the international and commercial markets.

As a result of the aforementioned events and factors, our overall revenue decreased by $5,065,000 or 23.2% to $16,812,000 for the three months ended September 30, 2024, from $21,877,000 for the corresponding period of 2023. We saw decreases in both segments where Treatment Segment revenue decreased by $1,731,000 to $9,064,000 or 16.0% from $10,795,000 and Services Segment revenue decreased by $3,334,000 or 30.1% to $7,748,000 from $11,082,000. Gross profit for the third quarter of 2024 was approximately $1,334,000 as compared to gross profit of $4,549,000 for the corresponding period of 2023, reflecting a decrease in gross profit of approximately $3,215,000 or 70.7%, primarily due to decreased revenue in both segments. Selling, General and Administrative (“SG&A”) expenses decreased by $301,000 or 7.7% for the three months ended September 30, 2024, as compared to the corresponding period of 2023.

During the third quarter of 2024, we provided a full valuation allowance against our deferred tax assets (see a discussion of this valuation allowance and the impact to our financial statements in “Results of Operations – Income Taxes” below).

For the nine months ended September 30, 2024, overall revenue decreased by $22,601,000 or 33.7% to $44,415,000 from $67,016,000 for the corresponding period of 2023 where we saw decrease in revenue in both segments. Treatment Segment revenue decreased by $7,107,000 to $26,116,000 or 21.4% from $33,223,000 and Services Segment revenue decreased by $15,494,000 or 45.8% to $18,299,000 from $33,793,000. The decrease in revenue within the Treatment Segment was attributed to factors which included among other things, delays in waste shipments by certain customers due to poor weather conditions and earlier Continuing Resolution (“CR”) impacts, temporary outages at our three primary facilities for equipment replacement and repairs, program enhancement and testing to support permit expansion and broader market penetration, weather impacts at certain of our treatment facilities resulting in temporary shutdown which limited revenue production and accelerated investment in R&D on our new technology to treat PFAS. Overall lower averaged price from waste mix within the Treatment Segment also contributed to revenue decrease. The decrease in revenue in the Services Segment was due to slower mobilization and delays in certain projects from the earlier impact of CR and poor weather conditions. Additionally, the decrease in revenue in the Services Segment was also attributed to the completion of two large projects in late 2023 which were not replaced by new projects of similar value. Together, these two large projects had generated a significant amount of revenues in the first nine months of 2023 when they were in full operational status. Total gross profit for the nine months ended 2024 decreased $12,666,000 or 104.9% due to decreased revenue generated in both segments. SG&A expenses decreased $338,000 or 3.1% for the nine months ended September 30, 2024, as compared to the corresponding period of 2023.

### Business Environment

Our Treatment and Services Segments’ business continues to be heavily dependent on services that we provide to U.S 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 potential future federal budget issues. 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. Our Italian contract under our partnership may be terminated by the Contracting Authority under certain conditions as set forth in the contract. 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 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 Segment and Services Segment.

### Summary – Three and Nine Months Ended September 30, 2024, and 2023

|  | Three Months Ended September 30, |  | Nine Months Ended September 30, |  |
| --- | ---: | ---: | ---: | ---: |
| Consolidated (amounts in thousands) | 2024% | 2023% | 2024% | 2023% |
| Net revenues | $16,812 100.0 | $21,877 100.0 | $44,415 100.0 | $67,016 100.0 |
| Cost of goods sold | 15,478 92.1 | 17,328 79.2 | 45,007 101.3 | 54,942 82.0 |
| Gross profit (loss) | 1,334 7.9 | 4,549 20.8 | (592) (1.3) | 12,074 18.0 |
| Selling, general and administrative | 3,632 21.6 | 3,933 18.0 | 10,631 23.9 | 10,969 16.4 |
| Research and development | 303 1.8 | 120 .5 | 872 2.0 | 340 .5 |
| Loss on disposal of property and equipment | — — | — — | 1 — | — — |
| (Loss) income from operations | (2,601) (15.5) | 496 2.3 | (12,096) (27.2) | 765 1.1 |
| Interest income | 292 1.7 | 146 .7 | 679 1.5 | 445 .7 |
| Interest expense | (121) (.7) | (89) (.4) | (346) (.8) | (189) (.3) |
| Interest expense-financing fees | (18) (.1) | (36) (.2) | (47) (.1) | (80) (.1) |
| Other | 59 .4 | (17) (.01) | 61 .1 | (11) — |
| (Loss) income from continuing operations before taxes | (2,389) (14.2) | 500 2.3 | (11,749) (26.5) | 930 1.4 |
| Income tax expense | 6,417 38.2 | 254 1.2 | 4,300 9.6 | 482 .7 |
| (Loss) income from continuing operations, net of taxes | $(8,806) (52.4) | $246 1.1 | $(16,049) (36.1) | $448 .7 |

#### Revenues

Consolidated revenues decreased $5,065,000 for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, as follows:

*(In thousands)*

| Treatment | 2024 | % Revenue | 2023 | % Revenue | Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Government waste | $5,794 | 34.5 | $6,692 | 30.6 | $(898) | (13.4) |
| Hazardous/non-hazardous (1) | 1,199 | 7.1 | 1,389 | 6.3 | (190) | (13.7) |
| Other nuclear waste | 2,071 | 12.3 | 2,714 | 12.4 | (643) | (23.7) |
| Total | 9,064 | 53.9 | 10,795 | 49.3 | (1,731) | (16.0) |
| Services |  |  |  |  |  |  |
| Nuclear services | 6,433 | 38.3 | 9,996 | 45.7 | (3,563) | (35.6) |
| Technical services | 1,315 | 7.8 | 1,086 | 5.0 | 229 | 21.1 |
| Total | 7,748 | 46.1 | 11,082 | 50.7 | (3,334) | (30.1) |
| Total | $16,812 | 100.0 | $21,877 | 100.0 | $(5,065) | (23.2) |

(1) Includes wastes generated by government clients of $784,000 and $653,000 for the three months ended September 30, 2024, and the corresponding period of 2023, respectively.

Treatment Segment revenue decreased by $1,731,000 or 16.0% for the three months ended September 30, 2024, over the same period in 2023. The overall decrease in revenue in the Treatment Segment was primarily due to lower waste volume as discussed in the “Overview” above. Services Segment revenue decreased by approximately $3,334,000 or 30.1%. The decrease in revenue in the Services Segment was due to reasons as discussed in the “Overview” above. Additionally, our Services Segment revenues are project based; as such, the scope, duration, and completion of each project vary.

Consolidated revenues decreased $22,601,000 for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, as follows:

*(In thousands)*

| Treatment | 2024 | % Revenue | 2023 | % Revenue | Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Government waste | $16,668 | 37.5 | $23,036 | 34.4 | $(6,368) | (27.6) |
| Hazardous/non-hazardous (1) | 3,829 | 8.6 | 4,522 | 6.7 | (693) | (15.3) |
| Other nuclear waste | 5,619 | 12.7 | 5,665 | 8.5 | (46) | (0.8) |
| Total | 26,116 | 58.8 | 33,223 | 49.6 | (7,107) | (21.4) |
| Services |  |  |  |  |  |  |
| Nuclear services | 15,563 | 35.0 | 31,918 | 47.6 | (16,355) | (51.2) |
| Technical services | 2,736 | 6.2 | 1,875 | 2.8 | 861 | 45.9 |
| Total | 18,299 | 41.2 | 33,793 | 50.4 | (15,494) | (45.8) |
| Total | $44,415 | 100.0 | $67,016 | 100.0 | $(22,601) | (33.7) |

(1) Includes wastes generated by government clients of $2,330,000 and $2,126,000 for the nine months ended September 30, 2024, and the corresponding period of 2023, respectively.

Treatment Segment revenue decreased by $7,107,000 or 21.4% for the nine months ended September 30, 2024, over the same period in 2023. The overall decrease in revenue was primarily due to lower waste volume attributed from the factors as discussed in the “Overview” section above. Overall lower averaged price from waste mix within the Treatment Segment also contributed to the revenue decrease. Services Segment revenue decreased by approximately $15,494,000 or 45.8%. The decrease in revenue in the Services Segment was due to the reasons as discussed in the “Overview” above. Additionally, our Services Segment revenues are project based; as such, the scope, duration, and completion of each project vary.

#### Cost of Goods Sold

Cost of goods sold decreased $1,850,000 for the quarter ended September 30, 2024, as compared to the quarter ended September 30, 2023, as follows:

*(In thousands)*

|  | 2024 | %% Revenue | 2023 | Revenue | Change |
| --- | ---: | ---: | ---: | ---: | ---: |
| Treatment | $8,654 | 95.5 | $9,301 | 86.2 | $(647) |
| Services | 6,824 | 88.1 | 8,027 | 72.4 | (1,203) |
| Total | $15,478 | 92.1 | $17,328 | 79.2 | $(1,850) |

Cost of goods sold for the Treatment Segment decreased by approximately $647,000 or 7.0% primarily due to lower revenue. Treatment Segment’s variable costs decreased by approximately $931,000 primarily due to overall lower transportation, disposal and lab costs. Treatment Segment’s overall fixed costs were higher by approximately $284,000 resulting from the following: salaries and payroll related expenses were higher by approximately $528,000 due to higher headcount; maintenance expenses were higher by approximately $136,000 due to unexpected breakdowns of certain equipment which required repair/replacement as discussed in the “Overview” previously; travel expenses were lower by approximately $22,000; depreciation expenses were lower by approximately $213,000 due to fully depreciated asset retirement obligations (“AROs”) that occurred in the third quarter of 2023 in connection with our EWOC facility; regulatory expenses were lower by approximately $41,000; and general expenses were lower by $104,000 in various categories. Services Segment cost of goods sold decreased $1,203,000 or 15.0% primarily due to lower revenue. The decrease in cost of goods sold was primarily due to overall lower salaries/payroll related, outside services, and travel costs totaling approximately $1,379,000; lower depreciation expenses of approximately $44,000; lower general expenses of approximately $110,000 in various categories; and overall higher material and supplies, regulatory, disposal and lab expenses totaling approximately $330,000. Included within cost of goods sold is depreciation and amortization expense of $408,000 and $666,000 for the three months ended September 30, 2024, and 2023, respectively.

Cost of goods sold decreased $9,935,000 for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, as follows:

*(In thousands)*

|  | 2024 | %% Revenue | 2023 | Revenue | Change |
| --- | ---: | ---: | ---: | ---: | ---: |
| Treatment | $26,955 | 103.2 | $27,986 | 84.2 | $(1,031) |
| Services | 18,052 | 98.7 | 26,956 | 79.8 | (8,904) |
| Total | $45,007 | 101.3 | $54,942 | 82.0 | $(9,935) |

Cost of goods sold for the Treatment Segment decreased by approximately $1,031,000 or 3.7%. Treatment Segment’s variable costs decreased by approximately $1,092,000 primarily due to overall lower material and supplies, transportation, disposal and lab costs. Treatment Segment’s overall fixed costs increased by approximately $61,000 resulting from the following: salaries and payroll related expenses were higher by $1,057,000 due to higher headcount; depreciation expenses were lower by approximately $641,000 due to fully depreciated AROs that occurred in the third quarter of 2023 in connection with our EWOC facility; regulatory expenses were lower by approximately $75,000; maintenance expenses were lower by approximately $80,000; general expenses were lower by $196,000 in various categories; and travel expenses were slightly lower by approximately $4,000. Services Segment cost of goods sold decreased $8,904,000 or 33.0% primarily due to lower revenue. The decrease in cost of goods sold was primarily due to overall lower salaries/payroll related, outside services, and travel costs totaling approximately $8,673,000; lower depreciation expenses of approximately $204,000; lower general expenses of $75,000 in various categories; and overall higher material and supplies, regulatory, disposal and lab expenses totaling approximately $48,000. Included within cost of goods sold is depreciation and amortization expense of $1,218,000 and $2,063,000 for the nine months ended September 30, 2024, and 2023, respectively.

#### Gross Profit

Gross profit for the quarter ended September 30, 2024, decreased $3,215,000 over the same period of 2023, as follows:

*(In thousands)*

|  | 2024 | %% Revenue | 2023 | Revenue | Change |
| --- | ---: | ---: | ---: | ---: | ---: |
| Treatment | $410 | 4.5 | $1,494 | 13.8 | $(1,084) |
| Services | 924 | 11.9 | 3,055 | 27.6 | (2,131) |
| Total | $1,334 | 7.9 | $4,549 | 20.8 | $(3,215) |

Treatment Segment gross profit decreased by $1,084,000 or approximately 72.6% and gross margin decreased to 4.5% from 13.8% primarily due to lower revenue from lower waste volume and the impact of our fixed costs structure. Services Segment gross profit decreased by $2,131,000 or 69.8% primarily due to decreased revenue as discussed in the “Overview” above. The decrease in gross margin in the Services Segment from 27.6% to 11.9% was attributed to overall lower margin projects as the two large projects completed in late 2023 were 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.

Gross profit for the nine months ended September 30, 2024, decreased $12,666,000 over the same period in 2023, as follows:

*(In thousands)*

|  | 2024 | %% Revenue | 2023 | Revenue | Change |
| --- | ---: | ---: | ---: | ---: | ---: |
| Treatment | $(839) | (3.2) | $5,237 | 15.8 | $(6,076) |
| Services | 247 | 1.3 | 6,837 | 20.2 | (6,590) |
| Total | $(592) | (1.3) | $12,074 | 18.0 | $(12,666) |

29

Treatment Segment gross profit decreased by $6,076,000 or approximately 116.0% and gross margin decreased to (3.2)% from 15.8% primarily due to lower revenue from lower waste volume, overall lower averaged price from waste mix and the impact of our fixed costs structure. Services Segment gross profit decreased by $6,590,000 or 96.4% primarily due to decreased revenue as discussed in the “Overview” above. The decrease in gross margin from 20.2% to 1.3% was attributed to overall lower margin projects as the two large projects completed in late 2023 were 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 decreased $301,000 for the three months ended September 30, 2024, as compared to the corresponding period for 2023, as follows:

*(In thousands)*

|  | 2024 | % Revenue | 2023 | % Revenue | Change |
| --- | ---: | ---: | ---: | ---: | ---: |
| Administrative | $1,733 | — | $1,916 | — | $(183) |
| Treatment | 1,084 | 12.0 | 1,039 | 9.6 | 45 |
| Services | 815 | 10.5 | 978 | 8.8 | (163) |
| Total | $3,632 | 21.6 | $3,933 | 18.0 | $(301) |

The decrease in Administrative SG&A expenses was primarily due to lower accrued incentives expenses. In the prior year quarter, approximately $178,000 in estimated accrued incentive expenses were recorded in connection with the Company’s management incentive plans (“MIPs”) and other employees’ bonus plans. Treatment Segment SG&A expenses were higher primarily due to higher salaries and payroll related expenses of approximately $139,000 which were offset by lower outside services expenses of $20,000 from fewer consulting matters and lower general expenses of $74,000 in various categories. The decrease in Services Segment SG&A was primarily due to the following: salaries and payroll related expenses were lower by approximately $65,000; outside services expenses were lower by approximately $69,000 due to fewer consulting/legal matters; and overall general expenses were lower by approximately $29,000 in various categories. Included in SG&A expenses is depreciation and amortization expenses of $25,000 and $20,000 for the three months ended September 30, 2024, and 2023, respectively.

SG&A expenses decreased $338,000 for the nine months ended September 30, 2024, as compared to the corresponding period for 2023, as follows:

*(In thousands)*

|  | 2024 | % Revenue | 2023 | % Revenue | Change |
| --- | ---: | ---: | ---: | ---: | ---: |
| Administrative | $5,134 | — | $5,281 | — | $(147) |
| Treatment | 3,224 | 12.3 | 3,071 | 9.2 | 153 |
| Services | 2,273 | 12.4 | 2,617 | 7.7 | (344) |
| Total | $10,631 | 23.9 | $10,969 | 16.4 | $(338) |

Administrative SG&A expenses were lower primarily due to the following: payroll-related expenses were lower by approximately $178,000 primarily due to lower accrued incentive expenses. Administrative SG&A expenses in the third quarter of 2023 included estimated incentives recorded in the amount of approximately $178,000 in connection with the Company’s management incentive plans (“MIPs”) and other employees’ bonus plans. Such incentives were not recorded in the first nine months of 2024; outside services expenses were lower by approximately $40,000 from fewer consulting/legal matters; and overall general and maintenance expenses were higher by approximately $71,000. Treatment Segment SG&A expenses were higher primarily due to higher salaries and payroll related expenses of approximately $332,000 which were offset by overall lower travel, outside services and general expenses totaling approximately $179,000. The decrease in Services Segment SG&A was primarily due to lower outside services expenses of approximately $116,000 from fewer consulting and legal matters, lower salaries and payroll related expenses of approximately $203,000 and lower general expenses of $25,000 in various categories. Included in SG&A expenses is depreciation and amortization expenses of $77,000 and $61,000 for the nine months ended September 30, 2024, and 2023, respectively.

#### R&D

R&D expenses increased by $183,000 and $532,000 for the three and nine months ended September 30, 2024, respectively, as compared to the corresponding period of 2023 primarily due to expenses incurred in connection with our new PFAS technology.

#### Interest Income

Interest income increased by approximately $146,000 and $234,000 for the three and nine months ended September 30, 2024, respectively, as compared to the corresponding period of 2023. The higher interest income for the third quarter of 2024 as compared to the corresponding quarter of 2023 was primarily due to interest income earned from our money market deposit account (“MMDA”) that we maintained with our lender starting in late 2023.

The increase in interest income for the nine months ended September 30, 2024, as compared to the corresponding period of 2023 was primarily due to higher interest income earned from our finite risk sinking fund from higher interest rates that took effect starting in April 2023. Additionally, the increase in interest income resulted from interest income earned from our MMDA that we maintained with our lender starting in late 2023. The overall increase in interest income from the above was reduced by interest income received in March of 2023 of approximately $60,000 in connection with the Employee Retention Credit refund that we received.

#### Interest Expense

Interest expense increased by approximately $32,000 and $157,000 for the three and nine months ended September 30, 2024, respectively, as compared to the corresponding period of 2023. The increase for each of the periods above was attributed primarily to interest incurred on the $2,500,000 term loan dated July 31, 2023, under our credit facility and the promissory note that we entered into on July 24, 2024, for the purchase of our EWOC facility. The higher interest expense was also from more finance leases.

#### Income Taxes

We use an estimated annual effective tax rate, which is based on expected annual income, statutory tax rates and tax planning opportunities available in the various jurisdictions in which we operate, to determine our quarterly provision for income taxes.

We record valuation allowances against our net deferred tax assets to the extent we determine it is more likely than not that such assets will not be realized in the future. We regularly evaluate the probability that our deferred tax assets will be realized and determines whether valuation allowances or adjustments thereto are needed. This determination involves judgement and the use of estimates and assumptions, including expectations of future taxable income and tax planning strategies. We apply judgment to consider the relative impact of negative and positive evidence, and the weight given to negative and positive evidence is commensurate with the extent to which such evidence can be objectively verified. Based on our evaluation of all available positive and negative evidence, and with greater weight placed on the objectively verifiable evidence which included our substantial losses incurred during the nine months ended September 30, 2024, we determined, at the end of the third quarter, that it is more likely than not that our net U.S. deferred tax assets will not be realized. As a result, we provided a full valuation allowance against our U.S. federal and state deferred tax assets resulting in a recorded income tax expense in the amount of approximately $6,417,000. We continue to maintain a valuation allowance against foreign tax attributes that may not be realized.

We had income tax expenses of $6,417,000 and $4,300,000 for the three and nine months ended September 30, 2024, respectively, and income tax expenses of $254,000 and $482,000 for the three and nine months ended September 30, 2023, respectively, for our continuing operations. Our effective tax rates were approximately 268.6% and 36.6% for the three and nine months ended September 30, 2024, respectively, and 50.8% and 51.8% for the three and nine months ended September 30, 2023, respectively. Our effective tax rates for the three and nine months ended September 30, 2024, were primarily impacted by the full valuation allowance on our deferred assets as discussed above.

### Liquidity and Capital Resources

Our cash flow requirements during the nine months ended September 30, 2024, were primarily financed by our operations and Liquidity (defined as borrowing availability under the revolving credit plus cash in our MMDA maintained with our lender) under our Credit Facility. Our cash included net proceeds received from the sale of 2,051,282 shares our Common Stock to certain institutional and retail investors in May 2024 (see “Financing Activities” below for a discussion of this direct offering, including the planned usage of the proceeds). 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, R&D on our PFAS technology and capital expenditures which include our PFAS technology (see “Known Trends and Uncertainties – New Processing Technology” within this MD&A for a discussion of this technology). We plan to fund these requirements from our operations and Liquidity under our Credit Facility. Our ability to utilize our Credit Facility from our lender is subject to meeting our quarterly financial covenant requirements, among other things. 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. At September 30, 2024, we had no outstanding borrowing under our revolving credit and our Liquidity under our Credit Facility was approximately $13,984,000. We believe that our cash flows from operations and our Liquidity should be sufficient to fund our operations for the next twelve months. Although we believe we should be profitable in 2025, if we continue to incur losses, such may cause a reduction in our Liquidity.

The following table reflects the cash flow activities during the first nine months of 2024

*(In thousands)*

|  |  |
| --- | ---: |
| Cash used in operating activities of continuing operations | $(10,971) |
| Cash used in operating activities of discontinued operations | (468) |
| Cash used in investing activities of continuing operations | (2,800) |
| Cash used in investing activities of discontinued operations | (49) |
| Cash provided by financing activities of continuing operations | 17,805 |
| Effect of exchange rate changes in cash | 1 |
| Increase in cash and finite risk sinking fund (restricted cash) | $3,518 |

As of September 30, 2024, we were in a positive cash position with no revolving credit balance. At September 30, 2024, we had cash on hand of approximately $10,567,000.

#### Operating Activities

Accounts receivable, net of credit losses, totaled $8,741,000 as of September 30, 2024, a decrease of $981,000 from the December 31, 2023, balance of $9,722,000. The decrease was attributed to reduced billing from decreased revenues which were negatively impacted by a number of events as previously discussed (See “Overview” within this MD&A). Our accounts receivable was also reduced by the collection in May 2024 of outstanding accounts receivable for work performed for a certain Canadian project for which a settlement agreement was reached, with collection subject to meeting certain conditions/terms precedent (see “Perma-Fix Canada Inc. (“PF Canada”)”) below for a discussion on the collection of the receivables).

Accounts payable totaled $7,675,000 as of September 30, 2024, a decrease of $1,907,000 from the December 31, 2023, balance of $9,582,000. The decrease in accounts payable was attributed to our overall reduced operations as discussed previously. Additionally, 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 our segments.

We had working capital of $9,424,000 (which included working capital of our discontinued operations) as of September 30, 2024, as compared to working capital of $4,613,000 as of December 31, 2023. The improvement in our in our working capital was primarily due to the increase in our cash from the sale of our Common Stock (see “Financing Activities” below for a discussion of this direct offering, including the planned usage of the proceeds) which was offset by the significant losses incurred from our results of operations attributed to the various factors as previously discussed.

#### Investing Activities

For the nine months ended September 30, 2024, our purchases of capital equipment totaled approximately $2,630,000, of which $406,000 was subject to financing, with the remaining funded from cash from operations, cash from the equity raise that we completed in May 2024 and our Credit Facility. We budgeted approximately $2,000,000 for 2024 capital expenditures for our Treatment and Services Segments to maintain operations and regulatory compliance requirements and support revenue growth. Our capital expenditures for 2024 also included additional expenditures made to support our PFAS initiatives from cash from our equity raise completed in May 2024. Certain of our 2024 budgeted projects may either be delayed until later years or deferred altogether. We plan to fund our capital expenditures from cash from operations, Liquidity under our Credit Facility and/or financing. The initiation and timing of projects are also determined by financing alternatives or funds available for such capital projects.

On July 24, 2024, the Company purchased the property which its EWOC facility operates on pursuant to a Purchase and Sales Agreement for a purchase price of $425,000. In connection with this transaction, we paid $63,750 in cash and financed the remaining $361,250 of the purchase price with a bank (“see Financing Activities” below for a discussion of the Note and its terms).

#### Financing Activities

We entered into a Second Amended and Restated Revolving Credit, Term Loan and Security Agreement, dated May 8, 2020, which has since been amended from time to time, with PNC National Association (“PNC” and “lender”), acting as agent and lender (the “Loan Agreement”). The Loan Agreement provides us with the following credit facility with a maturity date of May 15, 2027 (the “Credit Facility): (a) up to $12,500,000 revolving credit (“revolving credit”), which borrowing capacity is subject to eligible receivables (as defined) and reduced by outstanding standby letters of credit ($3,950,000 as of September 30, 2024) and borrowing reductions that our lender may impose from time to time ($750,000 as of September 30, 2024); (b) a term loan (“Term Loan 1”) of approximately $1,742,000, requiring monthly installments of $35,547 (Term Loan 1 was paid off by us in June 2024); (c) a term loan (“Term Loan 2”) of $2,500,000, requiring monthly installments of $41,667; and (d) a capital expenditure line (“Capital Line”) 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”). Amounts advanced under the Capital Line at the end of the Borrowing Period totaled approximately $524,000, requiring monthly installments of principal of approximately $8,700 plus interest, commencing June 1, 2022.

Pursuant to our Loan Agreement, payments of annual interest rates are as follows: (i) interest due on the revolving credit is at prime (8.00% at September 30, 2024) plus 2% or SOFR (as defined in the Loan Agreement, as amended) plus 3.00% plus an SOFR Adjustment applicable for an interest period selected by us; (ii) interest due on each Term Loan 1 and the Capital Line was/is at prime plus 2.50% or SOFR plus 3.50% plus an SOFR Adjustment applicable for an interest period selected by us; and (iii) interest due on Term Loan 2 is at prime plus 3% or SOFR plus 4.00% plus an SOFR Adjustment applicable for an interest period selected by us. 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.

We agreed to pay PNC 0.5% of the total financing if we pay off our obligations under our Loan Agreement to our lender after July 31, 2024, to and including July 31, 2025. No early termination fee shall apply if we pays off our obligations under Loan Agreement after July 31, 2025.

On May 8, 2024, we entered into an amendment to our Loan Agreement with our lender which provided the following, among other things:

- removed the quarterly FCCR testing requirement for the first and second quarters of 2024;
- reinstated the quarterly FCCR testing requirement starting in the third quarter of 2024 and revised the methodology to be used in calculating the FCCR as follows (with no change to the minimum 1.15:1 ratio requirement): FCCR for the third quarter is to be determined based on financial results for the three-months period ending September 30, 2024; FCCR for the fourth quarter is to be determined based on financial results for the six-months period ending December 31, 2024; FCCR for the first quarter of 2025 is to be determined based on financial results for the nine-months period ending March 31, 2025; and FCCR for the second quarter of 2025 and each fiscal quarter thereafter is to be determined based on financial results for a trailing twelve-months period ending basis;
- required maintenance of a daily minimum of $2,250,000 in Liquidity under our Credit Facility through June 29, 2024, (which was met by us) and a minimum of daily $3,000,000 in Liquidity starting June 30, 2024, through June 29, 2025 (which we have met to date); and
- in the event we are able to achieve the minimum quarterly FCCR requirement utilizing our financial results based on a trailing twelve-months period starting with the quarter ending June 30, 2024 (which we have not been able to achieve as of September 30, 2024), the maintenance of a daily minimum Liquidity requirement of $3,000,000 as discussed above will be removed. Any subsequent fiscal quarter testing of the FCCR will revert back to a trailing twelve-months period method.

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 interest expense-financing fees.

On November 12, 2024, we entered into an amendment to our Loan Agreement, as amended, with our lender which provided the following, among other things:

- removes the quarterly FCCR testing requirement for the third quarter of 2024;
- reinstates the quarterly FCCR testing requirement starting in the fourth quarter of 2024 and revises the methodology to be used in calculating the FCCR as follows (with no change to the minimum 1.15:1 ratio requirement): FCCR for the fourth quarter is to be determined based on financial results for the three-months period ending December 31, 2024; FCCR for the first quarter of 2025 is to be determined based on financial results for the six-months period ending March 31, 2025; FCCR for the second quarter of 2025 is to be determined based on financial results for the nine-months period ending June 30, 2025; and FCCR for the third quarter of 2025 and each fiscal quarter thereafter is to be determined based on financial results for a trailing twelve-months period ending basis;
- extends the required maintenance of a daily minimum of $3,000,000 in Liquidity from the ending date of June 29, 2025 (and including) to September 29, 2025 (and including); and
- in the event the we are able to achieve our minimum quarterly FCCR requirement utilizing our financial results based on a trailing twelve-months period starting with the quarter ended September 30, 2024, the maintenance of a daily minimum Liquidity requirement of $3,000,000 as discussed above will be removed. Any subsequent fiscal quarter testing of the FCCR will revert back to a trailing twelve-months period method.

In connection with the amendment, we paid our lender a fee of $12,500.

Our Credit Facility under our Loan Agreement 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 our FCCR requirement for the first and second quarters of 2024 pursuant to the amendment dated May 8, 2024, to our Loan Agreement as discussed above. We were also not required to perform testing of our FCCR requirement for the third quarter of 2024 pursuant to the amendment dated November 12, 2024, to our Loan Agreement, as amended, as discussed above. Otherwise, we met all of our other financial covenant requirements in each of the first three quarters of 2024. We expect to meet our quarterly financial covenant requirements for the next twelve months.

On May 21, 2024, we entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with certain institutional and retail investors (the “Purchasers”), pursuant to which we sold and issued, in a registered direct offering, an aggregate of 2,051,282 shares of the Company’s Common Stock, at a negotiated purchase price per share of $9.75 (the “Shares”), for aggregate gross proceeds to us of approximately $20,000,000, before deducting fees payable to the placement agents and other estimated offering expenses payable by the Company (the “Offering”). The net proceeds from the Offering is to fund (i) continued R&D and business development relating to the Company’s patent-pending process for the destruction of PFAS, as well as the cost of installing at least one commercial treatment unit; (ii) ongoing facility capital expenditures and maintenance costs; and (iii) general corporate and working capital purposes.

The Shares were offered and sold by us pursuant to the our “shelf” registration statement on Form S-3 and prospectus supplement relating thereto.

Craig-Hallum Capital Group LLC (“Craig-Hallum”) and Wellington Shields & Co. LLC (“Wellington Shields”) (Wellington Shields and Craig-Hallum together are known as the “Placement Agents”) served as the exclusive placement agents in connection with the Offering. We paid the Placement Agents a total cash fee of 6.00% of the aggregate gross proceeds in the Offering, which totaled approximately $1,200,000. We also reimbursed the Placement Agents certain expenses in connection with the Offering in an aggregate amount of approximately $80,000. As additional compensation to the Placement Agents in connection with the Offering, we also issued to the Placement Agents and two (2) of their members designees, warrants (the “Placement Agents’ Warrants”) to purchase an aggregate of 61,538 shares of Common Stock (the “Warrant Shares”), with the aggregate number of Warrant Shares that may be acquired under the Placement Agents’ Warrants equal to 3.0% of the number of Shares sold in the registered direct offering, at an exercise price per share equal to $12.19, which is equal to approximately 125% of the price per share of the Shares sold in the Offering. Neither the Placement Agents’ Warrants nor the Warrant Shares have been registered under the Registration Statement or otherwise. The Placement Agents’ Warrants have a term of five years, are exercisable at any time and from time to time, in whole or in part, during the four and one-half (4 ½) year period commencing 180 days from the last date of closing of the Offering which was May 24, 2024, and are exercisable via “cashless exercise” in certain circumstances. The aggregate fair value of the “Placement Agents’ Warrants” was determined to be approximately $331,000 using the Black-Scholes pricing model with the following assumptions: 58.78% volatility, risk free interest rate of 4.53%, an expected life of five years and no dividend. The aggregate fair market value of the Placement Agent’s Warrants was recorded as an offset to gross proceeds of the Offering and an increase to additional-paid-in capital.

After deducting costs incurred of approximately $1,544,000 (exclusive of the aggregate fair market value of the Placement Agents’ Warrants as discussed above) which were recorded as a deduction to equity in connection with the Offering, net cash proceeds to us totaled approximately $18,456,000. We have paid approximately $1,505,000 of the $1,544,000 costs incurred in connection with the Offering.

On July 24, 2024, We purchased the property which our EWOC facility operates on pursuant to a Purchase and Sales Agreement dated April 30, 2024, for a purchase price of $425,000. We paid $63,750 in cash and entered into a promissory note dated July 24, 2024, in an amount of $361,250 with a bank (the “lender”) for the remaining balance of the purchase price, with a maturity date in twenty years or July 24, 2044 (the “Note”). For the first five years starting August 24, 2024, monthly payments under the Note will consists of approximately $3,100 which include an annual fixed interest rate of 8.10%. Monthly payments under the Note will then be adjusted at the end of years five, ten and fifteen, with interest calculated based on the weekly average five-year US Treasury Securities Rate plus 3.0%. Under no circumstances will the variable interest rate on the Note be less than 4.0% per annum or more than (except in the case of default) the lesser of 20.5% per annum or the maximum rate allowed by applicable law. We agreed to pay the lender 3.0% of the total outstanding principal balance under the Note in the event we pays off our obligations during the first year of the Note. The prepayment penalty rate will be reduced by 1.0% at each subsequent annual anniversary of the Note. No prepayment penalty will apply in the event we pay off the Note on the fourth anniversary of the Note or thereafter. The property was previously accounted for under our operating leases.

### 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 Task Order Agreement (“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. At year-end 2023, PF Canada had approximately $2,389,000 in outstanding receivables due from CNL as a result of work performed under the TOA. A settlement agreement was reached between PF Canada and CNL on the payment of the aforementioned amount by CNL, subject to certain conditions/terms precedents being met. PF Canada received a partial payment from CNL of the outstanding receivables during the first quarter of 2024. In May 2024, PF Canada received the remaining approximately $1,612,000 in outstanding receivables from CNL. As a result of the aforementioned payments received from CNL, no outstanding receivables remain under the TOA from CNL.

### 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 September 30, 2024, the total amount of standby letters of credit outstanding totaled approximately $3,950,000 and the total amount of bonds outstanding totaled approximately $20,568,000. We also provide closure and post-closure requirements through a financial assurance policy for certain of our Treatment Segment facilities through AIG. At September 30, 2024, the closure and post-closure requirements for these facilities were approximately $23,379,000.

### 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, 2023.

### Recent Accounting Pronouncements

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

### Known Trends and Uncertainties

*Significant Customers*. The contracts that we are a party to with others as subcontractors to the U.S government or directly with the U.S government generally provide that the government may terminate the contract at any time for convenience at the government’s option. Our inability to continue under existing contracts that we have with U.S. government authorities (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 U.S government clients, either directly as a prime contractor or indirectly for others as a subcontractor to U.S. government entities, representing approximately $11,749,000 or 69.9% and $31,748,000 or 71.5% of our total revenues generated during the three and nine months ended September 30, 2024, respectively, as compared to 14,923,000 or 68.2% and $52,270,000 or 78.0% of our total revenues generated during the three and nine months ended September 30, 2023, respectively. Our partnership’s Italian contract may be terminated by the Contracting Authority under certain conditions as set forth in the contract. The scope of work to be performed in the initial phases of the Italian contract will be performed predominately by our JV partner. Revenue generated by the Company under the initial phases of the Italian contract will be limited to project management support through 2025 and is not material to date. The Company expects to generate an increase in revenue under the Italian contract starting in 2026 when the waste treatment phases begin.

*Potential U.S Government Shutdown.* As discussed above, a significant portion of our revenue is generated through contracts entered into indirectly as subcontractors for others who are prime contractors or directly as the prime contractor to U.S. government authorities. In September 2024, a CR was enacted by Congress to avoid a U.S. government shutdown and provide temporary funding for government operations through December 20, 2024. If Congress in unable to enact FY 2025 appropriation bills by the deadline of December 20, 2024, or extend the CR, the U.S. government could enter into shutdown. In the past, even with the enactment of a CR by Congress, there were instances in which certain of our government clients delayed procurement, waste shipments and project starts due to uncertain budget projections. The full impact of any government shutdown or further CR is uncertain and could negatively impact our financial results by delays in procurement actions, contract awards, waste shipments and/or project starts.

*New Processing Technology.* We have completed the fabrication, installation, commissioning and startup of our first full scale commercial Perma-FAS system (“System”) for PFAS (commonly known as “forever chemicals”) destruction at our Perma-Fix Florida, Inc. facility. Our System and patent-pending technology successfully processed commercial PFAS-containing waste materials. There are limited current treatment options for these materials, and we expect that our process will exceed any of these methods. Some of the sizable markets for PFAS include AFFF (aqueous film-forming foam) firefighting foams, both expired concentrate and flushing liquids, contaminated liquids from PFAS systems, and other water-based separation products from a variety of industrial systems. We have already secured approximately 6,000 gallons of AFFF liquids to support ongoing operations and demonstration, and we believe that we will receive an additional 20,000 gallons in the coming months.

Our strategy for our System includes continued treatment of PFAS liquids over the coming months and targeting engineering refinements to support larger-scale Systems. By mid-2025, we expect to advance this technology into pilot-scale applications for soil, biosolids, and filter media, broadening the reach of our System’s destruction capabilities.

### 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 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. As of September 30, 2024, we had total accrued environmental remediation liabilities of $767,000, a decrease of approximately $78,000 from the December 31, 2023, balance of $845,000. The decrease represents payments for remediation projects. At September 30, 2024, $1,000 of the total accrued environmental liabilities was recorded as current.

## Market risk

As filed, 3,224 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 not effective as of September 30, 2024, due to the material weakness in internal control over financial reporting described below. Material Weakness A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. In the period ended September 30, 2024, management identified a material weakness related to the precision level needed in order to properly evaluate the need for a valuation allowance on our U.S. deferred tax assets. This material weakness resulted in an income tax valuation adjustment recorded during the quarter. The necessary level of precision was not applied when evaluating the need for a valuation allowance. The error was corrected by management in the Condensed Consolidated Financial Statements as of September 30, 2024, and for the three and nine months ended September 30, 2024. The material weakness noted did not result in a material misstatement in our previously issued financial statements, nor in the financial statements included in this Quarterly Report on Form 10-Q. Management’s Plan to Remediate the Material Weakness Our management is committed to maintaining a strong internal control environment. As it relates to the material weakness identified, we have enhanced our management and precision level of review control activities in order to evaluate the income tax valuation allowance in subsequent reporting periods. In addition, if deemed necessary, we will retain a third-party specialist to review management’s valuation allowance conclusions. |
| (b) | Changes in internal control over financial reporting. |
|  | Other than the identification of the material weakness and the related remediation plan described above, there have been no changes 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 have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. |

37

## Risk factors

As filed, 5,941 characters.

There is no other material change from the risk factors previously disclosed in our Form 10-K for the year ended December 31, 2023, and our Form 10-Q for the quarter ended March 31, 2024, except as follows:

The following additional Risk Factor under “Risks Relating to our Business and Operations” is as follows:

### We have sustained losses during 2024.

The Company sustained substantial losses during the first nine months of 2024. We believe that our results of operations should substantially improve in 2025. If, however, we fail to become profitable on an annualized basis in the foreseeable future, this could have a material adverse effect on our operations, credit facility, liquidity and potential growth.

The following additional Risk Factor under “General Risk Factors” is as follows:

**Failure to maintain effective internal control over financial reporting or failure to remediate a material weakness in internal control over financial reporting could have a material adverse effect on our business, operating results, and stock price.**

Maintaining effective internal control over financial reporting is necessary for us to produce reliable financial reports and is important in helping to prevent financial fraud. If we are unable to maintain adequate internal controls, our business and operating results could be harmed. We are required to satisfy the requirements of Section 404 of Sarbanes Oxley and the related rules of the Commission, which require, among other things, management to assess the effectiveness of our internal control over financial reporting.

In the period ended September 30, 2024, management identified a material weakness related to the precision level needed in order to properly evaluate the need for a valuation allowance on its U.S. deferred tax assets. This material weakness resulted in an income tax valuation adjustment recorded during the quarter. The necessary level of precision was not applied when evaluating the need for a valuation allowance. The error was corrected by management in the Condensed Consolidated Financial Statements as of September 30, 2024, and for the three and nine months ended September 30, 2024. The material weakness noted did not result in a material misstatement in our previously issued financial statements, nor in the financial statements included in this Quarterly Report on Form 10-Q. We have implemented a plan to remediate this material weakness.

If we are unable to maintain adequate internal control over financial reporting and/or remediate any material weakness identified, there is a reasonable possibility that a misstatement of our annual or interim financial statements will not be prevented or detected in a timely manner. If we cannot produce reliable financial reports, investors could lose confidence in our reported financial information, the market price of our Common Stock could decline significantly, and our business, financial condition, and reputation could be harmed.

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

|  |  |
| ---: | --- |
| 4.1 | Revised Second Amended and Restated Revolving Credit, Term Loan and Security Agreement referenced as Annex A in the Fifth Amendment, as incorporated by reference from Exhibit 4.2 to the Company’s Form 8-K filed on August 29, 2022. |
| 4.2 | Eighth Amendment to Second Amended and Restated Revolving Credit, Term Loan and Security Agreement dated May 8, 2024, between Perma-Fix Environmental Services, Inc. and PNC Bank, National Association, as incorporated by reference from Exhibit 4.1 to the Company Form 10-Q for the first quarter 2024, filed on May 9, 2024. |
| 4.3 | Ninth Amendment to Second Amended and Restated Revolving Credit, Term Loan and Security Agreement, dated November 12, 2024, between Perma-Fix Environmental Services, Inc. and PNC Bank, National Association |
| 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-the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL 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 104 | Inline XBRL Taxonomy Extension Presentation Linkbase Document\* Cover Page Interactive Data File (formatted as an Inline XBRL document and included in Exhibit 101). |
| \* Pursuant to Rule 406T of Regulation S-T, the Inline 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. |  |

38

### SIGNATURES

Pursuant to the requirements of the Securities 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: November 13, 2024 | By: | /s/ Mark Duff |
|  |  | Mark Duff President and Chief (Principal) Executive Officer |
| Date: November 13, 2024 | By: | /s/ Ben Naccarato |
|  |  | Ben Naccarato |
|  |  | Chief (Principal) Financial Officer |

39

Filed Nov 13, 2024.
Source: SEC EDGAR, the filing index for accession 0001493152-24-045114. Last ingested by Listed: Nov 5, 2026, 13:52 ET. No prices; not investment advice.