Perma Fix Environmental Services Inc: Form 10-Q for the period ended Jun 30, 2026

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;
• spending priorities of Congress;
• passage of U.S. fiscal year government budgets or enactment of CRs to keep government departments and agencies in operations;
• commence treatment of Hanford-related waste received in the second quarter of 2026 in the third quarter of 2026 ;
• ramp-up of Hanford-related waste at our PFNW facility;
• investments made to support Hanford-related activity;
• value of LLNL contract;
• the issuance, number, size and timing of task orders to be issued to the Company under the Company’s Master Subcontract award;
• the effect of recent stabilize Services Segment contract recent awards on the segment’s revenue base;
• improvement in financial results in remainder of 2026;
• demand, pricing, or throughput levels for PFAS waste volumes are sufficient to offset costs incurred from PFAS initiatives;
• increase in Hanford waste receipts in 2026;
• delays in anticipated treatment waste volumes and project activity;
• ability to meet our quarterly financial covenant requirements under our PNC Loan Agreement;
• expansion into international and commercial markets;
• cash flow requirements;
• sufficient cash flow and liquidity to fund operations for the next twelve months;
• projected cash flows from operations subject to timing and uncertainty, including those resulting from ongoing federal spending constraints;
• amount and funding of capital expenditures;
• funding of operating and capital expenditures from existing cash from operations, PNC Liquidity under our Credit Facility, and/or financing;
• ability to continue to operate as a going concern;
• lower margin previously stored waste inventories substantially processed and not expected to have a material effect to operating results in the next twelve months;
• obtain additional liquidity on acceptable terms, or at all;
• adoption and acceptance of our PFAS technology are subject to regulatory and market factors;
• limited current treatment destruction options for these materials to eliminate generator liabilities;
• deployment of the second generation PFAS destruction unit in second half of 2026;
• expectation that the second generation PFAS destruction unit will triple our production capacity;
• funding of remediation expenditures for sites from funds generated internally;
• compliance with environmental regulations;
• remediation of material weakness identified;
• potential effect of being a PRP;
• material adverse effect on financial condition, results of operations, or cash flow from notice of non-compliance at the PFNW facility;
• favorable resolution of the notice of non-compliance at the PFNW facility;

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• potential violations of environmental laws and attendant remediation at our facilities.
• result of contract with Lawrence Livermore National Laboratory; and
• results of strategic operations.

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 and uncertainties;
• inability to process waste at our facilities;
• inability to properly bid contracts;
• reduction in or inability to obtain new contracts with federal, state and local governments, agencies and departments, resulting in a reduction in revenue;
• changes in federal government budgeting and spending priorities;
• failure by Congress or other governmental bodies to approve budgets and debt ceiling increases in a timely fashion and related reductions in government spending;
• tariff actions and uncertainties related to trade wars;
• 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;
• 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;
• 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;
• material adjustments to environmental remediation reserves;
• new or additional requirements to handle low-level radioactive and hazardous waste materials;
• 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;
• 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 our Italian team partner to perform its requirements in connection with the Italian project;
• changes in the scope of work relating to existing contracts;
• occurrence of a health pandemic having adverse effects on the U.S. and world economics;
• renegotiation or termination 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;
• risks resulting from expanding our service offerings and client base;
• non-acceptance of our new technology;
• adjustments to our valuation allowance;
• supply chain difficulties;
• pricing adjustments;
• cost reduction measures;
• new governmental regulations; and
• risk factors and other factors set forth in “Special Note Regarding Forward-Looking Statements” contained in the Company’s 2025 Form 10-K and the “Forward-Looking Statements” contained in the MD&A of the first quarter 2026 Form 10-Q and the this second quarter Form 10-Q.

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Our forward-looking statements are based on the beliefs and assumptions of our management and the information available to our management at the time these statements were prepared. Although we believe the expectations reflected in these statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. You should not place undue reliance on the forward-looking statements as noted above, which apply only to as of the date of this Form 10-Q. We undertake no obligation to update these forward-looking statements, even if our situation changes in the future.

Overview

Our operating results for the second quarter of 2026 were below management’s expectations, primarily due to the timing of anticipated waste receipts, processing delays due to customer-directed changes in treatment protocols and continued strategic investments in support of future growth initiatives within our Treatment Segment. In addition, delays in the commencement of several new projects within our Services Segment and the continued processing of previously stored waste inventories to prepare for anticipated increases in certain Hanford-related waste volumes negatively impacted our revenues during the quarter, as described below. Despite these near-term impacts, the quarter marked an important operational milestone as our PFNW facility received certain Hanford-related waste streams as anticipated. These receipts contributed to an increase in our Treatment Segment backlog to approximately $15,733,000 at June 30, 2026, up approximately 28.5% from $12,248,000 at March 31, 2026. Subsequent to quarter-end, in early July, PFNW also began receiving liquid effluent wastes from the DFLAW facility, representing another significant operational milestone for the Company.

Although these operational milestones were achieved, our second quarter financial results did not reflect the benefit of the waste receipts discussed above. Customer-directed changes in treatment protocols delayed the processing of certain Hanford-related waste streams received during the second quarter into the third quarter. We expect to commence treatment of these wastes during the third quarter of 2026. At the same time, we incurred increased personnel and other operating expenses in anticipation of increases of these waste receipts; thus, while the revenue shifted to the second half, associated costs were incurred in the second quarter, which contributed to our losses for the period. In addition, as noted above, delays in the commencement of several new projects within our Services Segment and the continued processing of previously stored waste inventories to prepare for anticipated increases in certain Hanford-related waste volumes negatively impacted our revenues during the quarter. Certain of these previously stored waste inventories carried lower margins, which adversely affected our results of operations. These lower-margin previously stored waste inventories have now been substantially processed and are not expected to have a material effect on operating results during the next twelve months.

We believe the investments we have made in personnel, operational readiness, facility upgrades, capacity enhancements, as well as the acquisition of the rail-line land parcel that connects the PFNW property to the Port of Benton short-line railroad (see “Note 8 – Long-Term Debt – Promissory Note” to the accompanying Condensed Consolidated Financial Statements for further discussion of rail-line land parcel) have positioned us to support increasing Hanford-related activity. The commencement of Hanford-related waste receipts during the second quarter, the start of DFLAW liquid effluent waste receipts subsequent to quarter-end, the H2C contract award in August 2026 discussed below, and the growth in our Treatment Segment backlog indicate that these investments are beginning to translate into increased operating activity.

On August 10 2026, we were awarded a Master IDIQ Subcontract by Hanford Tank Waste Operations & Closure, LLC (“H2C”) for the treatment and disposal of pretreated liquid mixed low-level waste from DOE’s Hanford Site (the “Company’s Master Subcontract”). H2C also awarded Master IDIQ Subcontracts to two other companies. H2C is the prime contractor to DOE’s Office of Environmental Management for tank waste operations and closure at the Hanford Site in southeastern Washington State. Work awarded to us under future task orders, if any, under the Company’s Master Subcontract, would be performed at our PFNW facility in Richland, Washington and would include the receipt and treatment of pretreated mixed low-level waste, with treated waste transported by rail for final disposal at a licensed commercial mixed low-level waste disposal facility outside the State of Washington. Task orders may be issued from January 1, 2027 through December 31, 2041, with performance of task orders issued before the end of the ordering period permitted for up to five years beyond the end of the ordering period. The multiple-award IDIQ procurement provides for a maximum cumulative quantity of 50 million gallons, with a maximum cumulative value of approximately $4.4 billion. These amounts represent procurement ceilings shared among all Master IDIQ Subcontract holders and do not represent amounts awarded or committed to us. The number, size and timing of task orders to be issued to us, if any, cannot be assured. Under our Performance Work Statement, we are required to maintain the capability to treat and dispose of pretreated tank waste at a rate of 100,800 gallons per week in accordance with facility license and permit conditions.

Our PFNW facility is working with Washington State regulators regarding an expansion of its existing grouting permits and is advancing the design and procurement of facility upgrades intended to support the proposed expanded capacity.

Activity in our Services Segment is also increasing. During the first quarter of 2026, the segment was awarded a two-year master task agreement with an estimated value of approximately $24 million for demolition and disposal services at Lawrence Livermore National Laboratory (“LLNL”). In addition, during the second quarter we were awarded nearly $15 million of additional contracts supporting multiple DOE and commercial sites.

In May 2026, we completed a public equity raise and issued and sold an aggregate 2,628,571 shares of our Common Stock to fund capital investments and general working capital needs, including investments at our PFNW facility to support the Hanford waste program (see “Liquidity and Capital Resources – Financing Activities” within this MD&A and “Note 13 – Sale of Common Stock” to the accompanying Condensed Consolidated Financial Statements for further discussion of this equity raise).

Looking ahead, we believe our current initiatives position us for potential improvement in our financial results during the remainder of 2026. These initiatives include pursuing additional large and mid-size procurement opportunities within the DOE and DOW, including opportunities under the Hanford waste program, as well as expanding our presence in commercial and international markets.

See “Federal Funding” and “Market Trends and Uncertainties” in “Known Trends and Uncertainties” within this MD&A for a discussion of factors that could negatively impact our results of operations for the remainder of 2026.

Financial Results Overview

As a result of the combined factors discussed above, revenue decreased by $1,701,000, or 11.7%, to $12,885,000 for the three months ended June 30, 2026, from $14,586,000 for the same period of 2025. The decrease was primarily attributable to our Treatment Segment, where revenue declined by $3,108,000, or 27.3%, to $8,289,000 from $11,397,000 in the prior-year period. This decrease was partially offset by higher Services Segment revenue, which increased by $1,407,000, or 44.1%, to $4,596,000 from $3,189,000 in the same period of 2025. Cost of goods sold increased by $2,349,000, or 18.0%, to $15,388,000 for the three months ended June 30, 2026, compared to $13,039,000 for the same period of 2025. As a result, we incurred a gross loss of $2,503,000 for the three months ended June 30, 2026, compared with gross profit of $1,547,000 in the prior-year period. SG&A expenses decreased by $379,000 to $3,751,000 for the three months ended June 30, 2026, from $4,130,000 in the same period of 2025.

For the six months ended June 30, 2026, revenue decreased by $4,494,000, or 15.8%, to $24,011,000 from $28,505,000 for the same period of 2025. The decrease was primarily attributed to our Treatment Segment where revenue declined by $4,415,000. Services Segment revenue decreased slightly by $79,000 or 1.0% to $7,843,000 for the six months ended June 30, 2026 from $7,922,000 for the same period of 2025. Cost of goods sold increased by $3,094,000, or 11.8%, to $29,395,000 for the six months ended June 30, 2026, from $26,301,000 in the same period of 2025. As a result, we incurred a gross loss of $5,384,000 for the six months ended June 30, 2026, compared with gross profit of $2,204,000 in the prior-year period. SG&A expenses decreased by $96,000, or 1.2%, to $8,049,000 from $8,145,000 for the same period of 2025.

See below “Results of Operations” for a discussion of our financial results for the three and six months ended June 30, 2026 as compared to the corresponding period of 2025.

Despite the positive developments discussed above, management concluded that substantial doubt continues to exist about our ability to continue as a going concern within one year after the date the accompanying Condensed Consolidated Financial Statements are issued (see “Liquidity and Capital Resources” within this MD&A for a discussion of the factors and conditions underlying this conclusion).

Business Environment

Our Treatment and Services Segments’ business continue to be heavily dependent on services that we provide to federal governmental clients, primarily as subcontractors for others who are 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. In addition, our governmental contracts and subcontracts relating to activities at federal governmental sites are generally subject to termination for convenience at any time, at the government’s option. Significant reductions in the level of governmental funding, government shutdown 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, liquidity and cash flows.

Results of Operations

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

Summary – Three and Six Months Ended June 30, 2026 and 2025

Revenues

Consolidated revenues decreased $1,701,000, for the three months ended June 30, 2026, compared to the three months ended June 30, 2025, as follows:

(In thousands)

(1) Includes wastes generated by government clients of $702,000 and $567,000 for the three months ended June 30, 2026 and the corresponding period of 2025, respectively.

Treatment Segment revenue decreased by $3,108,000, or 27.3%, for the three months ended June 30, 2026, compared with the same period in 2025. The decline was primarily due to lower waste volume and a less favorable revenue mix. The less favorable revenue mix reflected lower average pricing, primarily resulting from the processing of certain previously stored waste inventories. These previously stored waste inventories were processed as part of our preparation for anticipated increases in Hanford-related waste volumes.

The increase in revenue in our Services Segment was primarily attributable to a higher volume of project work during the period compared with the same period in 2025. Revenue in our Services Segment is project-based and is influenced by the scope, duration, timing, and completion of individual projects. As a result, revenue may fluctuate significantly between reporting periods based on the timing, scope, and mix of projects performed.

Consolidated revenues decreased $4,494,000 for the six months ended June 30, 2026, compared to the six months ended June 30, 2025, as follows:

(In thousands)

(1) Includes wastes generated by government clients of $1,214,000 and $1,007,000 for the six months ended June 30, 2026, and the corresponding period of 2025, respectively.

Treatment Segment revenue decreased by $4,415,000, or 21.4%, for the six months ended June 30, 2026, compared with the same period in 2025. The decline was primarily due to lower waste volumes and a less favorable revenue mix. The less favorable revenue mix reflected lower average pricing, which was impacted in part by the processing of certain previously stored waste inventories that carried lower average pricing. These previously stored waste inventories were processed as part of our preparation for anticipated increases in Hanford-related waste volumes.

The decrease in revenue in our Services Segment was primarily attributable to a lower volume of project work during the first quarter of 2026. The lower project volume reflected, in part, the impact of typical winter weather and post-holiday slowdowns that reduced field activity. Revenue in our Services Segment is project-based, and the scope, duration, timing, and completion of individual projects vary from period to period. As a result, revenue may fluctuate significantly between reporting periods based on the timing, scope, and mix of projects performed.

Cost of Goods Sold

Cost of goods sold increased $2,349,000 for the quarter ended June 30, 2026, compared with the same period in 2025, as follows:

(In thousands)

Cost of goods sold for the Treatment Segment increased by approximately $1,110,000, or 11.3%. Variable costs increased by approximately $477,000, primarily due to higher materials and supplies, transportation, and outside services costs totaling approximately $444,000, as well as higher overtime expense of approximately $217,000 incurred in processing previously stored waste inventories in anticipation of increases in Hanford-related waste volumes. These increases were partially offset by lower disposal costs of approximately $184,000. Within our Treatment Segment, the composition and level of variable costs can fluctuate based on the waste mix. Treatment Segment fixed costs increased by approximately $633,000. Fixed salaries and payroll-related expenses increased by approximately $499,000, primarily due to COLA adjustments implemented in July 2025 and increased headcount. Maintenance costs increased by approximately $45,000 due to general equipment upkeep and facility security enhancements. Depreciation expense increased by approximately $59,000 due to additional capitalized equipment, including our prototype PFAS reactor. Regulatory expenses increased by approximately $74,000 due to increased regulatory activities and higher fees assessed by regulatory agencies. These increases were partially offset by a decrease of approximately $44,000 in general expenses, primarily due to lower utility costs.

Services Segment cost of goods sold increased by $1,239,000, or 38.6%, primarily due to higher revenue during the period. The increase was primarily driven by higher subcontract and outside services costs of approximately $655,000 and higher salaries and payroll-related expenses of approximately $419,000. The increase in salaries and payroll-related expenses primarily reflected the COLA implemented in July 2025, as well as increased labor associated with the higher volume of project work. Cost of goods sold also increased due to higher travel costs of approximately $118,000 and increased materials and supplies, disposal, and regulatory costs totaling approximately $108,000. These increases were partially offset by lower general expenses of approximately $48,000 across various categories and lower depreciation expense of approximately $13,000, as certain equipment became fully depreciated in 2025. Within our Services Segment, the composition and level of cost of goods sold are influenced by the type, scope, and timing of projects performed during the period. Certain projects require greater reliance on subcontractors, specialized materials, regulatory compliance activities, or travel, while others are more labor-intensive or utilize primarily in-house resources. As a result, the mix of project work can significantly affect both the composition and level of costs incurred and may not be directly proportional to changes in revenue.

Cost of goods sold increased $3,094,000, for the six months ended June 30, 2026, compared with the same period in 2025, as follows:

(In thousands)

Cost of goods sold for the Treatment Segment increased by approximately $2,886,000, or 15.4%. Variable costs increased by approximately $1,686,000, primarily due to higher disposal, materials and supplies, transportation and lab costs totaling approximately $1,453,000, as well as higher overtime expense of approximately $233,000 incurred in processing previously stored waste inventories in anticipation of increases in Hanford-related waste volumes. Within our Treatment Segment, the composition and level of variable costs can fluctuate based on waste mix. Treatment Segment fixed costs increased by approximately $1,200,000. Fixed salaries and payroll-related expenses increased by approximately $810,000, primarily due to COLA adjustments implemented in July 2025 and increased headcount. Maintenance costs increased by approximately $127,000 due to general equipment upkeep and facility security enhancements. Depreciation expense increased by approximately $133,000 due to additional capitalized equipment, including our prototype PFAS reactor. Regulatory expenses increased by approximately $192,000 due to increased regulatory activities and higher fees assessed by regulatory agencies. These increases were partially offset by a decrease of approximately $62,000 in general expenses, primarily due to lower utility costs.

Services Segment cost of goods sold increased by $208,000, or 2.8%. The increase was primarily driven by higher salaries and payroll-related expenses of approximately $534,000, reflecting the COLA implemented in July 2025, as well as increased labor associated with the higher volume of project work. Cost of goods sold also increased due to higher travel costs of approximately $237,000. These increases were partially offset by lower outside services costs of approximately $276,000, lower materials and supplies, disposal and regulatory costs totaling approximately $171,000, lower general expenses of approximately $83,000 across various categories, and lower depreciation expense of approximately $33,000 as certain equipment became fully depreciated in 2025. Within our Services Segment, the composition and level of cost of goods sold are influenced by the type, scope, and timing of projects performed during the period. Certain projects require greater reliance on subcontractors, specialized materials, regulatory compliance activities, or travel, while others are more labor-intensive or utilize primarily in-house resources. As a result, the mix of project work can significantly affect both the composition and level of costs incurred and may not be directly proportional to changes in revenue.

Gross (Loss) Profit

Gross profit for the quarter ended June 30, 2026 decreased $4,050,000 over the same period in 2025 as follows:

(In thousands)

Treatment Segment incurred a gross loss of $2,652,000 for the three months ended June 30, 2026, compared with a gross profit of $1,566,000 for the same period in 2025. Gross margin declined to (32.0%) from 13.7%. The decline in gross profit and gross margin was primarily due to lower revenue resulting from reduced waste volumes and a less favorable waste mix. In addition, the Treatment Segment’s higher fixed operating costs were spread over a lower revenue base, further reducing gross margin and contributing to the gross loss.

Services Segment gross profit increased by approximately $168,000, and gross margin improved to 3.2% from (0.6%) in the prior-year period, primarily due to higher revenue. Gross margins within our Services Segment are influenced by the type, scope, and mix of projects performed, which are generally competitively bid and have varying margin structures. As a result, gross margins may fluctuate from period to period based on the timing and mix of projects completed.

Gross profit for the six months ended June 30, 2026 decreased $7,588,000 over 2025 as follows:

(In thousands)

Treatment Segment incurred a gross loss of $5,485,000 for the six months ended June 30, 2026, compared a gross profit of $1,816,000 for the same period of 2025. Gross margin declined to (33.9%) from 8.8%, primarily due to lower revenue from lower waste volume and a less favorable waste mix. In addition, higher operating fixed costs within the Treatment Segment, which were spread over a lower revenue base, further reduced gross margin and contributed to the gross loss.

Services Segment gross profit decreased by $287,000, and gross margin declined to 1.3% from 4.9% in the prior-year period, primarily due to lower revenue and a less favorable project margin mix. Gross margins within our Services Segment are influenced by the type, scope, and mix of projects performed, which are generally competitively bid and have varying margin structures. As a result, gross margins may fluctuate from period to period based on the timing and mix of projects completed.

SG&A

SG&A expenses decreased $379,000 for the three months ended June 30, 2026, compared to the corresponding period for 2025, as follows:

(In thousands)

Administrative SG&A increased primarily due to higher outside services costs associated with increased legal and business activities. Treatment Segment SG&A declined primarily due to lower salaries and payroll-related expenses as fewer employee hours were required to support administrative and marketing functions. Services Segment SG&A declined primarily due to a decrease in the provision for credit losses resulting from the settlement of a receivable that had previously been determined to be uncollectible, as well as lower salaries and payroll-related expenses due to fewer employee hours needed to support marketing functions.

SG&A expenses decreased $96,000 for the six months ended June 30, 2026, compared to the corresponding period for 2025, as follows:

(In thousands)

Administrative SG&A increased primarily due to approximately $184,000 of higher outside services costs associated with increased legal and business activities. The remaining increase was primarily attributable to higher salaries and payroll-related expenses resulting from COLA implemented in July 2025 for employees and January 2026 for executives. Treatment Segment SG&A increased primarily due to approximately $53,000 of higher outside services costs associated with increased consulting and business activities and approximately $31,000 of higher travel expenses incurred by information technology personnel. These increases were partially offset by lower salaries and payroll-related expenses, as fewer employee hours were required to support administrative and marketing functions. Services Segment SG&A declined primarily due to a decrease in provision for credit losses resulting from the settlement of a receivable that had previously been determined to be uncollectible.

Interest Income

Interest income decreased by approximately $98,000 and $252,000 for the three and six months ended June 30, 2026, respectively, compared with the same periods in 2025. The decreases were primarily due to lower interest income earned on lower balances maintained in our MMDA. Interest income also declined due to lower interest earned on our finite risk sinking funds, primarily as a result of lower interest rates.

Interest Expense

Interest expense decreased by approximately $51,000 and $103,000 for the three and six months ended June 30, 2026, respectively, compared with the same periods in 2025. The decreases were primarily due to the capitalization of approximately $40,000 and $74,000 of interest in the three and six months ended June 30, 2026, respectively, related to debt incurred for construction projects, including our second PFAS reactor.

Income Taxes

We had no income tax expense for continuing operations for the three and six months ended June 30, 2026 and 2025. Our effective tax rate was 0% for each period as a result of the full valuation allowance recognized against its U.S. federal and state deferred tax assets during the quarter ended September 30, 2024.

Liquidity and Capital Resources

Our cash flow requirements during the six months ended June 30, 2026, were funded primarily from available PNC Liquidity. Our PNC Liquidity includes cash held in our MMDA, which includes net proceeds from the sale of 2,628,571 shares of our Common Stock completed in May 2026 (see “Financing Activities” below within this MD&A and “Note 13—Sale of Common Stock” to the accompanying Condensed Consolidated Financial Statements for further discussion of the equity offering).

As of June 30, 2026, we had no outstanding borrowings under our Revolving Credit and our PNC Liquidity was approximately $25,584,000, which included approximately $20,338,000 of cash held in our MMDA. As of December 31, 2025, we had no outstanding borrowing under our Revolving Credit and our PNC Liquidity was approximately $18,126,000, which included approximately $11,529,000 of cash held in our MMDA.

We incurred losses from continuing operations before tax of $15,134,000 during 2024, $10,665,000 during 2025, and $13,637,000 during the first six months of 2026. We also experienced cash used in continuing operations of $14,146,000 during 2024, $10,311,000 during 2025, and $8,769,000 during the first six months of 2026. These results were due in part to delays in the enactment of federal appropriations and Congress’s continued use of CRs, as well as increased investments in PFAS technology (see “Known Trends and Uncertainties – New Processing Technology” within this MD&A for a discussion of our new technology), expansion of treatment capacity, workforce growth, and infrastructure enhancements intended to support anticipated waste treatment volumes, including anticipated Hanford-related waste volumes. In addition, for 2026 year to date, delays in the commencement of several new projects within our Services Segment, processing delays due to customer-directed changes in treatment protocols and the continued processing of previously stored waste inventories to prepare for anticipated increases in certain Hanford-related waste volumes negatively impacted our revenues during the quarter. Certain of these previously stored waste inventories carried lower margins, which adversely affected our results of operations. These lower-margin previously stored waste inventories have now been substantially processed and are not expected to have a material effect on operating results during the next twelve months.

Our expected cash requirements over the next twelve months include working capital needs, scheduled principal payments on debt, costs associated with the administration and monitoring of discontinued operations, R&D expenditures related to PFAS technology, and capital expenditures.

A significant portion of our projected revenues and cash flows underlying our forecast depends on the timing and volume of waste shipments and project activity directed by U.S. government customers. Because these customers do not provide binding assurances regarding the timing or volume of future work, and such activity is subject to appropriations, procurement processes, operational considerations and other factors outside our control, we could not conclude that our plans are probable of effectively mitigating the conditions giving rise to substantial doubt. Accordingly, substantial doubt continues to exist about our ability to continue as a going concern for one year following the date the accompanying Condensed Consolidated Financial Statements are issued.

Our plans to address these conditions include utilizing existing cash and borrowing availability; pursuing operating improvements supported by the Company’s Treatment and Services Segment backlogs; continuing to pursue additional government, commercial and international project opportunities; managing capital expenditures and operating costs; and, if necessary, seeking additional liquidity through equity or other financing arrangements or potential asset dispositions. In addition, on August 10, 2026, we extended the maturity of our PNC Credit Facility from May 2027 to May 2030, among other things (see “Liquidity and Capital Resources—Financing Activities—Credit Facility” for a discussion of this extension).

Although the May 2026 equity offering discussed elsewhere in this Report strengthened our liquidity, we concluded that the substantial doubt was not alleviated. We expect our existing liquidity, anticipated operating cash flows and borrowing availability to be sufficient to fund our operations during the assessment period. However, the ability of our plans to mitigate the conditions giving rise to substantial doubt depends in part on the timing and volume of government-directed waste shipments and project activity, as well as other matters outside our control. In addition, the Company’s borrowing availability is subject to compliance with applicable financial covenants and other conditions. There can be no assurance that additional liquidity , if needed, will be available on acceptable terms or at all.

The following table reflects the cash flow activities during the first six months of 2026 and 2025.

(In thousands)

As of June 30, 2026, we had cash on hand of approximately $20,497,000.

Operating Activities

Cash used in operating activities from continuing operations during the first six months of 2026 primarily reflected our net loss of approximately $13,637,000, adjusted for non-cash items, including stock-based compensation expense of approximately $398,000 and depreciation and amortization expense of approximately $974,000. Changes in operating assets and liabilities provided approximately $3,508,000 of cash, primarily reflecting a decrease in accounts receivable (including the recovery of credit losses) of approximately $1,481,000 and a net increase in accounts payable, accrued expenses, deferred revenue, and other accrued liabilities of approximately $3,074,000. These favorable changes were partially offset by an increase in unbilled receivables of approximately $797,000 and a net increase in inventories, prepaid expenses, and other assets of approximately $250,000. Accounts receivable balances are affected by the timing of customer invoicing and collections, while the timing of cash receipts is influenced by the payment terms and conditions of our customer contracts.

Cash used in operating activities from continuing operations during the first six months of 2025 primarily reflected our net loss of approximately $6,083,000, adjusted for non-cash items, including stock-based compensation expense of approximately $382,000 and depreciation and amortization expense of approximately $873,000. Changes in operating assets and liabilities provided approximately $1,072,000 of cash, primarily reflecting a decrease in accounts receivable (net of the provision for credit losses) of approximately $2,974,000 and a net decrease in inventories, prepaid expenses, and other assets of approximately $463,000. These favorable changes were partially offset by an increase in unbilled receivables of approximately $1,297,000 and a net decrease in accounts payable, accrued expenses, deferred revenue, and other accrued liabilities of approximately $1,068,000.

Cash used in operating activities from discontinued operations during the first six months of 2026 and 2025 consisted primarily of costs incurred in connection with the management of administrative and regulatory matters related to our remediation projects.

We had working capital of $18,390,000 (which included working capital of our discontinued operations) as of June 30, 2026, compared to working capital of $13,803,000 as of December 31, 2025. The increase in our working capital was primarily due to net proceeds received from the equity raise that we completed in May of 2026.

Investing Activities

Cash used in investing activities from continuing operations during the first six months of 2026 consisted primarily of cash purchases of property and equipment of approximately $2,675,000. The remaining cash outflows related to expenditures for operating permits and certain intangible assets.

Cash used in investing activities of our continuing operations in the first six months of 2025 consisted primarily of cash purchases of property and equipment of approximately $1,766,000. The remaining cash used in investing activities consisted of cash outlays made in connection with our operating permits and certain intangible assets. Total cash used in investing activities of our continuing operations was partially offset by approximately $33,000 from our sale of idle equipment.

Our capital expenditures for the periods noted above included investments in our second-generation and prototype PFAS technology systems, as well as facility upgrades and capacity enhancements to support anticipated increases in waste volumes associated with the Hanford waste program.

Our anticipated capital expenditures for the remainder of 2026 include expenditures to complete our second-generation reactor for our PFAS technology and continuing facility upgrades and capacity enhancements to support anticipated increases in waste volumes associated with the Hanford waste program. We plan to fund our capital expenditures for the remainder of 2026 from cash from operations, available PNC Liquidity (which includes proceeds from the May 2026 equity raise) and/or financing. The initiation, timing, and amount of these capital expenditures are subject to a number of factors, including, among other things, cost/benefit analysis, the pace of our strategic project initiatives, operating performance, project timing, and management’s continuing evaluation of liquidity. Continuing losses may require us to seek additional liquidity through equity or other financing arrangements, potential asset dispositions, or other strategic alternatives. We may also be required to reduce certain operating expenditures, including, but not limited to, reduction in R&D activities.

Cash used in investing activities of our discontinued operations in the first six months of 2026 and 2025 consisted of payments made in connection with a certain regulatory permit at our PFSG subsidiary.

Financing Activities

Cash provided by financing activities during the first six months of 2026 consisted primarily of net proceeds of approximately $21,295,000 received from the sale of 2,628,571 shares of our Common Stock in May 2026 to fund certain capital investments and general working capital needs (see “Note 13 – Sale of Common Stock” to the accompanying Condensed Consolidated Financial Statements for further discussion of this equity raise). The net proceeds reflect gross proceeds from the offering of approximately $23,000,000, net of $1,705,000 of offering costs paid through June 30, 2026. Total offering costs incurred in connection with the offering were $1,886,000 as of June 30, 2026. Cash provided by financing activities also included proceeds received of approximately $153,000 from stock option exercises. These cash inflows were partially offset by principal payments of approximately $521,000 on our Term Loan, Capital Loan, and finance lease obligations.

Our cash used in financing during the first six months of 2025 consisted mostly of principal payments of approximately $313,000 primarily for our Term and Capital Loans under our Credit Facility, principal payments of $148,000 for our finance leases, payments of $194,000 of offering costs from the equity raise that we completed in December 2024, partially offset by proceeds received from option exercises of approximately $49,000.

Credit Facility

Our Credit Facility, established pursuant to our PNC Loan Agreement, and maturing on May 15, 2027, consists of a Revolving Credit facility with a maximum borrowing capacity of $12,500,000. Availability under the Revolving Credit facility is subject to a borrowing base comprised of eligible receivables (as defined in the agreement) and is reduced by (i) outstanding standby letters of credit ($3,420,000 as of June 30, 2026) and (ii) discretionary reserves imposed by the lender ($750,000 as of June 30, 2026). The Credit Facility also includes a Term Loan and a Capital Loan with outstanding balances of approximately $1,083,000 and $96,000, respectively, as of June 30, 2026. On August 10, 2026, we entered into an amendment to our PNC Loan Agreement with our lender that extended the maturity date of the PNC Loan Agreement from May 15, 2027 to May 15, 2030. The amendment also eliminated the annual capital expenditure limitation of $6,000,000, provided that we maintain a minimum daily PNC Liquidity of $5,000,000. If PNC Liquidity falls below $5,000,000, the annual capital expenditure limitation of $6,000,000 becomes applicable.

Pursuant to the amendment, we may terminate the PNC Loan Agreement upon 90 days’ prior written notice upon payment in full of its obligations under the PNC Loan Agreement. We also agreed to pay PNC 0.25% of the total financing in the event we pay off our obligations on or before May 15, 2027. No early termination fee shall apply if we pay off our obligations under the PNC Loan Agreement after May 15, 2027.

In connection with the amendment, we paid our lender a fee of $12,500. All other terms of the PNC Loan Agreement remain unchanged.

Our PNC Loan Agreement contains certain financial covenant requirements, along with customary representations and warranties. A breach of any of these financial covenant requirements, unless waived by our lender, could result in a default under our PNC Loan Agreement allowing our lender to immediately require the repayment of all outstanding debt under our PNC Loan Agreement and terminate all commitments to extend further credit. We met all of our financial covenant requirements in the first and second quarters of 2026, including maintenance of a minimum of $5,000,000 in daily PNC Liquidity. We expect to meet our financial covenant requirements for the next twelve months.

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. As of June 30, 2026, the total amount of standby letters of credit outstanding totaled approximately $3,420,000 and the total amount of bonds outstanding totaled approximately $19,295,000. We also provide closure and post-closure requirements through a financial assurance policy for certain of our Treatment Segment facilities through AIG. As of June 30, 2026, the closure and post-closure requirements for these facilities were approximately $24,552,000.

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, 2025.

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 was adopted in the first six months of 2026 and recent accounting pronouncements 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 federal government or directly with the federal 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 the federal 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 federal government clients, either indirectly as a subcontractor or directly as a prime contractor to federal government entities, representing approximately $8,809,000 or 68.4% and $15,646,000 or 65.2% of our total revenues during the three and six months ended June 30, 2026, respectively, compared to $9,204,000 or 63.1% and $17,609,000 or 61.8% of our total revenues during the three and six months ended June 30, 2025.

Federal Funding. 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 federal government authorities. The timeliness of annual appropriations for U.S. government departments and agencies remains a recurrent risk for us. Uncertainties exist regarding how future federal government budgets and program and policy decisions will unfold, which include, the spending priorities of Congress, passage of federal government fiscal year annual budgets and potential for enactment of CRs to keep government departments and agencies in operations. The full impact of these uncertainties could negatively impact our financial results by impairing our ability to perform work on existing contracts, delaying or cancelling procurement actions by government entities, and/or cause other disruptions or delays, including payment delays.

Market Trends and Uncertainties. Macroeconomic conditions, including government and policy changes, government budget issues, tariff actions and uncertainties related to trade wars, ambiguity surrounding interest rates, inflationary pressures, softening labor markets, and geopolitical instability, including ongoing conflicts and unrest in the Middle East, have created significant uncertainty in the global economy and volatility in the capital markets. Inflationary pressures, including volatility in oil and fuel prices, have increased certain production-related variable costs, adversely impacting our gross margins. We continue to monitor the potential effects of these conditions on our revenue and profitability, including supply chain challenges, volatility in the cost of the goods and services we utilize in generating revenue, and economic pressures on our customers that may result in reduced and/or delayed spending. We continue to evaluate and implement strategic initiatives that we believe will assist us in managing the potential impacts of these factors, including supply chain optimization, pricing strategies, sourcing adjustments, and cost reduction measures designed to minimize the impact on our financial results.

New Processing Technology. With significant upgrades to our prototype Perma-FAS system (“System”) for PFAS destruction substantially completed in the latter part of 2025, our System has achieved commercial operational status at our PFF facility. PFAS, commonly known as “forever chemicals,” is a diverse group of thousands of human-made chemical pollutants that have the potential to persist in both the environment and the human body. An increasing number of studies have documented adverse health risks that are associated with PFAS exposure, including increased risks of some cancers, reduced immune function, and developmental delays in children.

Commercial destruction of PFAS offers a promising new source of revenue for us, as it complements our core waste remediation technologies. However, our PFAS technology remains in an early stage of commercialization, and we continue to incur operating, R&D and capital costs associated with scaling, market development, and regulatory acceptance. While we have filed patent applications relating to our technology for PFAS destruction and have processed limited commercial quantities of PFAS-containing waste materials with our System, there can be no assurance that demand, pricing, or throughput levels will be sufficient in the near term to offset these costs. Still, we believe that there are limited treatment options currently available that are intended to permanently destroy these materials, as opposed to managing them through storage or containment, which may be important to waste generators seeking to address potential long-term environmental liability. We believe that our patent-pending technology exceeds the performance of other current destruction-based methods; however, adoption and acceptance of any such technology remain subject to regulatory and market factors.

Some of the sizable markets for PFAS include Aqueous Film-Foaming Foam (“AFFF”) 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.

With commercial operation of our System, we anticipate deployment of our second-generation unit in the second half of 2026 at our EWOC facility in Oak Ridge, Tennessee, which we believe will allow us to triple our production capacity. We continue to market our System technology through various channels. In the next several calendar quarters, we expect to further advance our patent-pending PFAS technology from demonstrated successful bench-scale testing to pilot-scale applications for soil, biosolids, and filter media, broadening the reach of our System’s PFAS 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.

On April 30, 2026, we received a notice of non-compliance (the “Notice”) from the Washington State Department of Ecology (the “Department of Ecology”) following a June 24, 2025 inspection of our PFNW facility in Richland, Washington. The Notice is based on an inspection report identifying alleged non-compliance with certain Department of Ecology waste regulations and permit requirements and requires us to implement specified corrective actions and provide documentation of its compliance within prescribed timeframes.

No administrative order has been issued and no monetary penalties have been assessed as of the date of this report. We are actively responding to the Notice and implementing corrective measures. Based on information currently available and our ongoing response, we do not expect this matter to result in a material adverse effect on our financial condition, results of operations, or cash flows.

The outcome of this matter remains subject to regulatory review. While the Department of Ecology may pursue escalated enforcement action in accordance with Washington State Dangerous (Hazardous) Waste Regulations, we currently expects a favorable resolution of the Notice and does not believe that a loss is probable. Accordingly, the Company has not recorded an accrual for any potential loss related to this matter.

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 June 30, 2026, we had total environmental remediation liabilities of $3,436,000, a decrease of approximately $49,000 from the December 31, 2025 balance of $3,485,000. The decrease reflects payments for our PFSG remediation project. As of June 30, 2026, approximately $70,000 of the total environmental remediation liabilities were recorded as current.

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There has been no other material change from the risk factors previously disclosed in our Form 10-K for the year ended December 31, 2025 and Form 10-Q for the quarter ended March 31, 2026, except as follows:

Risks Relating to our Financial Performance and Position and Need for Financing:

We have sustained losses during 2024, 2025, and the first six months of 2026.

The Company sustained significant losses during 2024, 2025, and the first six months of 2026. We believe that our results of operations should improve starting in the second half of 2026. 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. Continuing losses may require us to seek additional liquidity through equity or other financing arrangements, potential asset dispositions, or other strategic alternatives. We may also be required to reduce certain operating expenditures, including, but not limited to, reduction in R&D activities.

Our recurring losses and negative operating cash flows have raised substantial doubt about our ability to continue as a going concern, and our expected improvement depends substantially on government-directed waste shipments and project activity that are outside our control.

As described in Note 1 to our unaudited condensed consolidated financial statements, our recurring operating losses and negative cash flows from continuing operations have raised substantial doubt about our ability to continue as a going concern within one year after the date those financial statements are issued. Although the May 2026 equity offering significantly increased our liquidity, management concluded that the substantial doubt was not alleviated because a significant portion of the revenues and cash flows underlying our forecast depends on the timing and volume of waste shipments and project activity directed by U.S. government customers. Those customers do not provide binding assurances regarding the timing or volume of future work, and such activity is subject to appropriations, procurement processes, operational considerations and other factors outside our control. We expect that the operational developments and backlog discussed in this report may result in improved operating results during the second half of 2026; however, the timing and amount of any improvement remain subject to significant uncertainty.