UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

[X]☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period endedJune 30, 20202021

Or

[  ]☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period fromto

Commission File No.111596001-11596

PERMA-FIX ENVIRONMENTAL SERVICES, INC.

(Exact name of registrant as specified in its charter)

DelawarePERMA-FIX ENVIRONMENTAL SERVICES, INC.

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction

of incorporation or organization)

58-1954497

(IRS Employer

Identification Number)

8302 Dunwoody Place, Suite 250, Atlanta, GA

(Address of principal executive offices)

30350

(Zip Code)

 

(770) (770) 587-9898

(Registrant’s telephone number)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, $.001 Par ValuePESIPESINASDAQ Capital Markets
Preferred Stock Purchase RightsNASDAQ Capital Markets

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] ☒ No [  ]☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).

Yes [X] ☒ No [  ]☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer [  ]☐ Accelerated Filer [  ] ☐ Non-accelerated Filer [  ] ☒ Smaller reporting company [X]☒ Emerging growth company [  ]☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial standards provided pursuant to Section 13(a) of the Exchange Act [  ]☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] ☐ No [X] ☒

Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock, as of the close of the latest practical date.

ClassOutstanding at July 30, 20202021
Common Stock, $.001 Par Value12,144,72112,196,623 shares

 

 

 

PERMA-FIX ENVIRONMENTAL SERVICES, INC.

INDEX

Page No.
PART IFINANCIAL INFORMATION
Item 1.Consolidated Financial Statements
Consolidated Balance Sheets - June 30, 20202021 and December 31, 201920201
Consolidated Statements of Operations - Three and Six Months Ended June 30, 20202021 and 201920203
Consolidated Statements of Comprehensive Income (Loss) - Three and Six Months Ended June 30, 20202021 and 201920204
Consolidated Statements of Stockholders’ Equity -Six- Six Months Ended June 30, 20202021 and 201920205
Consolidated Statements of Cash Flows -Six- Six Months Ended June 30, 20202021 and 201920206
Notes to Consolidated Financial Statements7
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations2723
Item 3.Quantitative and Qualitative Disclosures About Market Risk4036
Item 4.Controls and Procedures4136
PART IIOTHER INFORMATION
Item 1.Legal Proceedings4137
Item 1A.Risk Factors4137
Item 6.Exhibits4237

 

 

PART I - FINANCIAL INFORMATION

ITEMItem 1. – Financial Statements

PERMA-FIX ENVIRONMENTAL SERVICES, INC.

Consolidated Balance Sheets

 June 30, December 31,  June 30, December 31, 
 2020 2019  2021 2020 
(Amounts in Thousands, Except for Share and Per Share Amounts) (Unaudited) (Audited)  (Unaudited) (Audited) 
          
ASSETS                
Current assets:                
Cash $5,630  $390  $7,312  $7,924 
Accounts receivable, net of allowance for doubtful accounts of $426 and $487, respectively  10,806   13,178 
Accounts receivable, net of allowance for doubtful accounts of $27 and $404, respectively  9,244    9,659 
Unbilled receivables  11,069   7,984   7,332   14,453 
Inventories  548   487   701   610 
Prepaid and other assets  2,761   2,983   2,926   3,967 
Current assets related to discontinued operations  124   104   17   22 
Total current assets  30,938   25,126   27,532   36,635 
                
Property and equipment:                
Buildings and land  20,045   19,967   20,123   20,139 
Equipment  21,463   20,068   22,132   22,090 
Vehicles  457   410   454   457 
Leasehold improvements  23   23   23   23 
Office furniture and equipment  1,431   1,418   1,425   1,413 
Construction-in-progress  1,524   1,609   2,227   1,569 
Total property and equipment  44,943   43,495   46,384   45,691 
Less accumulated depreciation  (27,501)  (26,919)  (28,574)  (27,908)
Net property and equipment  17,442   16,576   17,810   17,783 
                
Property and equipment related to discontinued operations  81   81   81   81 
                
Operating lease right-of-use assets  2,419   2,545   2,317   2,287 
                
Intangibles and other long term assets:                
Permits  8,850   8,790   9,118   8,922 
Other intangible assets - net  999   1,065   885   875 
Finite risk sinking fund (restricted cash)  11,390   11,307   11,467   11,446 
Other assets  753   989   849   890 
Other assets related to discontinued operations  —   36 
Total assets $72,872  $66,515  $70,059  $78,919 

The accompanying notes are an integral part of these consolidated financial statements.

1

 

PERMA-FIX ENVIRONMENTAL SERVICES, INC.

Consolidated Balance Sheets, Continued

 June 30, December 31,  June 30, December 31, 
 2020 2019  2021 2020 
(Amounts in Thousands, Except for Share and Per Share Amounts) (Unaudited) (Audited) 
(Amounts in Thousands, Except for Share and per Share Amounts) (Unaudited) (Audited) 
          
LIABILITIES AND STOCKHOLDERS’ EQUITY                
Current liabilities:                
Accounts payable $11,560  $9,277  $11,511  $15,382 
Accrued expenses  5,794   6,118   5,637   6,381 
Disposal/transportation accrual  1,129   1,156   1,055   1,220 
Deferred revenue  3,699   5,456   3,932   4,614 
Accrued closure costs - current  82   84   74   75 
Current portion of long-term debt  1,730   1,300   404   3,595 
Current portion of operating lease liabilities  258   244   275   273 
Current portion of finance lease liabilities  444   471   433   525 
Current liabilities related to discontinued operations  928   994   817   898 
Total current liabilities  25,624   25,100   24,138   32,963 
                
Accrued closure costs  6,125   5,957   6,465   6,290 
Deferred tax liabilities  595   590   474   471 
Long-term debt, less current portion  6,547   2,580   819   3,134 
Long-term operating lease liabilities, less current portion  2,209   2,342   2,119   2,070 
Long-term finance lease liabilities, less current portion  375   466   555   662 
Other long-term liabilities  626   626 
Long-term liabilities related to discontinued operations  248   244   256   252 
Other long-term liabilities  393   — 
Total long-term liabilities  16,492   12,179   11,314   13,505 
                
Total liabilities  42,116   37,279   35,452   46,468 
                
Commitments and Contingencies (Note 10)        
Commitments and Contingencies (Note 9)        
                
Stockholders’ Equity:                
Preferred Stock, $.001 par value; 2,000,000 shares authorized, no shares issued and outstanding  —   — 
Common Stock, $.001 par value; 30,000,000 shares authorized; 12,142,771 and 12,123,520 shares issued, respectively; 12,135,129 and 12,115,878 shares outstanding, respectively  12   12 
Preferred Stock, $.001 par value; 2,000,000 shares authorized, 0 shares issued and outstanding  —   — 
Common Stock, $.001 par value; 30,000,000 shares authorized;12,188,256 and 12,161,539 shares issued, respectively;12,180,614 and 12,153,897 shares outstanding, respectively  12   12 
Additional paid-in capital  108,659   108,457   109,206   108,931 
Accumulated deficit  (75,891)  (77,315)  (72,555)  (74,455)
Accumulated other comprehensive loss  (262)  (211)  (167)  (207)
Less Common Stock in treasury, at cost; 7,642 shares  (88)  (88)  (88)  (88)
Total Perma-Fix Environmental Services, Inc. stockholders’ equity  32,430   30,855   36,408   34,193 
Non-controlling interest  (1,674)  (1,619)  (1,801)  (1,742)
Total stockholders’ equity  30,756   29,236   34,607   32,451 
                
Total liabilities and stockholders’ equity $72,872  $66,515  $70,059  $78,919 

The accompanying notes are an integral part of these consolidated financial statements.

2

 

PERMA-FIX ENVIRONMENTAL SERVICES, INC.

Consolidated Statements of Operations

(Unaudited)

                
 Three Months Ended Six Months Ended  Three Months Ended Six Months Ended 
 June 30, June 30,  June 30, June 30, 
(Amounts in Thousands, Except for Per Share Amounts) 2020 2019 2020 2019  2021 2020 2021 2020 
                  
Net revenues $22,047  $17,135  $46,907  $28,843  $16,145  $22,047  $39,278  $46,907 
Cost of goods sold  18,737   13,864   38,957   23,071   15,179   18,737   35,956   38,957 
Gross profit  3,310   3,271   7,950   5,772   966   3,310   3,322   7,950 
                                
Selling, general and administrative expenses  2,700   2,705   5,627   5,603   2,997   2,700   6,202   5,627 
Research and development  209   223   441   450   144   209   295   441 
(Gain) loss on disposal of property and equipment  (4)  (1)  27   (1)  —  (4)   —   27 
Income (loss) from operations  405   344   1,855   (280)
(Loss) income from operations  (2,175)  405   (3,175)  1,855 
                                
Other income (expense):                                
Interest income  28   107   84   188   2   28   21   84 
Interest expense  (99)  (107)  (219)  (194)  (65)  (99)  (132)  (219)
Interest expense-financing fees  (60)  (60)  (129)  (70)  (9)  (60)  (17)  (129)
Other  4   95   9   224   —  4  1  9
Loss on extinguishment of debt  (27)  —   (27)  — 
Income (loss) from continuing operations before taxes  251   379   1,573   (132)
Income tax (benefit) expense  (9)  6   5   45 
Income (loss) from continuing operations, net of taxes  260   373   1,568   (177)
Gain (loss) on extinguishment of debt  5,381   (27)  5,381   (27)
Income from continuing operations before taxes  3,134   251   2,079   1,573 
Income tax expense (benefit)  13   (9)  (4)  5 
Income from continuing operations, net of taxes  3,121   260   2,083   1,568 
                                
Loss from discontinued operations (net of taxes of $0)  (85)  (115)  (199)  (267)
Net income (loss)  175   258   1,369   (444)
Loss from discontinued operations (net of taxes of $0)  (127)  (85)  (242)  (199)
Net income  2,994   175   1,841   1,369 
                                
Net loss attributable to non-controlling interest  (29)  (31)  (55)  (61)  (29)  (29)  (59)  (55)
                                
Net income (loss) attributable to Perma-Fix Environmental Services, Inc. common stockholders $204  $289  $1,424  $(383)
Net income attributable to Perma-Fix Environmental Services, Inc. common stockholders $3,023  $204  $1,900  $1,424 
                                
Net income (loss) per common share attributable to Perma-Fix Environmental Services, Inc. stockholders - basic and diluted:                
Net income (loss) per common share attributable to Perma-Fix Environmental Services, Inc. stockholders - basic:                
Continuing operations $.02  $.03  $.13  $(.01) $.26  $.02  $.18  $.13 
Discontinued operations  —   (.01)  (.01)  (.02)  (.01)  —    (.02)  (.01)
Net income (loss) per common share $.02  $.02  $.12  $(.03)
Net income per common share $.25  $.02  $.16  $.12 
                                
Number of common shares used in computing net income (loss) per share:                
Net income (loss) per common share attributable to Perma-Fix Environmental Services, Inc. stockholders - diluted:                
                
Continuing operations $.25  $.02  $.17  $.13 
Discontinued operations  (.01)  —    (.02)  (.01) 
Net income per common share $.24  $.02  $.15  $.12 
                
Number of common shares used in computing net income per share:                
Basic  12,135   12,054   12,129   12,008   12,180   12,135   12,173   12,129 
Diluted  12,286   12,122   12,320   12,008   12,440   12,286   12,420   12,320 

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

 

.

PERMA-FIX ENVIRONMENTAL SERVICES, INC.

Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

                 
  Three Months Ended  Six Months Ended 
  June 30,  June 30, 
(Amounts in Thousands) 2021  2020  2021  2020 
             
Net income $2,994  $175  $1,841  $1,369 
Other comprehensive income (loss):                
Foreign currency translation gain (loss)  20   28   40   (51)
                 
Comprehensive income  3,014   203   1,881   1,318 
Comprehensive loss attributable to non-controlling interest  (29) (29) (59) (55)
Comprehensive income attributable to Perma-Fix Environmental Services, Inc. stockholders $3,043  $232  $1,940  $1,373 

  Three Months Ended  Six Months Ended 
  June 30,  June 30, 
(Amounts in Thousands) 2020  2019  2020  2019 
             
Net income (loss) $175  $258  $1,369  $(444)
Other comprehensive income (loss):                
Foreign currency translation gain (loss)  28   (4)  (51)  8 
                 
Comprehensive income (loss)  203   254   1,318   (436)
Comprehensive loss attributable to non-controlling interest  (29)  (31)  (55)  (61)
Comprehensive income (loss) attributable to Perma-Fix                
Environmental Services, Inc. stockholders $232  $285  $1,373  $(375)

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

 

PERMA-FIX ENVIRONMENTAL SERVICES, INC

Consolidated Statement of Stockholders’ Equity

(Unaudited)

(Amounts in thousands, except for share amounts)

                                 
  Common Stock  Additional Paid-In  Common Stock Held In  Accumulated Other Comprehensive  Non-controlling Interest in  Accumulated  Total Stockholders’ 
  Shares  Amount  Capital  Treasury  Loss  Subsidiary  Deficit  Equity 
                         
Balance at December 31, 2020  12,161,539  $12  $108,931  $(88) $(207) $(1,742) $(74,455) $32,451 
Net loss  —    —   —   —    —   (30)  (1,123)  (1,153)
Net Income (loss)  —    —   —   —    —   (30)  (1,123)  (1,153)
Foreign currency translation  —   —   —   —   20   —   —   20 
Issuance of Common Stock for services  11,837   —   79   —   —   —   —   79 
Stock-Based Compensation  —   —   45   —   —   —   —   45 
Balance at March 31, 2021  12,173,376  $12  $109,055  $(88) $(187) $(1,772) $(75,578) $31,442 
Net Income (loss)  —   —   —   —   —   (29)  3,023   2,994 
Foreign currency translation  —   —   —   —   20   —   —   20 
Issuance of Common Stock upon exercise of options  290   —   —   —   —   —   —   — 
Issuance of Common Stock for services  14,590   —   109   —   —   —   —   109 
Stock-Based Compensation  —   —   42   —   —   —   —   42 
Balance at June 30, 2021  12,188,256  $12  $109,206  $(88) $(167) $(1,801) $(72,555) $34,607 
                                 
Balance at December 31, 2019  12,123,520  $12  $108,457  $(88) $(211) $(1,619) $(77,315) $29,236 
Net Income (loss)  —   —   —   —   —   (26)  1,220   1,194 
Foreign currency translation  —   —   —   —   (79)  —   —   (79)
Issuance of Common Stock upon exercise of options  3,643   —   6   —   —   —   —   6 
Issuance of Common Stock for services  5,128   —   48   —   —   —    —   48 
Stock-Based Compensation  —   —   44   —   —   —   —   44 
Balance at March 31, 2020  12,132,291  $12  $108,555  $(88) $(290) $(1,645) $(76,095) $30,449 
Net Income (loss)  —   —   —   —   —   (29)  204   175 
Foreign currency translation  —   —   —   —   28   —   —   28 
Issuance of Common Stock upon exercise of options  241   —   —   —   —   —   —   — 
Issuance of Common Stock for services  10,239   —   56   —   —   —   —   56 
Stock-Based Compensation  —   —   48   —   —   —   —   48 
Balance at June 30, 2020  12,142,771  $12  $108,659  $(88) $(262) $(1,674) $(75,891) $30,756 

 

  Common Stock  Additional Paid-In  Common Stock Held In  Accumulated Other Comprehensive  Non-controlling Interest in  Accumulated  Total Stockholders' 
  Shares  Amount  Capital  Treasury  Loss  Subsidiary  Deficit  Equity 
Balance at December 31, 2019  12,123,520  $12  $108,457  $(88) $(211) $(1,619) $(77,315) $29,236 
Net Income (loss)  —    —    —    —    —    (26)  1,220   1,194 
Foreign currency translation  —    —    —    —    (79)  —     —    (79)
Issuance of Common Stock upon exercise of options  3,643   —    6   —    —    —     —    6 
Issuance of Common Stock for services  5,128   —    48   —    —    —     —    48 
Stock-Based Compensation  —    —    44   —    —    —    —    44 
Balance at March 31, 2020  12,132,291  $12  $108,555  $(88) $(290) $(1,645) $(76,095) $30,449 
Net Income (loss)  —    —    —     —    —    (29)  204   175 
Foreign currency translation  —    —    —     —    28   —    —    28 
Issuance of Common Stock upon exercise of options  241   —    —     —    —    —    —    —  
Issuance of Common Stock for services  10,239   —    56   —    —    —    —    56 
Stock-Based Compensation  —    —    48   —    —    —    —    48 
Balance at June 30, 2020  12,142,771  $12  $108,659  $(88) $(262) $(1,674) $(75,891) $30,756 
                                 
Balance at December 31, 2018  11,944,215  $12  $107,548  $(88) $(214) $(1,495) $(79,630) $26,133 
Net loss  —    —    —     —    —    (30)  (672)  (702)
Foreign currency translation  —    —    —     —    12   —    —    12 
Issuance of Common Stock for services  24,964   —    60   —    —    —    —    60 
Stock-Based Compensation  —    —    48   —    —    —    —     48 
Balance at March 31, 2019  11,969,179  $12  $107,656  $(88) $(202) $(1,525) $(80,302) $25,551 
Net income (loss)  —    —    —     —    —    (31)  289   258 
Foreign currency translation  —    —    —     —    (4)  —    —    (4)
Issuance of Common Stock for services  17,902   —    62   —    —    —    —    62 
Stock-Based Compensation  —    —    36   —    —    —    —    36 
Issuance of Common Stock with debt  75,000   —    263   —    —    —    —    263 
Issuance of warrant with debt  —    —    93   —    —    —    —    93 
Balance at June 30, 2019  12,062,081  $12   $108,110  $(88) $(206) $(1,556) $(80,013) $26,259 

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

PERMA-FIX ENVIRONMENTAL SERVICES, INC.

Consolidated Statements of Cash Flows

(Unaudited)

        
 Six Months Ended  Six Months Ended 
 June 30,  June 30, 
(Amounts in Thousands) 2020 2019  2021 2020 
Cash flows from operating activities:                
Net income (loss) $1,369  $(444)
Less: loss from discontinued operations, net of taxes of $0  (199)  (267)
Net income $1,841  $1,369 
Less: loss from discontinued operations, net of taxes of $0  (242)  (199)
                
Income (loss) from continuing operations, net of taxes  1,568   (177)
Adjustments to reconcile income (loss) from continuing operations to cash provided by (used in) operating activities:        
Income from continuing operations, net of taxes  2,083   1,568 
Adjustments to reconcile income from continuing operations to cash provided by operating activities:        
Depreciation and amortization  711   641   799   711 
Interest on finance lease with purchase option  4   —   4   4 
Loss on extinguishment of debt  27   — 
(Gain) loss on extinguishment of debt  (5,381)  27 
Amortization of debt discount/debt issuance costs  129   67   17   129 
Deferred tax expense  5   7   3   5 
(Recovery of) provision for bad debt reserves  (107)  37 
Loss (gain) on disposal of property and equipment  27   (1)
Recovery of bad debt reserves  (17)  (107)
Loss on disposal of property and equipment  —    27 
Issuance of common stock for services  104   122   188   104 
Stock-based compensation  92   84   87   92 
Changes in operating assets and liabilities of continuing operations                
Accounts receivable  2,479   (49)  432   2,479 
Unbilled receivables  (3,085)  (3,053)  7,121   (3,085)
Prepaid expenses, inventories and other assets  714   281   1,076   714 
Accounts payable, accrued expenses and unearned revenue  289   1,178   (5,609)  289 
Cash provided by (used in) continuing operations  2,957   (863)
Cash provided by continuing operations  803   2,957 
Cash used in discontinued operations  (259)  (334)  (315)  (259)
Cash provided by (used in) operating activities  2,698   (1,197)
Cash provided by operating activities  488   2,698 
                
Cash flows from investing activities:                
Purchases of property and equipment  (1,366)  (312)  (650)  (1,366)
Proceeds from sale of property and equipment  4   32   1   4 
Cash used in investing activities of continuing operations  (1,362)  (280)  (649)  (1,362)
Cash provided by investing activities of dicontinued operations  13   44   —    13 
Cash used in investing activities  (1,349)  (236)  (649)  (1,349)
                
Cash flows from financing activities:                
Repayments of revolving credit borrowings  (47,058)  (23,816)  (41,834)  (47,058)
Borrowing on revolving credit  46,737   23,177   41,834   46,737 
Proceeds from issuance of long-term debt  5,666   2,500   —   5,666 
Proceeds from finance leases  —   120 
Principal repayments of finance lease liabilities  (229)  (101)  (205)  (229)
Principal repayments of long term debt  (1,045)  (610)  (219)  (1,045)
Payment of debt issuance costs  (85)  (90)  (15)  (85)
Proceeds from issuance of common stock upon exercise of options  6   —   —   6 
Cash provided by financing activities of continuing operations  3,992   1,180 
Cash (used in) provided by financing activities of continuing operations  (439)  3,992 
                
Effect of exchange rate changes on cash  (18)  15   9   (18)
                
Increase (decrease) in cash and finite risk sinking fund (restricted cash)  5,323   (238)
(Decrease) increase in cash and finite risk sinking fund (restricted cash)  (591)  5,323 
Cash and finite risk sinking fund (restricted cash) at beginning of period  11,697   16,781   19,370   11,697 
Cash and finite risk sinking fund (restricted cash) at end of period $17,020  $16,543  $18,779  $17,020 
                
Supplemental disclosure:                
Interest paid $207  $184  $106  $207 
Income taxes paid  30   121   15   30 
Non-cash financing activities:        
Equipment purchase subject to finance lease  132   22   —   132 
Issuance of Common Stock with debt  —   263 
Issuance of Warrant with debt  —   93 
Equipment purchase subject to finance  29   — 

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

 

PERMA-FIX ENVIRONMENTAL SERVICES, INC.

Notes to Consolidated Financial Statements

June 30, 20202021

(Unaudited)

Reference is made herein to the notes to consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019.2020.

1. Basis of Presentation

The consolidated financial statements included herein have been prepared by the Company (which may be referred to as we, us or our), without an audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“the Commission”). Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations, although the Company believes the disclosures which are made are adequate to make the information presented not misleading. Further, the consolidated financial statements reflect, in the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position and results of operations as of and for the periods indicated. The results of operations for the six months ended June 30, 20202021 are not necessarily indicative of results to be expected for the fiscal year ending December 31, 2020.2021.

The Company suggests that these consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.2020.

The consolidated financial statements include our accounts, those of our wholly-owned subsidiaries, and our majority-owned Polish subsidiary, Perma-Fix Medical. Additionally, the Company’s financial statements include the account of a variable interest entity (“VIE”), Perma-Fix ERRG for which we are the primary beneficiary (See “Note 1413 - VIE” for a discussion of this VIE).

2. Summary of Significant Accounting Policies

Our accounting policies are as set forth in the notes to the December 31, 20192020 consolidated financial statements referred to above.

Recently Adopted Accounting Standards

In August 2018,December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-13, “Fair Value MeasurementNo. 2019-12, “Income Taxes (Topic 820)740): Disclosure Framework - ChangesSimplifying the Accounting for Income Taxes,” which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the Disclosure Requirements for Fair Value Measurement.” ASU 2018-13 improves the disclosure requirements on fair value measurements. ASU 2018-13general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.2020, with early adoption permitted. The adoption of ASU No. 2018-132019-12 by the Company effective January 1, 2021 did not have a material impact on the Company’s financial statements.

In January 2020, the FASB issued ASU 2020-01, “Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815), clarifying the Interactions between Topic 321, Topic 323, and Topic 815.” This guidance addresses accounting for the transition into and out of the equity method and provides clarification of the interaction of rules for equity securities, the equity method of accounting, and forward contracts and purchase options on certain types of securities. This standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2020. Early adoption is permitted. The adoption of ASU No. 2020-01 by the Company effective January 1, 2021 did not have a material impact on the Company’s financial statements.

7

In October 2020, the FASB issued ASU No 2020-10, “Codification Improvements.” ASU 2020-10 updates various codification topics by clarifying or improving disclosure requirements. ASU 2020-10 is effective for public entities for fiscal years beginning after December 15, 2020, with early adoption permitted. The adoption of ASU No. 2020-01 by the Company effective January 1, 2021 did not have a material impact on the Company’s financial statements or disclosures.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (“ASU 848”): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference London Interbank Offered Rate (“LIBOR”) or another rate that is expected to be discontinued. The amendments in the ASU are effective for all entities as of March 12, 2020 through December 31, 2022. The adoption of ASU 2020-04 on March 12, 2020 by the Company did not have a material impact on the Company’s financial statements. The Company will continue to assess the potential impact of this ASU through the effective period.

7

Recently Issued Accounting Standards – Not Yet Adopted

In June 2016, the FASB issued ASU No. 2016-13, “Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments,” and various subsequent amendments to the initial guidance: ASU 2018-19 “Codification Improvements to Topic 326, Financial Instruments - Credit Losses,” ASU 2019-04 “Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments,” ASU 2019-05 “Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief,” ASU 2019-11 “Codification Improvements to Topic 326, Financial Instruments - Credit Losses” and ASU 2020-02, “Financial Instruments—Credit Losses (Topic 326) and Leases (Topic 842)”guidance (collectively, “Topic 326”). Topic 326 introduces an approach, based on expected losses, to estimate credit losses on certain types of financial instruments and modifies the impairment model for available-for-sale debt securities. The new approach to estimating credit losses (referred to as the current expected credit losses model) applies to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables and loans. Entities are required to apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. In November 2019, FASB issued ASU 2019-10, “Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842),” which defers the effective date of ASU 2016-13 for public companies that are considered smaller reporting companies as defined by the Commission to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. These ASUs are effective January 1, 2023 for the Company as a smaller reporting company.company (“SRC”). Under new guidance issued by the Commission in March 2020, the Company will continue to qualify as a smaller reporting company but will also be an accelerated filer for all filings with the Commission after January 1, 2022. The Company had expected to early adopt theses ASUs effective January 1, 2020; however, due tois currently evaluating the need for reallocationimpact of the Company’s resources to manage COVID-19 related matters, the Company has deferred adoption of theses ASUs effective January 1,these ASU on its consolidated financial statements.

In August 2020, and expect to adopt these ASUs by January 1, 2023.

In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity.” ASU 2020-06 simplifies the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for convertible instruments by removing major separation models and removing certain settlement condition qualifiers for the derivatives scope exception for contracts in an entity’s own equity, and simplifies the related diluted net income taxes.per share calculation for both Subtopics. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance2020-06 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023, for the Company as a smaller reporting company. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, with early adoption permitted.including interim periods within those fiscal years. The Company is currently evaluating the impact of this standardASU on its consolidated financial statements and related disclosures.

In January 2020,May 2021, the FASB issued ASU 2020-01, “Investments - Equity SecuritiesNo. 2021-04, “Earnings Per Share (Topic 321)206), Investments - Equity MethodDebt-Modifications and Joint VenturesExtinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 323)718), and Derivatives and Hedging (Topic 815), clarifyingHedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the Interactions between Topic 321, Topic 323, and Topic 815.FASB Emerging Issues Task Force).”This guidance ASU 2021-04 addresses issuer’s accounting for the transition into and outcertain modifications or exchanges of the equity method and provides clarification of the interaction of rules for equity securities, the equity method of accounting, and forward contracts and purchase options on certain types of securities.freestanding equity-classified written call options. This standardASU is effective for fiscal years and interim periods within thoseall entities, for fiscal years beginning after December 15, 2020.2021, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of this standardASU on its consolidated financial statements.

8

 

3. COVID-19 ImpactRevenue

The spread of COVID-19 continues to result in significant volatility in the U.S. and international markets. The Company continues to closely monitor the impact of the COVID-19 pandemic on all aspects of its business. As previously reported, the COVID-19 pandemic did not result in a material impact to the Company’s first quarter 2020 results of operations; however, the Company’s second quarter results of operations were impacted by the shutdown of a number of projects and the delays of certain waste shipments which began in late March 2020 that continued into the second quarter of 2020. As states began to lift stay-at-home orders, along with certain other restrictions since the start of the pandemic, in the latter part of the second quarter of 2020, the Company was able to restart on a number, but not all, of the projects that were previously shutdown. Despite these project shutdowns, revenues within our Services Segment in the second quarter of 2020 exceeded the corresponding period of 2019 by approximately $7,166,000. The Company continues to experience some delays in waste shipments from certain customers within our Treatment Segment due to the planning time that is required by these customers to restart waste shipments as they return to work on-site. These continued project shutdowns and waste shipment delays may impact the Company’s results of operations for the third quarter of 2020 and potentially the remainder of fiscal year 2020.

At this time, the Company believes it has sufficient liquidity on hand to continue business operations during the next twelve months. At June 30, 2020, the Company had cash on hand of approximately $5,630,000 and borrowing availability under our revolving credit facility of $12,330,000 based on a percentage of eligible receivables and subject to certain reserves. The Company’s cash at June 30, 2020 included proceeds received from a loan in the amount of approximately $5,666,000 (“PPP Loan”) in April 2020 under the Paycheck Protection Program (“PPP”) that was established under the recently enacted Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). On June 5, 2020, the Paycheck Protection Program Flexibility Act of 2020 (the “Flexibility Act”) was signed into law, amending the CARES Act (see “Note 9 – Long Term Debt –PPP Loan” for further detail of this loan. Additionally, see “Note 16 – Subsequent Event – PPP Loan” for the discussion of the repayment of approximately $327,000 of the PPP Loan the Company made on July 9, 2020). The Company continues to assess reducing operating costs during this volatile time, which include curtailing capital expenditures, eliminating non-essential expenditures and implementing a hiring freeze as needed.

The Company is closely monitoring our customers’ payment performance. However, as a significant portion of our revenues is derived from government related contracts, the Company does not expect its accounts receivable collections to be materially impacted due to COVID-19.

The situation surrounding COVID-19 continues to remain fluid. The potential for a material impact on the Company’s business increases the longer COVID-19 impacts the level of economic activities in the United States and globally as our customers may continue to delay waste shipments and project work may shut down again. For this reason, we cannot reasonably estimate with any degree of certainty the future impact COVID-19 may have on our results of operations, financial position, and liquidity which may impact our ability to meet our financial covenant requirements under our credit facility. Given the current economic environment and the market volatility from COVID-19, the Company considered whether these events or changes in circumstances triggered the need for an interim impairment analysis of our long-lived assets and intangible assets. Based on the Company’s assessment of the impact of these conditions on our business, the Company determined there was no triggering event as of June 30, 2020. However, as the effects of the COVID-19 pandemic continue to evolve, the Company will continue to assess the need to perform interim impairment tests of our long-lived assets and intangible assets.

The CARES Act, as amended, among other things, includes modifications to net operating loss carryforwards, corporate alternative minimum tax (“AMT”) provisions, net interest expense deduction, and deferment of social security tax payments. The Company elected to defer payment of its shares of social security taxes starting in April 2020 (see “Note 15 – Deferral of Employment Tax Deposits”). The Company continues to evaluate the provisions of the CARES Act, as amended, and how certain other elections may impact our financial position, results of operations, and disclosures, if elected.

4.Revenue

Disaggregation of Revenue

In general, the Company’s business segmentation is aligned according to the nature and economic characteristics of our services and provides meaningful disaggregation of each business segment’s results of operations. The nature of the Company’s performance obligations within our Treatment and Services Segments result in the recognition of our revenue primarily over time. The following tables present further disaggregation of our revenues by different categories for our Services and Treatment Segments:

Schedule of Disaggregation of Revenue

Revenue by Contract Type                          
(In thousands) Three Months Ended Three Months Ended  Three Months Ended  Three Months Ended 
 June 30, 2020 June 30, 2019  June 30, 2021  June 30, 2020 
 Treatment Services Total Treatment Services Total  Treatment  Services  Total  Treatment  Services  Total 
Fixed price $7,840  $5,751  $13,591  $10,094  $2,709  $12,803  $7,706  $1,482  $9,188  $7,840  $2,329  $10,169 
Time and materials   ―   8,456   8,456    ―   4,332   4,332   —   6,957   6,957   —   11,878   11,878 
Total $7,840  $14,207  $22,047  $10,094  $7,041  $17,135  $7,706  $8,439  $16,145  $7,840  $14,207  $22,047 

Revenue by Contract Type                  
(In thousands) Six Months Ended  Six Months Ended 
  June 30, 2020  June 30, 2019 
  Treatment  Services  Total  Treatment  Services  Total 
Fixed price $17,403  $8,698  $26,101  $19,999  $3,137  $23,136 
Time and materials   ―   20,806   20,806    ―   5,707   5,707 
Total $17,403  $29,504  $46,907  $19,999  $8,844  $28,843 

Revenue by generator                  
(In thousands) Three Months Ended  Three Months Ended 
  June 30, 2020  June 30, 2019 
  Treatment  Services  Total  Treatment  Services  Total 
Domestic government $6,055  $12,791  $18,846  $6,537  $4,842  $11,379 
Domestic commercial  1,785   431   2,216   3,395   855   4,250 
Foreign government   ―   965   965   162   1,323   1,485 
Foreign commercial   ―   20   20    ―   21   21 
Total $7,840  $14,207  $22,047  $10,094  $7,041  $17,135 
Revenue by Contract Type               
(In thousands) Six Months Ended     Six Months Ended    
  June 30, 2021     June 30, 2020    
  Treatment  Services  Total  Treatment  Services  Total 
Fixed price $15,201  $4,063  $19,264  $17,403  $3,721  $21,124 
Time and materials  —   20,014   20,014   —   25,783   25,783 
Total $15,201  $24,077  $39,278  $17,403  $29,504  $46,907 

Revenue by generator                          
(In thousands) Six Months Ended Six Months Ended  Three Months Ended     Three Months Ended    
 June 30, 2020 June 30, 2019  June 30, 2021    June 30, 2020   
 Treatment Services Total Treatment Services Total  Treatment  Services  Total  Treatment  Services  Total 
Domestic government $13,745  $26,589  $40,334  $14,449  $5,529  $19,978  $5,639  $6,764  $12,403  $6,055  $12,791  $18,846 
Domestic commercial  3,658   893   4,551   5,274   1,613   6,887   2,060   391   2,451   1,785   431   2,216 
Foreign government   ―   1,979   1,979   220   1,659   1,879   7   1,261   1,268   —   965   965 
Foreign commercial   ―   43   43   56   43   99   —   23   23   —   20   20 
Total $17,403  $29,504  $46,907  $19,999  $8,844  $28,843  $7,706  $8,439  $16,145  $7,840  $14,207  $22,047 

Revenue by generator                  
(In thousands) Six Months Ended  Six Months Ended 
  June 30, 2021  June 30, 2020 
  Treatment  Services  Total  Treatment  Services  Total 
Domestic government $10,237  $19,425  $29,662  $13,745  $26,589  $40,334 
Domestic commercial  4,328   981   5,309   3,658   893   4,551 
Foreign government  541   3,625   4,166   —   1,979   1,979 
Foreign commercial  95   46   141   —   43   43 
Total $15,201  $24,077  $39,278  $17,403  $29,504  $46,907 

Contract Balances

The timing of revenue recognition, billings, and cash collections results in accounts receivable and unbilled receivables (contract assets). The Company’s contract liabilities consist of deferred revenues which represents advance payment from customers in advance of the completion of our performance obligation.

The following table represents changes in our contract assets and contract liabilities balances:

Schedule of Contract Assets and Liabilities

     Year-to-date Year-to-date  June 30, December 31, Year-to-date Year-to-date 
(In thousands) June 30, 2020 December 31, 2019 Change ($) Change (%)  2021  2020  Change ($)  Change (%) 
Contract assets                                
Account receivables, net of allowance $10,806  $13,178  $(2,372)  (18.0)% $9,244  $9,659  $(415)  (4.3)%
Unbilled receivables - current  11,069   7,984   3,085   38.6%  7,332   14,453   (7,121)  (49.3)%
                                
Contract liabilities                                
Deferred revenue $3,699  $5,456  $(1,757)  (32.2)% $3,932  $4,614  $(682)  (14.8)%

During the three and six months ended June 30, 2020,2021, the Company recognized revenue of $2,516,000$1,763,000 and $6,539,000,$6,074,000, respectively, related to untreated waste that was in the Company’s control as of the beginning of each respective year. During the three and six months ended June 30, 2019,2020, the Company recognized revenue of $2,865,000$2,516,000 and $7,442,000,$6,539,000, respectively, related to untreated waste that was in the Company’s control as of the beginning of each respective year. Revenue recognized in each period related to performance obligations satisfied within the respective period.

9

Remaining Performance Obligations

 

Remaining Performance Obligations

The Company applies the practical expedient in FASB Accounting Standards Codification (“ASC”)ASC 606-10-50-14 and does not disclose information about remaining performance obligations that have original expected durations of one year or less.

Within our Services Segment, there are service contracts which provide that the Company has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of our performance completed to date. For those contracts, the Company has utilized the practical expedient in ASC 606-10-55-18, which allows the Company to recognize revenue in the amount for which we have the right to invoice; accordingly, the Company does not disclose the value of remaining performance obligations for those contracts.

5. 4. Leases

 

At the inception of an arrangement, the Company determines if an arrangement is, or contains, a lease based on facts and circumstances present in that arrangement. Lease classifications, recognition, and measurement are then determined at the lease commencement date.

The Company’s operating lease right-of-use (“ROU”) assets and operating lease liabilities represent primarily leases for office and warehouse spaces used to conduct our business. These leases have remaining terms of approximately 4 to 10 years which include one or more options to renew, with renewal terms from 3 years to 8 years (which are included in valuing our ROU assets and liabilities). As most of our operating leases do not provide an implicit rate, the Company uses its incremental borrowing rate as the discount rate when determining the present value of the lease payments. The incremental borrowing rate is determined based on the Company’s secured borrowing rate, lease terms and current economic environment. Some of our operating leases include both lease (rent payments) and non-lease components (maintenance costs such as cleaning and landscaping services). The Company has elected the practical expedient to account for lease component and non-lease component as a single component for all leases. Lease expense for operating leases is recognized on a straight-line basis over the lease term.

Finance leases consist primarily consist of processing and transport equipment used by our facilities’ operations. Our finance leasesoperations and also includesinclude a building with land for our waste treatment operations. The Company’s finance leases generally have terms between one to three years and most of the leases include options to purchase the underlying assets at fair market value at the conclusion of the lease term. The lease for the building and land has a term of two year with option to buy at the end of the lease term which the Company is reasonably certain exercise.

The Company adopted the policy to not recognize ROU assets and liabilities for short term leases.

The components of lease cost for the Company’s leases for the three and six months ended June 30, 20202021 and 20192020 were as follows (in thousands):

Schedule of Components of Lease Cost

                
 Three Months Ended Six Months Ended  Three Months Ended Six Months Ended 
 June 30, June 30,  June 30,  June 30, 
 2020 2019 2020 2019  2021  2020  2021  2020 
                  
Operating Leases:                                
Lease cost $114  $124  $228  $228  $115  $114  $226  $228 
                                
Finance Leases:                                
Amortization of ROU assets  26   10   52   19   58   26   117   52 
Interest on lease liability  29   13   50   25   18   29   37   50 
  55   23   102   44 
Finance Leases   76   55   154   102 
                                
Short-term lease rent expense  1   23   4   72   3   1   6   4 
                                
Total lease cost  170   170   334   344   194   170   386   334 

The weighted average remaining lease term and the weighted average discount rate for operating and finance leases at June 30, 20202021 were:

Schedule of Weighted Average Lease

  Operating Leases  Finance Leases 
Weighted average remaining lease terms (years)  7.6   3.2 
         
Weighted average discount rate  7.7%  6.2%

10

 

  Operating Leases  Finance Leases 
Weighted average remaining lease terms (years)  8.4   1.5 
         
Weighted average discount rate  8.0%  11.0%

The following table reconciles the undiscounted cash flows for the operating and finance leases at June 30, 20202021 to the operating and finance lease liabilities recorded on the balance sheet (in thousands):

Schedule of Operating and Finance Lease Liability Maturity

 Operating Leases Finance Leases  Operating Leases  Finance Leases 
2020 Remainder $222  $365 
2021  450   405 
2021 (Remaining) $211  $353 
2022  458   123   478   271 
2023  466   2   486   150 
2024  342  ―   419   146 
2025  327   146 
2025 and thereafter  1,457  ―   1,260   18 
Total undiscounted lease payments  3,395   895   3,181   1,084 
Less: Imputed interest  (928)  (76)  (787)  (96)
Present value of lease payments $2,467  $819  $2,394  $988 
       
Current portion of operating lease obligations $258  $― 
Long-term operating lease obligations, less current portion $2,209  $― 
Current portion of finance lease obligations $―  $444 
Long-term finance lease obligations, less current portion $―  $375 

         
Current portion of operating lease obligations $275  $— 
Long-term operating lease obligations, less current portion $2,119  $— 
Current portion of finance lease obligations $ —  $433 
Long-term finance lease obligations, less current portion $ —  $555 

Supplemental cash flow and other information related to our leases were as follows for the three and six months ended June 30, 20202021 and 20192020 (in thousands):

  Three Months Ended  Six Months Ended 
  June 30,  June 30, 
  2020  2019  2020  2019 
Cash paid for amounts included in the measurement                
of lease liabilities:                
Operating cash flow used in operating leases $110  $119  $220  $217 
Operating cash flow used in finance leases $29  $13  $50  $25 
Financing cash flow used in finance leases $128  $57  $229  $101 
                 
ROU assets obtained in exchange for lease obligations for:                
Finance liabilities $41  $―     $123  $138 
Operating liabilities $ ―      182   ―     182 

6.Schedule of Supplemental Cash Flow and Other Information Related to Leases

                 
  Three Months Ended  Six Months Ended 
  June 30,  June 30, 
  2021  2020  2021  2020 
Cash paid for amounts included in the measurement of lease liabilities:                
Operating cash flow used in operating leases $103  $110  $204  $220 
Operating cash flow used in finance leases $18  $29  $37  $50 
Financing cash flow used in finance leases $91  $128  $205  $229 
                 
ROU assets obtained in exchange for lease obligations for:                
Finance liabilities $ —  $41  $ —  $123 
Operating liabilities $166     —   166     — 

5. Intangible Assets

The following table summarizes information relating to the Company’s definite-lived intangible assets:

Schedule of Finite-Lived Intangible Assets

 Weighted Average June 30, 2020 December 31, 2019     June 30, 2021     December 31, 2020    
 Amortization Gross   Net Gross   Net  

Weighted Average

Amortization

 Gross   Net Gross   Net 
 Period Carrying Accumulated Carrying Carrying Accumulated Carrying  Period Carrying Accumulated Carrying Carrying Accumulated Carrying 
 (Years) Amount Amortization Amount Amount Amortization Amount  (Years)  Amount  Amortization  Amount  Amount  Amortization  Amount 
Intangibles (amount in thousands)                                    
Patent  11  $797  $(368) $429  $760  $(358) $402   12.5  $746  $(343) $403  $742  $(334) $408 
Software  3   420   (409)  11   414   (408)  6   3   524   (413)  111   418   (411)  7 
Customer relationships  10   3,370   (2,811)  559   3,370   (2,713)  657   10   3,370   (2,999)  371   3,370   (2,910)  460 
Total     $4,587  $(3,588) $999  $4,544  $(3,479) $1,065      $4,640  $(3,755) $885  $4,530  $(3,655) $875 

The intangible assets noted above are amortized on a straight-line basis over their useful lives with the exception of customer relationships which are being amortized using an accelerated method.

11

The following table summarizes the expected amortization over the next five years for our definite-lived intangible assets:

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense

Year 

Amount

(In thousands)

  (In thousands) 
      
2020(remaining) $    112 
2021  202 
2021(remaining) $123 
2022  175   198 
2023  132   158 
2024  10   37 
2025  14 

Amortization expenses relating to the definite-lived intangible assets as discussed above were $55,000$50,000 and $109,000$100,000 for the three and six months ended June 30, 2021, respectively, and $55,000 and $109,000 for the three and six months ended June 30, 2020, respectively, and $61,000 and $134,000 for the three and six months ended June 30, 2019, respectively.

7. 6. Capital Stock, Stock Plans and Stock Based Compensation

The Company has certain stock option plans under which it may award incentive stock options (“ISOs”) and/or non-qualified stock options (“NQSOs”) to employees, officers, outside directors, and outside consultants.

On FebruaryMay 4, 2020,2021, the Company granted 6,000 NQSOs from the Company’s 2003 Outside Directors Stock Plan (“2003 Plan”) to a new director elected by the Company’s Board of Directors (“Board”) to fill a vacancy on the Board. The options granted were for a contractual term of ten years with a vesting period of six months. The exercise price of the options was $7.00$7.50 per share, which was equal to the Company’s closing stock price per share the day preceding the grant date, pursuant to the 2003 Plan.

On January 17, 2019 the Company granted 105,000 ISOs from the 2017 Stock Option Plan (“2017 Plan”) to certain employees, which included our executive officers as follows: 25,000 ISOs to our Chief Executive Officer (“CEO”); 15,000 ISOs to our Chief Financial Officer (“CFO”); and 15,000 ISOs to our Executive Vice President (“EVP”) of Strategic Initiatives. The ISOs granted were for a contractual term of six years with one-fifth vesting annually over a five year period. The exercise price of the ISO was $3.15 per share, which was equal to the fair market value of the Company’s Common Stock per share on the date of grant.

The Company granted a NQSO to Robert Ferguson on July 27, 2017 from the Company’s 2017 Stock Option Plan (“2017 Plan”) for the purchase of up to 100,000 shares of the Company’s Common Stock (“Ferguson Stock Option”) in connection with his work as a consultant to the Company’s Test Bed Initiative (“TBI”) at our Perma-Fix Northwest Richland, Inc. (“PFNWR”) facility at an exercise price of $3.65$3.65 per share, which was the fair market value of the Company’s Common Stock on the date of grant. The term of the Ferguson Stock Option is seven years from the grant date. The vesting of the Ferguson Stock Option is subject to the achievement of three separate milestones by certain dates. On January 17, 2019, the Company’s Compensation and Stock Option Committee (“Compensation Committee”) and Board approved an amendment to the Ferguson Stock Option whereby the vesting date for the second milestone for the purchase of up to 30,000 shares of the Company’s Common Stock was extended to March 31, 2020 from January 27, 2019. On March 27, 2020, the Compensation Committee and the Board approved another amendment to the Ferguson Stock Option whereby the vesting date for the second milestone was further extended to December 31, 2021 from March 31, 2020 and the vesting date for the third milestone for the purchase of up to 60,000 shares of the Company’s Common Stock was extended to December 31, 2022 from January 27, 2021. The 10,000 options under the first milestone were exercised by Robert Ferguson in May 2018. The vesting date for the second and third milestones for the purchase of up to 30,000 and 60,000 shares of the Company’s Common Stock was previously extended to December 31, 2021 and December 31, 2022, respectively. The Company has not recognized compensation costs (fair value of approximately $334,000$262,000 at June 30, 2020)2021) for the remaining 90,000 Ferguson Stock Option under the remaining two milestones since achievement of the performance obligation under each of the two remaining milestones is uncertain at June 30, 2020.2021. All other terms of the Ferguson Stock Option remain unchanged.

The Company estimates fair value of stock options using the Black-Scholes valuation model. Assumptions used to estimate the fair value of stock options granted include the exercise price of the award, the expected term, the expected volatility of the Company’s stock over the option’s expected term, the risk-free interest rate over the option’s expected term, and the expected annual dividend yield. The fair value of the options granted on FebruaryMay 4, 2020 and January 17, 20192021 as discussed above and the related assumptions used in the Black-Scholes option model used to value the options granted were as follows:

Schedule of Stock Options Valuation Assumptions

   Outside Director Stock Options Granted 
   May 4, 2021 
Weighted-average fair value per option $4.97 
Risk -free interest rate (1)  1.61%
Expected volatility of stock (2)  55.91%
Dividend yield  NaN 
Expected option life (3)  10.0 years 

12

 

  Outside Director Stock Options Granted  Employee Stock Option Granted 
  February 4, 2020  January 17, 2019 
Weighted-average fair value per option $4.89  $1.42 
Risk -free interest rate (1)  1.61%  2.58%
Expected volatility of stock (2)  55.83%  48.67%
Dividend yield  None   None 
Expected option life (3)  10.0 years   5.0 years 

(1)The risk-free interest rate is based on the U.S. Treasury yield in effect at the grant date over the expected term of the option.

(2)The expected volatility is based on historical volatility from our traded Common Stock over the expected term of the option.

(3)The expected option life is based on historical exercises and post-vesting data.

(1) The risk-free interest rate is based on the U.S. Treasury yield in effect at the grant date over the expected term of the option.

(2) The expected volatility is based on historical volatility from our traded Common Stock over the expected term of the option.

(3) The expected option life is based on historical exercises and post-vesting data.

The following table summarizes stock-based compensation recognized for the three and six months ended June 30, 20202021 and 20192020 for our employee and director stock options.

Schedule of Share-based Compensation, Allocation of Recognized Period Costs

 2021  2020  2021  2020 
 Three Months Ended Six Months Ended  Three Months Ended Six Months Ended 
Stock Options June 30, June 30,  June 30,  June 30, 
 2020 2019 2020 2019  2021  2020  2021  2020 
Employee Stock Options $33,000  $36,000  $65,000  $79,000  $33,000  $33,000  $66,000  $65,000 
Director Stock Options  15,000    ―   27,000   5,000   9,000   15,000   21,000   27,000 
Total $48,000  $36,000  $92,000  $84,000  $42,000  $48,000  $87,000  $92,000 
Stock-based compensation $42,000  $48,000  $87,000  $92,000 

At June 30, 2020,2021, the Company has approximately $335,000$215,000 of total unrecognized compensation costs related to unvested options for employee and directors. The weighted average period over which the unrecognized compensation costs are expected to be recognized is approximately 2.61.6 years.

The summary of the Company’s total Stock Option Plans as of June 30, 20202021 and June 30, 2019,2020, and changes during the periods then ended, are presented below. The Company’s Plans consist of the 2010 Stock Option Plan, the 2017 Plans and the 2003 Plan:

Schedule of Stock Options Roll Forward

  Shares  Weighted Average Exercise Price  Weighted Average Remaining Contractual Term (years)  Aggregate Intrinsic Value (4) 
Options outstanding January 1, 2021  658,400  $3.87         
Granted  6,000  $7.50         
Exercised  (500) $3.15      $2,175 
Forfeited/expired  (1,500) $3.15         
Options outstanding end of period (1)  662,400  $3.90   3.1  $2,153,595 
Options exercisable at June 30, 2021(2)  391,900  $4.08   3.1  $1,202,495 

  Shares  Weighted Average Exercise Price  Weighted Average Remaining Contractual Term (years)  Aggregate Intrinsic Value (4) 
Options outstanding January 1, 2020  681,300  $3.84         
Granted  6,000  $7.00       16,060 
Exercised  (12,500) $3.47         
Forfeited/expired  (20,000) $3.45         
Options outstanding end of period (3)  654,800  $3.88   3.7  $1,685,031 
Options exercisable as of June 30, 2020(3)  306,800  $4.20   3.6  $711,306 

(1)Options with exercise prices ranging from $2.79 to $7.50
(2)Options with exercise prices ranging from $2.79 to $7.29
(3)Options with exercise prices ranging from $2.79 to $8.40
(4)The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price.

13

 

  Shares  Weighted Average Exercise Price  Weighted Average Remaining Contractual Term (years)  Aggregate Intrinsic Value (3) 
Options outstanding January 1, 2020  681,300  $3.84         
Granted  6,000  $7.00        
Exercised  (12,500) $3.47      $16,060 
Forfeited/expired  (20,000) $3.45        
Options outstanding end of period (1)  654,800  $3.88   3.7  $1,685,031 
Options exercisable at June 30, 2020(1)  306,800  $4.20   3.6  $711,306 
  Shares  Weighted Average Exercise Price  Weighted Average Remaining Contractual Term (years)  Aggregate Intrinsic Value (3) 
Options outstanding January 1, 2019  616,000  $4.23         
Granted  105,000  $3.15         
Exercised    ─  $   ─            
Forfeited/expired  (13,000) $3.43         
Options outstanding end of period (2)  708,000  $4.08   4.4  $209,318 
Options exercisable as of June 30, 2019(2)  430,000  $4.94   4.1  $43,518 

(1) Options with exercise prices ranging from $2.79 to $8.40

(2) Options with exercise prices ranging from $2.79 to $13.35

(3) The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price.

During the six months ended June 30, 2020,2021, the Company issued a total of 15,36726,427 shares of its Common Stock under the 2003 Plan to its outside directors as compensation for serving on our Board. The Company has recorded approximately $115,000$221,000 in compensation expenses (included in selling, general and administration (“SG&A”) expenses) in connection with the issuance of shares of its Common Stock to outside directors. See “Note 15 – Subsequent Events - 2003 Plan” for a discussion of an amendment to the 2003 Plan as approved by the Company’s Stockholder at the Company’s 2021 Annual Meeting of Stockholders held on July 20, 2021.

During the six months ended June 30, 2020,2021, the Company issued 2,000 shares of its Common Stock resulting from the exercise of options from the Company’s 2017 Plan for total proceeds of $6,300. Additionally, the Company issued 1,884290 shares of its Common Stock from a cashless exercisesexercise of 8,000 and 2,500 optionsan option for the purchase of 500 shares of the Company’s Common Stock at $3.60$3.15 per share and $3.15 per share, respectively.share.

8.

7. Income (Loss) Per Share

Basic income (loss) per share is calculated based on the weighted-average number of outstanding common shares during the applicable period. Diluted income (loss) per share is based on the weighted-average number of outstanding common shares plus the weighted-average number of potential outstanding common shares. In periods where they are anti-dilutive, such amounts are excluded from the calculations of dilutive earnings per share. The following table reconciles the income (loss) and average share amounts used to compute both basic and diluted income (loss) per share:

Schedule of Earnings Per Share, Basic and Diluted

                 
  Three Months Ended  Six Months Ended 
  June 30,  June 30, 
  (Unaudited)  (Unaudited) 
(Amounts in Thousands, Except for Per Share Amounts) 2021  2020  2021  2020 
Net income (loss) attributable to Perma-Fix Environmental Services,Inc., common stockholders:                
Income from continuing operations, net of taxes $3,121  $260  $2,083  $1,568 
Net loss attributable to non-controlling interest  (29)  (29)  (59)  (55)

Income from continuing operations attributable to

Perma-Fix Environmental Services, Inc. common stockholders

  3,150   289   2,142   1,623 
Loss from discontinuing operations attributable to Perma-Fix Environmental Services, Inc. common stockholders  (127)  (85)  (242)  (199)
Net income attributable to Perma-Fix Environmental Services, Inc. common stockholders $3,023  $204  $1,900  $1,424 
                 
Basic income per share attributable to Perma-Fix Environmental Services, Inc. common stockholders $.25  $.02  $.16  $.12 
                 
Diluted income per share attributable to Perma-Fix Environmental Services, Inc. common stockholders $.24  $.02  $.15  $.12 
                 
Weighted average shares outstanding:                
Basic weighted average shares outstanding  12,180   12,135   12,173   12,129 
Add: dilutive effect of stock options  229   134   217   171 
Add: dilutive effect of warrants  31   17   30   20 
Diluted weighted average shares outstanding  12,440   12,286   12,420   12,320 
                 
Potential shares excluded from above weighted average share calcualtions due to their anti-dilutive effect include:                
Stock options  12   38   36   38 
Warrant  —   —   —   — 
Stock Options and Warrants                

14

 

  Three Months Ended  Six Months Ended 
  June 30,  June 30, 
  (Unaudited)  (Unaudited) 
(Amounts in Thousands, Except for Per Share Amounts) 2020  2019  2020  2019 
Net income (loss) attributable to Perma-Fix Environmental Services, Inc., common stockholders:                
Income (loss) from continuing operations, net of taxes $260  $373  $1,568  $(177)
Net loss attributable to non-controlling interest  (29)  (31)  (55)  (61)
Income (loss) from continuing operations attributable to Perma-Fix Environmental Services, Inc. common stockholders  289   404   1,623   (116)
Loss from discontinuing operations attributable to Perma-Fix Environmental Services, Inc. common stockholders  (85)  (115)  (199)  (267)
Net income (loss) attributable to Perma-Fix Environmental Services, Inc. common stockholders $204  $289  $1,424  $(383)
                 
Basic income (loss) per share attributable to Perma-Fix Environmental Services, Inc. common stockholders $.02  $.02  $.12  $(.03)
                 
Diluted income (loss) per share attributable to Perma-Fix Environmental Services, Inc. common stockholders $.02  $.02  $.12  $(.03)
                 
Weighted average shares outstanding:                
Basic weighted average shares outstanding  12,135   12,054   12,129   12,008 
Add: dilutive effect of stock options  134   68   171    ─ 
Add: dilutive effect of warrants  17    ─   20    ─ 
Diluted weighted average shares outstanding  12,286   12,122   12,320   12,008 
                 
Potential shares excluded from above weighted average share calcualtions due to their anti-dilutive effect include:                
Stock options  38   113   38   186 
Warrant  ―   ―   ―   ― 


9.8. Long Term Debt

Long-term debt consists of the following at June 30, 2020 and December 31, 2019:following:

(Amounts in Thousands) June 30, 2020  December 31, 2019 
Revolving Credit facility dated May 8, 2020, borrowings based upon eligible accounts receivable, subject to monthly borrowing base calculation, balance due on May 15, 2024, Effective interest rate for the first six months of 2020 was 6.1%. (1) $― $321 
Term Loan dated May 8, 2020, payable in equal monthly installments of principal, balance due on May 15, 2024. Effective interest rate for the first six months of 2020 was 6.0%. (1)  1,586(2)  1,827(2)
Promissory Note dated April 1, 2019, payable in twelve monthly installments of interest only, starting May 1, 2019 followed with twelve monthly installments of approximately $208 in principal plus accrued interest. Interest accrues at annual rate of 4.0%. (3)  999(4)  1,732(4)
Promissory Note dated April 14, 2020, subject to loan forgiveness, balance due April 14, 2022. Interest accrues at annual rate of 1.0%. (3)  5,666(5)  ―
Note Payable dated June 10, 2020, payable in 36 monthly installments, starting in July 2020 at annual interest rate of $5.64%.  26   ―
Total debt  8,277   3,880 
Less current portion of long-term debt  1,730(4)  1,300(4)
Long-term debt $6,547  $2,580 

(1) Our revolving credit facility is collateralized by our accounts receivable and ourSchedule of Long term loan is collateralized by our property, plant, and equipment. Effective July 1, 2019, monthly installment principal payment on the Term Loan was amended to approximately $35,500 from approximately $101,600. See “Revolving Credit and Term Loan Agreement” below for terms of the Company’s credit facility prior to the New Loan Agreement dated May 8, 2020.Debt

(Amounts in Thousands) 

June 30,2021

  December 31, 2020 
Total debt  1,223   6,729 
Revolving Credit facility dated May 8, 2020, borrowings based upon eligible accounts receivable, subject to monthly borrowing base calculation, balance due on May 15, 2024. Effective interest rate for the first six month of 2021 was 5.3%. (1) $—  $— 
Term Loan dated May 8, 2020, payable in equal monthly installments of principal, balance due on May 15, 2024. Effective interest rate for the first six months of 2021 was 4.4%. (1) 
 		 
 		 
1,177		 
(2) 		1,388
(2)
Promissory Note dated April 14, 2020, balance subject to loan forgiveness. Interest accrues at annual rate of 1.0%. (3) 
 		 
 		 
—		 
(4)		 
 		 
 
5,318		(4)
 
Notes Payable to 2023 and 2025, annual interest rate of 5.6% and 9.1%.  46   23 
Total debt  1,223   6,729 
Less current portion of long-term debt  404   3,595 
Long-term debt $819  $3,134 

(1)Our revolving credit facility is collateralized by our accounts receivable and our term loan is collateralized by our property, plant, and equipment.

(2)Net of debt issuance costs of ($103,000) and ($105,000) at June 30, 2021 and December 31, 2020, respectively.

(2) Net of debt issuance costs of ($120,000) and ($92,000) at June 30, 2020 and December 31, 2019, respectively.

(3)Uncollateralized note.

(3) Uncollateralized note.

(4) Net of debt discount/debt issuance costs of ($149,000) and ($248,000) at June 30, 2020 and December 31, 2019, respectively.

The Promissory Note provides for prepayment of principal over the term of the Note without penalty. In 2019, the Company made total prepayment of principal of $520,000 which was reflected in the current portion of the debt. During the first six months of 2020, the Company made total principal repayment of $832,000 of which $416,000 was prepaid. At June 30, 2020, outstanding balance of the loan are current.

 

(4)Entered into with the Company’s credit facility lender under the Paycheck Protection Program (“PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) (see “PPP Loan” below for information regarding forgiveness on the entire loan balance, along with accrued interest, effective June 15, 2021).

(5) Entered into with the Company’s credit facility lender under the Paycheck Protection Program (see “PPP Loan” below for further information on this loan).

Revolving Credit and Term Loan Agreement

The Company entered into ana Second Amended and Restated Revolving Credit, Term Loan and Security Agreement, dated October 31, 2011May 8, 2020 (“Amended Loan Agreement”), with PNC National Association (“PNC”), acting as agent and lender. The Amended Loan Agreement had been amended from time to time since the execution of the Amended Loan Agreement. The Amended Loan Agreement, as subsequently amended (“Revised Loan Agreement”), providedprovides the Company with the following credit facility with a maturity date of March 24, 2021:15, 2024: (a) up to $12,000,000$18,000,000 revolving credit (“revolving credit”) and (b) a term loan (“term loan”) of approximately $6,100,000.$1,742,000, requiring monthly installments of $35,547. The maximum that the Company can borrow under the revolving credit wasis based on a percentage of eligible receivables (as defined) at any one time reduced by outstanding standby letters of credit and borrowing reductions that our lender may impose from time to time.

On May 4, 2021, the Company entered into an amendment to the Loan Agreement with its lender which provided the following, among other things:

●

revised the Company’s fixed charge coverage ratio (“FCCR”) calculation requirement which allows for the add-back of approximately $5,318,000 in eligible expenses that were incurred and covered by the PPP Loan that the Company received in 2020. The add-back is to be applied retroactively to the second and third quarters of 2020. (see below for a discussion of the PPP Loan); and
●a capital expenditure line of up to $1,000,000with advances on the line, subject to certain limitations, permitted for up to twelve months starting May 4, 2021 (the “Borrowing Period”). Only interest is payable on advances during the Borrowing Period (see annual rate of interest below on the capital expenditure line). At the end of the Borrowing Period, the total amount advanced under the line will amortize equally based on a five-year amortization schedule with principal payment due monthly plus interest. At the maturity date of the Loan Agreement, any unpaid principal balance plus interest, if any, will become due. No advance on the capital line has been made as of June 30, 2021.

In connection with the amendment, the Company paid its lender a fee of $15,000 which is being amortized over the remaining term of the Loan Agreement, as amended, as interest expense-financing fees.

15

 

Payment

Pursuant to the Loan Agreement, as amended, payment of annual rate of interest due on the revolving credit under the Revised Loan Agreement wasis at prime (3.25%(3.25% at June 30, 2020)2021) plus 2% or London InterBank Offer Rate (“LIBOR”) plus 3.00% and the term loan and the capital expenditure line at prime plus 2.5%.

On May 8, 2020, the Company entered into a Second Amended and Restated Revolving Credit, Term Loan and Security Agreement (the “New Loan Agreement”) with PNC, replacing our previous Revised Loan Agreement with PNC. The New Loan Agreement provides the Company with the following credit facility:

●up to $18,000,000 revolving credit facility, subject to the amount of borrowings based on a percentage of eligible receivables and subject to certain reserves; and
●a term loan of $1,741,818, which requires monthly installments of $35,547.

The New Loan Agreement terminates as of May 15, 2024, unless sooner terminated.

Similar to our Revised Loan Agreement, the New Loan Agreement requires the Company to meet certain customary financial covenants, including, among other things, a minimum Tangible Adjusted Net Worth requirement of $27,000,000 at all times; maximum capital spending of $6,000,000 annually; and a minimum fixed charge coverage ratio (“FCCR”) requirement of 1.15:1.

Under the New Loan agreement, payment of annual rate of interest due on the credit facility is as follows:

●revolving credit at prime plus 2.50% or London InterBank Offer Rate (“LIBOR”) plus 3.50% and the term loan at prime plus 3.00% or LIBOR plus 4.00%2.50% or LIBOR plus 3.50%. The Company can only elect to use the LIBOR interest payment option after it becomes compliant with meeting the minimum FCCR of 1.15:1; and
●Upon the achievement of a FCCR of greater than 1.25:1, the Company will have the option of paying an annual rate of interest due on the revolving credit at prime plus 2.00% or LIBOR plus 3.00% and the term loan at prime plus 2.50% or LIBOR plus 3.50%. The Company met this FCCR in the first and second quarters of 2020. Upon meeting the FCCR of 1.25:1, this interest payment option will remain in place in the event that the Company’s future FCCR falls below 1.25:1.

Under the LIBOR option of interest payment, noted above, a LIBOR floor of 0.75% shall applyapplies in the event that LIBOR falls below 0.75% at any point in time.

Pursuant to the New Loan Agreement, theThe Company may terminate the Newits Loan Agreement upon 90 days’ prior written notice upon payment in full of our obligations under the New Loan Agreement. The Company has agreed to pay PNC 1.0% of the total financing inhad the event we payCompany paid off ourits obligations on or before May 7, 2021 and 0.5% of the total financing if we paythe Company pays off ourits obligations after May 7, 2021 but prior to or on May 7, 2022. No early termination fee shallwill apply if we paythe Company pays off ourits obligations under the New Loan Agreement after May 7, 2022.

In connection with New Loan Agreement, the Company paid its lender a fee of $50,000 and incurred other direct costs of approximately $35,000, which are being amortized over the term of the New Loan Agreement as interest expense-financing fees. As a result of the termination of the Revised Loan Agreement, the Company recorded approximately $27,000 in loss on extinguishment of debt in accordance with ASC 470-50, “Debt – Modifications and Extinguishment.”

At June 30, 2020,2021, the borrowing availability under ourthe Company’s revolving credit was approximately $12,330,000,$9,550,000 based on our eligible receivables and includes a reduction an in borrowing availability of approximately $3,126,000$3,020,000 from outstanding standby letters of credit.

The Company’s credit facility under its Revised and New Loan Agreement, as amended, with PNC contains certain financial covenants, along with customary representations and warranties. A breach of any of these financial covenants, unless waived by PNC, could result in a default under ourthe 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. The Company met its FCCR requirement in the first and second quarters of 2020. Additionally, the Company met its remaining financial covenant requirements in the first quarter of 2021. The Company’s FCCR calculation in the first quarter of 2021 included the add-back of approximately $5,318,000 in eligible expenses that were incurred and second quarters of 2020.

covered by the PPP Loan and Securities Purchase Agreement, Promissory Note and Subordination Agreement

On April 1, 2019,that the Company completed a lending transaction with Robert Ferguson (the “Lender”), wherebyreceived in 2020 as permitted by the Company borrowed from the Lender the sum of $2,500,000 pursuantamendment dated May 4, 2021 to the terms of aCompany’s Loan and Security Purchase Agreement and promissory note (the “Loan”).as discussed above. The Lender is a shareholder of the Company and also serves as a consultant to the Company in connection with the Company’s TBI atdid not meet its PFNWR subsidiary. The proceeds from the Loan were used for general working capital purposes. The Loan is unsecured, with a term of two years with interest payable at a fixed interest rate of 4.00% per annum. The Loan provides for monthly payments of accrued interest only during the first year of the Loan, with the first interest payment due May 1, 2019 and monthly payments of approximately $208,333 in principal plus accrued interest startingFCCR requirement in the second yearquarter of 2021. However, this FCCR non-compliance was waived by the Loan. The Loan also allows for prepayment of principal payments over the term of the Loan without penalty with such prepayment of principal paymentsCompany’s lender pursuant to be appliedanother amendment dated August 10, 2021 to the second year of the loan payments at the Company’s discretion. Since inception of the loan, the Company has made total prepayments in principal of $936,000, of which $416,000 was made in the first six months of 2020. In connection with the above Loan the Lender agreed under the terms of the Loan and a Subordination Agreement with our credit facility lender, to subordinate payment under the Loan, and agreed that the Loan will be junior in right of payment to the credit facility in the event of default or bankruptcy or other insolvency proceeding by us. In connection with this capital raise transaction described above and consideration for us receiving the Loan, the Company issued a Warrant (the “Warrant”) to the Lender to purchase up to 60,000 shares of our Common Stock at an exercise price of $3.51 per share, which was the closing bid price(see “Note 15 – Subsequent Events – Credit Facility” for a share of our Common Stock on NASDAQ.com immediately preceding the execution of the Loan and Warrant. The Warrant expires on April 1, 2024 and remains outstanding at June 30, 2020. As further consideration for this capital raise transaction relating to the Loan, the Company also issued 75,000 shares of its Common Stock to the Lender. The fair value of the Warrant and Common Stock and the related closing fees incurred from the transaction totaled approximately $398,000 and was recorded as debt discount/debt issuance costs, which is being amortized over the term of the loan as interest expense – financing fees. The 75,000 shares of Common Stock, the Warrant and the 60,000 shares of Common Stock that may be purchased under the Warrant were and will be issued in a private placement that was and will be exempt from registration under Rule 506 and/or Sections 4(a)(2) and 4(a)(5) of the Securities Act of 1933, as amended (the “Act”) and bear a restrictive legend against resale except in a transaction registered under the Act or in a transaction exempt from registration thereunder.

Upon default, the Lender will have the right to elect to receive in full and complete satisfaction of the Company’s obligations under the Loan either: (a) the cash amount equal to the sum of the unpaid principal balance owing under the loan and all accrued and unpaid interest thereon (the “Payoff Amount”) or (b) upon meeting certain conditions, the number of whole shares of the Company’s Common Stock (the “Payoff Shares”) determined by dividing the Payoff Amount by the dollar amount equal to the closing bid price of our Common Stock on the date immediately prior to the date of default, as reported or quoted on the primary nationally recognized exchange or automated quotation system on which our Common Stock is listed; provided however, that the dollar amount of such closing bid price shall not be less than $3.51, the closing bid price for our Common Stock as disclosed on NASDAQ.com immediately preceding the signingdiscussion of this loan agreement.waiver and additional provisions of this amendment).

If issued, the Payoff Shares will not be registered and the Lender will not be entitled to registration rights with respect to the Payoff Shares. The aggregate number of shares, warrant shares, and Payoff Shares that are or will be issued to the Lender pursuant to the Loan, together with the aggregate shares of the Company’s Common Stock and other voting securities of the Company owned by the Lender or which may be acquired by the Lender as of the date of issuance of the Payoff Shares, shall not exceed the number of shares of the Company’s Common Stock equal to 14.9% of the number of shares of the Company’s Common Stock issued and outstanding as of the date immediately prior to the default, less the number of shares of the Company’s Common Stock owned by the Lender immediately prior to the date of such default plus the number of shares of our Common Stock that may be acquired by the Lender under warrants and/or options outstanding immediately prior to the date of such default.

PPP Loan

On April 14, 2020, the Company entered into a promissory note under the PPP with PNC, our credit facility lender, in the amountwhich had a balance of $5,666,300 under the PPPapproximately $5,318,000 (the “PPP Loan”). at March 31, 2021. The PPP was established under the recently enacted CARES Act and is administered by the U.S. Small Business Administration (“SBA”). On June 5, 2020,The CARES Act was subsequently amended by the Paycheck Protection Program Flexibility Act was signed into law which amended the CARES Act. The note evidencing the PPP Loan contains events of default relating to, among other things, payment defaults, breach of representations and warranties, and provisions of2020 (“Flexibility Act”). Proceeds from the promissory note. (See “Note 16 – Subsequent Event – PPP Loan” for a discussion of a repayment of approximately $327,000 of the PPP Loan to PNC on July 9, 2020 which amount has been included in “current portion of long-term debt” in the Company’s Consolidated Balance Sheet at June 30, 2020).

Under the terms of the Flexibility Act, the Company can apply for and be granted forgiveness for all or a portion of the PPP Loan. Such forgiveness will be determined, subject to limitations, based on the use of loan proceedsnote was used by the Company for eligible payroll costs, mortgage interest, rent and utility costs and the maintenance of employee and compensation levels for the covered period (which is defined as a 24 week period, beginning April 14, 2020, the date in which proceeds from the PPP Loan was disbursed to the Company by PNC). At least 60% of such forgiven amount must be used for eligible payroll costs. The Company expects to apply for forgiveness on repayment of the loan as permitted under the program, which is subject to the approval of our lender. If all or a portion of the PPP Loan is not forgiven, all or the remaining portion will be for a term of two years but can be prepaid at any time prior to maturity without any prepayment penalties.Flexibility Act. The annual interest rate on the PPP Loan is 1.0% and no payments

On October 5, 2020, the Company applied for forgiveness on repayment of principal or interest are due until the datePPP Loan as permitted under the Flexibility Act. On July 1, 2021, the Company was notified by PNC that the entire balance of the PPP Loan of approximately $5,318,000, along with accrued interest of approximately $63,000 was forgiven by the SBA, remits the loan forgiveness amount to our lender, provided thateffective June 15, 2021. Accordingly, the Company submits its loan forgiveness application to our lender within ten months followingrecorded the last day of the applicable covered period. While the Company’sentire forgiven PPP Loan currently has a two year maturity,balance, along with accrued interest, totaling approximately $5,381,000 as “Gain on extinguishment of debt” on its Consolidated Statement of Operations for the Flexibility Act permits the Company to request a five year maturity with our lender which the Company does not expect to request at this time.quarter ended June 30, 2021.

10.

9. Commitments and Contingencies

Hazardous Waste

In connection with our waste management services, we processthe Company processes both hazardous and non-hazardous waste, which we transport to our own, or other, facilities for destruction or disposal. As a result of disposing of hazardous substances, in the event any cleanup is required weat the disposal site, the Company could be a potentially responsible party for the costs of the cleanup notwithstanding any absence of fault on our part.

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Legal Matters

In the normal course of conducting our business, we are involved in various litigation. We are not a party to any litigation or governmental proceeding which our management believes could result in any judgments or fines against us that could would have a material adverse effect on our financial position, liquidity or results of future operations.

InsuranceDuring July 2020, Tetra Tech EC, Inc. (“Tetra Tech”) filed a complaint in the United States District Court for the Northern District of California (the “Court”) against CH2M Hill, Inc. (“CH2M”) and four subcontractors of CH2M, including the Company (“Defendants”). The complaint alleges claims for negligence, negligent misrepresentation and equitable indemnification against all defendants related to alleged damages suffered by Tetra Tech in respect of certain draft reports prepared by defendants at the request of the U.S. Navy as part of an investigation and review of certain whistleblower complaints about Tetra Tech’s environmental restoration at the Hunter’s Point Naval Shipyard in San Francisco.

CH2M was hired by the Navy in 2016 to review Tetra Tech’s work. CH2M subcontracted with environmental consulting and cleanup firms Battelle Memorial Institute, Cabrera Services, Inc., SC&A, Inc. and the Company to assist with the review, according to the complaint.

The complaint alleges that the subject draft reports were prepared negligently and in a biased manner, made public, and caused damage to Tetra Tech’s reputation; triggering related lawsuits and costing it opportunities for both government and commercial contracts.

The Company has provided notice of this lawsuit to our insurance carrier. Our insurance carrier is providing a defense on our behalf in connection with this lawsuit, subject to a $100,000 self-insured retention and the terms and limitations contained in the insurance policy.

On January 7, 2021, Defendants’ motion to dismiss the complaint in its entirety was granted without prejudice, with leave to amend. Tetra Tech subsequently filed a First Amended Complaint (“FAC”) and Defendants filed a motion to dismiss Tetra Tech’s FAC. Tetra Tech filed an opposition to Defendant’s motion to dismiss Tetra Tech’s FAC. Defendants, subsequently filed a joint reply to Tetra Tech’s motion in opposition. A decision and Order on Defendants’ motion to dismiss is pending from the Court. At this time, the Company continues to believe it does not have any liability to Tetra Tech.

Insurance

The Company has a 25-year25-year finite risk insurance policy entered into in June 2003 (“2003 Closure Policy”) with AIG Specialty Insurance Company (“AIG”), which provides financial assurance to the applicable states for our permitted facilities in the event of unforeseen closure. The 2003 Closure Policy, as amended, provides for a maximum allowable coverage of $28,177,000$28,177,000 which includes available capacity to allow for annual inflation and other performance and surety bond requirements. Total coverage under the 2003 Closure Policy, as amended, was $19,651,000$19,898,000 at June 30, 2020.2021. At June 30, 20202021 and December 31, 2019,2020, finite risk sinking funds contributed by the Company related to the 2003 Closure Policy which is included in other long term assets on the accompanying Consolidated Balance Sheets totaled $11,390,000$11,467,000 and $11,307,000,$11,446,000, respectively, which included interest earned of $1,919,000$1,996,000 and $1,836,000$1,975,000 on the finite risk sinking funds as of June 30, 20202021 and December 31, 2019,2020, respectively. Interest income for the three and six months ended June 30, 2021 was approximately $2,000 and $21,000, respectively. Interest income for the three and six months ended June 30, 2020 was approximately $27,000$27,000 and $83,000, respectively. Interest income for the three and six months ended June 30, 2019 was approximately $107,000 and $188,000,$83,000, respectively. If we so elect, AIG is obligated to pay the Company an amount equal to 100% of the finite risk sinking fund account balance in return for complete release of liability from both the Company and any applicable regulatory agency using this policy as an instrument to comply with financial assurance requirements.

Letter of Credits and Bonding Requirements

From time to time, the Company is required to post standby letters of credit and various bonds to support contractual obligations to customers and other obligations, including facility closures. At June 30, 2020,2021, the total amount of standby letters of credit outstanding was approximately $3,126,000$3,020,000 and the total amount of bonds outstanding was approximately $52,519,000.$43,561,000.

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11. 10. Discontinued Operations

The Company’s discontinued operations consist of all our subsidiaries included in our previous Industrial Segment which encompasses subsidiaries divested in 2011 and prior and three previously closed locations.

The Company’s discontinued operations had net losses of $85,000$127,000 and $115,000$85,000 for the three months ended June 30, 20202021 and 2019,2020, respectively (net of taxes of $0$0 for each period) and net losses of $199,000$242,000 and $267,000$199,000 for the six months ended June 30, 20202021 and 2019,2020, respectively, (net of taxes of $0$0 for each period). The losses were primarily due to costs incurred in the administration and continued monitoring of our discontinued operations. The Company’s discontinued operations had no revenues for each of the periods noted above.

The following table presents the major class of assets of discontinued operations as of June 30, 20202021 and December 31, 2019.2020. No assets and liabilities were held for sale at each of the periods noted.

  June 30,  December 31, 
(Amounts in Thousands) 2020  2019 
Current assets        
Other assets $124  $104 
Total current assets  124   104 
Long-term assets        
Property, plant and equipment, net (1)  81   81 
Other assets  —   36 
Total long-term assets  81   117 
Total assets $205  $221 
Current liabilities        
Accounts payable $5  $8 
Accrued expenses and other liabilities  167   169 
Environmental liabilities  756   817 
Total current liabilities  928   994 
Long-term liabilities        
Closure liabilities  138   134 
Environmental liabilities  110   110 
Total long-term liabilities  248   244 
Total liabilities $1,176  $1,238 

(1) netSchedule of accumulated depreciation of $10,000 for each period presented.

The Company’s discontinued operations included a note receivable in the original amount of approximately $375,000 recorded in May 2016 resulting from the sale of property at our Perma-Fix of Michigan, Inc. (“PFMI”) subsidiary. This note requires 60 equal monthly installment payments by the buyer of approximately $7,250 (which includes interest). At June 30, 2020, the outstanding amount on this note receivable totaled approximately $105,000, which are all current and is included in “Current assets related to discontinued operations” in the accompanying ConsolidatedDisposal Groups, Including Discontinued Operation Balance Sheets.Sheet

  June 30,  December 31, 
(Amounts in Thousands) 2021  2020 
Current assets        
Other assets $17  $22 
Total current assets  17   22 
Long-term assets        
Property, plant and equipment, net (1)  81   81 
Other assets  —   —  
Total long-term assets  81   81 
Total assets $98  $103 
Current liabilities        
Accounts payable $4  $4 
Accrued expenses and other liabilities  142   150 
Environmental liabilities  671   744 
Total current liabilities  817   898 
Long-term liabilities        
Closure liabilities  146   142 
Environmental liabilities  110   110 
Total long-term liabilities  256   252 
Total liabilities $1,073  $1,150 

(1)net of accumulated depreciation of $10,000 for each period presented.


12. 11. Operating Segments

In accordance with ASC 280, “Segment Reporting”, the Company defines an operating segment as a business activity: (1) from which we may earn revenue and incur expenses; (2) whose operating results are regularly reviewed by the chief operating decision maker (“CODM”) to make decisions about resources to be allocated to the segment and assess its performance; and (3) for which discrete financial information is available.

Our reporting segments are defined as below:

TREATMENT SEGMENT, which includes:

-nuclear, low-level radioactive, mixed waste (containing both hazardous and low-level radioactive constituents), hazardous and non-hazardous waste treatment, processing and disposal services primarily through four uniquely licensed and permitted treatment and storage facilities; and
-Research and& Development (“R&D”) activities to identify, develop and implement innovative waste processing techniques for problematic waste streams.

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SERVICES SEGMENT, which includes:

-Technical services, which include:

○professional radiological measurement and site survey of large government and commercial installations using advanced methods, technology and engineering;
○health physics services including health physicists, radiological engineers, nuclear engineers and health physics technicians support to government and private radioactive materials licensees;
○integrated Occupational Safety and Health services including IHindustrial hygiene (“IH”) assessments; hazardous materials surveys, e.g., exposure monitoring; lead and asbestos management/abatement oversight; indoor air quality evaluations; health risk and exposure assessments; health & safety plan/program development, compliance auditing and training services; and OSHAOccupational Safety and Health Administration (“OSHA”) citation assistance;
○global technical services providing consulting, engineering (civil, nuclear, mechanical, chemical, radiological and environmental), project management, waste management, environmental, and decontamination and decommissioning field, technical, and management personnel and services to commercial and government customers; and
○on-site waste management services to commercial and governmental customers.

-Nuclear services, which include:

○technology-based services including engineering, decontamination and decommissioning (“D&D”), of government and commercial facilities impacted with radioactive material and hazardous constituents including engineering, technology applications, specialty services, and construction, logistics, transportation, processing and disposal;
○remediationlicense termination support of nuclearradioactive material licensed and federal facilities over the entire cycle of the termination process: project management, planning, characterization, waste stream identification and the remediation cleanup of nuclear legacy sites. Such services capability includes: project investigation; radiological engineering; partial and total plant D&D; facility decontamination, dismantling, demolition, and planning; site restoration; logistics; transportation;delineation, remediation/demo, final status survey, compliance demonstration, reporting, transportation, disposal and emergency response; andresponse.

-A company owned equipment calibration and maintenance laboratory that services, maintains, calibrates, and sources (i.e., rental) health physics, IH and customized NIOSHnuclear, environmental, and occupational safety and health (“NEOSH”) instrumentation.
-A company owned gamma spectroscopy laboratory for the analysis of oil and gas industry solids and liquids.

MEDICAL SEGMENT, which includes:is currently involved on a limited basis in the R&D of the Company’s medical isotope production technology, by our majority-owned Polish subsidiary, Perma-Fix of Medical or the Medical Segment. The Medical Segment has not generated any revenuesrevenue and all costs incurred are reflected within R&D in the accompanying consolidated financial statements. As previously disclosed, the Medical Segment has substantially reduced its R&D costs and activities due to the need for capital to fund these activities. The Company anticipates that the Medical Segment will not resume full R&D activities until the necessary capital is obtained through its own credit facility or additional equity raise, or obtains partners willing to provide funding for its R&D.

Our reporting segments exclude our corporate headquarters and our discontinued operations (see “Note 1110 – Discontinued Operations”) which do not generate revenues.

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The table below presents certain financial information of our operating segments for the three and six months ended June 30, 20202021 and 20192020 (in thousands):

Schedule of Segment Reporting Information

Segment Reporting for the Quarter Ended June 30, 2021

   Treatment  Services  Medical  Segments Total  Corporate (1)  Consolidated Total 
Revenue from external customers $7,706  $8,439   —  $16,145  $—  $16,145 
Intercompany revenues  319   32   —   351   —   — 
Gross profit (negative gross profit)  1,433   (467)  —   966   —   966 
Research and development  43   19   72   134   10   144 
Interest income  —   —   —   —   2   2 
Interest expense  (18)  —   —   (18)  (47)  (65)
Interest expense-financing fees  —   —   —   —   (9)  (9)
Depreciation and amortization  310   85   —   395   5   400 
Segment income (loss) before income taxes  471   (1,292)  (72)  (893)  4,027(2)  3,134 
Income tax expense  3   10   —   13   —   13 
Segment income (loss)  468   (1,302)  (72)  (906)  4,027   3,121 
Expenditures for segment assets  270   10   —   280   9   289(3)

Segment Reporting for the Quarter Ended June 30, 2020

 Treatment Services Medical Segments
Total		 Corporate (1) Consolidated
Total		   Treatment Services Medical Segments Total Corporate (1) Consolidated Total 
Revenue from external customers $7,840  $14,207   —  $22,047  $—  $22,047  $7,840  $14,207   —  $22,047  $—  $22,047 
Intercompany revenues  446   5   —   451   —   —   446   5   —   451   —   — 
Gross profit  1,695   1,615   —   3,310   —   3,310   1,695   1,615   —   3,310   —   3,310 
Research and development  52   46   74   172   37   209   52   46   74   172   37   209 
Interest income  1   —   —   1   27   28   1   —   —   1   27   28 
Interest expense  (28)  (4)  —   (32)  (67)  (99)  (28)  (4)  —   (32)  (67)  (99)
Interest expense-financing fees  —   —   —   —   (60)  (60)  —   —   —   —   (60)  (60)
Depreciation and amortization  275   84   —   359   5   364   275   84   —   359   5   364 
Segment income (loss) before income taxes  750   1,031   (74)  1,707   (1,456)  251   750   1,031   (74)  1,707   (1,456)  251 
Income tax benefit  (9)  —   —   (9)  —   (9)  (9)  —   —   (9)  —   (9)
Segment income (loss)  759   1,031   (74)  1,716   (1,456)  260   759   1,031   (74)  1,716   (1,456)  260 
Expenditures for segment assets  320   146   —   466   2   468(3)  320   146   —   466   2   468(4)

Segment Reporting for the QuarterSix Months Ended June 30, 20192021

 Treatment Services Medical Segments
Total		 Corporate (1) 

Consolidated

Total

   Treatment  Services Medical Segments Total Corporate (1) Consolidated Total 
Revenue from external customers $10,094  $7,041   —  $17,135  $—  $17,135  $15,201  $24,077   —  $39,278  $—  $39,278 
Intercompany revenues  7   42   —   49   —   —   979   39   —   1,018   —   — 
Gross profit  2,627   644   —   3,271   —   3,271   2,358   964   —   3,322   —   3,322 
Research and development  136   —   80   216   7   223   90   32   149   271   24   295 
Interest income  —   —   —   —   107   107   —   —   —   —  21   21 
Interest expense  (30)  (4)  —   (34)  (73)  (107)  (37)  (8)  —   (45)  (87)  (132)
Interest expense-financing fees  —   —   —   —   (60)  (60)  —   —   —   —   (17)  (17)
Depreciation and amortization  233   79   —   312   5   317   620   170   —   790   9   799 
Segment income (loss) before income taxes  1,611   137   (80)  1,668   (1,289)  379   352   (737)  (149)  (534)  2,613(2)  2,079 
Income tax expense  6   —   —   6   —   6 
Income tax (benefit) expense  (14)  10   —   (4)  —   (4)
Segment income (loss)  1,605   137   (80)  1,662   (1,289)  373   366   (747)  (149)  (530)  2,613   2,083 
Expenditures for segment assets  73   15   —   88   —   88(2)  627   14   —   641   9   650(3)

Segment Reporting for the Six Months Ended June 30, 2020

   Treatment  Services  Medical  Segments Total  Corporate (1)  Consolidated Total 
Revenue from external customers $17,403  $29,504   —  $46,907  $—  $46,907 
Intercompany revenues  653   13   —   666   —   — 
Gross profit  4,440   3,510   —   7,950   —   7,950 
Research and development  145   112   140   397   44   441 
Interest income  1   —   —   1   83   84 
Interest expense  (46)  (10)  —   (56)  (163)  (219)
Interest expense-financing fees  —   —   —   —   (129)  (129)
Depreciation and amortization  539   162   —   701   10   711 
Segment income (loss) before income taxes  2,297   2,349   (140)  4,506   (2,933)  1,573 
Income tax expense  5   —   —   5   —   5 
Segment income (loss)  2,292   2,349   (140)  4,501   (2,933)  1,568 
Expenditures for segment assets  1,000   361   —   1,361   5   1,366(4)

(1)Amounts reflect the activity for corporate headquarters not included in the segment information.

 

  Treatment  Services  Medical  Segments
Total		  Corporate (1)  Consolidated
Total		 
Revenue from external customers $17,403  $29,504   —  $46,907  $—  $46,907 
Intercompany revenues  653   13   —   666   —   — 
Gross profit  4,440   3,510   —   7,950   —   7,950 
Research and development  145   112   140   397   44   441 
Interest income  1   —   —   1   83   84 
Interest expense  (46)  (10)  —   (56)  (163)  (219)
Interest expense-financing fees  —   —   —   —   (129)  (129)
Depreciation and amortization  539   162   —   701   10   711 
Segment income (loss) before income taxes  2,297   2,349   (140)  4,506   (2,933)  1,573 
Income tax expense  5   —   —   5   —   5 
Segment income (loss)  2,292   2,349   (140)  4,501   (2,933)  1,568 
Expenditures for segment assets  1,000   361   —   1,361   5   1,366(3)
(2)Amounts includes approximately $5,381,000 of “Gain on extinguishment of debt” recorded in connection with the Company’s PPP Loan which was forgiven by the SBA effective June 15, 2021 (see “Note 8 – Long Term Debt – PPP Loan” for information of this loan forgiveness).

 

Segment Reporting for the Six Months Ended June 30, 2019

(3)Net of financed amount of $0 and $29,000 for the three and six months ended June 30, 2021, respectively.

 

  Treatment  Services  Medical  Segments
Total		  Corporate (1)  Consolidated
Total		 
Revenue from external customers $19,999  $8,844   —  $28,843  $—  $28,843 
Intercompany revenues  9   63   —   72   —   — 
Gross profit  5,584   188   —   5,772   —   5,772 
Research and development  283   —   154   437   13   450 
Interest income  —   —   —   —   188   188 
Interest expense  (47)  (13)  —   (60)  (134)  (194)
Interest expense-financing fees  —   —   —   —   (70)  (70)
Depreciation and amortization  470   157   —   627   14   641 
Segment income (loss) before income taxes  3,487   (875)  (154)  2,458   (2,590)  (132)
Income tax expense  45   —   —   45   —   45 
Segment income (loss)  3,442   (875)  (154)  2,413   (2,590)  (177)
Expenditures for segment assets  294   18   —   312   —   312(2)
(4)Net of financed amount of $51,000 and $132,000 for the three and six months ended June 30, 2020, respectively.

(1) Amounts reflect the activity for corporate headquarters not included in the segment information.

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(2) Net of financed amount of $18,000 and $22,000 for the three and six months ended June 30, 2019, respectively.

(3) Net of financed amount of $51,000 and $132,000 for the three and six months ended June 30, 2020, respectively.


13. 12. Income Taxes

The Company uses 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 the Company operates, to determine its quarterly provision for income taxes.

The Company had income tax expense of $13,000 and income tax benefit of $9,000$4,000 for continuing operations for the three and six months ended June 30, 2021, respectively, and income tax benefit of $9,000 and income tax expense of $5,000$5,000 for continuing operations for the three and six months ended June 30, 2020, respectively,respectively. The Company’s effective tax rates were approximately 0.4% and income tax expenses of $6,000 and $45,000 for continuing operations0.2% for the three and six months ended June 30, 2019, respectively. The Company’s effective tax rates were approximately 3.6%2021, respectively, and 3.6% and 0.3% for the three and six months ended June 30, 2020, respectively, and 1.6% and 34.1% for the three and six months ended June 30, 2019, respectively. The tax benefit and expense for the periods above were comprised of state tax benefit and expense for separate company filing states. The Company’s tax rate for each of the periods discussed above was impacted by the Company’s full valuation on its net deferred tax assets.

The CARES Act, among other things, includes modifications to net operating loss carryforwards and AMT provisions. At this time, the Company is not expecting any effects to its tax provisions from the CARES Act. However, the Company will continue to monitor for any potential impact to its tax provisions from the CARES Act.

14. 13. Variable Interest Entities (“VIE”)

On May 24, 2019, theThe Company and Engineering/Remediation Resources Group, Inc. (“ERRG”) previously entered into an unpopulated joint venture agreement for project work bids within the Company’s Services Segment. TheSegment with the joint venture is doing business as Perma-Fix ERRG, a general partnership. The Company has a 51% partnership interest in the joint venture and ERRG has a 49% partnership interest in the joint venture. Activities under Perma-Fix ERRG did not commence until the first quarter of 2020.

The Company determines whether joint ventures in which it has invested meet the criteria of a VIE at the start of each new venture and when a reconsideration event has occurred. A VIE is a legal entity that satisfies any of the following characteristics: (a) the legal entity does not have sufficient equity investment at risk; (b) the equity investors at risk as a group, lack the characteristics of a controlling financial interest; or (c) the legal entity is structured with disproportionate voting rights.

The Company consolidates a VIE if it is determined to be the primary beneficiary of the VIE. The primary beneficiary has both the power to direct the activities of the VIE that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.

Based on the Company’s evaluation of Perma-Fix ERRG and related agreements with Perma-Fix ERRG, thethe Company determined that Perma-Fix ERRG iscontinues to be a VIE in which we arethe Company is the primary beneficiary. At June 30, 2020,2021, Perma-Fix ERRG had total assets of $2,523,000$2,528,000 and total liabilities of $2,523,000$2,528,000 which are all recorded as current.

15. 14. Deferral of Employment Tax Deposits

The CARES Act, as amended by the Flexibility Act which was signed into law on June 5, 2020, provides employers the option to defer the payment of an employer’s share of social security taxes beginning on March 27, 2020 through December 31, 2020 among other things, with 50% of the amount of social security taxes deferred willto become due on December 31, 2021 with the remaining 50% due on December 31, 2022. The Company elected to defer such taxes starting in mid-April 2020. The Company estimates the remaining payment of approximately $790,000 of social security taxes otherwise due in 2020 will be deferred with 50% due by December 31, 2021 and the remaining 50% due by December 31, 2022. At June 30, 2020,2021, the Company has deferred payment of approximately $393,000$1,252,000 in its share of social security taxes, of which amount has beenapproximately $626,000 is included in “other“Other long-term liabilities”liabilities,” with the remaining balance included in “Accrued expenses” within current liabilities in the Company’s Consolidated Balance Sheet atSheets.

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15. Subsequent Events

Management evaluated events occurring subsequent to June 30, 2020.2021 through August 11, 2021, the date these consolidated financial statements were available for issuance, and other than as noted below determined that no material recognizable subsequent events occurred.

16. Subsequent Events2003 Plan

PPP Loan

As discussed in “Note 9 – Long Term Debt – PPP Loan,” the Company entered into a promissory note with PNC, our credit facility lender, in the amount of $5,666,300 (“PPP Loan”) under the PPP. The PPP was established under the recently enacted CARES Act (as amended by the Flexibility Act signed into law on June 5, 2020) and is administered by the SBA. On July 9, 2020, the Company repaid approximately $327,000 of the PPP Loan to PNC resulting from an error made in the loan calculation at the time of the loan origination.

Employment Agreements

On July 22, 2020,During April 2021, the Company’s Board appointed Richard Grondinapproved an amendment to the position2003 Plan which was approved by the Company’s Shareholders at the Company’s Annual Meeting of Stockholders held on July 20, 2021 (the “Meeting”). The amendment provides, among other things, the following:

●The number of shares of Common Stock available for issuance under the 2003 Plan was increased by an additional 500,000 shares;
●Each outside director is to be granted an option to purchase up to 10,000 shares of Common Stock on each date the director is reelected to the Board;
●Each newly-elected outside director is to be granted an option to purchase up to 20,000 shares of Common Stock upon initial election to the Board; and
●Changes to the vesting schedule of each option granted under the 2003 Plan to outside directors.

Upon the approval of the amendment to the 2003 Plan as discussed above and upon the reelection of the Company’s seven outside directors at the Meeting, the Company issued a NQSO to each of the Company’s seven reelected outside directors for the purchase of up to 10,000 shares of the Company’s Common Stock. Dr. Louis Centofanti, the Company’s EVP of Waste Treatment OperationsStrategic Initiatives and also a director, was not eligible to receive an executive officeroption under the 2003 Plan as an employee of the Company. Mr. Grondin previously heldEach NQSO granted was for a contractual term of ten years with one-fourth vesting annually over a four year period. The exercise price of the position of Vice President of Western Operations within our Treatment Segment. Immediately after the appointment of Richard GrondinNQSO was $5.93 per share, which was equal to the position of EVP of Waste Treatment Operations and an executive officerfair market value of the Company,Company’s Common Stock the Company’s Compensation Committee andday preceding the Board approved, andgrant date, pursuant to the 2003 Plan.

Credit Facility

On August 10, 2021, the Company entered into an employment agreementamendment to its Loan Agreement with each of Mark Duff, CEO (the “CEO Employment Agreement”), Dr. Louis Centofanti, EVP of Strategic Initiatives (the “EVP of Strategic Initiatives Employment Agreement”), Ben Naccarato, CFO (the “CFO Employment Agreement”), Andrew Lombardo, EVP of Nuclear and Technical Services (the “EVP of Nuclear and Technical Services Employment Agreement”), and Richard Grondin, EVP of Waste Treatment Operations (the “EVP of Waste Treatment Operations Employment Agreement”), collectivelyits lender which provided, among other things, the following:

●waived the Company’s failure to meet the minimum quarterly FCCR requirement for the second quarter of 2021;
●removes the quarterly FCCR testing requirement for the third quarter of 2021;
●reinstates the quarterly FCCR testing requirement starting for the fourth quarter of 2021 and revises the methodology to be used in calculating the FCCR for the quarters ending December 31, 2021, March 31, 2022, and June 30, 2022 (with no change to the minimum 1.15:1 ratio requirement for each quarter); and
●requires maintenance of a minimum $3,000,000 in borrowing availability under the revolving credit until the minimum FCCR requirement for the quarter ended December 31, 2021 has been met and certified to the lender.

In connection with the CEO Employment Agreement, the EVP of Strategic Initiative Employment Agreement, the CFO Employment Agreement, the EVP of Nuclear and Technical Services Employment Agreement and the EVP of Waste Treatment Operations Employment Agreement, the “New Employment Agreements” and each individually the “New Employment Agreement”. The Company had previously entered into an employment agreement with each of Mark Duff, Dr. Louis Centofanti and Ben Naccarato on September 8, 2017, all three of which were due to expire on September 8, 2020. These three employment agreements dated September 8, 2017 were terminated effective July, 22, 2020.

Pursuant to New Employment Agreements, which are effective July 22, 2020, each of these executive officers is provided an annual salary, which annual salary may be increased, but not reduced, from time to time as determined by the Compensation Committee. As a result of Richard Grondin’s promotion to EVP of Waste Treatment and an executive officer ofamendment, the Company his annual salary was increased from $208,000 as Vice Presidentpaid its lender a fee of Western Operations within our Treatment Segment to $240,000, effective July 22, 2020. No change was made to the salary of the remaining executive officers for fiscal year 2020. In addition, each of these executive officers is entitled to participate in the Company’s broad-based benefits plans and to certain performance compensation payable under separate Management Incentive Plans (“MIP”) as approved by the Company’s Compensation Committee and the Company’s Board. The Company’s Compensation Committee and the Board approved individual 2020 MIP on January 16, 2020 (which are effective January 1, 2020) for each Mark Duff, Dr. Louis Centofanti, Ben Naccarato and Andrew Lombardo which remains effective for fiscal year 2020. See “MIP” below for the MIP approved by the Compensation Committee and the Board for Richard Grondin.

Each of the New Employment Agreements is effective for three years from July 22, 2020 (the “Initial Term”) unless earlier terminated by the Company or by the executive officer. At the end of the Initial Term of each New Employment Agreement, each New Employment Agreement will automatically be extended for one additional year, unless at least six months prior to the expiration of the Initial Term, the Company or the executive officer provides written notice not to extend the$15,000. All other terms of the New Employment Agreement.Loan Agreement remains principally unchanged.

Pursuant to the New Employment Agreements, if the executive officer’s employment is terminated due to death/disability or for cause (as defined in the agreements), the Company will pay to the executive officer or to his estate an amount equal to the sum of any unpaid base salary and accrued unused vacation time through the date of termination and any benefits due to the executive officer under any employee benefit plan (the “Accrued Amounts”) plus any performance compensation payable pursuant to the MIP with respect to the fiscal year immediately preceding the date of termination.

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If the executive officer terminates his employment for “good reason” (as defined in the agreements) or is terminated by the Company without cause (including any such termination for “good reason” or without cause within 24 months after a Change in Control (as defined in the agreement)), the Company will pay the executive officer the Accrued Amounts, two years of full base salary, and two times the performance compensation (under the MIP) earned with respect to the fiscal year immediately preceding the date of termination provided the performance compensation earned with respect to the fiscal year immediately preceding the date of termination has not been paid. If performance compensation earned with respect to the fiscal year immediately preceding the date of termination has been made to the executive officer, the executive officer will be paid an additional year of the performance compensation earned with respect to the fiscal year immediately preceding the date of termination. If the executive terminates his employment for a reason other than for good reason, the Company will pay to the executive an amount equal to the Accrued Amounts plus any performance compensation payable pursuant to the MIP with respect to the fiscal year immediately preceding the date of termination.

If there is a Change in Control (as defined in the agreements), all outstanding stock options to purchase common stock held by the executive officer will immediately become exercisable in full commencing on the date of termination through the original term of the options. In the event of the death of an executive officer, all outstanding stock options to purchase common stock held by the executive officer will immediately become exercisable in full commencing on the date of death, with such options exercisable for the lesser of the original option term or twelve months from the date of the executive officer’s death. In the event an executive officer terminates his employment for “good reason” or is terminated by the Company without cause, all outstanding stock options to purchase common stock held by the executive officer will immediately become exercisable in full commencing on the date of termination, with such options exercisable for the lesser of the original option term or within 60 days from the date of the executive’s date of termination. Severance benefits payable with respect to a termination (other than Accrued Amounts) shall not be payable until the termination constitutes a “separation from service” (as defined under Treasury Regulation Section 1.409A-1(h)).

MIP

On July 22, 2020, upon the approval of the EVP of Waste Treatment Operations Employment Agreement as discussed above, the Company’s Board and the Company’s Compensation Committee approved a MIP for Richard Grondin effective January 1, 2020, applicable for fiscal 2020. The MIP provides guidelines for the calculation of annual cash incentive-based compensation, subject to Compensation Committee oversight and modification. The MIP awards cash compensation based on achievement of performance thresholds, with the amount of such compensation established as a percentage of the Mr. Grondin’s 2020 annual base salary as the EVP of Waste Treatment Operations. The potential target performance compensation ranges from 5% to 100% ($12,000 to $240,000) of the base salary for the EVP of Waste Treatment Operations, which became effective on July 22, 2020.

PFMI

As discussed in “Note 11- Discontinued Operations,” the Company’s discontinued operations included a note receivable in the original amount of approximately $375,000 recorded in May 2016 resulting from the sale of property at its PFMI subsidiary. On July 24, 2020, the purchaser of the property paid off the outstanding note receivable balance of approximately $105,000.

Legal Matter

During July 2020, Tetra Tech EC, Inc. (“Tetra Tech”) filed a complaint in the United States District Court for the Northern District of California against CH2M Hill, Inc. (“CH2M”) and four subcontractors of CH2M, including the Company (“defendants”). The complaint alleges claims for negligence, negligent misrepresentation and equitable indemnification against all defendants related to alleged damages suffered by Tetra Tech in respect of certain draft reports prepared by defendants at the request of the U.S. Navy as part of an investigation and review of certain whistleblower complaints about Tetra Tech’s environmental restoration at the Hunter’s Point Naval Shipyard in San Francisco.

CH2M was hired by the Navy in 2016 to review Tetra Tech’s work. CH2M subcontracted with environmental consulting and cleanup firms Battelle Memorial Institute, Cabrera Services, Inc., SC&A, Inc. and the Company to assist with the review, according to the complaint.

The complaint alleges that the subject draft reports were prepared negligently and in a biased manner, made public, and caused damage to Tetra Tech’s reputation; triggering related lawsuits and costing it opportunities for both government and commercial contracts.

At this time, the Company does not believe it has any liability to Tetra Tech, and has provided notice of the claim to its insurance carrier. The Company intends to vigorously defend the claims.


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-looking Statements

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

●demand for our services;
●contract bids, including international markets;
●reductions in the level of government funding in future years;
●R&D activity and necessary capital of our Medical Segment;
●reducing operating costs;costs and non-essential expenditures;
●expectability to meet our loan agreement covenant requirements in the next twelve months;requirements;
●cash flow requirements;
●accounts receivable impact and collections;
●sufficient liquidity to continue business;
●apply for forgiveness on PPP Loan subject to approval by our lender;future results of operations and liquidity;
●request maturity extensioneffect of economic disruptions on PPP Loan;our business;
●furlough or layoff eligible employees;
●curtail capital expenditures;
●government funding for our services;
●may not have liquidity to repay debt if our lender accelerates payment of our borrowings;
●manner in which the applicable government will be required to spend funding to remediate various sites;
●funding operations;
●fund capital expenditures from cash from operations and/or financing;
●impact from COVID-19;
●procurement actions and contract awards;
●waste receipts and contract awards in the second half of 2021;
●impact from COVID-19;returns in waste shipments;
●fund remediation expenditures for sites from funds generated internally;
●collection of accounts receivables;
●compliance with environmental regulations;
●potential effect of being a PRP;
●potential sites for violations of environmental laws and remediation of our facilities;
●continuation of contracts with federal government;
●meeting financial covenants in our loan agreement;
●loss of contracts;
●third quarter and fourth quarter financial results due to impact of COVID-19;
●partial or full shutdown of any of our facilities;
●liability from Tetra Tech claims;
●recurrence/continued shutdown of projects and continued waste shipments delays by clients; and
●necessary capital for Medical Segment.R&D costs.

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;

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●increased competitive pressures;
●inability to maintain and obtain required permits and approvals to conduct operations;
●public not accepting our new technology;
●inability to develop new and existing technologies in the conduct of operations;
●inability to maintain and obtain closure and operating insurance requirements;
●inability to retain or renew certain required permits;
●discovery of additional contamination or expanded contamination at any of the sites or facilities leased or owned by us or our subsidiaries which would result in a material increase in remediation expenditures;
●delays at our third-party disposal site can extend collection of our receivables greater than twelve months;
●refusal of third-party disposal sites to accept our waste;
●changes in federal, state and local laws and regulations, especially environmental laws and regulations, or in interpretation of such;
●requirements to obtain permits for TSD activities or licensing requirements to handle low level radioactive materials are limited or lessened;
●potential increases in equipment, maintenance, operating or labor costs;
●management retention and development;
●financial valuation of intangible assets is substantially more/less than expected;
●the requirement to use internally generated funds for purposes not presently anticipated;
●inability to continue to be profitable on an annualized basis;
●inability of the Company to maintain the listing of its Common Stock on the NASDAQ;
●terminations of contracts with government agencies (domestic and foreign) or subcontracts involving government agencies (domestic or foreign), or reduction in amount of waste delivered to the Company under the contracts or subcontracts;
●renegotiation of contracts involving government agencies (domestic and foreign);
●federal government’s inability or failure to provide necessary funding to remediate contaminated federal sites;
●disposal expense accrual could prove to be inadequate in the event the waste requires re-treatment;
●inability to raise capital on commercially reasonable terms;
●inability to increase profitable revenue;
●impact of the COVID-19;
●impact of the COVID-19;delays in waste shipments and contract awards;
●audit of our PPP Loan (as discussed below);
●new governmental regulations;
●lender refuses to waive non-compliance or revise our covenant so that we are in compliance; and
●risk factors and other factors set forth in “Special Note Regarding Forward-Looking Statements” contained in the Company’s 20192020 Form 10-K and the “Forward-Looking Statements” contained in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”) of the first quarter 20202021 Form 10-Q and this second quarter 20202021 Form 10-Q.

COVID-19 Impact

Since the outbreakOur management team continues to proactively update our ongoing business operations and safety plans in an effort to mitigate any potential impact of COVID-19, we have remainedCOVID-19. We continue to remain focused on keeping our employees working and, at the same time, focusing on protecting the health and wellbeingwell-being of our employees and the communities in which we operate while assuring the continuity of our business operations.operations, particularly in light of emerging new variants of the virus. Similar to most of the U.S., we have relaxed COVID-19 precautions associated with operations since more people have become vaccinated, including our employees. However, our Treatment Segment continues to see unexpected delays in waste shipments from certain customers due to impacts of COVID-19. We expect to see returns in waste receipts from these customers starting in the second half of 2021. Within our Services Segment, we continue to experience delays in procurement actions and contract awards resulting primarily from the impact of COVID-19 but have recently begun to receive new contract awards. Within our Treatment and Services Segments, we have an unprecedented number of bids currently submitted and awaiting awards. We expect procurement actions and contract awards to continue throughout the second half of 2021.

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Our management team has proactively implemented

As the situations surrounding COVID-19 continues to remain fluid, the full impact and extent of the pandemic on our business continuityfinancial results and safety plans and has taken a varietyliquidity cannot be estimated with any degree of measures to ensure the ongoing availability of our waste treatment and remediation services, while taking health and safety measures, including separating employee and customer contact, social distancing between employees, implementing enhanced cleaning and hygiene protocols in all of our facilities, and implementing remote work policies, when necessary.

The COVID-19 pandemic presents potential new risks to our business.certainty. We continue to closely monitor the impact of the COVID-19 pandemic on all aspects of our business. As previously reported, the COVID-19 pandemic did not result in a material impact to our first quarter 2020 results of operations; however, our second quarter results of operations were impacted by the shutdown of a number of projects and the delays of certain waste shipments which began in late March 2020 that continued into the second quarter of 2020. As states began to lift stay-at-home orders, along with certain other restrictions since the start of the pandemic, in the latter part of the second quarter of 2020, we were able to restart on a number, but not all, of the projects that were previously shutdown. Despite these project shutdowns, revenues within our Services Segment in the second quarter of 2020 exceeded the corresponding period of 2019 by approximately $7,166,000. We continue to experience some delays in waste shipments from certain customers within our Treatment Segment due to the planning time that is required by these customers to restart waste shipments as they return to work on-site. These continued project shutdowns and waste shipment delays may impact our results of operations for the third quarter of 2020 and potentially the remainder of fiscal year 2020.

At this time, we believe we have sufficient liquidity on hand to continue business, operations during the next twelve months. At June 30, 2020, we had cash on hand of approximately $5,630,000 and borrowing availability under our revolving credit facility of $12,330,000 based on a percentage of eligible receivables and subject to certain reserves. Our cash at June 30, 2020 included proceeds received from a loan in the amount of approximately $5,666,000 (“PPP Loan”) in April 2020 under the Paycheck Protection Program (“PPP”) that was established under the recently enacted Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). On June 5, 2020, the Paycheck Protection Program Flexibility Act of 2020 (the “Flexibility Act”) was signed into law, amending the CARES Act (see “CARES Act – PPP Loan” under “Liquidity and Capital Resources” below for a discussion of the PPP Loan and the repayment of approximately $327,000 of the PPP Loan we made to our lender on July 9, 2020). We expect to apply for forgiveness on all or a portion of the loan as permitted under the program, which is subject to the approval of our lender. Proceeds from the PPP Loan have allowed us to avoid having to furlough or layoff certain eligible employees as a result of the COVID-19 pandemic, although there are no assurances that such will not be required. We continue to assess reducing operating costs during this volatile time, which include curtailing capital expenditures, eliminating non-essential expenditures and implementing a hiring freeze as needed. We have elected to defer payment of our share of social security taxes as permitted under the CARES Act, as amended (see “CARES Act – Deferral of Employment Tax Deposits” within this MD&A for a discussion of this deferral).

We are closely monitoringincluding our customers’ payment performance. However, since a significant portion of our revenues is derived from government related contracts, we do not expect our accounts receivable collections to be materially impacted due to COVID-19.

The situation surrounding COVID-19 continues to remain fluid. The potential for a material impact on the Company’s business increases the longer COVID-19 impacts the level of economic activities in the United States and globally as our customers may continue to delay waste shipments and project work may shut down again. ForAt this reason, we cannot reasonably estimate with any degree of certainty the future impact COVID-19 may have on our results of operations, financial position, and liquidity during the next twelve months. As of the date of this report,time, we believe that our cashwe have sufficient liquidity on hand and our credit facility should provide sufficient liquidity to continue business operations during the next twelve months. At June 30, 2021, our borrowing availability under our revolving credit facility was approximately $9,550,000 which was based on a percentage of eligible receivables and subject to certain reserves. We continue to assess the need in reducing operating costs during this volatile time, which may include curtailing capital expenditures, eliminating non-essential expenditures and implementing a hiring freeze as needed. Based on our current projection, we believe that we will be able to meet theour current covenant requirements under our loan agreement for the next twelve months, despitehowever, such may not be the impactcase due to, among other things, the uncertainty of COVID-19.COVID on our operations and/or delays in procurement actions, contract awards, or waste shipments.

Overview

Revenue increased $4,912,000Our overall revenue decreased $5,902,000 or 28.7%26.8% to $22,047,000$16,145,000 for the three months ended June 30, 20202021 from $17,135,000$22,047,000 for the corresponding period of 2019.2020 due primarily from the impact of COVID-19. The increaserevenue decrease was entirelyprimarily within our Services Segment where revenue increased $7,166,000 or 101.8% from increased projects. Our Services Segment experienced this increase in revenue despite a number of our projects being shut down during part of the second quarter 2020 and certain projects not restarting until the latter part of the second quarter 2020. Our Treatment Services revenue decreased by $2,254,000approximately $5,768,000 or 22.3%40.6% to $8,439,000 for the three months ended June 30, 2021 from $14,207,000 for the corresponding period of 2020 primarily due to delays in procurement actions and contract awards resulting primarily from the impact of COVID-19. The completion of a certain large project in the Services Segment in the second quarter exacerbated the decrease in revenue. Revenue within our Treatment Segment decreased $134,000 or 1.7%. Our Treatment Segment’s revenue has been negatively impacted by continued waste shipmentsshipment delays from certain customers that started insince the latter part of the first quarter of 2020 and has continued throughat the start of the pandemic. However, we expect to see returns in waste receipts from these customers starting in the second quarterhalf of 2020, resulting from the impact of COVID-19. 2021. Gross profit increased $39,000decreased $2,344,000 or 1.2%70.8% primarily due to the increasedecreases in revenues in the Services Segment.both segments as described above. Selling, General, and Administrative (“SG&A”) expenses decreased $5,000increased by approximately 297,000 or 0.2%11.0% for the three months ended June 30, 20202021 as compared to the corresponding period of 2019.2020.

Revenue increased $18,064,000Our overall revenue decreased $7,629,000 or 62.6%16.3% to $46,907,000$39,278,000 for the six months ended June 30, 20202021 from $28,843,000$46,907,000 for the corresponding period of 2019. The increase was entirely within our2020. Services Segment where revenue increased $20,660,000 or 233.6% from increased projects. Our Services Segment experienced this increase in revenue despite a number of our projects being shut down during part of the second quarter 2020 and certain projects not restarting until the latter part of the second quarter 2020. Our Treatment Services revenue decreased by $2,596,000$5,427,000 or 13.0% primarily due18.4% to delays in waste resulting from the impact of COVID-19 as discussed above. Total gross profit increased $2,178,000 or 37.7%$24,077,000 for the six months ended June 30, 2021 from $29,504,000 for the corresponding period of 2020 primarily due to delays in procurement actions and contract awards as discussed above. Additionally, as discussed above, the completion of a certain large project in the Services Segment in the second quarter of 2021 exacerbated the decrease in revenue. Treatment Segment revenue decreased by $2,202,000 or 12.7% to $15,201,000 for the six months ended June 30, 2021 from $17,403,000 for the corresponding period of 2020 primarily due to continued delays in waste shipments from certain customers as discussed above. Total gross profit decreased $4,628,000 or 58.2% for the six months ended June 30, 2021 as compared to the corresponding period of 2019.2020. Total SG&A expenses increased $24,000$575,000 or 0.4%10.2% for the six months ended June 30, 20202021 as compared to the corresponding period of 2019.2020.

Our working capital was $5,314,000$3,394,000 at June 30, 20202021 as compared to working capital of $26,000$3,672,000 at December 31, 2019.2020. Our working capital was negatively impacted by revenue decreases in both Segments. However, the forgiveness of our Paycheck Protection Program (“PPP”) Loan, along with accrued interest, by the U.S. Small Business Administration (“SBA”) had a positive impact to our working capital (see “The CARES Act – PPP Loan” within this MD&A for a discussion of this loan forgiveness).

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Business Environment and Outlook

Our Treatment and Services Segments’ business continues to be heavily dependent on services that we provide to governmental clients, primarily as subcontractors for others who are prime contractors to government entities or directly as the contractor or indirectly as a subcontractor.prime contractor. We believe demand for our services will continue to be subject to fluctuations due to a variety of factors beyond our control, including, without limitation, the economic conditions, the manner in which the applicable government will be required to spend funding to remediate various sites, and/or the impact resulting from COVID-19 as discussed above. In addition, our governmental contracts and subcontracts relating to activities at governmental sites in the United States are generally subject to termination or renegotiation on 30 days’ notice at the government’s option, and our governmental contracts/task orders with the Canadian government authorities allow the authorities to terminate the contract/task orders at any time for convenience. 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. As previously disclosed, our Medical Segment continues to evaluate strategic options to commercialize its medical isotope production technology. These options generally require substantial capital to fund R&D requirements, in addition to start-uphas not generated any revenues and production costs. Our Medical Segment has substantially reduced its R&D costs and activities due to the need for capital to fund such activities. We anticipate that our Medical Segment will not resume full R&D activities until it obtains the necessary funding through obtaining its own credit facility or additional equity raise or obtaining new partners willing to fund its R&D activities. If the Medical Segment is unable to raise the necessary capital, the Medical Segment could be required to further reduce, delay or eliminate its R&D program.

We are continually reviewing methods to raise additional capital to supplement our liquidity requirements, when needed, and reducing our operating costs. 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 three reportable segments: The Treatment, Services, and Medical Segments. Our Medical Segment has not generated any revenue and all costs incurred are included within R&D. Our results of operations for the balance of 2020 could be subject to the impact of COVID-19 as discussed above under “COVID-19 Impact.”

Summary – Three and Six Months Ended June 30, 20202021 and 20192020

  Three Months Ended  Six Months Ended 
  June 30,  June 30, 
Consolidated (amounts in thousands) 2021  %  2020  %  2021  %  2020  % 
Net revenues $  16,145   100.0  $  22,047   100.0  $  39,278   100.0  $  46,907   100.0 
Cost of goods sold  15,179   94.0   18,737   85.0   35,956   91.5   38,957   83.1 
Gross profit  966   6.0   3,310   15.0   3,322   8.5   7,950   16.9 
Selling, general and administrative  2,997   18.6   2,700   12.2   6,202   15.8   5,627   12.0 
Research and development  144   .9   209   .9   295   .8   441   .9 
(Gain) loss on disposal of property and equipment  —   —   (4)  —   —   —   27   — 
(Loss) income from operations  (2,175)  (13.5)  405   1.9   (3,175)  (8.1)  1,855   4.0 
Interest income  2   —   28   .1   21  —   84   .2 
Interest expense  (65)  (.4)  (99)  (.5)  (132)  (.3)  (219)  (.5)
Interest expense-financing fees  (9)  —   (60)  (.3)  (17)  —   (129)  (.3)
Other  —   —   4   —   1   —   9   — 
Gain (loss) on extinuishment of debt  5,381   33.3   (27)  (.1)  5,381   13.7   (27)  — 
Income from continuing operations before taxes  3,134   19.4   251   1.1   2,079   5.3   1,573   3.4 
Income tax expense (benefit)  13   .1   (9)  (.1)  (4)  —   5   — 
Income (loss) from continuing operations $3,121   19.3  $260   1.2  $2,083   5.3  $1,568   3.4 

26

 

  Three Months Ended  Six Months Ended 
  June 30,  June 30, 
Consolidated (amounts in thousands) 2020  %  2019  %  2020  %  2019  % 
Net revenues $22,047   100.0  $17,135   100.0  $46,907   100.0  $28,843   100.0 
Cost of goods sold  18,737   85.0   13,864   80.9   38,957   83.1   23,071   80.0 
Gross profit  3,310   15.0   3,271   19.1   7,950   16.9   5,772   20.0 
Selling, general and administrative  2,700   12.2   2,705   15.8   5,627   12.0   5,603   19.4 
Research and development  209   .9   223   1.3   441   .9   450   1.6 
(Gain) loss on disposal of property and equipment  (4)   ―   (1)   ―   27    ―   (1)   ― 
Income (loss) from operations  405   1.9   344   2.0   1,855   4.0   (280)  (1.0)
Interest income  28   .1   107   .6   84   .2   188   .7 
Interest expense  (100)  (.5)  (107)  (.6)  (219)  (.5)  (194)  (.7)
Interest expense-financing fees  (59)  (.3)  (60)  (.4)  (129)  (.3)  (70)  (.3)
Other  4    ―   95   .6   9    ―   224   .8 
Loss on extinuishment of debt  (27)  (.1)   ―    ―   (27)   ―    ―    ― 
Income (loss) from continuing operations before taxes  251   1.1   379   2.2   1,573   3.4   (132)  (.5)
Income tax (benefit) expense  (9)  (.1)  6    ―   5    ―   45   .1 
Income (loss) from continuing operations $260   1.2  $373   2.2  $1,568   3.4  $(177)  (.6)

Revenues

Consolidated revenues increased $4,912,000decreased $5,902,000 for the three months ended June 30, 2020,2021, compared to the three months ended June 30, 2019,2020, as follows:

(In thousands) 2020 %
Revenue		 2019 %
Revenue		 Change %
Change		  2021 

%

Revenue

 2020 

%

Revenue

 Change % Change 
Treatment                                                
Government waste $5,559   25.2  $6,042   35.3  $(483)  (8.0) $5,102   31.6  $5,559   25.2  $(457)  (8.2)
Hazardous/non-hazardous (1)  938   4.3   1,686   9.8   (748)  (44.4)  1,317   8.1   938   4.3   379   40.4 
Other nuclear waste  1,343   6.1   2,366   13.8   (1,023)  (43.2)  1,287   8.0   1,343   6.1   (56)  (4.2)
Total  7,840   35.6   10,094   58.9   (2,254)  (22.3)  7,706   47.7   7,840   35.6   (134)  (1.7)
                                                
Services                                                
Nuclear services  13,776   62.5   6,186   36.1   7,590   122.7   8,052   49.9   13,776   62.5   (5,724)  (41.6)
Technical services  431   1.9   855   5.0   (424)  (49.6)  387   2.4   431   1.9   (44)  (10.2)
Total  14,207   64.4   7,041   41.1   7,166   101.8   8,439   52.3   14,207   64.4   (5,768)  (40.6)
                                                
Total $22,047   100.0  $17,135   100.0  $4,912   28.7  $16,145   100.0  $22,047   100.0  $(5,902)  (26.8)

1) Includes wastes generated by government clients of $496,000$544,000 and $657,000$496,000 for the three month ended June 30, 20202021 and the corresponding period of 2019,2020, respectively.

Treatment Segment revenue decreased $2,254,000$134,000 or 22.3 %1.7% for the three months ended June 30, 20202021 over the same period in 2019.2020. The decrease in Treatment Segment revenue in all categoriesdecrease was attributed primarily to lower revenue from government waste volumegenerators resulting from lower waste volume. The increase in hazardous/non hazardous waste was primarily due to higher averaged price waste. Our Treatment Segment revenue has been negatively impacted by continued waste shipment delays from certain customers since the latter part of the first quarter of 2020 at the start of the COVID-19 pandemic. Services Segment revenue decreased by approximately $5,768,000 or 40.6%. As previously disclosed, our Services Segment revenue for the second quarter was impacted primarily by delays in procurement actions and contract awards resulting from the impact of COVID-19. Our Services Segment revenues are project based; as such, the scope, duration and completion of each project vary. As a numberresult, our Services Segment revenues are subject to differences relating to timing and project value.

Consolidated revenues decreased $7,629,000 for the six months ended June 30, 2021, as compared to the six months ended June 30, 2020, as follows:

(In thousands) 2021  

%

Revenue

  2020  

%

Revenue

  Change  

%

Change

 
Treatment                        
Government waste $9,489   24.1  $12,626   26.9  $(3,137)  (24.8)
Hazardous/non-hazardous (1)  2,628   6.7   2,462   5.3   166   6.7 
Other nuclear waste  3,084   7.9   2,315   4.9   769   33.2 
Total  15,201   38.7   17,403   37.1   (2,202)  (12.7)
                         
Services                        
Nuclear services  23,132   58.9   28,611   61.0   (5,479)  (19.1)
Technical services  945   2.4   893   1.9   52   5.8 
Total  24,077   61.3   29,504   62.9   (5,427)  (18.4)
                         
Total $39,278   100.0  $46,907   100.0  $(7,629)  (16.3)

1) Includes wastes generated by government clients of $1,289,000 and $1,119,000 for the six month ended June 30, 2021 and the corresponding period of 2020, respectively.

27

Treatment Segment revenue decreased $2,202,000 or 12.7 % for the six months ended June 30, 2021 over the same period in 2020 primarily due to lower waste volume. As previously disclosed, since the latter part of the first quarter of 2020 at the start of the pandemic, revenue within our Treatment Segment has been impacted by waste shipment delays from certain customers delayed waste shipments starting in late March 2020primarily due to the impact of COVID-19. These delays has continued through the second quarter of 2020.Within our Treatment Segment, revenue generated from other nuclear waste increased primarily due to higher waste volume generated from commercial customers. Services Segment revenue increased by $7,166,000decreased $5,427,000 or 101.8% in18.4% for the threesix months ended June 30, 2020 from2021 over the correspondingsame period of 2019. The increase in 2020. As previously disclosed, our Services Segment revenue for the first six months of $7,166,000 or 101.8%2021 was impacted by delays in procurement actions and contract awards resulting primarily due tofrom the increase in numberimpact of projects. Our Services Segment experienced this increase in revenue despite a number of our projects being shut down during part of the second quarter 2020 and certain projects not restarting until the latter part of the second quarter 2020. Additionally,COVID-19. Also, our Services Segment revenues are project based; as such, the scope, duration and completion of each project vary. As a result, our Services Segment revenues are subject to differences relating to timing and project value.

Consolidated revenues increased $18,064,000 for the six months ended June 30, 2020, as compared to the six months ended June 30, 2019, as follows:

(In thousands) 2020  %
Revenue		  2019  %
Revenue		  Change  %
Change		 
Treatment                        
Government waste $12,626   26.9  $13,401   46.5  $(775)  (5.8)
Hazardous/non-hazardous (1)  2,462   5.3   3,308   11.5   (846)  (25.6)
Other nuclear waste  2,315   4.9   3,290   11.4   (975)  (29.6)
Total  17,403   37.1   19,999   69.3   (2,596)  (13.0)
                         
Services                        
Nuclear services  28,611   61.0   7,231   25.1   21,380   295.7 
Technical services  893   1.9   1,613   5.6   (720)  (44.6)
Total  29,504   62.9   8,844   30.7   20,660   233.6 
                         
Total $46,907   100.0  $28,843   100.0  $18,064   62.6 

1) Includes wastes generated by government clients of $1,119,000 and $1,268,000 for the six month ended June 30, 2020 and the corresponding period of 2019, respectively.

Treatment Segment revenue decreased $2,596,000 or 13.0 % for the six months ended June 30, 2020 over the same period in 2019. The revenue decrease was primarily due to lower revenue generated in the second quarter of 2020 resulting from waste shipment delays due to the impact of COVID-19 as discussed above. Our Services Segment revenue increased $20,660,000 or 233.6% due to the increase in number of projects. Our Services Segment experienced this increase in revenue despite a number of our projects being shut down during part of the second quarter 2020 and certain projects not restarting until the latter part of the second quarter 2020. Additionally, our Services Segment revenues are project based; as such, the scope, duration and completion of each project vary. As a result, our Services Segment revenues are subject to differences relating to timing and project value.

Cost of Goods Sold

Cost of goods sold increased $4,873,000decreased $3,558,000 for the quarter ended June 30, 2020,2021, as compared to the quarter ended June 30, 2019,2020, as follows:

   %   %      %   %   
(In thousands) 2020 Revenue 2019 Revenue Change  2021 Revenue 2020 Revenue Change 
Treatment $6,145   78.4  $7,467   74.0  $(1,322) $6,273   81.4  $6,145   78.4  $128 
Services  12,592   88.6   6,397   90.9   6,195   8,906   105.5   12,592   88.6   (3,686)
Total $18,737   85.0  $13,864   80.9  $4,873  $15,179   94.0  $18,737   85.0  $(3,558)

Cost of goods sold for the Treatment Segment increased by approximately $128,000 or 2.1%. Treatment Segment’s variable costs increased by approximately $136,000 primarily in disposal, transportation, material and supplies and outside services. Treatment Segment’s overall fixed costs were slightly lower by approximately $8,000 resulting from the following: payroll related expenses were lower by approximately $54,000; maintenance expenses were lower by $54,000; general expenses were higher by $52,000 in various categories; depreciation expenses were higher by approximately $35,000 due to more financed leases; and travel expenses were higher by approximately $13,000 due to ease of travel restrictions since the start of the pandemic. Services Segment cost of goods sold decreased $3,686,000 or 29.3% primarily due to lower revenue. The decrease in cost of goods sold was primarily due to lower salaries/payroll related, travel, and outside services expenses totaling approximately $3,177,000 with the remaining lower costs in material and supplies, disposal, regulatory, and general expenses. Included within cost of goods sold is depreciation and amortization expense of $394,000 and $358,000 for the three months ended June 30, 2021, and 2020, respectively.

Cost of goods sold decreased $3,001,000 for the six months ended June 30, 2021, as compared to the six months ended June 30, 2020, as follows:

     %     %    
(In thousands) 2021  Revenue  2020  Revenue  Change 
Treatment $12,843   84.5  $12,963   74.5  $(120)
Services  23,113   96.0   25,994   88.1   (2,881)
Total $35,956   91.5  $38,957   83.1  $(3,001)

Cost of goods sold for the Treatment Segment decreased by approximately $1,322,000$120,000 or 17.7%0.9%. Treatment Segment costs of goods sold for the three months ended June 30, 2019 included additional closure costs recorded in the amount of $165,000 for our East Tennessee Materials and Energy Corporation (“M&EC”) facility due to finalization of closure requirements in connection with the closure of the facility. Excluding the closure costs recorded in the second quarter of 2019, Treatment Segment cost of goods sold decreased $1,157,000 or 15.8% primarily due to the decrease in revenue. Excluding the closure costs recorded in the second quarter of 2019, Treatment SegmentSegment’s variable costs decreased by approximately $1,401,000$289,000 primarily in disposal, transportation, material and supplies and outside services due to lower revenues. Ourrevenue. Treatment Segment’s overall fixed costs were higher by approximately $244,000$169,000 resulting from the following: salaries and payroll relatedgeneral expenses were higher by $171,000 in various categories; depreciation expenses were higher by approximately $62,000;$80,000 due to more financed leases; regulatory expenses were higher by approximately $20,000;$23,000; maintenance expenses were higherlower by $116,000;$89,000; and depreciationtravel expenses were higherlower by approximately $46,000 primarily$16,000 due to financed leases that we did not have inrestrictions implemented from the second quarterimpact of 2019.COVID-19. Services Segment cost of goods sold increased $6,195,000decreased $2,881,000 or 96.8%11.1% primarily due to increased revenue as discussed above.lower revenue. The increasedecrease in cost of goods sold was primarily due to higher salaries and lower salaries/payroll costs,related, travel, and outside services expenses totaling approximately $5,556,000, higher$2,082,000 with the remaining lower costs in material and supplies, disposal, regulatory, and disposal costs totaling approximately $416,000, and higher general expenses of $223,000 in various categories.expenses. Included within cost of goods sold is depreciation and amortization expense of $358,000$787,000 and $307,000 for the three months ended June 30, 2020, and 2019, respectively.

Cost of goods sold increased $15,886,000$699,000 for the six months ended June 30, 2021, and 2020, as compared to the six months ended June 30, 2019, as follows:respectively.

28

 

     %     %    
(In thousands) 2020  Revenue  2019  Revenue  Change 
Treatment $12,963   74.5  $14,415   72.1  $(1,452)
Services  25,994   88.1   8,656   97.9   17,338 
Total $38,957   83.1  $23,071   80.0  $15,886 

Cost of goods sold for the Treatment Segment decreased approximately $1,452,000 or 10.1%. Treatment Segment costs of goods sold for the six months ended June 30, 2019 included additional closure costs recorded in the amount of $330,000 for our M&EC facility due to finalization of closure requirements in connection with the closure of the facility. Excluding the closure costs recorded in the six months of 2019, Treatment Segment cost of goods sold decreased $1,122,000 or 8.0% primarily due to the decrease in revenue. Excluding the closure costs recorded in the six months ended June 30, 2019, Treatment Segment variable costs decreased by approximately $1,285,000 primarily due to lower disposal, transportation, and outside services costs totaling approximately $1,516,000 which was partially offset by higher material and supplies costs of $231,000. Our overall fixed costs were higher by approximately $163,000 resulting from the following: salaries and payroll related expenses were higher by approximately $28,000; regulatory expenses were higher by approximately $51,000; maintenance expenses were higher by $229,000; travel expenses were higher by approximately $8,000; deprecation expenses were higher by approximately $78,000 primarily due to financed leases that we did not have in the first six months of 2019; and general expenses were lower by approximately $231,000 in various categories. Services Segment cost of goods sold increased $17,338,000 or 200.3% primarily due to the increase in revenue. The increase in cost of goods sold within our Services Segment was primarily due to higher salaries and payroll related costs, travel, and outside services expenses totaling approximately $15,452,000, higher material and supplies and disposal costs totaling approximately $1,392,000, and higher general expenses of $494,000 in various categories. Included within cost of goods sold is depreciation and amortization expense of $699,000 and $617,000 for the six months ended June 30, 2020, and 2019, respectively.

Gross Profit (Negative Gross Profit)

Gross profit for the quarter ended June 30, 2020 increased $39,0002021 decreased $2,344,000 over the same period in 2019,2020, as follows:

   %   %      %   %   
(In thousands) 2020 Revenue 2019 Revenue Change  2021 Revenue 2020 Revenue Change 
Treatment $1,695   21.6  $2,627   26.0  $(932) $1,433   18.6  $1,695   21.6  $(262)
Services  1,615   11.4   644   9.1   971   (467)  (5.5)  1,615   11.4   (2,082)
Total $3,310   15.0  $3,271   19.1  $39  $966   6.0  $3,310   15.0  $(2,344)

Excluding the additional $165,000 in closure costs recorded in the second quarter of 2019 as discussed above within our Treatment Segment’s cost of goods sold, our Treatment Segment gross profit decreased by $1,097,000$262,000 and gross margin decreased to 21.6%18.6% from 27.7%21.6% primarily due to lower revenue from lower waste volume. The increases in gross profit involume and the Services Segmentimpact of $971,000 or 150.8% and gross margin from 9.1% to 11.4% was primarily due to the increase in revenue as discussed above. Additionally, our overallfixed costs. 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 six months ended June 30, 2020 increased $2,178,000 over 2019, as follows:

     %     %    
(In thousands) 2020  Revenue  2019  Revenue  Change 
Treatment $4,440   25.5  $5,584   27.9  $(1,144)
Services  3,510   11.9   188   2.1   3,322 
Total $7,950   16.9  $5,772   20.0  $2,178 

Treatment Segment gross profit decreased $1,144,000by $2,082,000 or 20.5%128.9% and gross margin decreased from 11.4% to 25.5% from 27.9%. Excluding the additional closure costs of $330,000 recorded in connection with the closure of our M&EC facility as discussed previously, gross profit decreased 1,474,000 or 24.9% and gross margin decreased to 25.5% from 29.6%a negative 5.5% primarily due lower revenue from lower waste volume. In the Services Segment, gross profit increased $3,322,000 or 1,767.0% and gross margin increased from 2.1% to 11.9%. The increase in gross profit for the six month ended June 30, 2020 was attributed to the increase inlower revenue. Our overall Services Segment gross margin is impacted by our current projects which are competitively bid on and will therefore, have varying margin structures.

Selling, General

Gross profit for the six months ended June 30, 2021 decreased $4,628,000 over 2020, as follows:

     %     %    
(In thousands) 2021  Revenue  2020  Revenue  Change 
Treatment $2,358   15.5  $4,440   25.5  $(2,082)
Services  964   4.0   3,510   11.9   (2,546)
Total $3,322   8.5  $7,950   16.9  $(4,628)

Treatment Segment gross profit decreased by $2,082,000 and Administrative (“SG&A”)gross margin decreased to 15.5% from 25.5% primarily due to lower revenue from lower waste volume and the impact of our fixed costs. Services Segment gross profit decreased by $2,546,000 or 72.5% and gross margin decreased from 11.9% to 4.0% primarily due to lower revenue. 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 $5,000increased $297,000 for the three months ended June 30, 2020,2021, as compared to the corresponding period for 2019,2020, as follows:

(In thousands) 2020 %
Revenue		 2019 %
Revenue		 Change  2021 

%

Revenue

 2020 

%

Revenue

 Change 
Administrative $1,296   —  $1,261   —  $35  $1,291   —  $1,296   —  $(5)
Treatment  867   11.1   940   9.3   (73)  901   11.7   867   11.1   34 
Services  537   3.8   504   7.2   33   805   9.5   537   3.8   268 
Total $2,700   12.2  $2,705   15.8  $(5) $2,997   18.6  $2,700   12.2  $297 

Our AdministrativeThe overall increase in SG&A was higherprimarily within our Services Segment where SG&A expenses increased by approximately $268,000. The increase in SG&A expenses within our Services Segment was primarily due to the following: salaries and payroll related expenses were higher by approximately $39,000; general$185,000 primarily due to increased hours spent for bid and proposals and higher healthcare costs; travel expenses were higher by approximately $22,000 in various categories;$12,000 due to ease of travel expense was lowerrestrictions since the start of the pandemic; outside services expenses were higher by approximately $19,000$92,000 primarily due to restrictions implemented resulting from the impact of COVID-19;more consulting matters related to bid and outside services expense was lower by approximately $7,000 resulting from less consulting/subcontract matters. Our Treatment Segment SG&A was lower due to the following: travel expense were lower by approximately $45,000 due to restrictions implemented resulting from the impact of COVID-19;proposals; and general expenses were lower by $20,000 in various categories; bad debtapproximately $21,000. Administrative SG&A expenses were slightly lower primarily due to the following: payroll related expenses were lower by approximately $58,000;$98,000 primarily due to forfeiture of 401(k) plan matching funds contributed by us for former employees who failed to meet the 401(k) plan vesting requirements; director fees were higher by approximately $60,000 resulting from one additional director and fee increases that went into effect January 1, 2021; travel expenses were higher by approximately $13,000 due to ease of travel restrictions since the pandemic; outside services expenses were higher by approximately $14,000 resulting from more consulting/subcontract/legal matters; and general expenses were slightly higher by approximately $6,000. Treatment Segment SG&A expenses were higher due to the following: bad debt expenses were higher by approximately $69,000 as in the second quarter of 2020, certain customer accounts which had previously been reserved for were collected; travel expenses were slightly higher by approximately $5,000 due to ease of travel restrictions since the start of the pandemic; general expenses were slightly higher by approximately $10,000; and salaries and payroll related expenses were higherlower by approximately $50,000. The higherIncluded in SG&A costsexpenses is depreciation and amortization expense of $6,000 and $6,000 for the three months ended June 30, 2021, and 2020, respectively.

29

SG&A expenses increased $575,000 for the six months ended June 30, 2021, as compared to the corresponding period for 2020, as follows:

(In thousands) 2021  % Revenue  2020  % Revenue  Change 
Administrative $2,662   —  $2,655   —  $7 
Treatment  1,880   12.4   1,928   11.1   (48)
Services  1,660   6.9   1,044   3.5   616 
Total $6,202   15.8  $5,627   12.0  $575 

The overall increase in SG&A was primarily within our Services Segment where SG&A expenses increased by approximately $616,000. The increase in SG&A expenses within our Services Segment was primarily due to the following: salaries/salaries and payroll related expenses were higher by approximately $64,000; general$371,000 primarily due to increased hours spent for bid and proposals; outside services expenses were higher by approximately $24,000$192,000 due to more consulting matters related to bid and proposals; bad debt expenses were higher by approximately $40,000 as in various categories; travel expense wasthe first quarter of 2020, certain customer accounts which had previously been reserved for were collected; and general expenses were slightly higher by $13,000. Administrative SG&A expenses were slightly higher primarily due to the following: director fees were higher by approximately $119,000 resulting from one additional director and fee increases that went into effect January 1, 2021; general expenses were slightly higher by approximately $5,000; payroll related expenses were lower by approximately $40,000$79,000 primarily due to restrictions implemented resulting fromforfeiture of 401(k) plan matching funds contributed by us for former employees which failed to meet the impact of401(k) plan vesting requirements; travel expenses were lower by approximately $10,000 due to less travel due to COVID-19; and outside services expenses were lower by approximately $15,000$28,000 resulting from fewer consulting/subcontract/legal matters. Treatment Segment SG&A expenses were lower due to fewerthe following: travel expenses were lower by approximately $44,000 due to less travel resulting from COVID-19; general expenses were lower by $101,000 in various categories; bad debt expenses were higher by approximately $50,000 as in the second quarter of 2020, certain customer accounts which had previously been reserved for were collected; salaries and payroll related expenses were higher by approximately $36,000 due to increased hours spent on bid and proposals and higher healthcare costs; and outside services expenses were higher by approximately $11,000 primarily due to more consulting matters. Included in SG&A expenses is depreciation and amortization expense of $6,000$12,000 and $10,000 for the three months ended June 30, 2020, and 2019, respectively.

SG&A expenses increased $24,000$12,000 for the six months ended June 30, 2021 and 2020, as compared to the corresponding period for 2019, as follows:respectively.

(In thousands) 2020  %
Revenue		  2019  %
Revenue		  Change 
Administrative $2,655   —  $2,564   —  $91 
Treatment  1,928   11.1   1,978   9.9   (50)
Services  1,044   3.5   1,061   12.0   (17)
Total $5,627   12.0  $5,603   19.4  $24 

The increase in Administrative SG&A was primarily due to the following: salaries and payroll related costs were higher by approximately $40,000; general expenses were higher by $39,000 in various categories; outside services were higher by approximately $26,000 resulting from more consulting/business matters; and travel expense was lower by approximately 14,000 due to restrictions implemented resulting from the impact of COVID-19. Treatment SG&A was lower primarily due to the following: travel expense were lower by approximately $24,000 due to restrictions implemented resulting from the impact of COVID-19; bad debt expenses were lower by approximately $55,000; general expenses were higher by $13,000 in various categories; and salaries and payroll related expenses were higher by approximately $16,000. Services Segment SG&A decreased by $17,000 primarily due to the following: bad debt expenses were lower by approximately $89,000 as certain customer accounts which we had previously reserved for were collected in the first six months of 2020; travel expense was lower by approximately $64,000 due to restrictions implemented resulting from the impact of COVID-19; outside services expenses were lower by approximately $10,000 due to fewer consulting matters; salaries/payroll related expenses were higher by a total of approximately $124,000; and general expenses were higher by approximately $22,000 in various categories. Included in SG&A expenses is depreciation and amortization expense of $12,000 and $24,000 for the six months ended June 30, 2020 and 2019, respectively.

R&D

R&D expenses decreased $14,000$65,000 and $9,000$146,000 for the three and six months ended June 30, 2020,2021, respectively, as compared to the corresponding period of 2019.2020.

  Three Months Ended June 30,  Six Months Ended June 30, 
(In thousands) 2021  2020  Change  2021  2020  Change 
Administrative $10  $37  $(27) $24  $44  $(20)
Treatment  43   52   (9)  90   145   (55)
Services  19   46   (27)  32   112   (80)
PF Medical  72   74   (2)  149   140   9 
Total $144  $209  $(65) $295  $441  $(146)

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  Three Months Ended June 30,  Six Months Ended June 30, 
(In thousands) 2020  2019  Change  2020  2019  Change 
Administrative $37  $7  $30  $44  $13  $31 
Treatment  52   136   (84)  145   283   (138)
Services  46   —   46   112   —   112 
PF Medical  74   80   (6)  140   154   (14)
Total $209  $223  $(14) $441  $450  $(9)

R&D costs consist primarily of employee salaries and benefits, laboratory costs, third party fees, and other related costs associated with the development of new technologies and technological enhancement of new potential waste treatment processes.

Interest Income

Interest income decreased by approximately $79,000$26,000 and $104,000$63,000 for the three and six months ended June 30, 2020,2021, respectively, as compared to the corresponding period of 20192020 primarily due to lower interest earned from lower finite risk sinking fund balance resulting from the release of $5,000,000 in finite risk sinking funds by AIG Specialty Insurance Company (“AIG”) to us in July 2019 in connection with the closure of our M&EC facility. The $5,000,000 in finite sinking funds represented a partial release of the total collateral held under our finite risk insurance policy. The lower interest income for each period discussed above was also partially attributed to a lower interest rate earned on the finite risk sinking funds.fund.

Interest Expense

Interest expense decreased by approximately $8,000$34,000 and increased by approximately $25,000$87,000 for the three and six months ended June 30, 2020,2021, respectively, as compared to the corresponding period of 2019. The decrease in interest expense in the second quarter of 2020 as compared to the corresponding period of 2019 was primarily due to lower interest expense from our declining term loan balance outstanding and lower interest rate. Also, interest expense was lower resulting from declining loan balance outstanding onthe payoff of the $2,500,000 loan at year end 2020 that we had previously entered into with Robert Ferguson on April 1, 2019. The overall decrease in interest expense was partially offset

Interest Expense- Financing Fees

Interest expense-financing fees decreased by higher interest expense from higher averaged revolver loan balanceapproximately $51,000 and higher interest due to additional finance leases which we did not have in$112,000 for the second quarter of 2019. The increase in interest expense for thethree and six months ended June 30, 20202021, respectively, as compared to the corresponding period of 2019 was primarily due to higher interest expense incurred from the Robert Ferguson loan as discussed above, higher interest expense from higher averaged revolver loan balance and higher interest due to additional finance leases which we did not have in the first six months of 2019. The overall higher interest expense was reduced by lower interest expense from our declining term loan balance outstanding and lower interest rate.

Interest Expense- Financing Fees

No change was noted in interest expense-financing fees for the second quarter of 2020 as compared to the corresponding period of 2019. The increase in interest expense-financing fees of approximately $59,000 for the six months ended June 30, 2020 as compared to the corresponding period of 2019 was primarily due to debt discount/debt issuance costs that became fully amortized as financing fees at year end 2020 in connection with the issuance of our Common Stock and a purchase Warrant as consideration for the Companyus receiving the $2,500,000 loan from Robert Ferguson ondated April 1, 2020 (See “Liquidity and Capital Resources – Financing Activities” for further information of this debt discount).2019.

Discontinued Operations and Divestitures

The Company’s discontinued operations consist of all our subsidiaries included in our Industrial Segment which encompasses subsidiaries divested in 2011 and prior and three previously closed locations.

We had net losses of $85,000 and $199,000 for our discontinued operations for the three and six months ended June 30, 2020, respectively (net of taxes of $0 for each period). We had net losses of $115,000 and $267,000 for our discontinued operations for the three and six months ended June 30, 2019, respectively (net of taxes of $0 for each period).

The “Current assets related to discontinued operations” on our Consolidated Balance Sheet at June 30, 2020, included an outstanding note receivable in the amount of approximately $105,000 from the sale of property at our Perma-Fix of Michigan, Inc. (“PFMI”) subsidiary in May 2016. On July 24, 2020, the purchaser of the property paid off the outstanding note receivable balance.

Liquidity and Capital Resources

Our cash flow requirements during the six months ended June 30, 20202021 were primarily financed by our operations, cash on hand and credit facility availability, and the PPP Loan that we received under the CARES Act as discussed below (see “CARES Act – PPP Loan”). We generated approximately $2,957,000 cash from our continuing operations.availability. Subject to the impact of COVID-19 as discussed above, our cash flow requirements for the next twelve months will consist primarily of general working capital needs, scheduled principal payments on our debt obligations, remediation projects, and planned capital expenditures. We plan to fund these requirements from our operations, credit facility availability, andour capital expenditure line, cash on hand (which includes the proceeds received under the PPP Loan that we received under the Paycheck Protection Program established under the CARES Act, as amended). We continueand, if deemed appropriate, other sources available to explore all sources of increasing our capital to supplement our liquidity requirements, when needed, and to improve our revenue and working capital.us. We are continually reviewing operating costs and reviewing the possibility of further reducing operating costs and non-essential expenditures to bring them in line with revenue levels, when necessary. At this time, we believe that our cash flows from operations, our available liquidity from our credit facility, our capital expenditure line and our cash on hand should be sufficient to fund our operations for the next twelve months. However, due to the uncertainty of COVID-19, continued delays in waste shipments from certain customers, delays in procurement actions and contract awards, and/or certain reserves that our lender has placed (see the amendment that we entered into with our lender in August 2021 in “Financing Activities” below) or may place in the future against our revolving line of credit, there are no assurances such will be the case in the events that certain of our customerscase. As a result, we continue to delay waste shipmentsexplore all sources, including, but not limited to, selling additional stock of ours under our currently effective shelf registration, to increase our capital or the restart of projects and/or, elect to, shut down projects again due to governmentalsupplement our liquidity requirements and societal responses from continuation or potential second-wave outbreak of COVID-19. working capital. As previously disclosed, our Medical Segment, which has not generated any revenues, has substantially reduced its R&D costs and activities due to the need for capital to fund such activities. We continue to seek various sources of potential funding for our Medical Segment. We anticipate that our Medical Segment will not resume full R&D activities until it obtains the necessary funding through obtaining its own credit facility or additional equity raise or obtaining new partners willing to fund its R&D activities. If the Medical Segment is unable to raise the necessary capital, the Medical Segment could be required to further reduce, delay or eliminate its R&D program.

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We are aware that PPP loans in excess of $2,000,000 may be subject to being audited by the appropriate governmental authority. If our PPP Loan is audited, it is currently unknown how our PPP Loan could be affected by an audit. An audit could result, among other things, in us being required to return all or a portion of our PPP Loan (see discussion below as to the PPP Loan under “The CARES Act – PPP Loan”).

The following table reflects the cash flow activities during the first six months of 2020:2021:

(In thousands)      
Cash provided by operating activities of continuing operations $2,957  $803 
Cash used in operating activities of discontinued operations  (259)  (315)
Cash used in investing activities of continuing operations  (1,362)  (649)
Cash provided by investing activities of discontinued operations  13 
Cash provided by financing activities of continuing operations  3,992 
Cash used in financing activities of continuing operations  (439)
Effect of exchange rate changes in cash  (18)  9 
Increase in cash and finite risk sinking fund (restricted cash) $5,323 
Decrease in cash and finite risk sinking fund (restricted cash) $(591)

At June 30, 2020,2021, we were in a positive cash position with no revolving credit balance. At June 30, 2020,2021, we had cash on hand of approximately $5,630,000,$7,312,000, which includes account balances of our foreign subsidiaries totaling approximately $795,000.$675,000.

Operating Activities

Accounts receivable, net of allowances for doubtful accounts, totaled $10,806,000$9,244,000 at June 30, 2020,2021, a decrease of $2,372,000$415,000 from the December 31, 20192020 balance of $13,178,000.$9,659,000. The decrease was primarily due to timing of invoicing which was reflective of the increase in our unbilled receivablesaccounts receivable collection and timing of invoicing. Our contracts with our accounts receivable collection. We provide a variety ofcustomers are subject to various payment terms to our customers;and conditions; therefore, our accounts receivable are impacted by these terms and conditions and the related timing of accounts receivable collections. The amount ofAdditionally, contracts with our accountscustomers may sometimes result in modifications which can cause delays in collections.

Unbilled receivables and collection could be materially impacted the longer COVID-19 persists.

Accounts payable, totaled $11,560,000$7,332,000 at June 30, 2020, an increase2021, a decrease of $2,283,000$7,121,000 from the December 31, 20192020 balance of $9,277,000.$14,453,000. The increasedecrease in accounts payableunbilled receivables was attributed to an increase in costsprimarily within our Services Segment resultingdue to invoicing and collection of accounts receivable on certain large projects which have been completed or are near completion.

Accounts payable, totaled $11,511,000 at June 30, 2021, a decrease of $3,871,000 from the significant increase in revenue. Additionally, ourDecember 31, 2020 balance of $15,382,000. Our accounts payable are impacted by the timing of payments as we are continually managing payment terms with our vendors to maximize our cash position throughout all segments.

We had working capital of $5,314,000$3,394,000 (which included working capital of our discontinued operations) at June 30, 2020,2021, as compared to working capital of $26,000$3,672,000 at December 31, 2019. The improvement2020. Our working capital was primarily negatively impacted by lower revenue generated within both of our segments in the first six months of 2021. However, this negative impact to our working capital was primarily due topositively impacted by the proceeds that we received fromforgiveness of the entire balance of our PPP Loan, under the Paycheck Protection Program (see “PPP Loan” under “CARES Act” below for a discussion of this loan). The positive impact was partially offsetalong with accrued interest, by the increase in our accounts payable.SBA effective June 15, 2021 (see “CARES Act – PPP Loan” for information on this loan”).

Investing Activities

For the six months ended June 30, 2020,2021, our purchases of capital equipment totaled approximately $1,498,000,$679,000, of which $132,000$29,000 was subject to finance leases,financing, with the remaining funded from cash from operations and our credit facility. We have budgeted approximately $2,000,000 for 20202021 capital expenditures primarily for our Treatment and Services Segments to maintain operations and regulatory compliance requirements and support revenue growth. Certain of these budgeted projects may either be delayed until later years or deferred altogether. We plan to fund our capital expenditures from cash from operations and/or financing. The initiation and timing of projects are also determined by financing alternatives or funds available for such capital projects, especially in light of the uncertainties that COVID-19 may impact the economy which may have an adverse impact to our results of operations and liquidity.projects.

Financing Activities

We entered into ana Second Amended and Restated Revolving Credit, Term Loan and Security Agreement, dated October 31, 2011May 8, 2020 (“Amended Loan Agreement”), with PNC National Association (“PNC”), acting as agent and lender. The Amended Loan Agreement had been amended from time to time since the execution of the Amended Loan Agreement. The Amended Loan Agreement, as subsequently amended (“Revised Loan Agreement”), providedprovides us with the following credit facility with a maturity date of March 24, 2021:15, 2024: (a) up to $12,000,000$18,000,000 revolving credit (“revolving credit”) and (b) a term loan (“term loan”) of approximately $6,100,000.$1,742,000, requiring monthly installments of $35,547. The maximum that we can borrow under the revolving credit wasis based on a percentage of eligible receivables (as defined) at any one time reduced by outstanding standby letters of credit and borrowing reductions that our lender may impose from time to time.

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Payment

On May 4, 2021, we entered into an amendment to our Loan Agreement with our lender which provided the following, among other things:

●revised our fixed charge coverage ratio (“FCCR”) calculation requirement which allows for the add-back of approximately $5,318,000 in eligible expenses that were incurred and covered by the PPP Loan that we received in 2020. The add-back is to be applied retroactively to the second and third quarters of 2020. (see below for a discussion of the PPP Loan); and
●a capital expenditure 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”). Only interest is payable on advances during the Borrowing Period (see annual rate of interest below on the capital expenditure line). At the end of the Borrowing Period, the total amount advanced under the line will amortize equally based on a five-year amortization schedule with principal payment due monthly plus interest. At the maturity date of the Loan Agreement, any unpaid principal balance plus interest, if any, will become due. No advance on the capital line has been made as of June 30, 2021.

In connection with the amendment, we paid our lender a fee of $15,000.

Pursuant to our Loan Agreement, as amended, payment of annual rate of interest due on the revolving credit under the Revised Loan Agreement wasis at prime (3.25% at June 30, 2020)2021) plus 2% and the term loan at prime plus 2.5%.

On May 8, 2020, we entered into a Second Amended and Restated Revolving Credit, Term Loan and Security Agreement (the “New Loan Agreement”or London InterBank Offer Rate (“LIBOR”) with PNC, replacing our previous Revised Loan Agreement with PNC. The New Loan Agreement provides us with the following credit facility:

●up to $18,000,000 revolving credit facility, subject to the amount of borrowings based on a percentage of eligible receivables and subject to certain reserves; and
●a term loan of $1,741,818, which requires monthly installments of $35,547.

The New Loan Agreement terminates as of May 15, 2024, unless sooner terminated.

Similar to our Revised Loan Agreement, the New Loan Agreement requires us to meet certain customary financial covenants, including, among other things, a minimum Tangible Adjusted Net Worth requirement of $27,000,000 at all times; maximum capital spending of $6,000,000 annually; and a minimum fixed charge coverage ratio (“FCCR”) requirement of 1.15:1.

Under the New Loan agreement, payment of annual rate of interest due on the credit facility is as follows:

●revolving credit at prime plus 2.50% or LIBOR plus 3.50% and the term loan at prime plus 3.00% or LIBOR plus 4.00%. We can only elect to use the LIBOR interest payment option after we become compliant with meeting the minimum FCCR of 1.15:1; and

●Upon the achievement of a FCCR of greater than 1.25:1, we will have the option of paying an annual rate of interest due on the revolving credit at prime plus 2.00% or LIBOR plus 3.00% and the term loan and capital expenditure line at prime plus 2.50% or LIBOR plus 3.50%. We met this FCCR in the first and second quarters of 2020. Upon meeting the FCCR of 1.25:1, this interest payment option will remain in place in the event that our future FCCR falls below 1.25:1.

Under the LIBOR option of interest payment, noted above, a LIBOR floor of 0.75% shall applyapplies in the event that LIBOR falls below 0.75% at any point in time.

PursuantOn August 10, 2021, we entered into an amendment to the Newour Loan Agreement with our lender which provided, among other things, the following:

●waived our failure to meet the minimum quarterly FCCR requirement for the second quarter of 2021;
●removes the quarterly FCCR testing requirement for the third quarter of 2021;
●reinstates the quarterly FCCR testing requirement starting for the fourth quarter of 2021 and revises the methodology to be used in calculating the FCCR for the quarters ending December 31, 2021, March 31, 2022, and June 30, 2022 (with no change to the minimum 1.15:1 ratio requirement for each quarter); and
●requires maintenance of a minimum of $3,000,000 in borrowing availability under the revolving credit until the minimum FCCR requirement for the quarter ended December 31, 2021 has been met and certified to the lender.

In connection with the amendment, we paid our lender a fee of $15,000.

We may terminate the Newour Loan Agreement upon 90 days’ prior written notice upon payment in full of our obligations under the New Loan Agreement. We have agreed to pay PNC 1.0% of the total financing in the eventhad we paypaid off our obligations on or before May 7, 2021 and 0.5% of the total financing if we payspay off our obligations after May 7, 2021 but prior to or on May 7, 2022. No early termination fee shallwill apply if we pay off our obligations under the New Loan Agreement after May 7, 2022.

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In connection with New Loan Agreement, we paid our lender a fee of $50,000 and incurred other direct costs of approximately $35,000, which are being amortized over the term of the New Loan Agreement as interest expense-financing fees. As a result of the termination of the Revised Loan Agreement, the Company recorded approximately $27,000 in loss on extinguishment of debt in accordance with ASC 470-50, “Debt – Modifications and Extinguishment.”

At June 30, 2020,2021, the borrowing availability under our revolving credit was approximately $12,330,000,$9,550,000, based on our eligible receivables and includes a reduction an in borrowing availability of approximately $3,126,000$3,020,000 from outstanding standby letters of credit.

Our credit facility under our Revised and New Loan Agreement, as amended, with PNC contains certain financial covenants, along with customary representations and warranties. A breach of any of these financial covenants, unless waived by PNC, could result in a default under our credit facility allowing our lender to immediately require the repayment of all outstanding debt under our credit facility and terminate all commitments to extend further credit. We met our FCCR requirement in the first and second quarters of 2020. Additionally, we met our remaining financial covenant requirements in the first quarter of 2021. Our FCCR calculation in the first quarter of 2021 included the add-back of approximately $5,318,000 in eligible expenses that were incurred and covered by the PPP Loan that we received in 2020 as permitted by the amendment dated May 4, 2021 as discussed above. We did not meet our FCCR requirement in the second quartersquarter of 2020.2021; however, this non-compliance was waived by our lender as discussed above. We expect to meet our quarterly financial covenant requirements infor the next twelve months; however, if we fail to meet any of our financial covenant requirements and our lender does not further waive the non-compliance or revise our covenant so that we are in compliance, our lender could accelerate the repayment of borrowingsmonths under our credit facility. In the event that our lender accelerates the payment of our borrowings, we may not have sufficient liquidity to repay our debt under our credit facility and other indebtedness.

As previously disclosed, on April 1, 2019, the Company completed a lending transaction with Robert Ferguson (the “Lender”), whereby the Company borrowed from the Lender the sum of $2,500,000 pursuant to the terms of a Loan and Security Purchase Agreement, and promissory note (the “Loan”). The Lender is a shareholder of the Company and also serves as a consultant to the Company in connection with the Company’s TBI at its PFNWR subsidiary. The proceeds from the Loan were used for general working capital purposes. The Loan is unsecured, with a term of two years with interest payable at a fixed interest rate of 4.00% per annum. The Loan provides for monthly payments of accrued interest only during the first year of the Loan, with the first interest payment due May 1, 2019 and monthly payments of approximately $208,333 in principal plus accrued interest starting in the second year of the Loan. The Loan also allows for prepayment of principal payments over the term of the Loan without penalty with such prepayment of principal payments to be applied to the second year of the loan payments at our discretion. Since inception of the loan, we have made total prepayments in principal of $936,000, of which $416,000 was made in the first six months of 2020. In connection with this capital raise transaction described above and consideration for us receiving the Loan, we issued a Warrant (the “Warrant”) to the Lender to purchase up to 60,000 shares of our Common Stock at an exercise price of $3.51 per share, which was the closing bid price for a share of our Common Stock on NASDAQ.com immediately preceding the execution of the Loan and Warrant. The Warrant expires on April 1, 2024 and remains outstanding at June 30, 2020. As further consideration for this capital raise transaction relating to the Loan, we also issued 75,000 shares of its Common Stock to the Lender. The fair value of the Warrant and Common Stock and the related closing fees incurred from the transaction totaled approximately $398,000 and was recorded as debt discount/debt issuance costs, which is being amortized over the term of the loan as interest expense – financing fees. The 75,000 shares of Common Stock, the Warrant and the 60,000 shares of Common Stock that may be purchased under the Warrant were and will be issued in a private placement that was and will be exempt from registration under Rule 506 and/or Sections 4(a)(2) and 4(a)(5) of the Securities Act of 1933, as amended, (the “Act”) and bear a restrictive legend against resale except in a transaction registered under the Act or in a transaction exempt from registration thereunder.as discussed above.

The CARES Act

PPP Loan

On April 14, 2020, we entered into a promissory note under the PPP with PNC, our credit facility lender, in the amountwhich had a balance of $5,666,300 under the PPPapproximately $5,318,000 (the “PPP Loan”). at March 31, 2021. The PPP was established under the recently enacted Coronavirus Aid, Relief, and Economic Security Act (“CARES ActAct”) and is administered by the U.S. Small Business Administration (“SBA”). On June 5, 2020,SBA. The CARES Act was subsequently amended by the Paycheck Protection Program Flexibility Act of 2020 (“Flexibility Act”) was signed into law which amended the CARES Act. The note evidencing the PPP Loan contains events of default relating to, among other things, payment defaults, breach of representations and warranties, and provisions of. Proceeds from the promissory note. On July 9, 2020, we repaid approximately $327,000 of the PPP Loan to PNC resulting from an error made in the loan calculation at the time of the loan origination. This amount has been included the “current portion of long-term debt” on our Consolidated Balance Sheet as of June 30, 2020.

Under the terms of the Flexibility Act, we can apply for and be granted forgiveness for all or a portion of the PPP Loan. Such forgiveness will be determined, subject to limitations, based on the use of loan proceedsnote was used by us for eligible payroll costs, mortgage interest, rent and utility costs and the maintenance of employee and compensation levels for the covered period (which is defined as a 24 week period, beginning April 14, 2020, the date in which proceeds from the PPP Loan was disbursed to us by PNC). At least 60% of such forgiven amount must be used for eligible payroll costs. We expect to apply for forgiveness on repayment of the loan as permitted under the program, which is subject to the approval of our lender. If all or a portion of the PPP Loan is not forgiven, all or the remaining portion will be for a term of two years but can be prepaid at any time prior to maturity without any prepayment penalties.Flexibility Act. The annual interest rate on the PPP Loan is 1.0% and no payments

On October 5, 2020, we applied for forgiveness on repayment of principal or interest are due until the datePPP Loan as permitted under the Flexibility Act. On July 1, 2021, we were notified by PNC that the SBA remits the loan forgiveness amount to our lender, provided that we submit our loan forgiveness application to our lender within ten months following the last dayentire balance of the applicable covered period. While our PPP Loan currently has a two year maturity,of approximately $5,318,000, along with accrued interest of approximately $63,000 was forgiven by the Flexibility Act permits us to request a five year maturitySBA, effective June 15, 2021. Accordingly, we recorded the entire forgiven PPP Loan balance, along with accrued interest, totaling approximately $5,381,000 as “Gain on extinguishment of debt” on our lender which we do not expect to request at this time.Consolidated Statement of Operations for the quarter ended June 30, 2021.

Deferral of Employment Tax Deposits

The CARES Act, as amended by the Flexibility Act provides employers the option to defer the payment of an employer’s share of social security taxes beginning on March 27, 2020 through December 31, 2020, among other things.with 50% of the amount of social security taxes deferred willto become due on December 31, 2021 with the remaining 50% due on December 31, 2022. We elected to defer such taxes starting in mid-April 2020. We estimate the remainingAt June 30, 2021, we have deferred payment of approximately $790,000 of social security taxes otherwise due$1,252,000 in 2020 will be deferred with 50% due by December 31, 2021 and the remaining 50% due by December 31, 2022. At June 30, 2020, the Company has deferred payment of $393,000 in itsour share of social security taxes, of which amount has beenapproximately $626,000 is included in “other“Other long-term liabilities”liabilities,” with the remaining balance included in “Accrued expenses” within current liabilities in the Company’s Consolidated Balance Sheet at June 30, 2020.Sheets.

The CARES Act, as amended, among other things, includes modifications to net operating loss carryforwards, corporate alternative minimum tax (“AMT”) provisions, net interest expense deduction, and deferment of social security tax payments. We elected to defer payment of our shares of social security taxes as discussed above. We continue to evaluate the provisions of the CARES Act, as amended, and how certain other elections may impact our financial position, results of operations, and disclosures, if elected.

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 June 30, 2020,2021, the total amount of standby letters of credit outstanding totaled approximately $3,126,000$3,020,000 and the total amount of bonds outstanding totaled approximately $52,519,000.$43,561,000. We also provide closure and post-closure requirements through a financial assurance policy for certain of our Treatment Segment facilities through AIG. At June 30, 2020,2021, the closure and post-closure requirements for these facilities were approximately $19,651,000.$19,898,000.

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, 2019.2020.

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Recent Accounting Pronouncements

See “Note 2 – Summary of Significant Accounting Policies” in the “Notes to Consolidated Financial Statements” for the recent accounting pronouncements that have been adopted during the first six months of 2020,2021, or will be adopted in future periods.

Known Trends and Uncertainties

Significant Customers. Our Treatment and Services Segments have significant relationships with the U.S and Canadian governmental authorities and continue to enterthrough contracts entered into contracts,indirectly as subcontractors for others who are prime contractors or directly as the prime contractor or indirectly for others as a subcontractor to government authorities. As stated previously, our governmental contracts and subcontracts relating to activities at governmental sites in the United States are generally subject to termination or renegotiation on 30 days’ notice at the government’s option, and our governmental contracts/task orders with the Canadian government authorities allow the authorities to terminate the contract/task orders at any time for convenience. Our inability to continue under existing material contracts that we have with the U.S federal government and Canadian 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. In addition, our U.S. governmental contracts and subcontracts relating to activities at governmental sites are generally subject to termination or renegotiation on 30 days notice at the government’s option. The Task Order Agreements (“TOAs”) with the Canadian government generally provide that the government may terminate a TOA at any time for convenience.

We performed services relating to waste generated by government clients (domestic and foreign (primarily Canadian)), either directly as a prime contractor or indirectly for others as a subcontractor to government entities, representing approximately $13,671,000 or 84.7% and $33,828,000 or 86.1% of our total revenues generated during the three and six months ended June 30, 2021, respectively, as compared to $19,811,000 or 89.9% and $42,313,000 or 90.2% of our total revenues generated during the three and six months ended June 30, 2020, respectively, as compared to $12,864,000 or 75.1% and $21,857,000 or 75.8% of our total revenues generated during the three and six months ended June 30, 2019.2020.

CoronavirusCOVID-19 Impact. The extent of the impact of the COVID-19 pandemic on our business iscontinues to be uncertain and difficult to predict, as the responses to the pandemic continue to evolve rapidly, especiallyrapidly. We continue to experience delays in lightwaste shipments from certain customers within our Treatment Segment primarily related to the impact of the recent surgeCOVID-19. However, we expect to see returns in COVID-19 cases around the country. In the latter part ofwaste receipts from these customers in the second quarterhalf of 2020, we were able to restart on a number of projects that were previously shutdown as states lifted stay-at-home orders, along with certain other restrictions since the start of the pandemic. At this time,2021. Within our Services Segment, we continue to experience delays in procurement actions and contract awards resulting primarily from the restartimpact of some projectsCOVID-19 but have recently begun to receive contract awards. We expect procurement actions and some delays in waste shipment from certain customers duecontract awards to continue throughout the planning time that is required by these customers to restart waste shipment as they return to work on-site. Furthermore, capital marketssecond half of 2021. Within our Treatment and economies worldwide continue to be negatively impacted by the COVID-19 pandemic. Such economic disruption couldServices Segments, we have a material adverse effect on our business as our customers could curtailan unprecedented number of bids currently submitted and reduce capital and overall spending.awaiting awards.

The severity of the impact the COVID-19 pandemic on our business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic, impact from the emergence of new variants of the virus, the extent and severity of the impact on our customers, the impact on governmental programs and budgets, the developmentinoculation rate of treatments orthe vaccines, and how quickly and to what extent normal economic and operating conditions resume, all of which are uncertain and cannot be predicted with any accuracy or confidence at this time. Our future results of operations and liquidity could be adversely impacted byfrom continued delays in waste shipments, continued delays in procurement actions and restart of projectscontract awards, and/or the recurrence of project work shut downs as well as potential partial/full shutdown of any of our facilities due to COVID-19.

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.

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

Our subsidiaries where remediation expenditures will be made are at three sites within our discontinued operations. While no assurances can be made that we will be able to do so, we expect to fund the expenses to remediate these sites from funds generated from operations.

At June 30, 2020,2021, we had total accrued environmental remediation liabilities of $866,000,$781,000, a decrease of $61,000$73,000 from the December 31, 20192020 balance of $927,000.$854,000. The increasedecrease represents primarily payments made on remediation projects for our Perma-Fix of South Georgia, Inc. and Perma-Fix of Dayton, Inc. subsidiaries.projects. At June 30, 2020, $756,0002021, $671,000 of the total accrued environmental liabilities was recorded as current.


Item 3. Quantitative and Qualitative Disclosures about Market Risks

Not applicablerequired for smaller reporting companies.

Item 4. Controls and Procedures

Item 4.(a)Controls and Procedures
(a)Evaluation of disclosure controls and procedures.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic reports filed with the Securities and Exchange Commission is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and that such information is accumulated and communicated to our management. As of the end of the period covered by this report, we carried out an evaluation with the participation of our Principal Executive Officer and Principal Financial Officer. Based on this recent assessment, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) were effective as of June 30, 2020.    2021.

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

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PART II – OTHER INFORMATION



Item 1. Legal Proceedings

There are no material legal proceedings pending against us and/or our subsidiaries not previously reported by us in Item 3 of our Form 10-K for the year ended December 31, 2019 and Part II – Other Information – Item 1 of2020. Additionally, there has been no other material change in legal proceedings previously disclosed by us in our Form 10-Q10-K for the quarteryear ended MarchDecember 31, 2020, which is incorporated herein by reference, except as follows:2020.

During July 2020, Tetra Tech EC, Inc. (“Tetra Tech”) filed a complaint in the United States District Court for the Northern District of California against CH2M Hill, Inc. (“CH2M”) and four subcontractors of CH2M, including the Company (“defendants”). The complaint alleges claims for negligence, negligent misrepresentation and equitable indemnification against all defendants related to alleged damages suffered by Tetra Tech in respect of certain draft reports prepared by defendants at the request of the U.S. Navy as part of an investigation and review of certain whistleblower complaints about Tetra Tech’s environmental restoration at the Hunter’s Point Naval Shipyard in San Francisco.

CH2M was hired by the Navy in 2016 to review Tetra Tech’s work. CH2M subcontracted with environmental consulting and cleanup firms Battelle Memorial Institute, Cabrera Services, Inc., SC&A, Inc. and the Company to assist with the review, according to the complaint.

The complaint alleges that the subject draft reports were prepared negligently and in a biased manner, made public, and caused damage to Tetra Tech’s reputation; triggering related lawsuits and costing it opportunities for both government and commercial contracts.

At this time, the Company does not believe it has any liability to Tetra Tech, and has provided notice of the claim to its insurance carrier. The Company intends to vigorously defend the claims.


Item 1A. Risk Factors

There has been no other material change from the risk factors previously disclosed in our Form 10-K for the year ended December 31, 2019 and Form 10-Q for the quarter ended March 31, 2020 except the following, which amends the additional risk factor contained in Part II - Other Information of our Form 10-Q for the quarter ended March 31, 2020:2020.

COVID-19 could result in material adverse effects on our business, financial position, results of operations and cash flows.

The extent of the impact of the COVID-19 pandemic on our business is uncertain and difficult to predict, as the responses to the pandemic continue to evolve rapidly, especially in light of the recent surge in COVID-19 cases around the country. In the latter part of the second quarter of 2020, we were able to restart on a number of projects that were previously shutdown as states lifted stay-at-home orders, along with certain other restrictions since the start of the pandemic. At this time, we continue to experience delays in the restart of some projects and some delays in waste shipment from certain customers due to the planning time that is required by these customers to restart waste shipment as they return to work on-site. Furthermore, capital markets and economies worldwide continue to be negatively impacted by the COVID-19 pandemic. Such economic disruption could have a material adverse effect on our business as our customers could curtail and reduce capital and overall spending.

The severity of the impact the COVID-19 pandemic on our business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic, the extent and severity of the impact on our customers, the impact on governmental programs and budgets, the development of treatments or vaccines, and how quickly and to what extent normal economic and operating conditions resume, all of which are uncertain and cannot be predicted with any accuracy or confidence at this time. Our future results of operations and liquidity could be adversely impacted by continued delays in waste shipments and restart of projects and/or the recurrence of project work shut downs as well as potential partial/full shutdown of any of our facilities due to COVID-19.

Item 6.Exhibits
(a)Exhibits
4.14.1Second Amended and Restated Revolving Credit, Term Loan and Security Agreement between Perma-Fix Environmental Services, Inc. and PNC Bank, National Association (as Lender and as Agent), dated May 8, 2020, as incorporated by reference from Exhibit 4.1 to the Company’s Form 10-Q for the quarter ended March 31, 2020 filed on May 12, 2020.
4.24.2Payment Protection ProgramFirst Amendment to Second Amended and Restated Revolving Credit, Term Note dated April 11, 2020, byLoan and Security Agreement between Perma-Fix Environmental Services, Inc. and PNC Bank, National Association (as Lender and as Agent), dated May 4, 2021, as incorporated by reference from Exhibit 99.14.1 to the Company’s Form 8-K10-Q for the quarter ended March 31, 2021 filed on April 15, 2020.May 6, 2021.
10.14.3EmploymentSecond Amendment to Second Amended and Restated Revolving Credit, Term Loan and Security Agreement dated July 22, 2020 between Mark Duff, Chief Executive Officer, and Perma-Fix Environmental Services, Inc., which is incorporated by reference from Exhibit 99.1 to the Company’s Form 8-K filed on July 27, 2020.
10.2Employment Agreement dated July 22, 2020 between Louis Centofanti, EVP of Strategic Initiatives, and Perma-Fix Environmental Services, Inc., which is incorporated by reference from Exhibit 99.2 to the Company’s Form 8-K filed on July 27, 2020.
10.3Employment Agreement dated July 22, 2020 between Ben Naccarato, Chief Financial Officer, and Perma-Fix Environmental Services, Inc., which is incorporated by reference from Exhibit 99.3 to the Company’s Form 8-K filed on July 27, 2020.
10.4Employment Agreement dated July 22, 2020 between Andrew Lombardo, EVP of Nuclear and Technical Services, and Perma-Fix Environmental Services, Inc., which is incorporated by reference from Exhibit 99.4 to the Company’s Form 8-K filed on July 27, 2020.
10.5Employment Agreement dated July 22, 2020 between Richard Grondin, EVP of Waste Treatment Operations, and Perma-Fix Environmental Services, Inc., which is incorporated by reference from Exhibit 99.5 to the Company’s Form 8-K filed on July 27, 2020.
10.62020 Incentive Compensation Plan for Richard Grondin, our new EVP of Treatment Waste Operations, effective January 1, 2020, as incorporated by reference from Exhibit 99.6 to the Company’s Form 8-K filed on July 27, 2020.
10.72020 Incentive Compensation Plan for Chief Executive Officer, effective January 1, 2020, as incorporated by reference from Exhibit 99.1 to the Company’s Form 8-K filed on January 22, 2020.
10.82020 Incentive Compensation Plan for Chief Financial Officer, effective January 1, 2020, as incorporated by reference from Exhibit 99.2 to the Company’s Form 8-K filed on January 22, 2020.

10.92020 Incentive Compensation Plan for Executive Vice President of Strategic Initiatives, effective January 1, 2020, as incorporated by reference from Exhibit 99.3 to the Company’s Form 8-K filed on January 22, 2020.
10.102020 Incentive Compensation Plan for Executive Vice President of Nuclear and Technical Services, effective January 1, 2020, as incorporated by reference from Exhibit 99.4 to the Company’s Form 8-K filed on January 22, 2020.
10.11Incentive Stock Option Agreement, dated October 19, 2017, between Perma-Fix Environmental Services, Inc. and Richard Grondin,PNC Bank, National Association (as Lender and as incorporated by reference from Exhibit 99.11 to the Company’s Form 8-K filed on July 27, 2020.Agent), dated August 10, 2021.
10.1231.1Incentive Stock Option Agreement, dated January 17, 2019, between Perma-Fix Environmental Services, Inc. and Richard Grondin, as incorporated by reference from Exhibit 99.11 to the Company’s Form 8-K filed on July 27, 2020.
31.1Certification by Mark Duff, Chief Executive Officer of the Company pursuant to Rule 13a-14(a) or 15d-14(a).
31.231.2Certification by Ben Naccarato, Chief Financial Officer of the Company pursuant to Rule 13a-14(a) or 15d-14(a).
32.132.1Certification by Mark Duff, Chief Executive Officer of the Company furnished pursuant to 18 U.S.C. Section 1350.
32.232.2Certification by Ben Naccarato, Chief Financial Officer of the Company furnished pursuant to 18 U.S.C. Section 1350.
101.INS101.INSInline XBRL Instance Document*Document-the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document*
101.SCH101.SCHInline XBRL Taxonomy Extension Schema Document*
101.CAL101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB101.LABInline XBRL Taxonomy Extension Labels Linkbase Document*
101.PRE

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document*

  
104 * Pursuant to Rule 406T of Regulation S-T, theCover Page Interactive Data File (formatted as an Inline XBRL document and included 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.101).

SIGNATURES

* 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.

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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: August 7, 202011, 2021By:/s/ Mark Duff

Mark Duff

President and Chief (Principal) Executive Officer

Date: August 7, 202011, 2021By:/s/ Ben Naccarato
Ben Naccarato
Chief (Principal) Financial Officer

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