PERMA FIX ENVIRONMENTAL SERVICES INC 10-Q

10-Q 1 form10q.htm 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 ended March 31, 2021 Or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________________to _________________________ Commission File No. 111596 PERMA-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) 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: Title of each class Trading Symbol Name of each exchange on which registered Common Stock, $.001 Par Value PESI NASDAQ 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 [X] 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. Class Outstanding at May 4, 2021 Common Stock, $.001 Par Value 12,180,324 shares PERMA-FIX ENVIRONMENTAL SERVICES, INC. INDEX Page No. PART I FINANCIAL INFORMATION Item 1. Consolidated Financial Statements 3 Consolidated Balance Sheets - March 31, 2021 and December 31, 2020 3 Consolidated Statements of Operations - Three Months Ended March 31, 2021 and 2020 5 Consolidated Statements of Comprehensive (Loss) Income - Three Months Ended March 31, 2021 and 2020 6 Consolidated Statements of Stockholders’ Equity - Three Months Ended March 31, 2021 and 2020 7 Consolidated Statements of Cash Flows - Three Months Ended March 31, 2021 and 2020 8 Notes to Consolidated Financial Statements 9 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 26 Item 3. Quantitative and Qualitative Disclosures About Market Risk 36 Item 4. Controls and Procedures 37 PART II OTHER INFORMATION Item 1. Legal Proceedings 37 Item 1A. Risk Factors 37 Item 6. Exhibits 37 2 PART I - FINANCIAL INFORMATION Item 1. – Financial Statements PERMA-FIX ENVIRONMENTAL SERVICES, INC. Consolidated Balance Sheets March 31, December 31, 2021 2020 (Amounts in Thousands, Except for Share and Per Share Amounts) (Unaudited) (Audited) ASSETS Current assets: Cash $ 713 $ 7,924 Accounts receivable, net of allowance for doubtful accounts of $387 and $404, respectively 20,121 9,659 Unbilled receivables 9,229 14,453 Inventories 593 610 Prepaid and other assets 3,810 3,967 Current assets related to discontinued operations 20 22 Total current assets 34,486 36,635 Property and equipment: Buildings and land 20,123 20,139 Equipment 22,118 22,090 Vehicles 454 457 Leasehold improvements 23 23 Office furniture and equipment 1,425 1,413 Construction-in-progress 1,903 1,569 Total property and equipment 46,046 45,691 Less accumulated depreciation (28,224 ) (27,908 ) Net property and equipment 17,822 17,783 Property and equipment related to discontinued operations 81 81 Operating lease right-of-use assets 2,220 2,287 Intangibles and other long term assets: Permits 9,025 8,922 Other intangible assets - net 842 875 Finite risk sinking fund (restricted cash) 11,464 11,446 Other assets 870 890 Total assets $ 76,810 $ 78,919 The accompanying notes are an integral part of these consolidated financial statements. 3 PERMA-FIX ENVIRONMENTAL SERVICES, INC. Consolidated Balance Sheets, Continued March 31, December 31, 2021 2020 (Amounts in Thousands, Except for Share and per Share Amounts) (Unaudited) (Audited) LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 15,426 $ 15,382 Accrued expenses 7,075 6,381 Disposal/transportation accrual 1,081 1,220 Deferred revenue 3,106 4,614 Accrued closure costs - current 74 75 Current portion of long-term debt 5,196 3,595 Current portion of operating lease liabilities 241 273 Current portion of finance lease liabilities 467 525 Current liabilities related to discontinued operations 817 898 Total current liabilities 33,483 32,963 Accrued closure costs 6,378 6,290 Deferred tax liabilities 471 471 Long-term debt, less current portion 1,461 3,134 Long-term operating lease liabilities, less current portion 2,044 2,070 Long-term finance lease liabilities, less current portion 609 662 Other long-term liabilities 626 626 Long-term liabilities related to discontinued operations 296 252 Total long-term liabilities 11,885 13,505 Total liabilities 45,368 46,468 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; 12,173,376 and 12,161,539 shares issued, respectively; 12,165,734 and 12,153,897 shares outstanding, respectively 12 12 Additional paid-in capital 109,055 108,931 Accumulated deficit (75,578 ) (74,455 ) Accumulated other comprehensive loss (187 ) (207 ) Less Common Stock in treasury, at cost; 7,642 shares (88 ) (88 ) Total Perma-Fix Environmental Services, Inc. stockholders’ equity 33,214 34,193 Non-controlling interest (1,772 ) (1,742 ) Total stockholders’ equity 31,442 32,451 Total liabilities and stockholders’ equity $ 76,810 $ 78,919 The accompanying notes are an integral part of these consolidated financial statements. 4 PERMA-FIX ENVIRONMENTAL SERVICES, INC. Consolidated Statements of Operations (Unaudited) Three Months Ended March 31, (Amounts in Thousands, Except for Per Share Amounts) 2021 2020 Revenues $ 23,133 $ 24,860 Cost of goods sold 20,777 20,220 Gross profit 2,356 4,640 Selling, general and administrative expenses 3,205 2,928 Research and development 150 232 Loss on disposal of property and equipment — 31 (Loss) income from operations (999 ) 1,449 Other income (expense): Interest income 18 56 Interest expense (67 ) (120 ) Interest expense-financing fees (8 ) (68 ) Other 1 5 (Loss) income from continuing operations before taxes (1,055 ) 1,322 Income tax (benefit) expense (17 ) 14 (Loss) income from continuing operations, net of taxes (1,038 ) 1,308 Loss from discontinued operations (net of taxes of $0) (115 ) (114 ) Net (loss) income (1,153 ) 1,194 Net loss attributable to non-controlling interest (30 ) (26 ) Net (loss) income attributable to Perma-Fix Environmental Services, Inc. common stockholders $ (1,123 ) $ 1,220 Net (loss) income per common share attributable to Perma-Fix Environmental Services, Inc. stockholders - basic and diluted: Continuing operations $ (.08 ) $ .11 Discontinued operations (.01 ) (.01 ) Net (loss) income per common share $ (.09 ) $ .10 Number of common shares used in computing net (loss) income per share: Basic 12,165 12,122 Diluted 12,165 12,346 The accompanying notes are an integral part of these condensed consolidated financial statements. 5 PERMA-FIX ENVIRONMENTAL SERVICES, INC. Consolidated Statements of Comprehensive (Loss) Income (Unaudited) Three Months Ended March 31, (Amounts in Thousands) 2021 2020 Net (loss) income $ (1,153 ) $ 1,194 Other comprehensive income (loss): Foreign currency translation gain (loss) 20 (79 ) Total other comprehensive income (loss) 20 (79 ) Comprehensive (loss) income (1,133 ) 1,115 Comprehensive loss attributable to non-controlling interest (30 ) (26 ) Comprehensive (loss) income attributable to Perma-Fix Environmental Services, Inc. stockholders $ (1,103 ) $ 1,141 The accompanying notes are an integral part of these condensed consolidated financial statements. 6 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 ) 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 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 The accompanying notes are an integral part of these condensed consolidated financial statements. 7 PERMA-FIX ENVIRONMENTAL SERVICES, INC. Consolidated Statements of Cash Flows (Unaudited) Three Months Ended March 31, (Amounts in Thousands) 2021 2020 Cash flows from operating activities: Net (loss) income $ (1,153 ) $ 1,194 Less: loss from discontinued operations, net of taxes of $0 (115 ) (114 ) (Loss) income from continuing operations, net of taxes (1,038 ) 1,308 Adjustments to reconcile (loss) income from continuing operations to cash provided by operating activities : Depreciation and amortization 400 346 Interest on finance lease with purchase option 2 2 Amortization of debt issuance/debt discount costs 8 68 Deferred tax expense — 3 Recovery of bad debt reserves (17 ) (60 ) Loss on disposal of plant, property, and equipment — 31 Issuance of common stock for services 79 48 Stock-based compensation 45 44 Changes in operating assets and liabilities of continuing operations: Accounts receivable (10,445 ) 3,012 Unbilled receivables 5,224 (2,204 ) Prepaid expenses, inventories and other assets 557 (449 ) Accounts payable, accrued expenses and unearned revenue (1,270 ) 1,275 Cash (used in) provided by continuing operations (6,455 ) 3,424 Cash used in discontinued operations (149 ) (151 ) Cash (used in) provided by operating activities (6,604 ) 3,273 Cash flows from investing activities: Purchases of property and equipment (361 ) (896 ) Proceeds from sale of plant, property, and equipment 1 1 Cash used in investing activities of continuing operations (360 ) (895 ) Cash provided by investing activities of discontinued operations — 13 Cash used in investing activities (360 ) (882 ) Cash flows from financing activities: Repayments of revolving credit borrowings (14,780 ) (24,204 ) Borrowing on revolving credit 14,780 23,883 Proceeds from issuance of common stock upon exercise of option — 6 Principal repayments of finance lease liabilities (114 ) (101 ) Principal repayments of long term debt (109 ) (418 ) Cash used in financing activities (223 ) (834 ) Effect of exchange rate changes on cash (6 ) (32 ) (Decrease) increase in cash and finite risk sinking fund (restricted cash) (7,193 ) 1,525 Cash and finite risk sinking fund (restricted cash) at beginning of period 19,370 11,697 Cash and finite risk sinking fund (restricted cash) at end of period $ 12,177 $ 13,222 Supplemental disclosure: Interest paid $ 54 $ 112 Income taxes paid — 30 Non-cash investing and financing activities: Equipment purchase subject to finance lease — 82 Equipment purchase subject to financing 29 — The accompanying notes are an integral part of these condensed consolidated financial statements. 8 PERMA-FIX ENVIRONMENTAL SERVICES, INC. Notes to Consolidated Financial Statements March 31, 2021 (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, 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 three months ended March 31, 2021 are not necessarily indicative of results to be expected for the fiscal year ending December 31, 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, 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 13 - 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, 2020 consolidated financial statements referred to above. Recently Adopted Accounting Standards In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, “Income Taxes (Topic 740): Simplifying 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 general 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, 2020, with early adoption permitted. The adoption of ASU No. 2019-12 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. 9 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. 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 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)” (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. These ASUs are effective January 1, 2023 for the Company as a smaller reporting company. The Company is currently evaluating the impact of this ASU on its consolidated financial statements. In August 2020, the FASB issued ASU No. 2020-06, “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 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 per share calculation for both Subtopics. ASU 2020-06 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, including interim periods within those fiscal years. The Company is currently evaluating the impact of this ASU on its consolidated financial statements and disclosures. 10 3. 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: Revenue by Contract Type (In thousands) Three Months Ended Three Months Ended March 31, 2021 March 31, 2020 Treatment Services Total Treatment Services Total Fixed price $ 7,495 $ 2,581 $ 10,076 $ 9,563 $ 1,392 $ 10,955 Time and materials — 13,057 13,057 — 13,905 13,905 Total $ 7,495 $ 15,638 $ 23,133 $ 9,563 $ 15,297 $ 24,860 Revenue by generator (In thousands) Three Months Ended Three Months Ended March 31, 2021 March 31, 2020 Treatment Services Total Treatment Services Total Domestic government $ 4,598 $ 12,661 $ 17,259 $ 7,690 $ 13,798 $ 21,488 Domestic commercial 2,265 590 2,855 1,873 462 2,335 Foreign government 534 2,364 2,898 — 1,014 1,014 Foreign commercial 98 23 121 — 23 23 Total $ 7,495 $ 15,638 $ 23,133 $ 9,563 $ 15,297 $ 24,860 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: Year-to-date Year-to-date (In thousands) March 31, 2021 December 31, 2020 Change ($) Change (%) Contract assets Account receivables, net of allowance $ 20,121 $ 9,659 $ 10,462 108.3 % Unbilled receivables - current 9,229 14,453 (5,224 ) (36.1 )% Contract liabilities Deferred revenue $ 3,106 $ 4,614 $ (1,508 ) (32.7 )% During the three months ended March 31, 2021 and 2020, the Company recognized revenue of $4,311,000 and $4,023,000, 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. Remaining Performance Obligations The Company applies the practical expedient in paragraph 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. 11 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. Finance leases consist primarily of processing and transport equipment used by our facilities’ operations and also include a building with land for our waste treatment operations. The components of lease cost for the Company’s leases were as follows (in thousands): Three Months Ended March 31, 2021 2020 Operating Lease: Lease cost $ 111 $ 114 Finance Leases: Amortization of ROU assets 59 26 Interst on lease liablity 19 21 78 47 Short-term lease rent expense 3 3 Total lease cost $ 192 $ 164 The weighted average remaining lease term and the weighted average discount rate for operating and finance leases at March 31, 2021 were: Operating Leases Finance Leases Weighted average remaining lease terms (years) 7.8 3.4 Weighted average discount rate 7.8 % 6.8 % The weighted average remaining lease term and the weighted average discount rate for operating and finance leases at March 31, 2020 were: Operating Leases Finance Leases Weighted average remaining lease terms (years) 8.6 1.6 Weighted average discount rate 8.0 % 12.1 % 12 The following table reconciles the undiscounted cash flows for the operating and finance leases at March 31, 2021 to the operating and finance lease liabilities recorded on the balance sheet (in thousands): Operating Leases Finance Leases 2021 (Remaining) $ 296 $ 458 2022 455 271 2023 463 150 2024 395 146 2025 304 146 2025 and thereafter 1,154 18 Total undiscounted lease payments 3,067 1,189 Less: Imputed interest (782 ) (113 ) Present value of lease payments $ 2,285 $ 1,076 Current portion of operating lease obligations $ 241 $ — Long-term operating lease obligations, less current portion $ 2,044 — Current portion of finance lease obligations $ — $ 467 Long-term finance lease obligations, less current portion $ — $ 609 Supplemental cash flow and other information related to our leases were as follows (in thousands): Three Months Ended March 31, 2021 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flow from operating leases $ 101 $ 110 Operating cash flow from finance leases $ 19 $ 21 Financing cash flow from finance leases $ 114 $ 101 ROU assets obtained in exchange for lease obligations for: Finance liabilities $ — $ 82 Operating liabilities $ — $ — 5. Intangible Assets The following table summarizes information relating to the Company’s definite-lived intangible assets: March 31, 2021 December 31, 2020 Weighted Average Amortization Gross Net Gross Net Period Carrying Accumulated Carrying Carrying Accumulated Carrying (Years) Amount Amortization Amount Amount Amortization Amount Intangibles (amount in thousands) Patent 12.5 $ 746 $ (339 ) $ 407 $ 742 $ (334 ) $ 408 Software 3 431 (411 ) 20 418 (411 ) 7 Customer relationships 10 3,370 (2,955 ) 415 3,370 (2,910 ) 460 Total $ 4,547 $ (3,705 ) $ 842 $ 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. 13 The following table summarizes the expected amortization over the next five years for our definite-lived intangible assets: Amount Year (In thousands) 2021 (Remaining) 162 2022 172 2023 132 2024 11 2025 11 Amortization expenses relating to the definite-lived intangible assets as discussed above were $50,000 and $54,000 for the three months ended March 31, 2021 and 2020, respectively. 6. Capital Stock, Stock Plans, Warrants 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. No stock options were granted in the first quarter of 2021. 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 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. The 10,000 options under the first milestone were exercised by Robert Ferguson in 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 $262,000 at March 31, 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 March 31, 2021. All other terms of the Ferguson Stock Option remain unchanged. The following table summarizes stock-based compensation recognized for the three months ended March 31, 2021 and 2020 for our employee and director stock options. Three Months Ended Stock Options March 31, 2021 2020 Employee Stock Options $ 33,000 $ 32,000 Director Stock Options 12,000 12,000 Total $ 45,000 $ 44,000 At March 31, 2021, the Company has approximately $229,000 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 2.0 years. 14 The summary of the Company’s total Stock Option Plans as of March 31, 2021 and March 31, 2020, and changes during the periods then ended, are presented below. The Company’s Plans consist of the 2010 Stock Option Plan, the 2017 Plan and the 2003 Outside Directors Stock Plan (“2003 Plan”): Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (years) Aggregate Intrinsic Value (3) Options outstanding January 1, 2021 658,400 $ 3.87 Granted — — Exercised — — — Forfeited/expired — — Options outstanding end of period (1) 658,400 $ 3.87 3.2 $ 2,279,267 Options exercisable at March 31, 2021 (1) 392,400 $ 4.08 3.4 $ 1,274,287 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 (12,000 ) 3.48 14,600 Forfeited/expired (20,000 ) 3.45 Options outstanding end of period (2) 655,300 $ 3.88 4.0 $ 962,189 Options exercisable at March 31, 2020 (2) 306,800 $ 4.20 3.9 $ 392,614 (1) Options with exercise prices ranging from $2.79 to $7.29 (2) Options with exercise prices ranging from $2.79 to $8.40 (3) The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the option. During the three months ended March 31, 2021, the Company issued a total of 11,837 shares of its Common Stock under the 2003 Plan to its outside directors as compensation for serving on our Board of Directors (the “Board”). The Company recorded approximately $107,000 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 16 – Subsequent Events - 2003 Plan” for a discussion of a proposed amendment to the 2003 Plan as approved by the Company’s Board of Directors (the “Board”), subject to the approval by the Company’s Stockholder at the Company’s 2021 Annual Meeting of Stockholders to be held on July 20, 2021. In connection with a $2,500,000 loan that the Company entered into with Mr. Robert Ferguson (the “Ferguson Loan”) on April 1, 2019, the Company issued a warrant to Mr. Ferguson for the purchase of up to 60,000 shares of our Common Stock at an exercise price of $3.51 per share. The warrant is exercisable six months from April 1, 2019 and expires on April 1, 2024 and remains outstanding at March 31, 2021. The Ferguson Loan was paid-in-full in December 2020. 15 7. (Loss) Income Per Share Basic (loss) income per share is calculated based on the weighted-average number of outstanding common shares during the applicable period. Diluted (loss) income 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 (loss) earnings per shares. The following table reconciles the (loss) income and average share amounts used to compute both basic and diluted (loss) income per share: Three Months Ended (Unaudited) March 31, (Amounts in Thousands, Except for Per Share Amounts) 2021 2020 Net (loss) income attributable to Perma-Fix Environmental Services, Inc., common stockholders: (Loss) income from continuing operations, net of taxes $ (1,038 ) $ 1,308 Net loss attributable to non-controlling interest (30 ) (26 ) (Loss) income from continuing operations attributable to Perma-Fix Environmental Services, Inc. common stockholders (1,008 ) 1,334 Loss from discontinuing operations attributable to Perma-Fix Environmental Services, Inc. common stockholders (115 ) (114 ) Net (loss) income attributable to Perma-Fix Environmental Services, Inc. common stockholders $ (1,123 ) $ 1,220 Basic (loss) income per share attributable to Perma-Fix Environmental Services, Inc. common stockholders $ (.09 ) $ .10 Diluted (loss) income per share attributable to Perma-Fix Environmental Services, Inc. common stockholders $ (.09 ) $ .10 Weighted average shares outstanding: Basic weighted average shares outstanding 12,165 12,122 Add: dilutive effect of stock options — 201 Add: dilutive effect of warrants — 23 Diluted weighted average shares outstanding 12,165 12,346 Potential shares excluded from above weighted average share calculations due to their anti-dilutive effect include: Stock options 30 14 Warrant — — 8. Long Term Debt Long-term debt consists of the following: (Amounts in Thousands) March 31, 2021 December 31, 2020 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 quarter 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 quarter of 2021 was 4.5%. (1) 1,290 (2) 1,388 (2) Promissory Note dated April 14, 2020, balance subject to loan forgiveness. Interest accrues at annual rate of 1.0%. (3) 5,318 (4) 5,318 (4) Notes Payable to 2023 and 2025, annual interest rate of 5.6% and 9.1%. 49 23 Total debt 6,657 6,729 Less current portion of long-term debt 5,196 3,595 Long-term debt $ 1,461 $ 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 ($97,000) and ($105,000) at March 31, 2021 and December 31, 2020, respectively. (3) Uncollateralized note. (4) Entered into with the Company’s credit facility lender under the PPP under the CARES Act (see “Paycheck Protection Program (“PPP”) Loan” below for further information on this loan and its terms). 16 Revolving Credit and Term Loan Agreement The Company entered into a Second Amended and Restated Revolving Credit, Term Loan and Security Agreement, dated May 8, 2020 (“Loan Agreement”), with PNC National Association (“PNC”), acting as agent and lender. The Loan Agreement provides the Company with the following credit facility with a maturity date of March 15, 2024: (a) up to $18,000,000 revolving credit (“revolving credit”) and (b) a term loan (“term loan”) of approximately $1,742,000, requiring monthly installments of $35,547. The maximum that the Company can borrow under the revolving credit is based on a percentage of eligible receivables (as defined) at any one time reduced by outstanding standby letters of credit and borrowing reductions that our lender may impose from time to time. Payment of annual rate of interest due on the revolving credit is at prime (3.25% at March 31, 2021) plus 2% or London InterBank Offer Rate (“LIBOR”) plus 3.00% and the term loan at prime plus 2.50% or LIBOR plus 3.50%. Under the LIBOR option of interest payment, a LIBOR floor of 0.75% applies in the event that LIBOR falls below 0.75% at any point in time. Pursuant to the Loan Agreement, the Company may terminate the Loan Agreement upon 90 days’ prior written notice upon payment in full of our obligations under the Loan Agreement. The Company has agreed to pay PNC 1.0% of the total financing in the event we pay off our obligations on or before May 7, 2021 and 0.5% of the total financing if we pay off our obligations after May 7, 2021 but prior to or on May 7, 2022. No early termination fee will apply if we pay off our obligations under the New Loan Agreement after May 7, 2022. At March 31, 2021, the borrowing availability under our revolving credit was approximately $10,280,000, based on our eligible receivables and includes a reduction in borrowing availability of approximately $3,026,000 from outstanding standby letters of credit. The Company’s credit facility under its Loan Agreement with PNC contains certain financial covenants, along with customary representations and warranties. A breach of any of these financial covenants, unless waived by PNC, could result in a default under our credit facility allowing our lender to immediately require the repayment of all outstanding debt under our credit facility and terminate all commitments to extend further credit. The Company met its financial covenant requirements in the first quarter of 2021. The Company’s fixed charge coverage ratio (“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 the Company received in 2020. This add-back was permitted by an amendment to our Loan Agreement that the Company entered into with our lender in May 2021 and was applied retroactively to the second and third quarters of 2020 pursuant to the amendment (see “Note 16 – Subsequent Events – Credit Facility” for a discussion of this amendment). Paycheck Protection Program (“PPP”) Loan On April 14, 2020, the Company entered into a promissory note under the PPP with PNC, our credit facility lender, which has a balance of approximately $5,318,000 (the “PPP Loan”) at March 31, 2021. The PPP was established under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and is administered by the Small Business Administration (“SBA”). The CARES Act was subsequently amended by the Paycheck Protection Program Flexibility Act of 2020 (“Flexibility 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 the promissory note. 17 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 proceeds 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). On October 5, 2020, the Company applied for forgiveness on repayment of the loan balance as permitted under the program, which is subject to the review and approval of our lender and the SBA. If all or a portion of the PPP Loan is not forgiven, all or the remaining portion of the loan will be for a term of two years but can be prepaid at any time prior to maturity without any prepayment penalties. The annual interest rate on the PPP Loan is 1.0% and no payments of principal or interest are due until SBA remits the loan forgiveness amount to our lender. While the Company’s PPP Loan currently has a two year maturity, the Flexibility Act permits the Company to request a five year maturity with our lender. At March 31, 2021, the Company has not received a determination on potential forgiveness on any portion of the PPP Loan balance; therefore, the Company has classified approximately $4,786,000 of the PPP Loan balance as “Current portion of long-term debt,” on its Consolidated Balance Sheets, which was based on payment of the PPP Loan starting in July 2021 (10 months from end of our covered period) in accordance with the terms of our PPP Loan agreement. 9. Commitments and Contingencies Hazardous Waste In connection with our waste management services, the 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 at 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. 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. 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. 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 hearing on Defendants’ motion to dismiss is pending. At this time, the Company continues to believe it does not have any liability to Tetra Tech. 18 Insurance The Company has a 25-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 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 $19,897,000 at March 31, 2021. At March 31, 2021 and December 31, 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 $11,464,000 and $11,446,000, respectively, which included interest earned of $1,993,000 and $1,975,000 on the finite risk sinking funds as of March 31, 2021 and December 31, 2020, respectively. Interest income for the three months ended March 31, 2021 and 2020 was approximately $18,000 and $56,000, respectively. If we so elect, AIG is obligated to pay us an amount equal to 100% of the finite risk sinking fund account balance in return for complete release of liability from both us 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 March 31, 2021, the total amount of standby letters of credit outstanding was approximately $3,026,000 and the total amount of bonds outstanding was approximately $42,973,000. 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 $115,000 and $114,000 for the three months ended March 31, 2021 and 2020 (net of taxes of $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. 19 The following table presents the major class of assets of discontinued operations as of March 31, 2021 and December 31, 2020. No assets and liabilities were held for sale at each of the periods noted. March 31, December 31, (Amounts in Thousands) 2021 2020 Current assets Other assets $ 20 $ 22 Total current assets 20 22 Long-term assets Property, plant and equipment, net (1) 81 81 Other assets — — Total long-term assets 81 81 Total assets $ 101 $ 103 Current liabilities Accounts payable $ 4 $ 4 Accrued expenses and other liabilities 154 150 Environmental liabilities 659 744 Total current liabilities 817 898 Long-term liabilities Closure liabilities 144 142 Environmental liabilities 152 110 Total long-term liabilities 296 252 Total liabilities $ 1,113 $ 1,150 (1) net of accumulated depreciation of $10,000 for each period presented. 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 & Development (“R&D”) activities to identify, develop and implement innovative waste processing techniques for problematic waste streams. SERVICES SEGMENT, which includes: - Technical services, which include: ○ professional radiological measurement and site survey of large government and commercial installations using advanced methods, technology and engineering; ○ 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 industrial 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 Occupational 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 ○ waste management services to commercial and governmental customers. 20 - Nuclear services, which include: ○ decontamination and decommissioning (“D&D”) of government and commercial facilities impacted with radioactive material and hazardous constituents including engineering, technology applications, specialty services, logistics, transportation, processing and disposal; ○ license termination support of radioactive material licensed and federal facilities over the entire cycle of the termination process: project management, planning, characterization, waste stream identification and delineation, remediation/demo, final status survey, compliance demonstration, reporting, transportation, disposal and emergency response. - A company owned equipment calibration and maintenance laboratory that services, maintains, calibrates, and sources (i.e., rental) health physics, IH and customized nuclear, 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 is currently involved on a limited basis in the R&D of the Company’s medical isotope production technology, has not generated any revenue and has substantially reduced 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 10 – Discontinued Operations”) which do not generate revenues. 21 The table below presents certain financial information of our operating segments for the three months ended March 31, 2021 and 2020 (in thousands): Segment Reporting for the Quarter Ended March 31, 2021 Treatment Services Medical Segments Total Corporate (1) Consolidated Total Revenue from external customers $ 7,495 $ 15,638 — $ 23,133 $ — $ 23,133 Intercompany revenues 660 7 — 667 — — Gross profit 925 1,431 — 2,356 — 2,356 Research and development 47 13 76 136 14 150 Interest income — — — — 18 18 Interest expense (19 ) (8 ) — (27 ) (40 ) (67 ) Interest expense-financing fees — — — — (8 ) (8 ) Depreciation and amortization 310 85 — 395 5 400 Segment (loss) income before income taxes (119 ) 555 (76 ) 360 (1,415 ) (1,055 ) Income tax benefit (17 ) — — (17 ) — (17 ) Segment (loss) income (102 ) 555 (76 ) 377 (1,415 ) (1,038 ) Expenditures for segment assets 357 4 — 361 — 361 (2) Segment Reporting for the Quarter Ended March 31, 2020 Treatment Services Medical Segments Total Corporate (1) Consolidated Total Revenue from external customers $ 9,563 $ 15,297 — $ 24,860 $ — $ 24,860 Intercompany revenues 207 8 — 215 — — Gross profit 2,745 1,895 — 4,640 — 4,640 Research and development 94 66 66 226 6 232 Interest income — — — — 56 56 Interest expense (18 ) (6 ) — (24 ) (96 ) (120 ) Interest expense-financing fees — — — — (68 ) (68 ) Depreciation and amortization 264 77 — 341 5 346 Segment income (loss) before income taxes 1,547 1,318 (66 ) 2,799 (1,477 ) 1,322 Income tax expense 14 — — 14 — 14 Segment income (loss) 1,533 1,318 (66 ) 2,785 (1,477 ) 1,308 Expenditures for segment assets 679 214 — 893 3 896 (2) (1) Amounts reflect the activity for corporate headquarters not included in the segment information. (2) Net of financed amount of $29,000 and $82,000 for the three month ended March 31, 2021 and 2020, respectively. 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 benefit of approximately $17,000 for continuing operations for the three months ended March 31, 2021 as compared to income tax expense of approximately $14,000 for the corresponding period of 2020. The Company’s effective tax rate was approximately 1.6% and 1.0% for the three months ended March 31, 2021 and the corresponding period of 2020, respectively. 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. 13. Variable Interest Entities (“VIE”) The 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 with the joint venture 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. 22 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, the Company determined that Perma-Fix ERRG continues to be a VIE in which we are the primary beneficiary. At March 31, 2021, Perma-Fix ERRG had total assets of $4,865,000 and total liabilities of $4,865,000 which are all recorded as current. 14. Deferral of Employment Tax Deposits 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 with 50% of the amount of social security taxes deferred to 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. At March 31, 2021, the Company has deferred payment of approximately $1,252,000 in its share of social security taxes, of which approximately $626,000 is included in “Other long-term liabilities,” with the remaining balance included in “Accrued expenses” within current liabilities in the Company’s Consolidated Balance Sheets. 15. Executive Officer and Board of Director Compensation Management Incentive Plans (“MIP”) On January 21, 2021, the Company’s Compensation and Stock Option Committee (the “Compensation Committee”) and the Board approved individual MIP for the calendar year 2021 for each Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”), Executive Vice President (“EVP”) of Strategic Initiatives, EVP of Nuclear and Technical Services and EVP of Waste Treatment Operations. Each of the MIPs is effective January 1, 2021 and applicable for year 2021. Each MIP provides guidelines for the calculation of annual cash incentive-based compensation, subject to Compensation Committee oversight and modification. Each MIP awards cash compensation based on achievement of performance thresholds, with the amount of such compensation established as a percentage of the executive’s 2021 annual base salary at the time of the approval of the MIP. The potential target performance compensation ranges from 5% to 150% of the base salary for the CEO ($17,220 to $516,600), 5% to 100% of the base salary for the CFO ($14,000 to $280,000), 5% to 100% of the base salary for the EVP of Strategic Initiatives ($11,667 to $233,336), 5% to 100% of the base salary for the EVP of Nuclear and Technical Services ($14,000 to $280,000) and 5% to 100% ($12,000 to $240,000) of the base salary for the EVP of Waste Treatment Operations. Subsequent to the approval of the MIPs for fiscal year 2021 on January 21, 2021 as described above, in February 2021, the Compensation Committee approved a cost of living adjustment of approximately 2.3% to each executive officer’s base salary, effective April 1, 2021. As such, compensation payable, if any, under each of the MIPs for fiscal year 2021 as discussed above for our executives will be adjusted accordingly to reflect this cost of living adjustment. 23 Board Compensation On January 21, 2021, the Company’s Compensation Committee and the Board approved the following revision to the annual compensation of each non-employee Board member and the Board Committee(s) for which the Board member serves, effective January 1, 2021. ● each director is to be paid a quarterly fee of $11,500, compared to the previous quarterly fee of $8,000; ● the Chairman of the Board is to be paid an additional quarterly fee of $8,750, compared to the Chairman’s previous additional quarterly fee of $7,500; ● the Chairman of the Audit Committee is to be paid an additional quarterly fee of $6,250, compared to the Audit Chairman’s previous additional quarterly fee of $5,500; ● the Chairman of each of the Compensation Committee, the Corporate Governance and Nominating Committee (the “Nominating Committee”), and the Strategic Advisory Committee (the “Strategic Committee”) is to receive $3,125 in additional quarterly fees. No additional quarterly fees were previously paid to the Chairman of such committees. The Chairman of the Board is not eligible to receive a quarterly fee for serving as the Chairman of any the aforementioned committees ; ● each Audit Committee member (excluding the Chairman of the Audit Committee) is to receive an additional quarterly fee of $1,250; and ● each member of the Compensation Committee, the Nominating Committee, and the Strategic Committee is to receive a quarterly fee of $500. Such fee is payable only if the member does not serve as the Chairman of the Audit Committee, the Nominating Committee, the Strategic Committee or as the Chairman of the Board. Each non-employee Board member will continue to receive $1,000 for each board meeting attendance and a $500 fee for meeting attendance via conference call. Also, each director will continue to receive an option to purchase up to 2,400 shares of the Company’s Common Stock on the date of his re-election to the Board at the Company’s Annual Meeting of Stockholders, with each option having a 10-year term and becoming fully vested after six months from grant date. Each director may continue to elect to have either 65% or 100% of such fees payable in Common Stock under the 2003 Plan, with the balance, if any, payable in cash. See below “Note 16 – Subsequent Events - 2003 Plan” for a discussion of a proposed amendment to the 2003 Plan as approved by the Board, subject to the approval by the Company’s Stockholder at the Company’s 2021 Annual Meeting of Stockholders to be held on July 20, 2021. 16. Subsequent Events Management evaluated events occurring subsequent to March 31, 2021 through May 6, 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. Credit Facility On May 4, 2021, the Company entered into an amendment to our Loan Agreement with our lender which provided the following, among other things: ● revised the Company’s 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 “Note 8 – Long Term Debt – Paycheck Protection Program (“PPP”) Loan” 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 at annual rate of prime plus 2.50% or LIBOR (with minimum floor rate of 0.75%) plus 3.50%. 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. 24 In connection with the amendment, the Company paid our lender a fee of $15,000. All other terms of the Loan Agreement remains principally unchanged. 2003 Plan During April 2021, the Company’s Board approved, subject to the Company’s Shareholder approval, a proposed amendment to the 2003 Plan that provides, among other things, the following: ● The number of shares of Common Stock available for issuance under the 2003 Plan be increased by an additional 500,000 shares; ● Each outside director 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 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 subsequent to the amendment becoming effective. Preferred Share Rights Plan (“Rights Plan”) The Company’s Rights Plan had a termination date of May 2, 2021. As previously reported, during April 2021, the Company’s Board decided not to renew or extend the Rights Plan and, as a result, such Rights Plan terminated as of May 2, 2021. 25 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; ● reductions in the level of government funding in future years; ● R&D activity and necessary capital of our Medical Segment; ● reducing operating costs and non-essential expenditures; ● ability to meet loan agreement covenant requirements; ● cash flow requirements; ● accounts receivable impact; ● sufficient liquidity to continue business; ● PPP Loan forgiveness; ● future results of operations and liquidity; ● effect of economic disruptions on our business; ● 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; 26 ● fund capital expenditures from cash from operations and/or financing; ● impact from COVID-19; ● delays in procurement actions and contract awards; ● gradual return 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; ● partial or full shutdown of any of our facilities; ● continued waste shipments delays by clients; and ● 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; ● 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; 27 ● 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; ● audit of our PPP Loan; ● 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 2020 Form 10-K and the “Forward-Looking Statements” contained in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”) of this first quarter 2021 Form 10-Q.. COVID-19 Impact Our management team continues to proactively update our ongoing business operations and safety plans. We continue to remain focused on protecting the health and well-being of our employees and the communities in which we operate while assuring the continuity of our business operations. Similar to most of the U.S., we are beginning to relax the COVID-19-related precautions associated with ongoing operations as more staff is vaccinated and the new cases continue to decline in our locations. However, our Treatment Segment continues to see delays in waste shipments from certain customers due to continued impacts of COVID-19. We expect to see a gradual return in waste receipts from these customers in the first half of 2021. Within our Services Segment, we are realizing delays in procurement actions and contract awards resulting from the impact of COVID-19. As the situations surrounding COVID-19 continues to remain fluid, the full impact and extent of the pandemic on our financial results and liquidity cannot be estimated with any degree of certainty but appear to be subsiding towards the end of the second quarter of 2021. We are realizing pent-up demands in both segments, which have been reflected in the large increase in proposal requests throughout the first quarter of 2021 and into the second quarter of 2021. We continue to closely monitor the impact of the COVID-19 pandemic on all aspects of our business, including 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. At this time, we believe we have sufficient liquidity on hand to continue business operations during the next twelve months. At March 31, 2021, our borrowing availability under our revolving credit facility was approximately $10,280,000 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. Overview Revenue decreased by $1,727,000 or 6.9% to $23,133,000 for the three months ended March 31, 2021 from $24,860,000 for the corresponding period of 2020. The decrease was entirely within our Treatment Segment where revenue decreased $2,068,000 or 21.6% which was attributed primarily to lower waste volume resulting from continued delays in waste shipment from certain customers from the impact of COVID-19 as discussed above. Also, lower averaged price waste from revenue mix contributed to the decrease in revenue within the Treatment Segment. Revenue from our Services Segment increased by approximately $341,000 or 2.2%. Gross profit decreased $2,284,000 or 49.2% primarily due to the decrease in revenues in the Treatment Segment. Selling, General, and Administrative (“SG&A”) expenses increased $277,000 or 9.5% for the three months ended March 31, 2021 as compared to the corresponding period of 2020. 28 Business Environment Our Treatment and Services Segments’ business continues to be heavily dependent on services that we provide to governmental clients, primarily as subcontractors for others who are prime contractors to government entities or directly as the prime contractor. We believe demand for our services will continue to be subject to fluctuations due to a variety of factors beyond our control, including, without limitation, the economic conditions, the manner in which the applicable government will be required to spend funding to remediate various sites, and/or 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 has not generated any revenues and 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. Summary – Three Months Ended March 31, 2021 and 2020 Three Months Ended March 31, Consolidated (amounts in thousands) 2021 % 2020 % Revenues $ 23,133 100.0 $ 24,860 100.0 Cost of good sold 20,777 89.8 20,220 81.3 Gross profit 2,356 10.2 4,640 18.7 Selling, general and administrative 3,205 13.9 2,928 11.8 Research and development 150 .6 232 .9 Loss on disposal of property and equipment — — 31 .1 (Loss) income from operations $ (999 ) (4.3 ) $ 1,449 5.9 Interest income 18 — 56 .2 Interest expense (67 ) (.2 ) (120 ) (.5 ) Interest expense-financing fees (8 ) — (68 ) (.3 ) Other 1 — 5 — (Loss) income from continuing operations before taxes (1,055 ) (4.5 ) 1,322 5.3 Income tax (benefit) expense (17 ) — 14 — (Loss) income from continuing operations $ (1,038 ) (4.5 ) $ 1,308 5.3 29 Revenues Consolidated revenues decreased $1,727,000 for the three months ended March 31, 2021, compared to the three months ended March 31, 2020, as follows: (In thousands) 2021 % Revenue 2020 % Revenue Change % Change Treatment Government waste $ 4,387 18.9 $ 7,067 28.5 $ (2,680 ) (37.9 ) Hazardous/non-hazardous (1) 1,311 5.7 1,524 6.1 (213 ) (14.0 ) Other nuclear waste 1,797 7.8 972 3.9 825 84.9 Total 7,495 32.4 9,563 38.5 (2,068 ) (21.6 ) Services Nuclear services 15,080 65.2 14,835 59.7 245 1.7 Technical services 558 2.4 462 1.8 96 20.8 Total 15,638 67.6 15,297 61.5 341 2.2 Total $ 23,133 100.0 $ 24,860 100.0 $ (1,727 ) (6.9 ) (1) Includes wastes generated by government clients of $745,000 and $623,000 for the three month ended March 31, 2021 and the corresponding period of 2020, respectively. Treatment Segment revenue decreased $2,068,000 or 21.6% for the three months ended March 31, 2021 over the same period in 2020. The revenue decrease was attributed primarily to lower revenue generated from lower waste volume resulting from continued waste shipment delays from certain customers due to the continued impact of COVID-19. Within our Treatment Segment, revenue generated from other nuclear waste increased primarily due to higher waste volume generated from commercial customers. Lower averaged price waste from revenue mix also contributed to the overall decrease in revenue within the Treatment Segment. Our Services Segment revenue increased by approximately $341,000 or 2.2%. 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 $557,000 for the quarter ended March 31, 2021, compared to the quarter ended March 31, 2020, as follows: % % (In thousands) 2021 Revenue 2020 Revenue Change Treatment $ 6,570 87.7 $ 6,818 71.3 $ (248 ) Services 14,207 90.8 13,402 87.6 805 Total $ 20,777 89.8 $ 20,220 81.3 $ 557 Cost of goods sold for the Treatment Segment decreased by approximately $248,000 or 3.6%. Treatment Segment’s variable costs decreased by approximately $426,000 primarily in disposal, transportation, material and supplies and outside services due to lower revenue. Treatment Segment’s overall fixed costs were higher by approximately $178,000 resulting from the following: general expenses were higher by $119,000 in various categories; salaries and payroll related expenses were higher by approximately $54,000 primarily due to higher healthcare costs; depreciation expenses were higher by approximately $45,000 due to more financed leases; regulatory expenses were higher by approximately $24,000; maintenance expenses were lower by $35,000; and travel expenses were lower by $29,000 due to restrictions implemented from the impact of COVID-19. Services Segment cost of goods sold increased $805,000 or 6.0% primarily due to higher revenue. The increase in cost of goods sold was primarily due to higher salaries/payroll related, travel, and outside services expenses totaling approximately $1,095,000. The overall higher expenses were partially offset by lower material and supplies, regulatory and disposal expenses totaling approximately $187,000 and lower general expenses of $103,000 in various categories. Included within cost of goods sold is depreciation and amortization expense of $394,000 and $341,000 for the three months ended March 31, 2021, and 2020, respectively. 30 Gross Profit Gross profit for the quarter ended March 31, 2021 decreased $2,284,000 over the corresponding period of 2020, as follows: % % (In thousands) 2021 Revenue 2020 Revenue Change Treatment $ 925 12.3 $ 2,745 28.7 $ (1,820 ) Services 1,431 9.2 1,895 12.4 (464 ) Total $ 2,356 10.2 $ 4,640 18.7 $ (2,284 ) Treatment Segment gross profit decreased by $1,820,000 and gross margin decreased to 12.3% from 28.7% primarily due to lower revenue from lower waste volume and the impact of our fixed costs. Services Segment gross profit decreased by $464,000 or 24.5% and gross margin decreased from 12.4% to 9.2%. Our overall Services Segment gross margin is impacted by our current projects which are competitively bid on and will therefore, have varying margin structures. SG&A SG& A expenses increased $277,000 for the three months ended March 31, 2021, as compared to the corresponding period for 2020, as follows: (In thousands) 2021 % Revenue 2020 % Revenue Change Administrative $ 1,372 — $ 1,360 — $ 12 Treatment 978 13.0 1,061 11.1 (83 ) Services 855 5.5 507 3.3 348 Total $ 3,205 13.9 $ 2,928 11.8 $ 277 Administrative SG&A expenses were slightly higher primarily due to the following: director fees were higher by approximately $59,000 resulting from one additional director and fee increases that went into effect January 1, 2021; payroll and benefit expenses were higher by approximately $19,000 primarily due to higher healthcare costs; travel expenses were lower by approximately $23,000 due to restrictions implemented from the impact of COVID-19; outside services expenses were lower by approximately $41,000 resulting from fewer consulting/subcontract/legal matters; and general expenses were lower by approximately $2,000. Treatment Segment SG&A expenses were lower due to the following: travel expenses were lower by approximately $49,000 due to restrictions implemented from the impact of COVID-19; maintenance expenses were lower by approximately $25,000; general expenses were lower by $94,000 in various categories, with lower tradeshow expenses of $38,000 due to impact of COVID-19; and salaries and payroll related expenses were higher by approximately $85,000 due to increased hours spent on bid and proposals. The increase in SG&A expenses within our Services Segment was primarily due to the following: bad debt expenses were higher by approximately $63,000 as in the first quarter of 2020, certain customer accounts which had previously been reserved for were collected; outside services expenses were higher by approximately $101,000 due to more consulting matters related to bid and proposals; general expenses were slightly higher by $12,000; salaries/payroll related expenses were higher by approximately $185,000 primarily due to increased hours spent for bid and proposals; and travel expenses were lower by a total of approximately $13,000. Included in SG&A expenses is depreciation and amortization expense of $6,000 and $5,000 for the three months ended March 31, 2021 and 2020, respectively. 31 R&D R&D expenses decreased $82,000 for the three months ended March 31, 2021, as compared to the corresponding period for 2020, as follows: (In thousands) 2021 2020 Change Administrative $ 14 $ 6 $ 8 Treatment 47 94 (47 ) Services 13 66 13 PF Medical 76 66 10 Total $ 150 $ 232 $ (82 ) 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 $38,000 in the first quarter of 2021 as compared to the corresponding period of 2020 primarily due to lower interest earned from lower finite risk sinking fund. Interest Expense Interest expense decreased approximately $53,000 in the first quarter of 2021 as compared to the corresponding period of 2020 primarily due to lower interest expense from our declining term loan balance outstanding and lower interest rate. Also, interest expense was lower resulting from the 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 by interest accrued for the Paycheck Protection Program (“PPP”) Loan in the first quarter of 2021 (see “The CARES Act – PPP Loan” below for further information of the PPP Loan). Interest Expense- Financing Fees Interest expense-financing fees decreased by approximately $60,000 in the first quarter of 2021 as compared to the corresponding period 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 us receiving the $2,500,000 loan from Robert Ferguson dated April 1, 2019. Liquidity and Capital Resources Our cash flow requirements during the three months ended March 31, 2021 were primarily financed by our operations, cash on hand and credit facility 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, our capital expenditure line (see “Financing Activities” below for this new capital expenditure line entered into with our lender below) and cash on hand. We continue to explore all sources of increasing our capital to supplement our liquidity requirements, when needed, and to improve our revenue and working capital. 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, which has resulted in continued delays in waste shipments from certain customers and delays in procurement actions and contract awards, there are no assurances such will be the case. 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. 32 The following table reflects the cash flow activities during the first three months of 2021: (In thousands) Cash used in operating activities of continuing operations $ (6,455 ) Cash used in operating activities of discontinued operations (149 ) Cash used in investing activities of continuing operations (360 ) Cash used in financing activities of continuing operations (223 ) Effect of exchange rate changes in cash (6 ) Decrease in cash and finite risk sinking fund (restricted cash) $ (7,193 ) At March 31, 2020, we were in a positive cash position with no revolving credit balance At March 31, 2021, we had cash on hand of approximately $713,000, which included account balances of our foreign subsidiaries totaling approximately $559,000. Operating Activities Accounts receivable, net of allowances for doubtful accounts, totaled $20,121,000 at March 31, 2021, an increase of $10,462,000 from the December 31, 2020 balance of $9,659,000. The increase was primarily due to timing of invoicing which was reflective of the decrease in our unbilled receivables and timing of our accounts receivable collection. Our contracts with our customers are subject to various payment terms and conditions; therefore, our accounts receivable are impacted by these terms and conditions and the related timing of accounts receivable collections. Additionally, contracts with our customers may sometimes result in modifications which can cause delays in collections. Accounts payable, totaled $15,426,000 at March 31, 2021, an increase of $44,000 from the December 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 $1,003,000 (which included working capital of our discontinued operations) at March 31, 2021, as compared to working capital of $3,672,000 at December 31, 2020. Our working capital was negatively impacted primarily by the additional reclass of approximately $1,595,000 of the outstanding PPP Loan balance from long-term debt to current debt. At December 31, 2021, the current portion of the PPP Loan was approximately $3,191,000. As previously discussed, we have applied for forgiveness on repayment of the entire PPP Loan balance which is subject to the review and approval of our lender and the Small Business Administration (“SBA”) (see “CARES Act – PPP Loan” for information on this loan”). Our working capital was also impacted by the increase in accrued expenses primarily related to payroll accrual. Investing Activities For the three months ended March 31, 2021, our purchases of capital equipment totaled approximately $390,000, of which $29,000 was subject to financing, with the remaining funded from cash from operations and our credit facility. We have budgeted approximately $2,000,000 for 2021 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. 33 Financing Activities We entered into a Second Amended and Restated Revolving Credit, Term Loan and Security Agreement, dated May 8, 2020 (“Loan Agreement”), with PNC National Association (“PNC”), acting as agent and lender. The Loan Agreement provides the Company with the following credit facility with a maturity date of March 15, 2024: (a) up to $18,000,000 revolving credit (“revolving credit”) and (b) a term loan (“term loan”) of approximately $1,742,000, requiring monthly installments of $35,547. The maximum that the Company can borrow under the revolving credit is based on a percentage of eligible receivables (as defined) at any one time reduced by outstanding standby letters of credit and borrowing reductions that our lender may impose from time to time. Payment of annual rate of interest due on the revolving credit is at prime (3.25% at March 31, 2021) plus 2% or LIBOR plus 3.00% and the term loan at prime plus 2.50% or LIBOR plus 3.50%. Under the LIBOR option of interest payment noted above, a LIBOR floor of 0.75% will apply in the event that LIBOR falls below 0.75% at any point in time. At March 31, 2021, the borrowing availability under our revolving credit was approximately $10,280,000, based on our eligible receivables and includes a reduction in borrowing availability of approximately $3,026,000 from outstanding standby letters of credit. Our credit facility under our Loan Agreement with PNC contains certain financial covenants, along with customary representations and warranties. A breach of any of these financial covenants, unless waived by PNC, could result in a default under our credit facility allowing our lender to immediately require the repayment of all outstanding debt under our credit facility and terminate all commitments to extend further credit. We met our financial covenant requirements in the first quarter of 2021 and expects to meet our quarterly financial covenant requirements in the next twelve months. Our fixed charge coverage ratio (“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 an amendment to our Loan Agreement that we entered into with our lender as discussed below. 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 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 “The CARES Act – PPP Loan” 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 at annual rate of prime plus 2.50% or LIBOR (with minimum floor rate of 0.75%) plus 3.50%. 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. In connection with the amendment, we paid our lender a fee of $15,000. All other terms of the Loan Agreement remains principally unchanged. The CARES Act PPP Loan On April 14, 2020, we entered into a promissory note under the PPP with PNC, our credit facility lender, which has a balance of approximately $5,318,000 (the “PPP Loan”) at March 31, 2021. The PPP was established under the CARES Act and was subsequently amended by the Paycheck Protection Program Flexibility Act of 2020 (“Flexibility 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 the promissory note. 34 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 proceeds 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). On October 5, 2020, we applied for forgiveness on repayment of the loan balance as permitted under the program, which is subject to the review and approval of our lender and the SBA. If all or a portion of the PPP Loan is not forgiven, all or the remaining portion of the loan will be for a term of two years but can be prepaid at any time prior to maturity without any prepayment penalties. The annual interest rate on the PPP Loan is 1.0% and no payments of principal or interest are due until the date that the SBA remits the loan forgiveness amount to our lender. While our PPP Loan currently has a two year maturity, the Flexibility Act permits us to request a five year maturity with our lender. At March 31, 2021, we have not received a determination on potential forgiveness on any portion of the PPP Loan balance; therefore, we have classified approximately $4,786,000 of the PPP Loan balance as “Current portion of long-term debt,” on our Consolidated Balance Sheets, which was based on payment of the PPP Loan starting in July 2021 (10 months from end of our covered period) in accordance with the terms of our PPP Loan agreement. Deferral of Employment Tax Deposits 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, with 50% of the amount of social security taxes deferred to 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. At March 31, 2021, we have deferred payment of approximately $1,252,000 in our share of social security taxes, of which approximately $626,000 is included in “Other long-term liabilities,” with the remaining balance included in “Accrued expenses” within current liabilities in the Company’s Consolidated Balance Sheets. Off Balance Sheet Arrangements From time to time, we are required to post standby letters of credit and various bonds to support contractual obligations to customers and other obligations, including facility closures. At March 31, 2021, the total amount of standby letters of credit outstanding totaled approximately $3,026,000 and the total amount of bonds outstanding totaled approximately $42,973,000. We also provide closure and post-closure requirements through a financial assurance policy for certain of our Treatment Segment facilities through AIG. At March 31, 2021, the closure and post-closure requirements for these facilities were approximately $19,897,000. 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, 2020. 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 quarter ended March 31, 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 through contracts entered into indirectly as subcontractors for others who are prime contractors or directly as the prime contractor 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 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. 35 We performed services relating to waste generated by government clients (domestic and foreign (primarily Canadian)), either indirectly as a subcontractor or directly as a prime contractor to government entities, representing approximately $20,157,000 or 87.1% of our total revenue during the three months ended March 31, 2021, as compared to $22,502,000 or 90.5% of our total revenue during the corresponding period of 2020. COVID-19 Impact. The extent of the impact of the COVID-19 pandemic on our business continues to be uncertain and difficult to predict, as the responses to the pandemic continue to evolve rapidly. We continue to experience delays in waste shipments from certain customers within our Treatment Segment directly related to the impact of COVID-19. However, we expect to see a gradual return in waste receipts from these customers in the first half of 2021. Within our Services Segment, we are realizing delays in procurement actions and contract awards resulting from the impact of COVID-19. 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, inoculation rate of the 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 from continued delays in waste shipments, delays in procurement actions and contract awards, and/or 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. 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 March 31, 2021, we had total accrued environmental remediation liabilities of $811,000, a decrease of $43,000 from the December 31, 2020 balance of $854,000. The decrease represents primarily payments made on remediation projects for our Perma-Fix of Memphis, Inc. subsidiary. At March 31, 2021, $659,000 of the total accrued environmental liabilities was recorded as current. Item 3. Quantitative and Qualitative Disclosures about Market Risks Not required for smaller reporting companies. 36 Item 4. Controls and Procedures (a) Evaluation of disclosure controls, and procedures. We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic reports filed with the Securities and Exchange Commission is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and that such information is accumulated and communicated to our management. As of the end of the period covered by this report, we carried out an evaluation with the participation of our Principal Executive Officer and Principal Financial Officer. Based on this recent assessment, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) were effective as of March 31, 2021. (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. 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, 2020. Additionally, there has been no other material change in legal proceedings previously disclosed by us in our Form 10-K for the year ended December 31, 2020. 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, 2020. Item 6. Exhibits (a) Exhibits 3(i) Restated Certificate of Incorporation, as amended, of Perma-Fix Environmental Services, Inc. 4.1 First Amendment to Second 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 4, 2021. 10.1 2021 Incentive Compensation Plan for Chief Executive Officer, effective January 1, 2021, as incorporated by reference from Exhibit 99.1 to the Company’s Form 8-K filed on January 26, 2021. 10.2 2021 Incentive Compensation Plan for Chief Financial Officer, effective January 1, 2021, as incorporated by reference from Exhibit 99.2 to the Company’s Form 8-K filed on January 26, 2021. 10.3 2021 Incentive Compensation Plan for EVP of Strategic Initiatives, effective January 1, 2021, as incorporated by reference from Exhibit 99.3 to the Company’s Form 8-K filed on January 26, 2021. 10.4 2021 Incentive Compensation Plan for EVP of Nuclear and Technical Services, effective January 1, 2021, as incorporated by reference from Exhibit 99.4 to the Company’s Form 8-K filed on January 26, 2021. 37 10.5 2021 Incentive Compensation Plan for EVP of Waste Treatment Operations, effective January 1, 2021, as incorporated by reference from Exhibit 99.5 to the Company’s Form 8-K filed on January 26, 2021. 31.1 Certification by Mark Duff, Chief Executive Officer of the Company pursuant to Rule 13a-14(a) or 15d-14(a). 31.2 Certification by Ben Naccarato, Chief Financial Officer of the Company pursuant to Rule 13a-14(a) or 15d-14(a). 32.1 Certification by Mark Duff, Chief Executive Officer of the Company furnished pursuant to 18 U.S.C. Section 1350. 32.2 Certification by Ben Naccarato, Chief Financial Officer of the Company furnished pursuant to 18 U.S.C. Section 1350. 101.INS XBRL Instance Document* 101.SCH XBRL Taxonomy Extension Schema Document* 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document* 101.DEF XBRL Taxonomy Extension Definition Linkbase Document* 101.LAB XBRL Taxonomy Extension Labels Linkbase Document* 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document* * Pursuant to Rule 406T of Regulation S-T, the Interactive Data File in Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purpose of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections. 38 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized. PERMA-FIX ENVIRONMENTAL SERVICES Date: May 6, 2021 By: /s/ Mark Duff Mark Duff President and Chief (Principal) Executive Officer Date: May 6, 2021 By: /s/ Ben Naccarato Ben Naccarato Chief (Principal) Financial Officer 39