What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-03-23 compared with 2022-04-06 · 454 added, 485 removed, 167 unchanged (85% of the section changed)

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

statements contained within this “Management’s Discussion and Analysis of Financial Condition and Results of Operations”

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See “Special Note regarding Forward-Looking Statements” contained in this report.

discussion and analysis is based, among other things, upon our audited consolidated financial statements and includes our accounts, the

accounts of our wholly-owned subsidiaries, the accounts of our majority-owned Polish subsidiary (which was sold in December 2021 –

see a discussion below “PF Medical” for a discussion of this sale), and the account of a variable interest entity for which

we are the primary beneficiary, after elimination of all significant intercompany balances and transactions.

discussion and analysis is based, among other things, our audited consolidated financial statements and includes our accounts, the accounts

of our wholly-owned subsidiaries and the account of a variable interest entity for which we were the primary beneficiary.

following discussion and analysis should be read in conjunction with our consolidated financial statements and the notes thereto included

in Item 8 of this report.

2021 financial results continued to be impacted by COVID-19 with the emergence of new COVID variants.

Our Treatment Segment’s

revenue has been negatively impacted by continued waste shipment delays from certain customers since the latter part of the first quarter

of 2020 at the start of the pandemic.

However, we expect to see a gradual return in waste receipts from these customers starting in the

second quarter of 2022 as we expect our customers to start easing up on COVID-19 restrictions, including reinstating return-to-work schedules

in the upcoming months.

Additionally, as a result of the constraint in supply chain, we experienced a delay in the delivery of a new

technology waste processing unit from our supplier which negatively impacted our revenue as associated revenue was not able to be generated.

Delivery of this unit had been expected during the third quarter of 2021 but did not occur until the first quarter of 2022.

Services Segment, we experienced delays in procurement actions and contract awards resulting primarily from the impact of COVID-19.

since the end of the second quarter of 2021, we were awarded a number of new contracts, including a fixed price contract awarded to us

at the end of the third quarter of 2021 with a value of approximately $40,000,000 for the decommissioning of a navy ship, with work expected

to be completed over an eighteen to twenty-four month period.

Due to customer administrative delay and/or continued COVID-19 impact

experienced by certain customers, work under certain of our new awards was temporarily curtailed/delayed which negatively impacted

We expect to see a ramp-up in activities from certain of these new projects starting in the second quarter

Within our Treatment and Services Segments, we continue to have bids currently submitted and awaiting awards.

management team continues to proactively update our ongoing business operations and safety plans in an effort to mitigate any potential

impact of COVID-19.

We continue to monitor government mandates and recommendations and 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.

this time, we believe we have sufficient liquidity on hand to continue business operations during the next twelve months.

31, 2021, we had borrowing availability under our revolving credit facility of approximately $8,692,000 which was based on a percentage

of eligible receivables and subject to certain reserves and included our cash on hand of approximately $4,440,000.

As a result of a recent

amendment to our Loan Agreement, we are required to maintain a minimum of $3,000,000 in borrowing availability under our revolving credit

until the minimum FCCR requirement for the quarter ended June 30, 2022 has been met and certified to our lender (see “Financing

Activities” within this MD&A for a discussion of this amendment).

We continue to assess the need in reducing operating costs

during this volatile time, which may include curtailing certain capital expenditures and eliminating non-essential expenditures.

are closely monitoring our customers’ payment performance.

However, since a significant portion of our revenues is derived from

government related contracts, we do not expect our accounts receivable collections to be materially impacted due to COVID-19.

the 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.

We continue to closely monitor the impact of the COVID-19 pandemic on all

aspects of our business.

Our overall revenue decreased $33,235,000

or 31.5% to $72,191,000 for the twelve months ended December 31, 2021 from $105,426,000 for the corresponding period

The revenue decrease was entirely within our Services Segment where revenue decreased by approximately $36,084,000 or

47.9% to $39,199,000 for the twelve months ended December 31, 2021 from $75,283,000 for the corresponding period of 2020

primarily due to delays in contract awards resulting primarily from the impact of COVID-19 as discussed above which was further exacerbated

by the completion of a certain large project in the Services Segment in the second quarter of 2021 and the near completion of

another certain large project in 2021.

As discussed above, although we were awarded a number of new contracts within

the Services Segment since the end of the second quarter of 2021, work under certain of these new awards was temporarily curtailed/delayed

due to customer administrative delay and/or COVID-19 impact experienced by the customer.

However, we expect to see a ramp-up in

activities from certain of these new projects starting in the second quarter of 2022.

Treatment Segment revenue increased by $2,849,000

or 9.5% to $32,992,000 for the twelve months ended December 31, 2021 from $30,143,000 for the corresponding period of 2020.

Our Treatment

Segment revenue for the twelve months ended December 31, 2021 included approximately $1,286,000 recognized in the third quarter of 2021

from a request for equitable adjustment (“REA”) resulting from certain pricing provisions of a government related contract.

The increase in revenue within our Treatment Segment in 2021 was also attributed to higher waste volume from commercial waste generators.

Despite the increase in our Treatment Segment revenue, our Treatment Segment revenue has not returned to pre-pandemic level and has continued

to be impacted by delays in waste shipments from certain customers resulting from the shutdown of waste generating activities in

the field due to slow return-to-work schedules from the impact of COVID-19 since the start of the pandemic.

However, we expect

to see a gradual return in waste receipts from these customers starting in the second quarter of 2022.

Additionally, delayed delivery

of a new technology waste processing unit by our supplier due to supply chain issue as discussed above also negatively impacted our revenue

as processing of associated revenue did not occur.

Gross profit decreased $9,069,000 or 57.1% primarily due to the revenue

decrease in the Services Segment.

Selling, General, and Administrative (“SG&A”) expenses increased by approximately $1,071,000

or 9.1% for the twelve months ended December 31, 2021 as compared to the corresponding period of 2020.

previously disclosed, our Medical Segment business, conducted through our majority-owned Polish subsidiary, Perma-Fix Medical S.A (“PFM

Poland”), and PFM Poland’s wholly-owned subsidiary, Perma-Fix Medical Corporation, a Delaware corporation (“PFMC”),

had not generated any revenue and had substantially reduced R&D activities of our medical isotope production technology due to the

need for capital to fund these activities.

During December 2021, we made the strategic decision to cease all R&D activities under

the Medical Segment and sold 100% of our interest in PFM Poland for a nominal amount.

As a condition precent to the sale of PFM Poland,

we acquired PFMC after its conversion to a Delaware limited liability company.

Additionally, as further condition precedent to the sale

of PFM Poland, we released PFM Poland from unsatisfied trade payables owed by PFM Poland to us totaling approximately $2,537,000 (USD).

As a result of the sale of PFM Poland, we deconsolidated the entity from our consolidated financial statements and recorded a non-cash

“Loss on deconsolidation of subsidiary” of approximately $1,062,000 on our Consolidated Statement of Operations for the year

ended December 31, 2021.

and Other Impacts

2022 financial results continued to be impacted by COVID-19, among other things.

Our Treatment Segment began to see steady improvements

in waste receipts starting in the second quarter of 2022 from certain customers who had previously delayed waste shipments due, in part,

from the impact of COVID-19 which is reflective of our Treatment Segment’s backlog of approximately $9,156,000 at December 31,

2022, an increase of approximately $2,027,000 from the balance of $7,129,000 at December 31, 2021.

This positive trend was negatively

impacted by occurrences of severe weather conditions which contributed to temporary delays in waste shipments from certain customers

and a temporary shortage in skilled production personnel which peaked through the fourth quarter of 2022 at one of our facilities.

early part of 2022, our Services Segment continued to experience delays/curtailments in project work by certain customers since the award

of projects to us late in the second quarter of 2021 due to COVID-19 impact and/or administrative delays.

However, starting in the second

quarter of 2022, work under these projects had resumed/increased as the pandemic impacts began to subside and has since reached full

operational status.

2022, we continued to realize delays in procurement and planning on behalf of our government clients that saw easing through the second

half of the year.

Heading into 2023, we expect to see continued improvements in waste receipts and continued increases in project work

from contracts recently won and bids submitted in both segments that are awaiting awards, subject to potential impact of COVID-19 and

economic impacts.

Liquidity Overview

believe we have sufficient liquidity on hand to continue business operations during the next twelve months.

At December 31, 2022, we

had borrowing availability under our revolving credit facility of approximately $4,290,000 which was based on a percentage of eligible

receivables and subject to certain reserves.

Our borrowing availability of $4,290,000 at December 31, 2022 included a requirement from

our lender that we maintain a minimum of $3,000,000 in borrowing availability.

As a result of an amendment to our Loan Agreement that

we entered into with our lender in March 2023, we are required to continue to maintain a minimum of $3,000,000 in borrowing availability

under our revolving credit until the minimum FCCR requirement for the quarter ended June 30, 2023 has been met and certified to our lender

(see “Financing Activities” within this MD&A for a discussion of this amendment).

We continue to assess ways to improve

our liquidity and the need in reducing operating costs during this volatile time.

Reducing operating costs may include curtailing certain

capital expenditures and eliminating non-essential expenditures.

We continue to closely monitor any potential impact from the countries’

economic conditions and COVID-19 pandemic on all aspects of our business.

we believe we have sufficient liquidity to support our operations over the next twelve months, due to losses incurred in 2022 and our

lender requiring us to maintain a minimum borrowing availability of $3,000,000 as discussed above, we are working toward improving our

liquidity by either amending our existing lines of credit, obtaining new term loans or entering into equity transactions.

assurances that we will be successful in increasing our liquidity through these efforts.

decreased by $1,592,000 or 2.2% to $70,599,000 for the twelve-month ended December 31, 2022 from $72,191,000 for the corresponding period

The decrease was entirely within our Services Segment where revenue decreased by $1,958,000 or 5.0% to $37,241,000 from $39,199,000.

As previously disclosed, work under certain of the new projects awarded to our Services Segment at the end of the second quarter of 2021

continued to be delayed/curtailed into most of the first quarter of 2022 due to COVID-19 impact and/or administrative delays experienced

by certain customers.

However, work under these projects resumed/increased starting in the second quarter of 2022 and has since reached

full operational status.

The lower revenue in 2022 was further exacerbated by the completion of a large project in the second quarter

of 2021 which was not replaced with a similar size contract because of delays in contract awards and procurement from COVID-19 impact

which continued into the first half of 2022 and eased through the second half of 2022.

Our Treatment Segment revenue increased by $366,000

or 1.1% primarily due to overall higher waste volume which was offset by lower averaged price waste due to revenue mix.

above, our Treatment Segment began to see steady improvements in waste receipts starting in the second quarter of 2022 from certain customers

who had previously delayed waste shipments due, in part, from the impact of COVID-19.

This positive trend was negatively impacted by

occurrences of severe weather conditions which resulted in temporary delays in waste shipments from certain customers and a temporary

shortage in skilled production personnel which peaked through the fourth quarter of 2022 at one of our facilities.

gross profit for 2022 increased $2,785,000 or 40.8%.

The increase was entirely from our Services Segment due to higher margin projects.

The decrease in Treatment Segment gross profit was impacted by overall lower averaged price waste from revenue mix and the impact of

the increase in fixed costs.

SG&A expenses increased by approximately $1,807,000 or 14.1% for the year ended December 31, 2022 as

compared to the corresponding period of 2021.

the third quarter of 2022, we recorded approximately $1,975,000 in other income and other receivables (within current assets in our Consolidated

Balance Sheets), which represent an employee retention credit that we are eligible for under the Coronavirus Aid, Relief, and Economic

Security Act, as amended (the “CARES Act”) as result of the COVID-19 pandemic (see “Employee Retention Credit (“ERC”)”

within this MD&A for a discussion of this refund that we are expecting resulting from this tax credit).

Treatment and Services Segments’ business continues to be heavily dependent on services that we provide to governmental clients,

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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 for convenience at any time at the government’s

option, and our governmental contracts/task orders with the Canadian government authorities also allow the authorities to terminate the

contract/task orders at any time for convenience.

Our work under contracts/task order agreements with Canadian government authorities

has substantially been completed.

See “Known Trends

and Uncertainties – Perma-Fix Canada, Inc.

(“PF Canada”)” for additional discussion as to a terminated Canadian

task order agreement.

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

sites, and/or potential further impact from COVID-19.

In addition, our governmental contracts and subcontracts relating to activities

at governmental sites in the United States are generally subject to termination for convenience at any time at the government’s

option, and our governmental contracts/TOAs with the Canadian government authorities also allow the authorities to terminate the contract/task

orders at any time for convenience.

Work under all of our contracts/TOAs with Canadian government authorities has substantially been

A significant account receivable due to PF Canada is subject to continuing negotiations.

See “Known Trends and Uncertainties

– Perma-Fix Canada, Inc.

(“PF Canada”)” within this MD&A for additional discussion as to a terminated Canadian

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.

are continually reviewing methods to raise additional capital to supplement our liquidity requirements, when needed, and reducing our

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of Operations

reporting of financial results and pertinent discussions are tailored to our three reportable segments:

reporting of financial results and pertinent discussions are tailored to our two reportable segments:

The Treatment Segment (“Treatment”)

the Services Segment (“Services”), and the Medical Segment (“Medical”) (see “PF Medical” above for

a discussion of the cease of all R&D activities under the Medical Segment and the sale of 100% of PFM Poland which comprises the

Medical Segment).

and the Services Segment (“Services”).

Our financial results for 2021 also included our Medical Segments.

As previously disclosed,

we made the strategic decision to cease all R&D activities under the Medical Segment and sold 100% of our interest in Perma-Fix Medical

(“PFM Poland” - which comprised the Medical Segment) in December 2021.

Our Medical Segment had not generated any revenue

and was involved in our medical isotope production technology.

All costs previously incurred by the Medical Segment were included within

- Years Ended December 31, 2022 and 2021

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Loss on disposal of property and equipment

(Loss) income from operations

Loss from operations

Interest income

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Interest expense – financing fees

Gain (Loss) on extinguishment of debt

Other income (expense)

Gain on extinguishment of debt

Loss on deconsolidation of subsidiary

(Loss) income from continuing operations before taxes

Loss from continuing operations before taxes

Income tax benefit

Income from continuing operations

(Loss) income from continuing operations

revenues decreased $1,592,000 for the year ended December 31, 2022 compared to the year ended December 31, 2021, as follows:

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2021, respectively.

Treatment Segment revenue increased $2,849,000

or 9.5% for the twelve months ended December 31, 2021 over the same period in 2020.

The increase in Other nuclear waste was attributed

to higher waste volume from commercial waste generators as our Treatment Segment continues its efforts to expand into the commercial

market domestically and internationally.

Revenue from government waste generators for the twelve months ended December 31, 2021 included

approximately $1,286,000 recognized in the third quarter of 2021 from a REA resulting

from certain pricing provisions of a contract.

In 2021, revenue from government waste generators within our Treatment Segment continued

to be impacted by delayed waste shipment from certain customers due to the impact of COVID-19.

However, we expect to see a gradual return

in waste receipts from these customers starting in the second quarter of 2022.

As previously discussed,

the delay in deployment of our new waste processing technology unit due to supply chain constraint also negatively impacted our Treatment

Segment revenue in 2021.

Services Segment revenue decreased $36,084,000 or 47.9% for the twelve months ended December

31, 2021 over the same period in 2020.

As previously disclosed, our Services Segment revenue for the first half of 2021 was impacted

primarily by delays in procurement actions and contract awards resulting from the impact of COVID-19 and the completion of a certain

large contract in the second quarter of 2021 and the near completion of a certain other project.

Since the end of the second quarter

of 2021, our Services Segment was awarded a number of new contracts.

However, due to COVID-19 impact and/or administrative delay by the

customer under certain of these new awards, our Services Segment revenue was impacted by temporary curtailment/delay in work under certain

of these new projects.

Our Services Segment expects to see a ramp- up of activities from certain of these new projects starting

in the second quarter of 2022.

Segment revenue increased by $366,000 or 1.1% for the twelve months ended December 31, 2022 over the same period in 2021.

increase was primarily due to higher waste volume as certain customers who had previously delayed waste shipments due to COVID-19 resumed

steady waste shipments starting in the latter part of the second quarter.

This positive trend was negatively impacted by occurrences

of severe weather conditions which resulted in temporary delays in waste shipments from certain customers and a temporary shortage in

skilled production personnel which peaked through the fourth quarter of 2022 at one of our facilities.

The higher revenue from higher

waste volume was offset by lower averaged price waste from revenue mix.

Services Segment revenue decreased by approximately $1,958,000

As previously disclosed, work under certain of the new projects awarded to our Services Segment at the end of the second quarter

of 2021 continued to be delayed/curtailed into most of the first quarter of 2022 due to COVID-19 impact and/or administrative delays

experienced by certain customers.

However, since the second quarter of 2022, work under these projects had resumed/increased and has

since reached full operational status.

The lower revenue in 2022 was further exacerbated by the completion of a large project in the

second quarter of 2021 which was not replaced with a similar size contract because of delays in contract awards and procurement from

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.

as such, the scope, duration and completion of each project vary.

our Services Segment revenues are subject to differences relating to timing and project value.

In 2022, our Segments continued to realize

delays in procurement and planning on behalf of our government clients which did not ease until the second half of 2022.

of Goods Sold

of goods sold decreased $24,166,000 for the year ended December 31, 2021, as compared to the year ended December 31, 2020, as

of goods sold decreased $4,377,000 for the year ended December 31, 2022, as compared to the year ended December 31, 2021, as follows:

(In thousands)

Cost of goods sold for the Treatment

Segment increased by approximately $1,622,000 or 6.6%.

Treatment Segment’s variable costs increased by approximately $894,000 primarily

in disposal, transportation, material and supplies and lab services.

Treatment Segment’s overall fixed costs were higher by approximately

$728,000 resulting from the following:

general expenses were higher by $235,000 in various categories;

salaries and payroll related expenses

were higher by approximately $430,000;

depreciation expenses were higher by approximately $100,000;

regulatory expenses were higher by

approximately $64,000;

travel expenses were higher by approximately $14,000;

and maintenance expenses were lower by $115,000.

Segment cost of goods sold decreased $25,788,000 or 39.7% primarily due to lower revenue.

The decrease in cost of goods

sold was primarily due to lower salaries/payroll related, travel, and outside services expenses totaling approximately $22,680,000

with the remaining lower costs in material and supplies, disposal, regulatory, and general expenses.

Included within cost of goods

sold is depreciation and amortization expense of $1,654,000 and $1,555,000 for the twelve months ended December 31, 2021, and 2020, respectively.

profit for the year ended December 31, 2021 was $9,069,000 lower than 2020 as follows:

of goods sold for the Treatment Segment increased by approximately $1,841,000 or 7.0%.

Treatment Segment’s variable costs increased

by approximately $607,000 primarily due to higher material and supplies, transportation, and outside services costs.

Treatment Segment’s

overall fixed costs were higher by approximately $1,234,000 resulting from the following:

general expenses were higher by $483,000 primarily

due to higher utility costs;

depreciation expenses were higher by approximately $392,000 due to depreciation for asset retirement obligations

in connection with our EWOC facility;

regulatory expenses were higher by approximately $232,000 primarily due to additional closure costs

recorded for our EWOC facility due to change in estimated costs;

maintenance costs were higher by approximately $109,000;

payroll related expenses were higher by $61,000;

and travel expenses were lower by approximately $43,000.

Services Segment cost of goods

sold decreased $6,218,000 or 15.9% primarily due to lower revenue.

The decrease in cost of goods sold was primarily due to lower salaries/payroll

related, outside services, material and supplies and travel costs totaling approximately $6,863,000 which was offset by higher disposal,

transportation and general expenses totaling approximately $645,000.

Included within cost of goods sold is depreciation and amortization

expense of $2,027,000 and $1,654,000 for the twelve months ended December 31, 2022, and 2021, respectively.

profit for the year ended December 31, 2022 was $2,785,000 higher than 2021 as follows:

(In thousands)

Segment gross profit increased by $1,227,000 or 22.3% and gross margin increased to 20.4% from 18.2% primarily due to higher revenue

from the REA as discussed above.

The decrease in gross profit and gross margin in the Services Segment was primarily due to lower revenue

from fewer projects and overall lower margin projects.

Our overall Services Segment gross margin is impacted by our current projects

which are competitively bid on and will therefore, have varying margin structures.

Segment gross profit decreased by $1,475,000 or approximately 22.0% and gross margin decreased to 15.7% from 20.4% primarily due to lower

averaged price waste from revenue mix and the impact of the increase in fixed costs.

Services Segment gross profit increased by $4,260,000

or 4,018.9% and gross margin increased to 11.7% from 0.3% primarily due to higher margin projects.

Our overall Services Segment gross

margin is impacted by our current projects which are competitively bid on and will therefore, have varying margin structures.

expenses increased $1,807,000 for the year ended December 31, 2022 as compared to the corresponding period for 2021 as follows:

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SG&A expenses were higher primarily due to the following:

director fees were higher by approximately $250,000 resulting from one

additional director and fee increases that went into effect January 1, 2021;

outside services expenses were higher by approximately $41,000

resulting from more consulting/subcontract matters;

and salaries and payroll related expenses were lower by approximately $77,000 primarily

due to lower expenses related to our incentive plans and forfeiture of 401(k) plan matching funds contributed by us for former employees

which failed to meet the 401(k) plan vesting requirements, offset by higher salaries and other payroll related expenses.

overall outside services expenses were higher by approximately $654,000

resulting from higher consulting/outside services/audit fees;

travel expenses were higher by approximately $19,000;

general expenses

were higher by approximately $13,000 in various categories;

and salaries and payroll related expenses were higher by approximately $445,000

primarily due to higher stock-based compensation expenses from options granted to certain employees in October 2021 and higher 401(k)

plan matching expenses as our payroll expenses in 2021 included more forfeitures of 401(k) plan matching funds contributed by us for

former employees who failed to meet the 401(k) plan vesting requirements.

Additionally, Administrative salaries and payroll related expenses

were higher as in 2021, resources were allocated in supporting Medical Segment’s R&D/administrative functions.

Treatment Segment

SG&A expenses were higher due to the following:

salaries and payroll related expenses were higher by approximately $255,000 as in

2020 more of the resources were supporting a large Services Segment project;

outside services expenses were higher by approximately $49,000

resulting from more consulting/subcontract matters;

and general expenses were lower by $93,000 in various categories.

The increase in

SG&A expenses within our Services Segment was primarily due to the following:

SG&A expenses were higher primarily due to the following:

outside services expense were higher by $120,000 due to more consulting/business

matters (including our ESG initiatives);

salaries and payroll related expenses were higher by $46,000;

approximately $287,000 primarily due to increased resources for bid and proposals;

outside services expenses were higher by approximately

$178,000 due to more consulting matters related to bid and proposals;

bad debt expenses were higher by approximately $80,000 as in the

first quarter of 2020, certain customer accounts which had previously been reserved for were collected;

travel expenses were higher by

and general expenses were higher by $81,000 in various categories.

Included in SG&A expenses is depreciation and amortization

expense of $33,000 and $41,000 for the twelve months ended December 31, 2021 and 2020, respectively.

approximately $59,000;

and general expenses were higher by $164,000 which included higher tradeshow expenses and various other categories.

The increase in SG&A expenses within our Services Segment was primarily due to the following:

travel expenses were higher by $32,000;

general expenses were higher by approximately $107,000 which included higher tradeshow expenses and various other categories;

salaries/payroll

related and consulting expenses were higher by approximately $202,000, and credit loss expense on accounts receivable was lower by approximately

Included in SG&A expenses is depreciation and amortization expense of $82,000 and $33,000 for the twelve months ended December

31, 2022 and 2021, respectively.

expenses decreased $410,000 for the year ended December 31, 2022 as compared to the corresponding period of 2021 as follows:

(In thousands)

Administrative

and development 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.

Medical” above for a discussion of the strategic decision made by us to cease all R&D activities under the Medical Segment

during the fourth quarter of 2021.

income decreased by approximately $114,000 for the twelve months ended December 31 2021 as compared to the corresponding period of 2020

primarily due to lower interest earned from our finite risk sinking fund.

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.

The decrease was primarily

the result of the sale of PFM Poland in December 2021 which comprised of our Medical Segment and which previously was involved in the

R&D of our medical isotope technology.

income increased by approximately $73,000 for the twelve months ended December 31 2022 as compared to the corresponding period of 2021

primarily due to higher interest earned from our finite risk sinking fund.

expense decreased by approximately $72,000 for the twelve months ended December 31, 2022 as compared to the corresponding period of 2021

primarily due to lower interest expense from our declining term loan balance outstanding.

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.

Expense- Financing Fees

expense-financing fees decreased by approximately $253,000 for the twelve months ended December 31, 2021 as compared to the corresponding

period 2020 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 Warrant as consideration for us receiving the $2,500,000 loan from Robert Ferguson dated

April 1, 2019.

regularly assess the likelihood that the deferred tax asset will be recovered from future taxable income.

We consider projected future

taxable income and ongoing tax planning strategies, then record a valuation allowance to reduce the carrying value of the net deferred

income taxes to an amount that is more likely than not to be realized.

For the year ended December 31, 2020, we maintained a full valuation

allowance against net deferred income tax assets because insufficient evidence existed to support the realization of any future income

tax benefits.

Since the end of the second quarter of 2021, however, we entered into a number of new contracts awarded to the Company’s

Services Segment (including a contract award with a value of approximately $40,000,000 for the decommissioning of a navy ship).

result of these new contracts, we expected future profitability and improved overall prospects of future business.

as of September 30, 2021, we determined that it was more likely than not that we would be able to realize a portion of the deferred

income tax assets.

As a result, a deferred income tax benefit in the amount of approximately $2,351,000 attributable to the valuation

allowance release on beginning of year deferred tax assets primarily related to U.S.

Federal income taxes was realized in the three months

ended September 30, 2021.

We continue to maintain a valuation allowance against certain state and foreign tax attributes that may not

be realizable along with the capital loss carryover generated during 2021 that we do not expect to realize.

Also, interest expense for the first six months

of 2021 included interest accrued for our Paycheck Protection Program (“PPP”) Loan which was forgiven by the U.S.

Small Business

Administration (“SBA”) effective June 15, 2021.

The overall lower interest expense was offset by monthly interest incurred

starting in June of 2022 from the capital line under our credit facility.

had income tax benefits of $378,000 and $3,890,000 for continuing operations for the twelve months ended December 31, 2022 and 2021,

respectively.

Our effective tax rates were approximately 139.0% and (6.4%) for the twelve months ended December 31, 2021

and 2020, respectively.

Our effective tax rate for the twelve months ended December 31, 2021 was substantially impacted by the release

of valuation allowance as discussed above.

Our tax rate for the twelve months ended December 31, 2020 was impacted by the full valuation

on our net deferred tax assets.

For the twelve months ended December 31, 2021, the primary reasons for the differences between our effective

tax rate and statutory tax rate were due to the aforementioned release of valuation allowance and the forgiveness of our PPP Loan which

is included in our Consolidated Statement of Operations as “Gain on extinguishment of debt” but is exempt from income taxes.

Our effective tax rates were approximately 10.5% and 139.0% for the twelve months ended December 31, 2022 and 2021, respectively.

Our effective tax rates for the twelve months ended December 31, 2022 were impacted by non-deductible expenses and state taxes.

Our effective

tax rate for the twelve months ended December 31, 2021 was substantially impacted by the release of our valuation allowance on deferred

tax assets primarily related to U.S.

Federal income taxes during the third quarter of 2021 of approximately $2,351,000.

For the twelve

months ended December 31, 2021, the primary reasons for the differences between our effective tax rate and statutory tax rate were due

to the release of valuation allowance and the forgiveness of our PPP Loan which was included in our Consolidated Statement of Operations

as “Gain on extinguishment of debt” but is exempt from income taxes.

Treatment Segment maintains a backlog of stored waste, which represents waste that has not been processed.

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We incurred net losses of $605,000 (net

of tax benefit of $139,000) and $412,000 (net of tax expense of $0) for our discontinued operations for the twelve months ended December

31, 2021 and 2020, respectively.

We have three environmental remediation projects, all within our discontinued operations, which principally

entail the removal/remediation of contaminated soil, and, in most cases, the remediation of surrounding ground water.

Our loss for fiscal

year 2021 within our discontinued operations included an increase of $100,000 made to the remediation reserve for our PFSG subsidiary

due to reassessment of the reserve.

See a discussion of the environmental reserves and the related liabilities in “Part II - Item

8 – Financial Statements and Supplementary Data – Notes to Consolidate Financial Statements – Note 9 – Discontinued

Operations – Environmental Liabilities.”

of tax benefit of $199,000) and $421,000 (net of tax benefit of $139,000) for our discontinued operations for the twelve months ended

December 31, 2022 and 2021, respectively.

The increase in net losses in 2022 as compared to 2021 was primarily due to costs incurred

in connection with management of administrative and regulatory matters within our discontinued operations.

We have three environmental

remediation projects, all within our discontinued operations, which principally entail the removal/remediation of contaminated soil,

and, in most cases, the remediation of surrounding ground water.

and Capital Resources

cash flow requirements during the twelve months ended December 31, 2021 were primarily financed by our operations, credit facility availability

and an equity raise that was consummated at the end of the third quarter of 2021 which we received gross proceeds of approximately $6,200,000

from subscription agreements that we entered into with certain institutional and retail investors for the sale and issuance of 1,000,000

shares of our Common Stock in a registered direct offering (see “Financing Activities” below for additional information on

this equity raise).

At December 31, 2021, we had cash on hand of approximately $4,440,000.

As previously disclosed, we have ceased all

R&D activities under our Medical Segment and sold our majority-owned subsidiary, PFM Poland.

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, and cash on hand.

We are continually reviewing operating

costs and reviewing the possibility of further reducing operating costs and non-essential expenditures to bring them in line with revenue

cash flow requirements during the twelve months ended December 31, 2022 were primarily financed by our operations, cash on hand and

credit facility availability.

Subject to COVID-19 and other impacts 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, cash on hand and a refund that we expect to receive under the ERC program under the CARES Act (see a discussion of

this expected refund below – “Employee Retention Credit (“ERC”)”).

We continue to explore all sources

of increasing our capital and/or liquidity and to improve our revenue and working capital (see our discussion contained in this

“MD&A – Liquidity Overview” above for further discussion as to liquidity.

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.

to the uncertainty of COVID-19, there are no assurances such will be the case.

See discussion under “Liquidity and Capital

Resources – Investing Activities” as to potential funding of an investment under the joint venture term sheet.

At this time, we believe that our cash flows from operations, our available liquidity from our credit

facility, our cash on hand and the expected refund from the ERC program should be sufficient to fund our operations for the next

twelve months.

However, due to the uncertainty of the countries’ current economic environment and the COVID-19 as disclosed in

“COVID-19 and Other Impacts” within this MD&A, there are no assurances such will be the case.

following table reflects the cash flow activity for the year ended December 31, 2022 and the corresponding period of 2021:

(In thousands)

Cash (used in) provided by operating activities of continuing operations

Cash provided by (used in) operating activities of continuing operations

Cash used in operating activities of discontinued operations

Cash used in investing activities of continuing operations

Cash provided by investing activities of discontinued operations

Cash provided by financing activities of continuing operations

Cash (used in) provided by financing activities of continuing operations

Effect of exchange rate changes on cash

(Decrease) increase in cash and finite risk sinking fund (restricted cash)

Decrease in cash and finite risk sinking fund (restricted cash)

December 31, 2022, we were in a positive cash position with no revolving credit balance.

At December 31, 2022, we had cash on hand of

approximately $4,440,000, which includes account balances of our foreign subsidiaries totaling approximately $26,000.

Accounts receivable, net of allowances

for doubtful accounts, totaled $11,372,000 at December 31, 2021, an increase of $1,713,000 from the December 31, 2020 balance

of $9,659,000.

The increase was primarily due to timing of accounts receivable collection and timing of invoicing.

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.

Unbilled receivables totaled $8,995,000

at December 31, 2021, a decrease of $5,458,000 from the December 31, 2020 balance of $14,453,000.

The decrease in unbilled

receivables was primarily within our Services Segment due to invoicing and collection of accounts receivable on certain large projects

which have been completed or are near completion.

Accounts payable, totaled $11,975,000

at December 31, 2021, a decrease of $3,407,000 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 $4,060,000

(which included working capital of our discontinued operations) at December 31, 2021, as compared to working capital of $3,672,000

at December 31, 2020.

Our working capital was positively impacted by the forgiveness of the entire balance of our Paycheck Protection

Program (“PPP”) Loan, along with accrued interest, by the U.S.

Small Business Administration (“SBA”) effective

June 15, 2021 (see “CARES Act – PPP Loan” for information on this loan”) and the proceeds that we received from

subscription agreements that we entered into with certain institutional and retail investors, for the sale and issuance of 1,000,000

shares of our Common Stock in a registered direct offering (see “Financing Activities” below for a discussion of this direct

The positive impact was reduced by our results of operations which were heavily impacted from COVID-19 as discussed above.

2021, our purchases of capital equipment totaled approximately $2,162,000, of which $585,000 was subject to financing, with the

remaining funded from cash from operations and our credit facility.

We have budgeted approximately $2,000,000 for 2022 capital expenditures

primarily for our Treatment and Services Segments to maintain operations and regulatory compliance requirements and support revenue growth.

Certain of these budgeted projects may either be delayed until later years or deferred altogether.

We plan to fund our capital expenditures

from cash from operations and/or financing.

The initiation and timing of projects are also determined by financing alternatives or funds

available for such capital projects.

During March 2022, we signed a

joint venture term sheet addressing plans to partner with Springfields Fuels Limited (“SFL”), an affiliate of Westinghouse

Electric Company LLC, to develop and manage a nuclear waste-materials treatment facility (the “Facility”) in the United Kingdom.

The Facility is for the purpose of expanding the partners’ waste treatment capabilities for the European nuclear market.

expected that upon finalization of a partnership agreement, SFL will have an ownership interest of fifty-five (55) percent and our interest

will be forty-five (45) percent.

The finalization, form and capitalization of this unpopulated partnership is subject to numerous conditions,

including but not limited to, completion and execution of a definitive agreement and facility design and the granting of required regulatory,

lender or permitting approvals.

Upon finalization of this venture, we will be required to make an investment in this venture.

of our investment, the period of which it is to be made and the method of funding are to be determined.

entered into a Second Amended and Restated Revolving Credit, Term Loan and Security Agreement, dated May 8, 2020 (“Loan Agreement”),

approximately $1,866,000.

receivable, net of credit losses, totaled $9,364,000 at December 31, 2022, a decrease of $2,008,000 from the December

31, 2021 balance of $11,372,000.

The decrease was attributed to timing of invoicing and accounts receivable collection.

Our contracts with our customers are subject to various payment terms and conditions.

Additionally, our contracts with our customers

may sometimes result in modifications which can cause delays in collections.

Our accounts receivable at December 31, 2022 include invoices

for work performed which previously was in our unbilled account for a certain Canadian project that remain outstanding and subject to

negotiations (see unbilled receivables discussion below).

See discussion under “Known Trends and Uncertainties – Perma-Fix

(“PF Canada”)” for a discussion as to this certain account receivable.

receivables totaled $6,062,000 at December 31, 2022, a decrease of $2,933,000 from the December 31, 2021 balance of $8,995,000.

in unbilled receivables was primarily within our Services Segment due to invoicing in connection with our Canadian projects.

payable, totaled $10,325,000 at December 31, 2022, a decrease of $1,650,000 from the December 31, 2021 balance of $11,975,000.

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.

had working capital of $818,000 (which included working capital of our discontinued operations) at December 31, 2022, as compared to

working capital of $4,060,000 at December 31, 2021.

Our working capital was negatively impacted primarily by our results of operations

which were heavily impacted from COVID-19 and other delays as discussed previously, especially in the first quarter of 2022.

capital was positively impacted by the employee retention credit in the amount of approximately $1,975,000 recorded as current receivables

(within “Prepaid and other assets” on our Consolidated Balance Sheets.

See a discussion of this credit below “Employee

Retention Credit (“ERC”)”).

2022, our purchases of capital equipment totaled approximately $1,137,000, of which $114,000 was subject to financing, with the remaining

funded from cash from operations and our credit facility.

We have budgeted approximately $2,000,000 for 2023 capital expenditures primarily

for our Treatment and Services Segments to maintain operations and regulatory compliance requirements and support revenue growth.

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.

March 2022, we signed a joint venture term sheet addressing plans to partner with Springfields Fuels Limited (“SFL”), an

affiliate of Westinghouse Electric Company LLC, to develop and manage a nuclear waste-materials treatment facility (the “Facility”)

in the United Kingdom.

The Facility is for the purpose of expanding the partners’ waste treatment capabilities for the European

nuclear market.

It is expected that upon finalization of a partnership agreement, SFL will have an ownership interest of fifty-five (55)

percent and our interest will be forty-five (45) percent.

The finalization, form and capitalization of this unpopulated partnership is

subject to numerous conditions, including but not limited to, winning a certain contract, completion and execution of a definitive agreement

and facility design, granting of required regulatory, lender or permitting approvals and updated cost and profitability analysis based

on current and forecast future economic conditions.

Upon finalization of this venture, we will be required to make an investment in this

The amount of our investment, the period of which it is to be made and the method of funding are to be determined.

entered into a Second Amended and Restated Revolving Credit, Term Loan and Security Agreement, dated May 8, 2020, (the “Loan Agreement”),

with PNC National Association (“PNC”), acting as agent and lender.

1 unchanged sentence

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 we can borrow

under the revolving credit is based on a percentage of eligible receivables (as defined) at any one time reduced by outstanding standby

letters of credit and borrowing reductions that our lender may impose from time to time.

2021, we entered into several amendments to our Loan Agreement with our lender, which provided the following, among other things:

our fixed charge coverage ratio (“FCCR”) calculation requirement which allows

for the add-back of approximately $5,318,000 in eligible expenses that were incurred and

covered by the PPP Loan that we received in 2020.

The add-back is to be applied retroactively

to the second and third quarters of 2020.

(see below for a discussion of the PPP Loan);

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

Only interest is payable on advances during the Borrowing Period (see annual

rate of interest below on the capital expenditure line).

At the end of the Borrowing Period,

the total amount advanced under the line will amortize equally based on a five-year amortization

(a) up to $18,000,000 revolving credit (“revolving credit”) (see discussion

below as to an amendment dated March 21, 2023 which reduced the revolving credit to $12,500,000) and (b) a term loan (“term loan”)

of approximately $1,742,000, requiring monthly installments of $35,547.

The maximum that we can borrow under the revolving credit is

based on a percentage of eligible receivables (as defined) at any one time reduced by outstanding standby letters of credit and borrowing

reductions that our lender may impose from time to time.

Our Loan Agreement, as amended (the “Amended Loan Agreement”), also

provides 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 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.

on the capital line has been made as of December 31, 2021.

our failure to meet the minimum quarterly FCCR requirement for the second quarter of 2021;

the quarterly FCCR testing requirement for the third quarter of 2021;

At the maturity date of the Amended Loan Agreement, any unpaid principal balance

plus interest, if any, will become due.

At the end of the Borrowing Period, advance on the capital line totaled approximately $524,000.

We are required to make monthly principal installment payment of approximately $8,700 starting June 1, 2022 plus interest.

31, 2022, balance on the capital line was approximately $463,000.

The advance made on the capital line was used to purchase the underlying

asset under a previous finance lease.

2022, we entered into further amendments to our Amended Loan Agreement with our lender, which provided the following, among other things

(with the amended terms set forth in a Revised Loan Agreement):

our failure to meet the minimum quarterly fixed charge coverage ratio (“FCCR”)

requirement for the fourth quarter of 2021 and second quarter of 2022;

the quarterly FCCR testing requirement for the first and third quarters of 2022;

the quarterly FCCR testing requirement starting for the fourth quarter of 2022 and revised

the methodology to be used in calculating the FCCR for the quarters ending December 31, 2021,

March 31, 2022, and June 30, 2022 (with no change to the minimum 1.15:1 ratio requirement

for each quarter);

the methodology in calculating the FCCR for the quarter ended December 31, 2022 and the methodology

to be used in calculating the FCCR for the quarter ending March 31, 2023 (with no change

to the minimum 1.15:1 ratio requirement for each quarter);

maintenance of a minimum of $3,000,000 in borrowing availability under the revolving credit

1 unchanged sentence

certified to the lender;

March 29, 2022, we entered into an amendment to our Loan Agreement with our lender which provided, among other things, the following:

our failure to meet the minimum quarterly FCCR requirement for the fourth quarter of 2021;

the quarterly FCCR testing requirement for the first quarter of 2022;

the quarterly FCCR testing requirement starting for the second quarter of 2022 and revises

the methodology to be used in calculating the FCCR for the quarters ending June 30, 2022,

September 30, 2022, and December 31, 2022 (with no change to the minimum 1.15:1 ratio requirement

for each quarter);

maintenance of a minimum of $3,000,000 in borrowing availability under the revolving credit

until the minimum FCCR requirement for the quarter ended June 30, 2022 has been met and certified

to the lender;

the annual rate used to calculate the Facility Fee (as defined in the Loan Agreement) on

2 unchanged sentences

Facility Fee rate of 0.375% will be reinstated;

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

to our Loan Agreement, as amended, payment of annual rate of interest due on the revolving credit is at prime (3.25% at December 31,

2021) plus 2% or London InterBank Offer Rate (“LIBOR”) plus 3.00% and the term loan and capital expenditure line 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.

may terminate our Loan Agreement, as amended, upon 90 days’ prior written notice upon payment in full of our obligations under

the Loan Agreement.

We agreed to pay PNC 1.0% of the total financing had we paid 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 Loan Agreement after May 7, 2022.

credit facility under our Loan Agreement, as amended, with PNC contains certain financial covenants, along with customary representations

certain additional anti-terrorism provisions to the covenants;

the London InterBank Offer Rate (“LIBOR”) based interest rate benchmark with

the Secured Overnight Finance Rate (“SOFR”).

As a result of this new provision,

payment of annual rate of interest due on the revolving credit is at prime (7.50% at December

31, 2022) plus 2% or Term SOFR Rate (as defined in the Revised Loan Agreement) plus 3.00%

plus an SOFR Adjustment applicable for an interest period selected by us and payment of annual

rate of interest due on the term loan and the capital expenditure line is at prime plus 2.50%

or Term SOFR Rate plus 3.50% plus an SOFR Adjustment applicable for an interest period selected

A SOFR Adjustment rates of 0.10% and 0.15% are applicable for a one-month interest

period and three-month period, respectively, that may be selected by us

connection with the amendments, we paid our lender fees totaling $30,000 which is being amortized over the remaining term of the Revised

Loan Agreement as interest expense-financing fees.

credit facility under our Revised Loan Agreement with PNC contains certain financial covenants, along with customary representations

and warranties.

2 unchanged sentences

to extend further credit.

We met our financial covenant requirements in the first quarter of 2021.

Our FCCR calculation in the first

quarter of 2021 included the add-back of approximately $5,318,000 in eligible expenses that were incurred and covered by the PPP Loan

that we received in 2020 as permitted by the amendment dated May 4, 2021 as discussed above.

We did not meet our FCCR requirement in

the second quarter of 2021;

however, this non-compliance was waived by our lender as discussed above.

Testing of our FCCR was not required

for the third quarter 2021 pursuant to the August 10, 2021 amendment to the Loan Agreement as discussed above.

We met our financial covenant

requirements for the fourth quarter of 2021, with the exception of our FCCR requirement;

however, this non-compliance of our FCCR requirement

was waived by our lender pursuant to an amendment to our Loan Agreement as discussed above.

Additionally, testing of the FCCR requirement

is not required for the first quarter of 2022 pursuant to this same amendment.

We expect to meet our quarterly financial covenant requirements

for the next twelve months under our Loan Agreement, subject to no FCCR testing requirement for the first quarter of 2022.

September 30, 2021, we entered into subscription agreements with certain institutional and retail investors, pursuant to which we sold

and issued, in a registered direct offering, an aggregate of 1,000,000 shares of our Common Stock, at a negotiated purchase price per

share of $6.20, for aggregate gross proceeds to us of approximately $6,200,000.

Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”)

April 14, 2020, we entered into a promissory note under the PPP with PNC, our credit facility lender, which had a balance of approximately

$5,318,000 (the “PPP Loan”).

The PPP was established under the CARES Act and is administered by the SBA.

The CARES Act was

subsequently amended by the Paycheck Protection Program Flexibility Act of 2020 (“Flexibility Act”).

Proceeds from the promissory

note was used by us for eligible payroll costs, mortgage interest, rent and utility costs as permitted under the Flexibility Act.

annual interest rate on the PPP Loan is 1.0%

October 5, 2020, we applied for forgiveness on repayment of the PPP Loan as permitted under the Flexibility Act.

On July 1, 2021, we

were notified by PNC that the entire balance of the PPP Loan of approximately $5,318,000, along with accrued interest of approximately

$63,000 was forgiven by the SBA, effective June 15, 2021.

Accordingly, we recorded the entire forgiven PPP Loan balance, along with accrued

interest, totaling approximately $5,381,000 as “Gain on extinguishment of debt” on our Consolidated Statement of Operations

for the year ended 2021.

of Employment Tax Deposits

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 were not required to perform testing of the FCCR requirement in the first and third quarters of 2022 pursuant

to the amendments that we entered with our lender in 2022 as discussed above.

Based on an amendment that we entered into with our lender

on March 21, 2023 as discussed below, we were not required to perform testing of the FCCR

requirement in the fourth quarter of 2022.

We failed to meet our FCCR requirement in the second quarter of 2022;

however, this non-compliance

was waived by our lender pursuant to an amendment that we entered into with our lender in 2022 as discussed above.

Other than the above

discussion pertaining to our FCCR requirements, we met all of our other financial covenant requirements in each of the quarters of 2022.

We expect to meet our quarterly financial covenant requirements for the next twelve months under our Amended Loan Agreement.

March 21, 2023, we entered into an amendment to our

Revised Loan Agreement with our lender which provides, among other things, the following:

the quarterly FCCR testing requirement for the fourth quarter of 2022 and removes the FCCR

testing requirement the first quarter of 2023;

the maximum revolving credit line under the credit facility from $18,000,000 to $12,500,000;

the quarterly FCCR testing requirement starting in the second quarter of 2023 using a trailing

twelve months period (with no change to the minimum 1.15:1 ratio requirement for each quarter);

maintenance of a minimum of $3,000,000 in borrowing availability under the revolving credit

until the minimum FCCR requirement for the quarter ended June 30, 2023 has been met and certified

to the lender.

connection with the amendment, the Company paid its lender a fee of $25,000.

this point on, we may terminate our Revised Loan Agreement upon 90 days’ prior written notice upon payment in full of our obligations

under the Revised Loan Agreement with no early termination fees.

Retention Credit (“ERC”)

CARES Act, which was enacted on March 27, 2020, provides an ERC for qualifying businesses keeping employees on their payroll during the

COVID-19 pandemic.

The ERC was subsequently amended by the Taxpayer Certainty and Disaster Tax Relief Act of 2020, the Consolidated Appropriation

Act of 2021, and the American Rescue Plan Act of 2021, all of which amended and extended the ERC availability and guidelines under the

Following these amendments, we determined that we were eligible for the ERC, and as a result of the foregoing legislations,

are eligible to claim a refundable tax credit against our share of certain payroll taxes equal to 70% of the qualified wages paid to

employees between July 1, 2021 and September 30, 2021.

Qualified wages are limited to $10,000 per employee per calendar quarter in 2021

for a maximum allowable ERC per employee of $7,000 per calendar quarter in 2021.

For purposes of the amended ERC, an eligible employer

is defined as having experienced a significant (20% or more) decline in gross receipts during one or more of the first three 2021 calendar

quarters when compared to 2019.

the third quarter of 2022, we determined we were eligible for the ERC and amended our third quarter 2021 employer payroll tax filings

claiming a refund from the U.S.

Treasury in the amount of approximately $1,975,000.

As there is no authoritative guidance under U.S.

GAAP on accounting for government assistance to for-profit business entities, we account for the ERC by analogy to International Accounting

Standard (“IAS”) 20, Accounting for Government Grants and Disclosure of Government Assistance.

In accordance with IAS 20,

management determined it has reasonable assurance for receipt of the ERC and recorded the expected refund as other income (within “Other

income (expense)”) on our Consolidated Statements of Operations and other receivables (within “Prepaid and other assets”)

on our Consolidated Balance Sheets.

of Deferred Employment Tax Deposits

CARES Act provided 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.

Our deferment of such taxes totaled approximately $1,252,000 of which approximately $626,000

$626,000 was paid in December 2021.

At December 31, 2021, the remaining $626,000 in deferred social security taxes was included in “Accrued

expenses” within current liabilities in our Consolidated Balance Sheets.

was paid in December 2021 with the remaining paid in December 2022 (previously included in “Accrued expenses” within current

liabilities in our Consolidated Balance Sheets).

Balance Sheet Arrangements

4 unchanged sentences

We also provide closure and post-closure

requirements through a financial assurance policy for certain of our Treatment Segment facilities through AIG.

At December 31, 2021,

the closure and post-closure requirements for these facilities were approximately $20,403,000.

requirements through a financial assurance policy for certain of our Treatment Segment facilities through American International Group,

At December 31, 2022, the closure and post-closure requirements for these facilities were approximately $21,175,000.

Accounting Policies and Estimates

27 unchanged sentences

indicate that the asset’s carrying value may not be recoverable.

future cash flow assumptions and conclusions with respect to asset impairments could be impacted by changes arising from (i) a sustained

period of economic and industrial slowdowns (ii) inability to scale our operations and implement cost reduction efforts during reduced

demand and/or (iii) a significant decline in our share price for a sustained period of time.

These factors, among others, could significantly

impact the impairment analysis and may result in future asset impairment charges that, if incurred, could have a material adverse effect

on our financial condition and results of operations.

We believe that the assumptions and estimates

utilized for the reporting periods are appropriate based on the information available to management.

Closure Costs and Asset Retirement Obligations (“ARO”).

7 unchanged sentences

technology, laws and regulations, and credit adjusted risk-free rate to be used.

This estimate is inflated, using an inflation rate,

to the expected time at which the closure will occur, and then discounted back, using a credit adjusted risk free rate, to the present

ARO’s are included within buildings as part of property and equipment and are depreciated over the estimated useful life

of the property.

In periods subsequent to initial measurement of the ARO, we must recognize period-to-period changes in the liability

resulting from the passage of time and revisions to either the timing or the amount of the original estimate of undiscounted cash flow.

Increases in the ARO liability due to passage of time impact net income as accretion expense and are included in cost of goods sold in

the Consolidated Statements of Operations.

Changes in the estimated future cash flows costs underlying the obligations (resulting from

changes or expansion at the facilities) require adjustment to the ARO liability calculated and are capitalized and charged as depreciation

expense, in accordance with our depreciation policy.

We develop estimates for the cost of these activities

based on our evaluation of site-specific facts and circumstances, such as the existence of structures and other improvements that would

need to be dismantled and the length of the post-closure period as determined by the applicable regulatory agency, among other things.

Included in our cost estimates are our interpretation of current regulatory requirements and any proposed regulatory changes.

estimates may change in the future due to various circumstances including, but not limited to, permit modifications, changes in legislation

or regulations, technological changes and results of environmental studies.

Our cost estimates are calculated using internal sources

as well as input from third-party experts.

This estimate is inflated, using an inflation rate, to the expected time at which the closure

will occur, and then discounted back, using a credit adjusted risk free rate, to the present value.

ARO’s are included within buildings

as part of property and equipment and are depreciated over the estimated useful life of the property.

In periods subsequent to initial

measurement of the ARO, we must recognize period-to-period changes in the liability resulting from the passage of time and revisions

to either the timing or the amount of the original estimate of undiscounted cash flow.

Increases in the ARO liability due to passage

of time impact net income as accretion expense and are included in cost of goods sold in the Consolidated Statements of Operations.

in the estimated future cash flows costs underlying the obligations (resulting from changes or expansion at the facilities) require adjustment

to the ARO liability calculated and are capitalized and charged as depreciation expense, in accordance with our depreciation policy.

Income Taxes.

The provision for income tax

is determined in accordance with ASC 740, “Income Taxes.” As part of the process of preparing our consolidated financial statements,

we are required to estimate our income taxes in each of the jurisdictions in which we operate.

We record this amount as a provision or

benefit for taxes .

This process involves estimating our actual current tax exposure, including assessing the risks associated with

tax audits, and assessing temporary differences resulting from different treatment of items for tax and accounting purposes.

These differences

result in deferred tax assets and liabilities.

We regularly review deferred tax assets by jurisdiction to assess their potential realization and establish

a valuation allowance for portions of such assets that we believe will not be realized.

In performing this review, we make estimates and

assumptions regarding projected future taxable income, the expected timing of the reversals of existing temporary differences and the

implementation of tax planning strategies.

A change in these assumptions could cause an increase or decrease to the valuation allowance

which could materially impact our results of operations.

Accounting Pronouncements

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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, COVID-19 impact, and the manner in which the government entity will be required to spend

funding to remediate various sites.

without limitation, the economic conditions, the manner in which the government entity will be required to spend funding to remediate

various sites, and potential COVID-19 impact.

In addition, our U.S.

governmental contracts and subcontracts relating to activities at governmental

sites are generally subject to termination for convenience at any time at the option of the government.

Our TOAs with the Canadian government

also provide that the government may terminate a TOA at any time for convenience (see below “Perma-Fix Canada, Inc.

Canada”)” below for a discussion of a notice of termination (“NOT”) that we received under a contract with a

Canadian government authority during the fourth quarter of 2021).

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.

governmental contracts and subcontracts relating to activities at

governmental sites are generally subject to termination for convenience at any time at the option of the government.

Our TOAs with the

Canadian government also provided that the government may terminate a TOA 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.

Our Treatment and Services Segments have significant relationships with the U.S governmental authorities through contracts

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performed services relating to waste generated by government clients (domestic and foreign (primarily Canadian)), either directly as

a prime contractor or indirectly for others as a subcontractor to government entities, representing approximately $60,812,000,

or 84.2%, of our total revenue during 2021, as compared to $96,582,000, or 91.6%, of our total revenue during 2020.

generated by us as a subcontractor to a customer for a remediation project performed for a government entity (the DOE) within our Services

Segment in 2021 and 2020 accounted for approximately $8,526,000 or 11.8% and $41,011,000 or 38.9% (included in revenue generated

relating to government clients above) of our total revenue for 2021 and 2020, respectively.

This remediation project included among other

things, decontamination support of a building.

This project was completed in the second quarter of 2021.

our revenues are project/event based where the completion of one contract with a specific customer may be replaced by another contract

with a different customer from year to year, we do not believe the loss of one specific customer from one year to the next will generally

have a material adverse effect on our operations and financial condition.

a prime contractor or indirectly for others as a subcontractor to government entities, representing approximately $60,030,000, or 85.0%,

of our total revenue during 2022, as compared to $60,812,000, or 84.2%, of our total revenue during 2021.

revenues are project/event based where the completion of one contract with a specific customer may be replaced by another contract with

a different customer from year to year.

(“PF Canada”)

During the fourth quarter of 2021, PF

Canada received a NOT from Canadian Nuclear Laboratories, LTD.

(“CNL”) on a TOA that PF Canada entered into with CNL in May

2019 for remediation work within Ontario, Canada.

The NOT was received after work under the TOA was substantially completed.

terminate the TOA at any time for convenience.

As of December 31, 2021, PF Canada has approximately $2,640,000 in unpaid receivables

and unbilled costs due from CNL as a result of work performed under the TOA.

the fourth quarter of 2021, PF Canada received a Notice of Termination (“NOT”) from Canadian Nuclear Laboratories, LTD.

on a Task Order Agreement (“TOA”) that PF Canada entered into with CNL in May 2019 for remediation work within Ontario, Canada

(“Agreement”).

The NOT was received after work under the TOA was substantially completed and work under the TOA has since

been completed.

CNL may terminate the TOA at any time for convenience.

As of December 31, 2022, PF Canada has approximately $1,853,000

in unpaid receivables due from CNL as a result of work performed under the TOA.

Additionally, CNL has approximately $1,060,000 in contractual

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CNL also established a bond securing approximately $1,900,000 (CAD) to cover certain

issue raised in connection with the TOA.

issues raised in connection with the TOA.

Under the TOA, CNL may be entitled to set off certain costs and expenses incurred by CNL in

connection with the termination of the TOA, including the bond as discussed above, against amounts owed to PF Canada for work

performed by PF Canada or its subcontractors.

PF Canada continues to be in discussions with CNL to finalize the amounts due to

PF Canada under the TOA and continues to believes these amounts are due and payable.

See “COVID-19 Impact” within this MD&A for a discussion of the impact of COVID-19 on our 2021 financial results

and the potential impact it may have to our future financial results and business operations.

connection with the termination of the TOA, including the bond as discussed above, against amounts owed to PF Canada for work performed

by PF Canada or its subcontractors.

PF Canada continues to be in discussions with CNL to finalize the amounts due to PF Canada under

the TOA and continues to believe these amounts are due and payable to PF Canada.

We use various commercially available materials and supplies which include among other things chemicals, containers/drums

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Our equipment may be obtained through direct purchase, rental option or leases.

Within our Services Segment,

equipment required for projects are often provided by our subcontractors as part of our contract agreement with the subcontractor.

to some of our specialized waste treatment processes, certain equipment that we utilize are designed and built to our specifications.

We rely on various commercial equipment suppliers for the construction of these equipment.

Due to recent supply chain constraints, we

experienced a delay in the delivery of a new waste processing unit to us by our supplier due to shortage of parts required for the construction

of the unit, among other things.

Delivery of this unit was expected during the third quarter of 2021 but did not occur until the first

quarter of 2022.

The supply chain interruption delayed deployment of our new technology which negatively impacted our revenue for 2021

as associated revenue was not able to be generated.

Continued increases in pricing and/or potential delays in procurements of material

and supplies and equipment required for our operations resulting from further tightening supply chain could further adversely affect

our operations and profitability.

Partnership with Springfields Fuels Limited.

As discussed above, we have signed a term sheet addressing plans to partner with Springfields

Fuels Limited, an affiliate of Westinghouse Electric Company LLC, to develop and manage a nuclear waste-materials treatment facility

in the United Kingdom.

See “Liquidity and Capital Resources – Investing Activities” of this MD&A for a discussion

of this transaction.

Due to some of our specialized

waste treatment processes, certain equipment that we utilize are designed and built to our specifications.

We rely on various commercial

equipment suppliers for the construction of these equipment.

Due to supply chain challenges, we previously experienced a delay in the

delivery of a new waste processing unit to us by our supplier due to shortage of parts required for the construction of the unit, among

other things, This supply chain interruption delayed deployment of our new technology which negatively impacted our revenue for 2021

and the first quarter of 2022 as associated revenue was not able to be generated.

Deployment of this unit commenced in mid-May of 2022.

Continued increases in pricing and/or potential delays in procurements of material and supplies and equipment required for our operations

resulting from further tightening supply chain could further adversely affect our operations and profitability.

and Cost Increases.

Continued increases in any of our operating costs, including changes in fuel prices (which impacts our transportation

costs), wage rates, supplies, and utility costs, may increase our overall cost of goods sold or operating expenses.

These cost increases

may be the result of inflationary pressures that could further reduce profitability.

Competitive pressures in our industry may have the

effect of inhibiting our ability to reflect these increased costs in the prices of our services that we provide to our customers and

therefore reduce our profitability.

Continued increases in any of our operating costs, including further changes in fuel prices, wage rates, supplies,

and utility costs, may further increase our overall cost of goods sold or operating expenses.

Some of these cost increases have been

the result of inflationary pressures that could further reduce profitability.

We may attempt to increase our sales prices in order to

maintain satisfactory margin;

however, competitive pressures in our industry may have the effect of inhibiting our ability to reflect

these increased costs in the prices of our services that we provide to our customers and therefore reduce our profitability.

See above discussion contained herein as to issues relating to “Liqudity” and efforts to improve our liquidity

Party Transactions

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Notes to Consolidate Financial Statements – Note 18 – Related Party Transactions and Note 20 – Subsequent Events –

Executive Compensation.”

Executive Compensation - MIPs.”

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis