PERMA FIX ENVIRONMENTAL SERVICES INC
For the period ended Dec 31, 2024. Filed Mar 13, 2025.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 13, 2025
PESI$14.05+9.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-13.
0001493152-24-009805
Item 7. Management’s Discussion and Analysis of Financial Condition And Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-13.
0001493152-25-010161
Item 7. Management’s Discussion and Analysis of Financial Condition And Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 90 previous paragraphs and 102 current paragraphs.
35 unchanged; 29 reworded; 37 added; 24 removed; 2 previous and 1 current paragraphs rearranged.
Tables are not compared: 9 previous and 10 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (37)
Current report
We were disappointed with our 2024 financial results, which were negatively impacted by a number of unexpected events and factors. These events and factors included among other things,
Current report
As a result of the aforementioned events and factors, overall revenue decreased by $30,618,000 or 34.1% to $59,117,000 for the twelve-months ended December 31, 2024, from $89,735,000 for the corresponding period of 2023. Treatment Segment revenue decreased by $8,524,000 to $34,953,000 or 19.6% from $43,477,000, and Services Segment revenue decreased by $22,094,000 or 47.8% to $24,164,000 from $46,258,000. Total gross profit for the twelve-months ended December 31, 2024, decreased $16,367,000 or 100.0% due to decreased revenue generated in both segments. Selling, general and administrative (“SG&A”) expenses decreased $484,000 or 3.2% for the twelve-months ended December 31, 2024, as compared to the corresponding period of 2023.
Current report
During 2024, we provided a full valuation allowance against our deferred tax assets (see a discussion of this valuation allowance and the impact to our financial statements in “Results of Operations – Income Taxes” below).
Current report
In 2024, we completed two public equity raises and sold an aggregate 4,581,282 shares of our Common Stock. See “Liquidity and Capital Resources - Financing Activities” within this MD&A for discussions of these equity raises that occurred in May 2024 and December 2024.
Current report
Although we are disappointed with our 2024 financial results, we believe our base business is positioned for improvement and that our results of operations should improve in 2025. We continue to advance a number of initiatives which are discussed within this report on Form 10-K. Some of these initiatives have been realized, with additional initiatives that are expected to be more fully realized in 2025. In December 2024, BWXT Technologies, Inc (“BWXT”) announced that the DOE had awarded BWXT and its team, which we are a member of, the contract for the cleanup operations at the West Valley Development Project in West Valley, NY. As disclosed by BWXT, the contract has a 10-year ordering period with a maximum value of up to $3 billion that can be performed for up to 15 years. The scope attributable to us has not yet been defined and is subject to certain approvals. The West Valley Project is anticipated to begin transition in the first quarter of 2025 and realize full operations in 120 days from initiation. As previously disclosed, in December 2023, we and our partner, Campoverde Srl, each owning 50% of the partnership, were awarded a multi-year contract for the treatment of radioactive waste from the Joint Research Center in Ispra, Italy. Revenue generated and to be generated by us from this contract has been and will be limited to project management support through 2025. The scope of work in the initial phases of this contract is being performed predominantly by our partner. We expect to generate an increase in revenue under this contract starting in 2026 when the waste treatment phases begin.
Current report
Our continuing initiatives include, among other things, positioning ourselves for further large and mid-size procurements within the DOE and DOD and waste treatment in support of DOE’s Hanford closure strategy, continued investments in our facilities and capabilities to allow for broader waste treatment (including PFAS) (see “Known Trends and Uncertainties - New Processing Technology” within this MD&A for a discussion of our PFAS technology), and continued expansion of our waste treatment offerings within the international and commercial markets (see “Part I, Item 1 – Business – Foreign Revenue and Initiatives” for a discussion of our foreign revenue and initiatives).
Current report
See “Known Trends and Uncertainties – Federal Funding” within this MD&A for a discussion of factors that could impacts our results of operations in 2025.
Current report
Treatment Segment revenue decreased by $8,524,000 or 19.6% for the twelve-months ended December 31, 2024, over the same period in 2023. The overall decrease in revenue was primarily due to lower waste volume attributed from the factors as discussed in the “Overview” section above. Overall lower averaged price from waste mix within the Treatment Segment also contributed to the revenue decrease. Services Segment revenue decreased by approximately $22,094,000 or 47.8%. The decrease in revenue in the Services Segment was due to the reasons as discussed in the “Overview” above. Additionally, our Services Segment revenues are project based; as such, the scope, duration, and completion of each project vary.
Current report
Cost of goods sold decreased $14,251,000 for the year ended December 31, 2024, as compared to the year ended December 31, 2023, as follows:
Current report
Administrative SG&A expenses were lower primarily due to lower incentive expenses of approximately $540,000, which was offset by overall higher expenses of $206,000 in various categories. Administrative SG&A expenses in 2023 included incentives earned in connection with the Company’s management incentive plans (“MIPs”) and other employees’ bonus plans. Such incentives were not earned in 2024. Treatment Segment SG&A expenses were higher primarily due to higher salaries and payroll related expenses of approximately $420,000 which were offset by overall lower travel, outside services and general expenses totaling approximately $379,000. The decrease in Services Segment SG&A was primarily due to lower outside services expenses of approximately $102,000 from fewer consulting and legal matters and lower salaries and payroll related expenses of approximately $249,000. The overall lower SG&A expenses were offset by higher credit loss expenses of approximately $160,000 as a certain account receivable was determined to be uncertain as to collectability as of December 31, 2024. Included in SG&A expenses is depreciation and amortization expense of $126,000 and $84,000 for the twelve months ended December 31, 2024 and 2023, respectively.
Current report
R&D
Current report
R&D expenses increased by $611,000 for the twelve-months ended December 31, 2024, as compared to the corresponding period of 2023 primarily due to expenses incurred in connection with our new PFAS technology.
Current report
Interest income increased by approximately $315,000 for the twelve-months ended December 31, 2024, as compared to the corresponding period of 2023. The increase was primarily due to higher interest income earned from our finite risk sinking fund from higher interest rates that took effect starting in March 2023. Additionally, the increase in interest income resulted from more funds that we maintained in our money market deposit accounts from the two equity raises that were complete in May 2024 and December 2024. The overall increase in interest income from the above was reduced by interest income received in March of 2023 of approximately $60,000 in connection with the Employee Retention Credit refund that we received.
Current report
We record a valuation allowance against our net deferred tax asset to the extent we determine it is more likely than not that such asset will not be realized in the future. We regularly evaluate the probability that our deferred tax assets will be realized and determines whether valuation allowances or adjustments thereto are needed. This determination involves judgement and the use of estimates and assumptions, including expectations of future taxable income and tax planning strategies. We apply judgment to consider the relative impact of negative and positive evidence, and the weight given to negative and positive evidence is commensurate with the extent to which such evidence can be objectively verified. Based on our evaluation of all available positive and negative evidence, and with greater weight placed on the objectively verifiable evidence which primarily included our three-year cumulative losses, we determined that it was more likely than not that our net U.S. deferred tax asset will not be realized. As a result, in 2024, we provided a full valuation allowance against our U.S. federal and state deferred tax assets and recorded an income tax expense in the amount of approximately $8,194,000. We continue to maintain a valuation allowance against foreign tax attributes that may not be realized.
Current report
Cash used in operating activities of our continuing operations during 2024 consisted mostly of the significant net loss that we incurred of approximately $19,569,000, adjusted for certain non-cash items, such as $656,000 of stock-based compensation expense, $1,763,000 of depreciation and amortization expense and the deferred income tax expense of $4,448,000. The decrease in cash used in operating activities of our continuing operations from 2023 to 2024 was driven primarily from the significant net loss that we incurred. Our cash used in operating activities of our discontinued operations consisted primarily of expenses incurred in connection with management and administration of regulatory matters for the Company’s remediation projects.
Current report
Cash used in investing activities of our continuing operations during 2024 consisted mostly of our purchases of property and equipment totaling approximately $3,811,000, of which $406,000 was financed. The remaining cash used in investing activities consisted of cash outlays made in connection with our operating permits and certain intangible assets. The increase in cash used in investing activities of our continuing operations in 2024 as compared to 2023 was primarily due to capital expenditures made in connection with our PFAS technology which included the installation of our first unit in treating PFAS. Cash used in investing activities of our discontinued operations was primarily for roof replacement at our PFSG location.
Current report
Capital Expenditures
Current report
We anticipate making capital expenditures of approximately $2,000,000 to $5,500,000 in 2025 to maintain operations and regulatory compliance requirements and support revenue growth. We expect our capital expenditures to be higher in 2025 based on certain strategic project initiatives which include the installation of our second generation unit for our PFAS technology. We plan to fund our capital expenditures for 2025 from cash from operations, Liquidity under our Credit Facility and/or financing. The initiation and timing of our capital expenditures are subject to a number of factors which include, among other things, cost/benefit analysis, the pace of our strategic project initiatives and improvement in our operations.
Current report
Our cash provided by financing during 2024 consisted mostly of net proceeds of $41,859,000 received from the sales of our Common Stock in May 2024 and December 2024 as discussed below and proceeds received from option and a warrant exercises totaling approximately $292,000, partially offset by principal payments of approximately $832,000 primarily for our Terms Loans and Capital Loan under our Credit Facility (see below for a discussion of our Credit Facility) and $291,000 for our finance leases.
Current report
Credit Facility
Current report
In connection with the amendment, the Company paid its lender a fee of $12,500.
Current report
EWOC Note
Current report
Our financing activities for 2024 included monthly principal payments on a note that we entered into on July 24, 2024, to finance the balance of the purchase price of the property where our EWOC facility operates. Pursuant to a Purchase and Sales Agreement dated April 30, 2024, we acquired the property for a purchase price of $425,000, paying $63,750 in cash and financing the balance with a bank loan of $361,250 (the “Note”). The Note, which matures on July 24, 2044 (the “Note”), provides for monthly payments of $3,100 for the first five years commencing August 24, 2024, which payments includes interest at an annual fixed interest rate of 8.10%. Monthly payments under the Note will then be adjusted at the end of years five, ten and fifteen, with interest calculated based on the weekly average five-year US Treasury Securities Rate plus 3.0%. Under no circumstances will the variable interest rate on the Note be less than 4.0% per annum or more than (except in the case of default) the lesser of 20.5% per annum or the maximum rate allowed by applicable law. We agreed to pay the lender 3.0% of the total outstanding principal balance under the Note in the event we pay off our obligations during the first year of the Note. The prepayment penalty rate will be reduced by 1.0% at each subsequent annual anniversary of the Note. No prepayment penalty will apply in the event we pay off the Note on the fourth anniversary of the Note or thereafter. The property was previously accounted for under our operating leases.
Current report
Sale of Common Stock (May 2024)
Current report
On May 21, 2024, we entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with certain institutional and retail investors (the “Purchasers”), pursuant to which we sold and issued, in a registered direct public offering, an aggregate of 2,051,282 shares of the Company’s Common Stock, at a negotiated purchase price per share of $9.75 (the “Shares”), for aggregate gross proceeds to us of approximately $20,000,000, before deducting fees payable to the placement agents and other estimated offering expenses payable by the Company (the “Offering”). The net proceeds from the Offering was utilized to fund (i) continued R&D and business development relating to our patent-pending process for the destruction of PFAS, as well as the cost of installing at least one commercial treatment unit; (ii) ongoing facility capital expenditures and maintenance costs; and (iii) general corporate and working capital purposes. The Shares were offered and sold by the Company pursuant to the Company’s “shelf” registration statement on Form S-3 and prospectus supplement relating thereto.
Current report
Craig-Hallum Capital Group LLC (“Craig-Hallum”) and Wellington Shields & Co. LLC (“Wellington Shields”) (Wellington Shields and Craig-Hallum together are known as the “Placement Agents”) served as the exclusive placement agents in connection with the Offering. We paid the Placement Agents an aggregate cash fee of $1,200,000, which represented 6.00% of the gross proceeds of the Offering. We also reimbursed the Placement Agents certain expenses in connection with the Offering in an aggregate amount of approximately $80,000. As additional compensation to the Placement Agents in connection with the Offering, we also issued to the Placement Agents and two (2) of their designees, warrants (the “Placement Agents’ Warrants”) to purchase an aggregate of 61,538 shares of Common Stock (the “Warrant Shares”), an amount equal to 3.0% of the number of Shares sold in the registered direct offering. The Placement Agents’ Warrants have an exercise price per share equal to $12.19, which is equal to approximately 125% of the price per share of the Shares sold in the Offering. Neither the Placement Agents’ Warrants nor the Warrant Shares have been registered under the Registration Statement or otherwise. The Placement Agents’ Warrants have a term of five years, are exercisable at any time and from time to time, in whole or in part, during the four and one-half (4 ½) year period commencing 180 days from the last date of closing of the Offering, which was May 24, 2024, and are exercisable via “cashless exercise” in certain circumstances. The aggregate fair value of the “Placement Agents’ Warrants” was determined to be approximately $331,000 using the Black-Scholes pricing model with the following assumptions: 58.78% volatility, risk free interest rate of 4.53%, an expected life of five years and no dividend. The aggregate fair market value of the Placement Agent’s Warrants was recorded as an offset to gross proceeds of the Offering and an increase to additional paid-in capital.
Current report
After deducting costs incurred (which have all been paid) of approximately $1,544,000 (exclusive of the aggregate fair market value of the Placement Agents’ Warrants as discussed above) which were recorded as a deduction to equity in connection with the Offering, net cash proceeds to us totaled approximately $18,456,000.
Current report
Sale of Common Stock (December 2024)
Current report
On December 18, 2024, we entered into an underwriting agreement (the “Underwriting Agreement”) with Craig-Hallum Capital Group, LLC (the “Underwriter”) to which we sold and issued pursuant to the terms and conditions of the Underwriting Agreement, 2,200,000 shares of the Company’s Common Stock. The shares of Common stock were sold at a negotiated price to the public of $10.00 per share. The Underwriting Agreement also allowed the Underwriter a 30-day over-allotment option (the “Over-Allotment Option”) to purchase up to an additional 330,000 shares of our Common Stock on the same terms and conditions, which option was exercised in its entirely on December 18, 2024. The shares were offered and sold to the public pursuant to our “universal shelf” registration statement on Form S-3 filed with the Commission on December 2, 2024, and declared effective by the Commission on December 12, 2024, and prospectus supplement relating thereto. The aggregate gross proceeds received by us from the sale of the 2,530,000 shares sold totaled $25,300,000, before deducting fees payable to the Underwriter and other estimated offering expenses payable by us (the “Offering”). The net proceeds from the Offering is anticipated to fund (i) continued R&D and business development relating to our patent-pending process for the destruction of PFAS, as well as the cost of installing at least one second-generation Perma-FAS commercial treatment unit; (ii) ongoing facility capital expenditures and maintenance costs; and (iii) general corporate and working capital purposes.
Current report
We paid the Underwriter a total cash fee of 7.00% of the aggregate gross proceeds in the Offering, which totaled approximately $1,771,000. We also reimbursed the Underwriter certain expenses in connection with the Offering in an aggregate amount of approximately $95,000. As additional compensation to the Underwriter in connection with the Offering, we also issued to the Underwriter and three (3) of their designees, warrants (the “Underwriters’ Warrant’s”) to purchase an aggregate of 126,500 shares of Common Stock (the “Warrant Shares”), equal to 5.0% of the number of Shares sold in the offering, at an exercise price per share equal to $11.50, which exercise price is equal to approximately 115% of the price per share of the shares sold in the Offering. The Underwriter’s Warrants have a term of five years, are exercisable at any time and from time to time, in whole or in part, during the five (5) year period commencing on December 19, 2024, the closing date of the Offering, and are exercisable via “cashless exercise” in certain circumstances. The aggregate fair value of the “Underwriter’s Warrants” was determined to be approximately $695,000 using the Black-Scholes pricing model with the following assumptions: 58.51% volatility, risk free interest rate of 4.43%, an expected life of five years and no dividend. The aggregate fair market value of the Underwriter’s Warrants was recorded as an offset to gross proceeds of the Offering and an increase to additional-paid-in capital.
Current report
After deducting costs incurred of approximately $2,092,000 (exclusive of the aggregate fair market value of the Underwriter’s Warrants as discussed above) which were recorded as a deduction to equity in connection with the Offering, net cash proceeds to us totaled approximately $23,208,000. We have paid approximately $1,897,000 of the $2,092,000 costs incurred in connection with the Offering.
Current report
Contracts in our Treatment Segment primarily have a single performance obligation as the promise to receive, treat and dispose of waste is not separately identifiable in the contract and, therefore, not distinct. Revenue for Treatment Segment performance obligations are generally satisfied over time using the input method. For the input method, revenue is recognized based on the costs incurred. Transaction price for Treatment Segment contracts are determined by the stated fixed rate per unit price as stipulated in the contract.
Current report
Some of our contracts have multiple performance obligations, most commonly when we provide additional services to the customer under a waste treatment contract. For contract with multiple performance obligations, the contract’s transaction price is allocated to each performance obligation using our best estimate of the standalone selling price of each distinct good or service in the contract. Generally, we use the observable selling prices from an observable price list, but when a price list is not available, the standalone selling price is determined by the cost plus margin approach.
Current report
Within our Treatment Segment, we periodically enter into arrangements with customers for transportation of wastes to either our facility or to non-company owned disposal sites. Revenue from this arrangement is recognized at a point in time, upon the transfer of control. Control transfers when the wastes are picked up by us.
Current report
Federal Funding. As discussed above, a significant portion of our revenue is generated through contracts entered into indirectly as subcontractors for others who are prime contractors or directly as the prime contractor to federal government authorities. Uncertainties exist regarding how future federal government budget and program and policy decisions will unfold, which include, the spending priorities of the new Administration and Congress, passage of the 2025 fiscal year U.S. government budget and potential for enactment of additional continuing resolutions to keep government departments and agencies in operations. The full impact of these uncertainties could negatively impact our financial results by impairing our ability to perform work on existing contracts, delaying or cancelling procurement actions by government entities, and/or cause other disruptions or delays, including payment delays.
Current report
New Processing Technology. We have completed the fabrication, installation, commissioning and startup of our first full scale commercial Perma-FAS system (“System”) for PFAS (commonly known as “forever chemicals”) destruction at our Perma-Fix Florida, Inc. facility. Our System and patent-pending technology successfully processed commercial PFAS-containing waste materials. There are limited current treatment options for these materials, and we expect that our process will exceed any of these methods. Some of the sizable markets for PFAS include AFFF (aqueous film-forming foam) firefighting foams, both expired concentrate and flushing liquids, contaminated liquids from PFAS systems, and other water-based separation products from a variety of industrial systems. We have already secured and are treating approximately 6,000 gallons of AFFF liquids to support ongoing operations, demonstration, and further testing of our System. We believe that we will receive an additional 20,000 gallons in the coming months.
Current report
Our strategy for our System includes continued treatment of PFAS liquids over the coming months and targeting engineering refinements to support larger-scale Systems. With significant upgrades to our prototype currently in the design phase, we anticipate deployment of the second-generation unit in the third quarter of 2025 at one of our other existing treatment facilities to support revenue generation in the fourth quarter of 2025. By the third quarter of 2025, we expect to advance this technology into pilot-scale applications for soil, biosolids, and filter media, broadening the reach of our System’s destruction capabilities for PFAS.
Removed paragraphs (24)
Previous report
We experienced significant improvement in our 2023 financial results as the lingering effects of COVID-19 began to subside starting in the early part of 2022. Our Treatment Segment continued to see steady improvements in waste receipts from certain customers who had previously delayed waste shipments due, in part, from the impact of COVID-19. Within our Services Segment, certain projects which were delayed/curtailed in first part of 2022 due, in part, from the lingering effects of the COVID-19, achieved full operational status and improved productivity in 2023 which positively impacted revenue. Revenue from both of our Segments were also positively impacted from contracts won in 2023 as procurement and planning on behalf of our government clients continued to progress as the lingering effects of COVID-19 pandemic subsided.
Previous report
Revenue increased by $19,136,000 or 27.1% to $89,735,000 for the twelve-months ended December 31, 2023, from $70,599,000 for the corresponding period of 2022. We saw increases in both Segments where Treatment Segment revenue increased by $10,119,000 or 30.3% to $43,477,000 from $33,358,000 and Services Segment revenue increased by $9,017,000 or 24.2% to $46,258,000 from $37,241,000. The increase in revenue in the Treatment Segment was primarily due to overall higher waste volume which was offset by lower averaged price from waste mix. The increase in revenue in the Services Segment was primarily due to achievement of full operational status and improved productivity on certain projects which had been delayed/curtailed in 2022 due, in part, from the lingering effects of the COVID-19 pandemic. Total gross profit for 2023 increased $6,760,000 or 70.4% due to increased revenue. Selling, General, and Administrative (“SG&A”) expenses increased $323,000 or 2.2% for the twelve-months ended December 31, 2023, as compared to the corresponding period of 2022.
Previous report
In March 2023, we received the Employee Retention Credit (“ERC”) of $1,975,000 that we applied for during the third quarter of 2022 as permitted under the Coronavirus Aid, Relief and Economic Securities Act, as amended (the “CARES Act”). In addition to the $1,975,000, we also received approximately $60,000 in interest (recorded within “Interest Income” on our Consolidated Statements of Operations).
Previous report
We believe we have sufficient liquidity on hand to continue business operations during the next twelve months. See a discussion of our liquidity overview within this MD&A – “Liquidity and Capital Resources.”
Previous report
Heading into 2024, we expect to see overall continue steady improvements in waste receipts and increases in project work from certain existing contracts, contracts won in 2023, and bids submitted in both segments that are awaiting awards. However, due to our operations which is subject to seasonal factor, we generally experience lower revenue in the first quarter due to overall reduced activities by our customers from the usual slowdown in operations due, in part, from returning from the holiday periods and poorer weather conditions. Additionally, due to Congress’s inability to timely approve FY 2024 budget and the extension of the continuing resolution, certain of our government related customers have informed us that waste shipments will likely be delayed. Although we expect to see overall improvements in revenue in 2024 as disclosed above, if Congress is unable to enact the full FY 2024 appropriation bills or further extend the continuing resolutions to fund government spending by the late March deadline, the U.S. government will enter into a partial shutdown. The full impact of any additional continued resolution beyond March or a partial government shutdown is uncertain. If a partial government shutdown were to occur and were to continue an extended period, our financial results of operations could be negatively impacted by delays in procurement actions, waste shipments and project delays on newly awarded projects.
Previous report
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. On December 18, 2023, the JV where we and Campoverde Srl (“JV partner”) each owns 50% of the partnership, was awarded a multi-year contract valued up to approximately EUR 50 million by the European Commission (the “Contracting Authority”) for the treatment of radioactive waste from the Joint Research Center in Ispra, Italy. Work under this JV has not started as of December 31, 2023. The scope of work to be performed in the initial phases of this contract will be performed predominately by our JV partner. Revenue generated by us under the initial phases will be limited to project management support through 2025. We expect to generate an increase in revenue under this contract starting in 2026 when the waste treatment phases begin. The Contracting Authority may terminate the contract under certain conditions as set forth in the contract. Once activities commence under this JV, we will consolidate the operations of this JV into our financial statements.
Previous report
Treatment Segment revenue increased by $10,119,000 or 30.3% for the twelve-months ended December 31, 2023 over the same period in 2022. The overall increase was primarily due to higher waste volume offset by lower averaged price from waste mix. As previously disclosed, starting in the latter part of the second quarter of 2022, our Treatment Segment began to see steady improvements in waste receipts from certain customers who had previously delayed waste shipments due, in part, from the lingering effects of COVID-19. Services Segment revenue increased by approximately $9,017,000 or 24.2%. primarily due to achievement of full operational status and improved productivity on certain projects which had been delayed/curtailed in the early part of 2022 due, in part, from the lingering effects of the COVID-19 pandemic. 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. Revenues from both of our segments were also positively impacted from contracts won in 2023.
Previous report
Cost of goods sold increased $12,376,000 for the year ended December 31, 2023, as compared to the year ended December 31, 2022, as follows:
Previous report
Administrative SG&A expenses were higher primarily due to the following: payroll-related expenses were higher by approximately $660,000 primarily due to higher accrued employee incentives (including our management incentive plans (“MIPs”)) and higher 401(k) matching expenses as payroll expenses in 2022 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; outside services expenses were lower by approximately $256,000 as a result of fewer audit/consulting matters; and general expenses were lower by approximately $56,000 in various categories. Treatment Segment SG&A expenses were lower primarily due to the following: outside services expenses were lower by approximately $110,000 due to fewer consulting matters; salaries and payroll related expenses were lower by approximately $212,000; travel expenses were lower by approximately $24,000; and general expenses were higher by approximately $176,000 in various categories. The increase in SG&A expenses within our Services Segment was primarily due to the following: salaries/payroll-related expenses were higher by approximately $92,000 due to more administrative support functions required as the result of higher revenue; travel expenses were higher by approximately $43,000; credit losses on accounts receivable were higher by approximately $59,000, as in the first quarter of 2022 our Services Segment collected on certain accounts that were previously deemed to be uncollectible; outside services expenses were lower by approximately $41,000 due to fewer consulting matters; and general expenses were lower slightly by $8,000. Included in SG&A expenses is depreciation and amortization expense of $84,000 and $82,000 for the twelve months ended December 31, 2023 and 2022, respectively.
Previous report
Interest income increased by approximately $507,000 for the twelve-months ended December 31, 2023, respectively, as compared to the corresponding period of 2022 primarily due to higher interest earned from the finite risk sinking fund. Interest income for 2023 also included approximately $60,000 received in March 2023 under the ERC program under the CARES Act.
Previous report
Accounts receivable, net of credit losses, totaled $9,722,000 as of December 31, 2023, an increase of $358,000 from the December 31, 2022, balance of $9,364,000. The increase was attributed to increased revenue, timing of invoicing, and our accounts receivable collection. Our contracts with our customers are subject to various payment terms and conditions. Our accounts receivable at December 31, 2023, included invoices for work performed for a certain Canadian project that remained outstanding which a settlement agreement has been reached, subject to meeting certain conditions/terms precedent (See discussion under “Known Trends and Uncertainties - Perma-Fix Canada Inc. (“PF Canada”)” below for a discussion of the accounts receivable and a partial payment made by the customer on January 22, 2024).
Previous report
Prepaid and other assets totaled $3,738,000 as of December 31, 2023, a decrease of $1,667,000 from the December 31, 2022, balance of $5,405,000. The decrease was primarily due to receipt of the ERC of $1,975,000 in March 2023 that we applied for during the third quarter of 2022.
Previous report
Accounts payable totaled $9,582,000 as of December 31, 2023, a decrease of $743,000 from the December 31, 2022, balance of $10,325,000. 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 our segments.
Previous report
Accrued expenses totaled $6,560,000 as of December 31, 2023, an increase of $1,967,000 from the December 31, 2022, balance of $4,593,000. The increase was primarily due to higher employee incentive and commission accruals totaling approximately $1,346,000. Our employee incentive accruals included an aggregate of approximately $750,000 recorded under our 2023 Management Incentive Plans (“MIPs”) for our executives.
Previous report
See discussion of a multi-year contract valued up to approximately EUR 50 million awarded to us and our JV partner by the European Commission on December 18, 2023, for the treatment of radioactive waste from the Joint Research Center in Ispra, Italy under “Business Environment” within this MD&A.
Previous report
During 2023, our purchases of capital equipment totaled approximately $2,498,000, of which $784,000 was subject to financing, with the remaining funded from cash from operations and our credit facility. We have budgeted approximately $2,000,000 for 2024 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, collections of unpaid receivables, borrowing availability under our credit facility and/or financing. The initiation and timing of projects are also determined by financing alternatives or funds available for such capital projects.
Previous report
During March 2022, we signed a non-binding 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, 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 venture. The amount of our investment, the period of which it is to be made and the method of funding are to be determined.
Previous report
At maturity of the Loan Agreement, as amended, any unpaid principal balance plus interest, if any, will become due.
Previous report
Pursuant to the amendment dated July 31, 2023, we have agreed to pay PNC 1.0% of the total financing under the Loan Agreement, as amended, in the event we pay off our obligations on or before July 31, 2024, and 0.5% of the total financing if we pay off our obligations after July 31, 2024, to and including July 31, 2025. No early termination fee shall apply if we pay off our obligations under the amended Loan Agreement after July 31, 2025.
Previous report
Pursuant to the Loan Agreement, as amended, the annual rate of interest due on the revolving credit is at prime plus 2% or SOFR plus 3.00% plus an SOFR Adjustment applicable for an interest period selected by us. The annual rate of interest due on Term Loan 1 and the Capital line is at prime plus 2.50% or SOFR plus 3.50% plus an SOFR Adjustment applicable for an interest period selected by us. SOFR Adjustment rates of 0.10% and 0.15% are applicable for a one-month interest period and three-month period, respectively, that may be selected by us. See payment of annual rate of interest due on Term Loan 2 under the amendment dated July 31, 2023, as discussed above.
Previous report
On May 19, 2023, we filed a shelf registration statement on Form S-3 with the U.S Securities and Exchange Commission (the “Commission”), which was declared effective by the Commission on June 1, 2023. The shelf registration statement gives us the ability to sell up to 2,500,000 shares of our Common Stock from time to time and through one or more methods of distribution, subject to market conditions and our capital needs at that time. The terms of any offering under the registration statement will be established at the time of the offering and be set forth in an accompanying prospectus or prospectus supplement relating to the offering. At this time, we do not have any immediate plans or current commitments to issue shares under the registration statement. This is not an offer to sell or a solicitation of an offer to buy, nor shall there be a sale of securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such state or jurisdiction.
Previous report
See discussion of a multi-year contract valued up to approximately EUR 50 million awarded to us and our JV partner by the European Commission on December 18, 2023, for the treatment of radioactive waste from the Joint Research Center in Ispra, Italy under “Business Environment” within this MD&A.
Previous report
*Potential Partnership with Springfields Fuels Limited.*As discussed above, we have signed a non-binding 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.
Previous report
Inflation and Supply Chain. Our financial results have been negatively impacted by various macroeconomic factors, including the effects of inflation, supply chain issues, labor shortages, and higher interest rates, due, in part, to the impact of COVID-19 (which has mostly subsided). Continued increases in any of our operating costs, including utility, transportation, wage rates, and supply costs, may further increase our overall cost of goods sold or operating expenses. We may attempt to increase our service and treatment prices in order to maintain satisfactory margin from the effect of these factors as discussed above; 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.
Reworded paragraphs (29)
Previous wording
Certain statements contained within this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”) may be deemed “forward-looking statements” within the meaning of Section 27A of the Act, and Section 21E of the Securities Exchange Act of 1934, as amended (collectively, the “Private Securities Litigation Reform Act of 1995”). See “Special Note regarding Forward-Looking Statements” contained in this report.
Current wording
Certain statements contained within Item 1 – “Business” and this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”) may be deemed “forward-looking statements” within the meaning of Section 27A of the Act, and Section 21E of the Securities Exchange Act of 1934, as amended (collectively, the “Private Securities Litigation Reform Act of 1995”). See “Special Note regarding Forward-Looking Statements” contained in this report.
Previous wording
Management’s discussion and analysis is based, among other things, our audited consolidated financial statements and includes our accounts and the accounts of our wholly-owned subsidiaries. Our 2022 consolidated financial statements also included the accounts of a variable interest entity (“VIE”) for which we were the primary beneficiary. During the fourth quarter of 2022, project work under this VIE was completed.
Current wording
Management’s discussion and analysis is based, among other things, on our audited consolidated financial statements and includes our accounts and the accounts of our wholly-owned subsidiaries.
Previous wording
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 and the manner in which the applicable government will be required to spend funding to remediate various sites and a potential partial government shutdown. 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. 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.
Current wording
Our Treatment and Services Segments’ business continues to be heavily dependent on services that we provide to federal governmental clients, primarily as subcontractors for others who are contractors to government entities or directly as the prime contractor. We believe demand for our services will continue to be subject to fluctuations due to a variety of factors beyond our control, including, without limitation, current economic and political conditions, the manner in which the applicable government authority will be required to spend funding to remediate various sites and potential future federal budget issues. In addition, our governmental contracts and subcontracts relating to activities at federal governmental sites in the United States are generally subject to termination for convenience at any time at the government’s option. 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.
Previous wording
Consolidated revenues increased $19,136,000 for the year ended December 31, 2023, compared to the year ended December 31, 2022, as follows:
Current wording
Consolidated revenues decreased $30,618,000 for the year ended December 31, 2024, compared to the year ended December 31, 2023, as follows:
Previous wording
1)Includes wastes generated by government clients of $2,943,000 and $2,380,000 for the twelve months ended December 31, 2023, and 2022, respectively.
Current wording
1)Includes wastes generated by government clients of $2,898,000 and $2,943,000 for the twelve months ended December 31, 2024, and 2023, respectively.
Previous wording
Cost of goods sold for the Treatment Segment increased by approximately $8,486,000 or 30.2%. Treatment Segment’s variable costs increased by approximately $6,189,000 primarily due to higher material and supplies, disposal, lab, outside services costs and higher employee incentives. Treatment Segment’s overall fixed costs were higher by approximately $2,297,000 resulting from the following: salaries and payroll related expenses were higher by approximately $1,483,000 due to higher headcount; depreciation expenses were higher by approximately $393,000 due to depreciation for asset retirement obligations in connection with our EWOC facility; general expenses were higher by approximately $279,000 primarily due to higher utility costs; maintenance costs were higher by approximately $235,000; travel expenses were higher by approximately $90,000; and regulatory expenses were lower by approximately $183,000. Services Segment cost of goods sold increased $3,890,000 or 11.8% due to higher revenue. The overall increase in cost of goods sold was primarily due to the following: aggregated higher salaries/payroll related, outside services, and travel costs totaling approximately $4,356,000; higher depreciation expenses of $63,000; lower material and supplies, lab, regulatory and disposal expenses totaling approximately $444,000; and lower general expenses by approximately $85,000 in various categories. Included within cost of goods sold is depreciation and amortization expense of $2,484,000 and $2,027,000 for the twelve months ended December 31, 2022, and 2021, respectively.
Current wording
Cost of goods sold for the Treatment Segment decreased by approximately $538,000 or 1.5%. Treatment Segment’s variable costs decreased by approximately $1,467,000 primarily due to overall lower transportation, disposal, lab and bonus/incentive costs. Treatment Segment’s overall fixed costs increased by approximately $929,000 resulting from the following: salaries and payroll related expenses were higher by $1,717,000 due to higher headcount; regulatory costs were higher by approximately $101,000; depreciation expenses were lower by approximately $626,000 due to fully depreciated AROs that occurred in the third quarter of 2023 in connection with our EWOC facility; maintenance costs were lower by approximately $123,000; general expenses were lower by $111,000 in various categories; and travel expenses were lower by approximately $29,000. Services Segment cost of goods sold decreased $13,713,000 or 37.3% primarily due to lower revenue. The decrease in cost of goods sold was primarily due to overall lower salaries/payroll related, outside services, and travel costs totaling approximately $13,565,000; lower depreciation expenses of approximately $220,000; lower general expenses of $49,000 in various categories; and higher material and supplies expenses of approximately $121,000. Included within cost of goods sold is depreciation and amortization expense of $1,637,000 and $2,484,000 for the twelve months ended December 31, 2024, and 2023, respectively.
Previous wording
Gross profit for the year ended December 31, 2023, was $6,760,000 higher than 2022 as follows:
Current wording
Gross profit for the year ended December 31, 2024, was $16,367,000 lower than 2023 as follows:
Previous wording
Treatment Segment gross profit increased by $1,633,000 or 31.1% primarily due to higher revenue as discussed previously. Despite the slight increase in gross margin, Treatment Segment gross margin was negatively impacted by higher variable costs from waste mix and the impact of overall increase in fixed costs. Services Segment gross profit increased by $5,127,000 or 117.4% and gross margin increased from 11.7% to 20.5% primarily due to higher revenue and improved margin projects. Our overall Services Segment gross margin is impacted by our current projects which are competitively bid and therefore have varying margin structures.
Current wording
Treatment Segment gross profit decreased by $7,986,000 or approximately 116.1% and gross margin decreased to (3.2)% from 15.8% primarily due to lower revenue from lower waste volume, overall lower averaged price from waste mix and the impact of our fixed cost structure. Services Segment gross profit decreased by $8,381,000 or 88.3% primarily due to decreased revenue as discussed in the “Overview” above. The decrease in gross margin from 20.5% to 4.6% was attributed to overall lower margin projects as the two large projects completed in late 2023 were higher margin projects. Our overall Services Segment gross margin is impacted by our current projects which are competitively bid on and will therefore have varying margin structures.
Previous wording
SG&Aexpenses increased $323,000 for the year ended December 31, 2023, as compared to the corresponding period for 2022 as follows:
Current wording
SG&Aexpenses decreased $484,000 for the year ended December 31, 2024, as compared to the corresponding period for 2023 as follows:
Previous wording
Interest expense increased by approximately $148,000 for the twelve-months ended December 31, 2023, as compared to the corresponding period of 2022 due to interest incurred on the new $2,500,000 term loan dated July 31, 2023, under our credit facility. Interest expense was also higher in 2023 from higher interest rate on our term loan dated May 8, 2020, which was offset by the declining term loan balance. Additionally, the increase in interest expense in 2023 was also the result of interest incurred from advances made in May of 2022 from the capital line under our credit facility.
Current wording
Interest expense increased by approximately $150,000 for the twelve-months ended December 31, 2024, as compared to the corresponding period of 2023. The increase was attributed primarily to interest incurred on the $2,500,000 term loan dated July 31, 2023, under our credit facility and the promissory note that we entered into on July 24, 2024, for the purchase of our EWOC facility. The higher interest expense was also attributed to more finance leases.
Previous wording
We had income tax expense of $17,000 and income tax benefit of $378,000 for continuing operations for the twelve-months ended December 31, 2023 and 2022, respectively. Our effective tax rates were approximately 1.8% and 10.5% for the twelve- month ended December 31, 2023 and 2022, respectively. Our effective tax rates for the twelve-months ended December 31, 2023, and 2022 were impacted by non-deductible expenses and state taxes.
Current wording
We had income tax expenses of $4,435,000 and $17,000 for continuing operations for the twelve-months ended December 31, 2024 and 2023, respectively. Our effective tax rates were approximately 29.3% and 1.8% for the twelve-month ended December 31, 2024 and 2023, respectively. Our effective tax rate for the twelve-months ended December 31, 2024, was impacted primarily by the income tax expense recorded in the amount of approximately $8,194,000 as we provided for a full valuation allowance against our U.S. federal and state deferred tax assets. Our effective tax rate for the twelve-months ended December 31, 2023, was impacted by non-deductible expenses and state taxes.
Previous wording
Our Treatment Segment maintains a backlog of stored waste, which represents waste that has not been processed. The backlog is principally a result of the timing and complexity of the waste being brought into the facilities and the selling price per container. As of December 31, 2023, our Treatment Segment had a backlog of approximately $8,702,000, as compared to approximately $9,156,000 as of December 31, 2022. Additionally, the time it takes to process waste from the time it arrives may increase due to the types and complexities of the waste we are currently receiving. We typically process our backlog during periods of low waste receipts, which historically has been in the first or fourth quarters.
Current wording
Our Treatment Segment maintains a backlog of stored waste, which represents waste that has not been processed. The backlog is principally a result of the timing and complexity of the waste being brought into the facilities and the selling price per container. As of December 31, 2024, our Treatment Segment had a backlog of approximately $7,859,000, as compared to approximately $8,702,000 as of December 31, 2023. Additionally, the time it takes to process waste from the time it arrives may increase due to the types and complexities of the waste we are currently receiving. We typically process our backlog during periods of low waste receipts, which historically has been in the first or fourth quarters.
Previous wording
Our discontinued operations had no revenue for the twelve-months ended December 31, 2023 and 2022. We incurred net losses of $433,000 (net of tax benefit of $117,000) and $605,000 (net of tax benefit of $199,000) for our discontinued operations for the twelve-months ended December 31, 2023, and 2022, respectively. In 2022, we incurred additional costs in connection with management of administrative and regulatory matters related to our remediation projects. 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.
Current wording
Our discontinued operations had no revenue for the twelve-months ended December 31, 2024 and 2023. We incurred net losses of $410,000 (net of tax benefit of $149,000) and $433,000 (net of tax benefit of $117,000) for our discontinued operations for the twelve-months ended December 31, 2024, and 2023, respectively. Net losses for both years were primarily due to costs incurred in connection with management of administrative and regulatory matters related to our remediation projects. 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.
Previous wording
Our cash flow requirements during the twelve-months ended December 31, 2023, were primarily financed by our operations, cash on hand (which included the ERC, along with interest, that we received in March 2023 and proceeds from a new term loan dated July 31, 2023, in the amount of $2,500,000 provided to us under an amendment to our existing credit facility), and credit facility availability. 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 collections of unpaid receivables (See “Known Trends and Uncertainties – Perma-Fix Canada, Inc. (“PF Canada”)” for a discussion of unpaid receivables due to our Perma-Fix Canada, Inc. subsidiary from a certain customer in which a settlement agreement has been reached, subject to meeting certain conditions/terms precedent and a partial payment received in January 2024). Our ability to utilize our credit facility from our lender is subject to meeting our quarterly financial covenant requirements, among other things. We continue to explore all sources of increasing our capital and/or liquidity and to improve our revenue and working capital, including, but not limited to entering into equity transactions. There are no assurances that we will be successful in increasing our liquidity through our efforts. 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. As of December 31, 2023, our borrowing availability under our revolving part of our credit facility was approximately $10,622,000, which included our cash (deposited with our lender) and was based on our eligible receivables and was net of approximately $3,950,000 in outstanding standby letters of credit and a $750,000 indefinite reduction in borrowing availability that our lender imposed pursuant to the July 31, 2023 amendment of our Loan Agreement. We believe that our cash flows from operations, our available liquidity from our credit facility, and our cash on hand should be sufficient to fund our operations for the next twelve months.
Current wording
Our cash flow requirements during the twelve-months ended December 31, 2024, were primarily financed by our Liquidity (defined as borrowing availability under the revolving credit plus cash in our MMDA maintained with our lender). Our Liquidity included net proceeds received from the sales of an aggregate 4,581,282 shares of our Common Stock pursuant to certain Securities Purchase and Underwriting Agreements executed in May 2024 and December 2024 (see “Financing Activities” below for a discussion of these offerings, including the planned usage of the proceeds). We believe our cash flow requirements for the next twelve months will consist primarily of general working capital needs, scheduled principal payments on our debt obligations, remediation projects, R&D on our PFAS technology and capital expenditures (which include our PFAS technology) (see “Known Trends and Uncertainties – New Processing Technology” within this MD&A for a discussion of this technology). We plan to fund these requirements from our operations and Liquidity under our Credit Facility. 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. As of December 31, 2024, we had no outstanding borrowing under our revolving credit and our Liquidity under our Credit Facility was approximately $33,905,000. We believe that our cash flows from operations and our Liquidity should be sufficient to fund our operations for the next twelve months. Although we believe our operations should improve in 2025, if we continue to incur losses such as in 2024, this could cause a reduction in our Liquidity.
Previous wording
As of December 31, 2023, we were in a positive cash position with no revolving credit balance. As of December 31, 2023, we had cash on hand of approximately $7,500,000.
Current wording
As of December 31, 2024, we were in a positive cash position with no revolving credit balance. As of December 31, 2024, we had cash on hand of approximately $28,975,000.
Previous wording
We had working capital of $4,613,000 (which included working capital of our discontinued operations) as of December 31, 2023, as compared to working capital of $818,000 as of December 31, 2022. The improvement in our working capital was primarily due to increases in our cash and unbilled receivables from improved operations. In 2023, our cash was also increased from the receipt of the ERC in March 2023 and the additional Term Loan 2 dated July 31, 2023, that we entered into with our lender under our Loan Agreement (see a discussion of the Term Loan 2 below under “Financing Activities). The overall improvement in our working capital was offset by the increases in our accrued expenses and deferred revenues.
Current wording
We had working capital of $28,283,000 (which included working capital of our discontinued operations) as of December 31, 2024, as compared to working capital of $4,613,000 as of December 31, 2023. The improvement in our in our working capital was primarily due to the increase in our cash from the sales of our Common Stock in May 2024 and December 2024, which was offset by the significant losses incurred from our results of operations attributed to the various factors as previously discussed.
Previous wording
*Perma-Fix Canada Inc. (“PF Canada”).*During the fourth quarter of 2021, PF Canada received a Notice of Termination (“NOT”) from Canadian Nuclear Laboratories, LTD. (“CNL”) on a Task Order Agreement (“TOA”) that PF Canada entered into with CNL in May 2019 for remediation work within Ontario, Canada (“Agreement”). The NOT was received after work under the TOA was substantially completed and work under the TOA has since been completed. CNL may terminate the TOA at any time for convenience. As of December 31, 2023, PF Canada has approximately $2,389,000 in unpaid receivables due from CNL as a result of work performed under the TOA. CNL and PF Canada have reached a settlement agreement on payment of the receivables to PF Canada by CNL, subject to certain conditions/terms precedents being met, including release of certain liens. On January 22, 2024, we received a partial payment of approximately $741,000 from CNL, with the remaining receivables to be paid by CNL upon completion of the settlement conditions/terms, which we believe should occur during 2024.
Current wording
Our cash used in operating activities in 2024 included receipt of certain outstanding receivables from Canadian Nuclear Laboratories, LTD (“CNL”) as follows: During the fourth quarter of 2021, PF Canada received a Notice of Termination (“NOT”) from CNL on a Task Order Agreement (“TOA”) that PF Canada entered into with CNL in May 2019 for remediation work within Ontario, Canada (“Agreement”). The NOT was received after work under the TOA was substantially completed and work under the TOA has since been completed. CNL may terminate the TOA at any time for convenience. At year-end 2023, PF Canada had approximately $2,389,000 in outstanding receivables due from CNL as a result of work performed under the TOA. A settlement agreement was reached between PF Canada and CNL on the payment of the aforementioned amount by CNL, subject to certain conditions/terms precedents being met. PF Canada received a partial payment from CNL of the outstanding receivables during the first quarter of 2024. In May 2024, PF Canada received the remaining approximately $1,612,000 in outstanding receivables from CNL. As a result of the aforementioned payments received from CNL, no outstanding receivables remain under the TOA from CNL.
Previous wording
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” and “lender”), acting as agent and lender. The Loan Agreement, as amended (including the two amendments that we entered into with our lender in 2023 described below), provides us with the following credit facility with a maturity date of May 15, 2027: (a) up to $12,500,000 revolving credit (“revolving credit”), with the maximum that we can borrow under the revolving credit 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; (b) a term loan (“Term Loan 1”) dated May 8, 2020, of approximately $1,742,000, requiring monthly installments of $35,547; (c) a term loan (“Term Loan 2”) of $2,500,000 dated July 31, 2023, requiring monthly installments of $41,667; and (d) a capital expenditure line (“Capital Line”) of up to $1,000,000 with advances on the line, subject to certain limitations, permitted for up to twelve months starting May 4, 2021 (the “Borrowing Period”), with interest only payable on advances during the Borrowing Period. Amounts advanced under the Capital Line at the end of the Borrowing Period totaled approximately $524,000, requiring monthly installments of principal of approximately $8,700 plus interest, commencing June 1, 2022.
Current wording
We entered into a Second Amended and Restated Revolving Credit, Term Loan and Security Agreement, dated May 8, 2020, which has since been amended from time to time, with PNC National Association (“PNC” and “lender”), acting as agent and lender (the “Loan Agreement”). The Loan Agreement provides us with the following credit facility with a maturity date of May 15, 2027 (the “Credit Facility): (a) up to $12,500,000 revolving credit (“revolving credit”), which borrowing capacity is subject to eligible receivables (as defined) and reduced by outstanding standby letters of credit ($3,200,000 as of December 31, 2024) and borrowing reductions that our lender may impose from time to time ($750,000 as of December 31, 2024); (b) a term loan (“Term Loan 1”) of approximately $1,742,000, requiring monthly installments of $35,547 (Term Loan 1 was paid off by us in June 2024); (c) a term loan (“Term Loan 2”) of $2,500,000, requiring monthly installments of $41,667; and (d) a capital expenditure loan (“Capital Loan”) of approximately $524,000, requiring monthly installments of principal of approximately $8,700 plus interest, that commenced on June 1, 2022.
Previous wording
On July 31, 2023, we entered into a further amendment of the Loan Agreement, as amended, with our lender which provided, among other things, the following:
Current wording
On May 8, 2024 and November 12, 2024, we entered into amendments to our Loan Agreement with our lender which provided the following, among other things:
Previous wording
In connection with the March 2023 amendment, we paid our lender a fee of $25,000 which is being amortized over the remaining term of the Loan Agreement, as amended, as interest expense-financing fees.
Current wording
In connection with the amendments, we paid our lender fees totaling $37,500 which is being amortized over the remaining term of the Loan Agreement as interest expense-financing fees.
Previous wording
On March 21, 2023, we entered into an amendment to our Loan Agreement, as amended, with our lender which provided, among other things, the following:
Current wording
On March 11, 2025, we entered into an amendment to our Loan Agreement with our lender which provided the following, among other things:
Previous wording
Our credit facility under our Loan Agreement, as amended, contains certain financial covenants, along with customary representations and warranties. A breach of any of these financial covenants, unless waived by our lender, could result in a default under our credit facility allowing our lender to immediately require the repayment of all outstanding debt under our credit facility and terminate all commitments to extend further credit. We were not required to perform testing of the FCCR requirement in the first quarter of 2023 pursuant to the March 21, 2023, amendment as discussed above. We otherwise met all of our other financial covenant requirements. We met all of our covenant requirements in each of the second to fourth quarters of 2023 and we expect to meet our covenant requirements in the next twelve months.
Current wording
Our Credit Facility under our Loan Agreement with PNC contains certain financial covenants, along with customary representations and warranties. A breach of any of these financial covenants, unless waived by PNC, could result in a default under our Credit Facility allowing our lender to immediately require the repayment of all outstanding debt under our Credit Facility and terminate all commitments to extend further credit. We were not required to perform testing of our FCCR requirement for the first, second and third quarters of 2024 pursuant to the amendments dated May 8, 2024, and November 12, 2024, to our Loan Agreement as discussed above. We were also not required to perform testing of our FCCR requirement for the fourth quarter of 2024 pursuant to the amendment dated March 11, 2025, to our Loan Agreement, as amended, as discussed above. Otherwise, we met all of our other financial covenant requirements in each of the quarters in 2024. We expect to meet our quarterly financial covenant requirements for the next twelve months.
Previous wording
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 December 31, 2023, the total amount of standby letters of credit outstanding totaled approximately $3,950,000 and the total amount of bonds outstanding totaled approximately $36,674,000. We also provide closure and post-closure requirements through a financial assurance policy for certain of our Treatment Segment facilities through American International Group, Inc. (“AIG”). At December 31, 2023, the closure and post-closure requirements for these facilities were approximately $22,461,000.
Current wording
From time to time, we are required to post standby letters of credit and various bonds to support contractual obligations to customers and other obligations, including facility closures. As of December 31, 2024, the total amount of standby letters of credit outstanding was approximately $3,200,000 and the total amount of bonds outstanding was approximately $20,930,000. We also provide closure and post-closure requirements through a financial assurance policy for certain of our Treatment Segment facilities through American International Group, Inc. (“AIG”). As of December 31, 2024, the closure and post-closure requirements for these facilities were approximately $23,379,000.
Previous wording
*Revenues.*Our revenues are generated from our two segments, Treatment and Services. Certain contracts within our Services Segment are generated from long-term fixed price contracts. Under fixed price contracts, the objective of the project is not attained unless all scope items within the contract are completed and all of the services promised within fixed fee contracts constitute a single performance obligation. Transaction price is estimated based upon the estimated cost to complete the overall project. Revenue from fixed price contracts is recognized over time primarily using the input method. For the input method, revenue is recognized based on costs incurred on the project relative to the total estimated costs of the project.
Current wording
Revenues. Our revenues are generated from our two reportable segments, Treatment and Services. Certain contracts within our Services Segment are generated from long-term fixed price contracts. Under fixed price contracts, the objective of the project is not attained unless all scope items within the contract are completed and all of the services promised within fixed fee contracts constitute a single performance obligation. Transaction price is determined based on fixed price outline within the contract. Revenue from fixed price contracts is recognized over time primarily using the input method. For the input method, revenue is recognized based on costs incurred on the project relative to the total estimated costs of the project.
Previous wording
Indefinite-lived intangible assets are not amortized but are reviewed for impairment annually as of October 1, or when events or changes in the business environment indicate that the carrying value may be impaired. If the fair value of the asset is less than the carrying amount, we perform a quantitative test to determine the fair value. The impairment loss, if any, is measured as the excess of the carrying value of the asset over its fair value. Significant judgments are inherent in these analyses and include assumptions for, among other factors, forecasted revenue, gross margin, growth rate, operating income, timing of expected future cash flows, and the determination of appropriate long-term discount rates.
Current wording
Indefinite-lived intangible assets are not amortized but are reviewed for impairment annually as of October 1, or when events or changes in the business environment indicate that the carrying value may be impaired. We perform a quantitative test to determine if the fair value of the assets is less than the carrying value. The impairment loss, if any, is measured as the excess of the carrying value of the asset over its fair value. Significant judgments are inherent in these analyses and include assumptions for, among other factors, forecasted revenue, gross margin, growth rate, operating income, timing of expected future cash flows, and the determination of appropriate long-term discount rates.
Previous wording
Intangible assets that have definite useful lives are amortized using the straight-line method over the estimated useful lives (with the exception of customer relationships which are amortized using an accelerated method) and are excluded from our annual intangible asset valuation review as of October 1. Intangible assets with definite useful lives are also tested for impairment whenever events or changes in circumstances indicate that the asset’s carrying value may not be recoverable.
Current wording
Intangible assets that have definite useful lives are amortized using the straight-line method over the estimated useful lives and are excluded from our annual intangible asset valuation review as of October 1. Intangible assets with definite useful lives are tested for impairment whenever events or changes in circumstances indicate that the asset’s carrying value may not be recoverable.
Previous wording
See “Item 8 – Financial Statements and Supplementary Data” – Notes to Consolidated Financial Statements” – Note 2 – Summary of Significant Accounting Policies” for the recent accounting pronouncements that will be adopted in future periods.
Current wording
See “Item 8 – Financial Statements and Supplementary Data” – Notes to Consolidated Financial Statements – Note 2 – Summary of Significant Accounting Policies” for the recent accounting pronouncement that was adopted in 2024 and recent accounting pronouncements that will be adopted in future periods.
Previous wording
Significant Customers. Our Treatment and Services Segments have significant relationships with the U.S governmental authorities through contracts entered into indirectly as subcontractors for others who are prime contractors or directly as the prime contractor to government authorities. Our inability to continue under existing contracts that we have with the U.S government (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.
Current wording
Significant Customers. Our Treatment and Services Segments have significant relationships with federal governmental authorities through contracts entered into indirectly as subcontractors for others who are contractors or directly as the prime contractor to federal government authorities. Our inability to continue under existing contracts that we have with the federal government (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.
Previous wording
We performed services relating to waste generated by government clients (domestic), either directly as a prime contractor or indirectly for others as a subcontractor to government entities, representing approximately $70,642,000, or 78.7%, of our total revenue during 2023, as compared to $59,658,000, or 84.5%, of our total revenue during 2022.
Current wording
The contracts that we are a party to with others as subcontractors to the federal government or directly with the federal government generally provide that the government may terminate the contract at any time for convenience at the government’s option. Our inability to continue under existing contracts that we have with the federal government authorities (directly or indirectly as a subcontractor) or significant reductions in the level of governmental funding in any given year could have a material adverse impact on our operations and financial condition. We performed services relating to waste generated by federal government clients, either directly as a prime contractor or indirectly for others as a subcontractor to federal government entities, representing approximately $40,551,000, or 68.6%, of our total revenue during 2024, as compared to $68,595,000 or 76.4%, of our total revenue during 2023.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Perma-Fix Canada Inc. (“PF Canada”)
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
In connection with amendment dated July 31, 2023, we paid our lender a fee of $100,000 which is being amortized over the remaining term of the Loan Agreement, as amended, as interest expense-financing fees.
Previous report — wording carried elsewhere
*Economic Conditions.*Our business continues to be heavily dependent on services that we provide to governmental clients (domestic), primarily as subcontractors for others who are prime contractors to government authorities (particularly the DOE and DOD) 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 and the manner in which the government entity will be required to spend funding to remediate various sites. 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. 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.