PERMA FIX ENVIRONMENTAL SERVICES INC

Previous wording

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

Current wording

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

Previous wording

Our Treatment and Services Segments’ business continue to be heavily dependent on services that we provide to federal governmental clients, primarily as subcontractors for others who are contractors to government entities or directly as the prime contractor. We believe demand for our services will continue to be subject to fluctuations due to a variety of factors beyond our control, including, without limitation, current economic and political conditions, government reductions, passage of government budgets, government shutdowns and CRs, and the manner in which the applicable government authority will be required to spend funding to remediate various sites. In addition, our governmental contracts and subcontracts relating to activities at federal governmental sites are generally subject to termination for convenience at any time, at the government’s option. Significant reductions in the level of governmental funding, government shutdown or specifically mandated levels for different programs that are important to our business could have a material adverse impact on our business, financial position, results of operations, liquidity and cash flows.

Current wording

Our Treatment and Services Segments’ business continue to be heavily dependent on services that we provide to federal governmental clients, primarily as subcontractors for others who are contractors to government entities or directly as the prime contractor. We believe demand for our services will continue to be subject to fluctuations due to a variety of factors beyond our control. In addition, our governmental contracts and subcontracts relating to activities at federal governmental sites are generally subject to termination for convenience at any time, at the government’s option. Significant reductions in the level of governmental funding, government shutdown or specifically mandated levels for different programs that are important to our business could have a material adverse impact on our business, financial position, results of operations, liquidity and cash flows.

Previous wording

Consolidated revenues decreased $2,793,000 for the three months ended March 31, 2026, compared to the three months ended March 31, 2025, as follows:

Current wording

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

Previous wording

Cost of goods sold for the Treatment Segment increased by approximately $1,775,000, or 19.9%. Variable costs rose by approximately $1,209,000, driven primarily by higher disposal costs of approximately $1,235,000, partially offset by lower transportation, materials and supplies, and laboratory costs totaling approximately $26,000. Within our Treatment Segment, variable cost categories can fluctuate based on waste mix. Treatment Segment’s overall fixed costs increased by approximately $566,000 resulting from the following: fixed salaries and payroll related expenses were higher by $313,000 due to COLA implemented in July 2025; maintenance costs were higher by approximately $81,000 due to general equipment upkeep and facility security enhancements; depreciation expenses were higher by $74,000 due to increased capitalized equipment, including our prototype PFAS reactor; regulatory expenses were higher by approximately $117,000 due to increased regulatory activities and higher fees from regulatory agencies; and overall general expenses were lower by $19,000 primarily due to lower utility costs. Services Segment cost of goods sold decreased by $1,030,000, or 23.8%, primarily due to lower revenue. The decrease was largely driven by reduced subcontract and outside services costs of approximately $931,000. Additional decreases included lower general expenses of approximately $39,000 across various categories, reduced depreciation expense of approximately $20,000 as certain equipment became fully depreciated in 2025, and an overall reduction in material and supplies, disposal, laboratory, and regulatory expenses totaling approximately $275,000. These decreases were partially offset by higher salaries and payroll-related expenses of approximately $115,000 due to COLA implemented in July 2025, as well as increased travel expenses of approximately $120,000. Within our Services Segment, fluctuations in expense categories are influenced by the type and scope of projects performed during the period. Certain projects require greater reliance on subcontractors, specialized materials, regulatory compliance efforts, or travel, while others are more labor-driven or utilize in-house resources. As a result, the mix of project work can significantly impact the composition and level of costs incurred. Included within cost of goods sold is depreciation and amortization expense of $475,000 and $421,000 for the three months ended March 31, 2026, and 2025, respectively.

Current wording

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

Previous wording

SG&Aincreased $284,000 for the three months ended March 31, 2026, as compared to the corresponding period for 2025, as follows:

Current wording

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

Previous wording

Administrative SG&A increased primarily due to approximately $65,000 in higher salaries and payroll-related costs, driven by the addition of one employee and COLA implemented in July 2025 for employees and January 2026 for executives. The remaining increase was attributable to higher outside services costs associated with increased legal and business activities. Treatment Segment SG&A rose mainly due to higher outside services costs of approximately $60,000 from increased consulting and business activities, as well as higher travel expenses of about $23,000. In the Services Segment, SG&A increased primarily due to approximately $72,000 in higher salaries and payroll-related costs, reflecting additional hours spent supporting bids and proposals. Outside services expenses also increased by about $20,000 due to more consulting activities. These increases were partially offset by a reduction of approximately $11,000 in general expenses across various categories. Included in SG&A is depreciation and amortization expense of $15,000 for the three months ended March 31, 2026, and the corresponding period of 2025.

Current wording

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

Previous wording

Interest expense decreased by approximately $53,000 for the first quarter of 2026 compared to the same period in 2025. The decrease was primarily due to the capitalization of approximately $34,000 of interest related to debt incurred for construction projects, including the Company’s second PFAS reactor.

Current wording

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

Previous wording

We had income tax expense for continuing operations of $0 for both the three months ended March 31, 2026, and 2025. The effective tax rate was 0% in both periods, primarily due to the full valuation allowance recorded in 2024 against the Company’s U.S. federal and state deferred tax assets.

Current wording

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

Previous wording

As of March 31, 2026, we had no outstanding borrowing under our Revolving Credit and our Liquidity was approximately $10,720,000, which included approximately $6,545,000 of cash held in our MMDA. As of December 31, 2025, we had no outstanding borrowing under our Revolving Credit and our Liquidity was approximately $18,126,000, which included approximately $11,529,000 of cash held in our MMDA.

Current wording

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

Previous wording

We incurred losses from continuing operations before tax of $15,134,000 during 2024, $10,665,000 during 2025, and $7,375,000 during the first quarter of 2026. We also experienced cash used in continuing operations of $14,146,000 during 2024, $10,311,000 during 2025, and $3,648,000 during the first quarter of 2026, which contributed to declines in cash balances as we continued to fund operations and investments. These results were due in part to delays in the passage of a Federal Budget and the continued use of continuing resolutions by Congress, as well as increased investments in PFAS technology (see “Known Trends and Uncertainties – New Processing Technology” within this MD&A for a discussion of our new technology), expansion of treatment capacity, workforce growth, and infrastructure enhancements intended to support anticipated waste treatment volumes, including those related to the DFLAW program. Our expected cash requirements over the next twelve months include working capital needs, scheduled principal payments on debt, costs associated with the administration and monitoring of discontinued operations, R&D expenditures related to PFAS technology, and capital expenditures.

Current wording

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

Previous wording

The following table reflects the cash flow activities during the first three months of 2026 and 2025:

Current wording

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

Previous wording

As of March 31, 2026, we had cash on hand of approximately $6,664,000.

Current wording

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

Previous wording

Cash used in operating activities of our continuing operations during the first quarter of 2025 consisted mostly of the net loss that we incurred of approximately $3,500,000, adjusted for certain non-cash items, such as $196,000 of stock-based compensation expenses and $436,000 of depreciation and amortization expenses. Cash flow increase of approximately $668,000 resulting from net change in assets and liabilities included a decrease in accounts receivables (net of provision for credit losses) of $2,248,000, offset by an increase in unbilled receivables of $178,000, a net increase in inventories, prepaids and other assets totaling approximately $30,000 and a net decrease in accounts payables, accrued expenses, deferred revenue and other accruals totaling approximately $1,372,000

Current wording

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

Previous wording

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

Current wording

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

Previous wording

We had working capital of $5,894,000 (which included working capital of our discontinued operations) as of March 31, 2026, compared to working capital of $13,803,000 as of December 31, 2025. The decrease in our working capital was primarily driven by the net loss incurred from our operations as previously discussed and increase in capital expenditures discussed below.

Current wording

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

Previous wording

Cash used in investing activities from continuing operations during the first quarter of 2026 primarily consisted of purchases of property and equipment totaling approximately $859,000. The remaining cash outflows related to expenditures for operating permits and certain intangible assets.

Current wording

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

Previous wording

We anticipate making capital expenditures of approximately $3,000,000 to $5,500,000 in 2026 to maintain operations and regulatory compliance requirements and support revenue growth. In 2025, we made capital expenditure for our continuing operations of approximately $5,172,000, which included our PFAS reactors. Our anticipated capital expenditures for 2026 include certain strategic project initiatives which include expenditures to complete our second generation reactor for our PFAS technology. We plan to fund our capital expenditures for 2026 from cash from operations, Liquidity and/or financing. The initiation and timing of our capital expenditures in 2026 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. However, continuing losses may require us to consider various reductions to operations, including, but not limited to, reduction in R&D activities.

Current wording

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

Previous wording

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

Current wording

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

Previous wording

Our cash used in financing during the first quarter of 2025 consisted mostly of principal payments of approximately $157,000 primarily for our Term and Capital Loans under our Credit Facility, principal payments of $71,000 for our finance leases, payments of $194,000 of offering costs from the equity raise that we completed in December 2024, partially offset by proceeds received from option exercises of approximately $41,000.

Current wording

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

Previous wording

Our Credit Facility, established pursuant to our PNC Loan Agreement, and maturing on May 15, 2027, consists of a Revolving Credit facility with a maximum borrowing capacity of $12,500,000. Availability under the Revolving Credit facility is subject to a borrowing base comprised of eligible receivables (as defined in the agreement) and is reduced by (i) outstanding standby letters of credit ($3,350,000 as of March 31, 2026) and (ii) discretionary reserves imposed by the lender ($750,000 as of March 31, 2026). The Credit Facility also includes a Term Loan and a Capital Loan with outstanding balances of approximately $1,208,000 and $122,000, respectively, as of March 31, 2026. We have initiated discussions with our lender regarding our Credit Facility and expect to either enter into a new loan agreement or amend our existing PNC Loan Agreement with our lender. See discussion in Note 8 of the Financial Statements, “Long Term Debt – Credit Facility” included herein as to the Company’s Credit Facility.

Current wording

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

Previous wording

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

Current wording

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

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. As of March 31, 2026, the total amount of standby letters of credit outstanding totaled approximately $3,350,000 and the total amount of bonds outstanding totaled approximately $12,296,000. We also provide closure and post-closure requirements through a financial assurance policy for certain of our Treatment Segment facilities through AIG. As of March 31, 2026, the closure and post-closure requirements for these facilities were approximately $24,550,000.

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

Previous wording

See “Note 2 – Summary of Significant Accounting Policies” in the “Notes to Condensed Consolidated Financial Statements” for the recent accounting pronouncement that was adopted in the first quarter of 2026 and recent accounting pronouncements that will be adopted in future periods.

Current wording

See “Note 2 – Summary of Significant Accounting Policies” in the “Notes to Condensed Consolidated Financial Statements” for the recent accounting pronouncement that was adopted in the first six months of 2026 and recent accounting pronouncements that will be adopted in future periods.

Previous wording

Significant Customers. The contracts that we are a party to with others as subcontractors to the federal government or directly with the federal government generally provide that the government may terminate the contract at any time for convenience at the government’s option. Our inability to continue under existing contracts that we have with the federal government authorities (directly or indirectly as a subcontractor) or significant reductions in the level of governmental funding in any given year could have a material adverse impact on our operations and financial condition. We performed services relating to waste generated by federal government clients, either indirectly as a subcontractor or directly as a prime contractor to federal government entities, representing approximately $6,836,000 or 61.4% of our total revenue during the three months ended March 31, 2026, as compared to $8,404,00 or 60.4% of our total revenue during the corresponding period of 2025.

Current wording

Significant Customers. The contracts that we are a party to with others as subcontractors to the federal government or directly with the federal government generally provide that the government may terminate the contract at any time for convenience at the government’s option. Our inability to continue under existing contracts that we have with the federal government authorities (directly or indirectly as a subcontractor) or significant reductions in the level of governmental funding in any given year could have a material adverse impact on our operations and financial condition. We performed services relating to waste generated by federal government clients, either indirectly as a subcontractor or directly as a prime contractor to federal government entities, representing approximately $8,809,000 or 68.4% and $15,646,000 or 65.2% of our total revenues during the three and six months ended June 30, 2026, respectively, compared to $9,204,000 or 63.1% and $17,609,000 or 61.8% of our total revenues during the three and six months ended June 30, 2025.

Previous wording

Market Trends and Uncertainties. Macroeconomic conditions which include recent government and policy changes implemented in the United States, government budget issues, tariff actions and uncertainties related to trade wars, ambiguity around interest rates, softening labor markets and geopolitical instability, including ongoing conflicts and unrest in the Middle East, have created significant uncertainty in the global economy, volatility in the capital markets and recessionary pressures. We continue to monitor potential effects from these conditions that could impact our revenue and profitability which include supply chain challenges, cost volatility in goods that we utilize in our revenue production, and economic pressures on our customers that may result in reduced and/or delayed spending. We continue to monitor, evaluate and implement a range of strategic options which we believe will assist us to manage potential impacts from these factors, including supply chain optimization, pricing strategies, sourcing adjustments and cost reduction measures in order to minimize impacts to our financial results.

Current wording

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

Previous wording

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

Current wording

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

Previous wording

With commercial operation of our System, we anticipate deployment of our second-generation unit in the second half of 2026 at our EWOC facility in Oak Ridge, Tennessee, which we believe will allow us to triple our production capacity. We continue to market our System technology through various channels. In December 2025, we entered into a joint distribution agreement with a U.S.-based company that manufactures fluorine-free firefighting agents and compressed air foam system, to promote our PFAS destruction technology as a preferred treatment options for customers requiring, compliant, long-term destruction of legacy PFAS stockpiles. In the next several calendar quarters, we expect to further advance our Perma-FAS technology from demonstrated successful bench-scale testing to pilot-scale applications for soil, biosolids, and filter media, broadening the reach of our System’s PFAS destruction capabilities.

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

The outcome of this matter remains subject to regulatory review. While the Department of Ecology may pursue escalated enforcement action in accordance with Washington State Dangerous (Hazardous) Waste Regulations, we currently expect a favorable resolution of the NOV and is not able to reasonably estimate the amount or range of any potential loss, if any, associated with this matter.

Current wording

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

Previous wording

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

Current wording

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

Previous wording

We have three environmental remediation projects, all within our discontinued operations, which principally entail the removal/remediation of contaminated soil, and, in most cases, the remediation of surrounding ground water. We expect to fund the expenses to remediate these sites from funds generated from operations. As of March 31, 2026, we had total environmental remediation liabilities of $3,472,000, a decrease of approximately $13,000 from the December 31, 2025 balance of $3,485,000. The decrease reflects payments for our PFSG remediation project. As of March 31, 2026, approximately $63,000 of the total environmental remediation liabilities were recorded as current.

Current wording

We have three environmental remediation projects, all within our discontinued operations, which principally entail the removal/remediation of contaminated soil, and, in most cases, the remediation of surrounding ground water. We expect to fund the expenses to remediate these sites from funds generated from operations. As of June 30, 2026, we had total environmental remediation liabilities of $3,436,000, a decrease of approximately $49,000 from the December 31, 2025 balance of $3,485,000. The decrease reflects payments for our PFSG remediation project. As of June 30, 2026, approximately $70,000 of the total environmental remediation liabilities were recorded as current.