Perma-Fix Environmental Services(PESI) - 2025 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Presents the unaudited condensed consolidated financial statements and management's discussion for the quarter ended March 31, 2025 Item 1. Condensed Consolidated Financial Statements (Unaudited) Presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, cash flows, and comprehensive notes for Q1 2025 and 2024 Condensed Consolidated Balance Sheets Details the company's financial position, assets, liabilities, and equity as of March 31, 2025, and December 31, 2024 Condensed Consolidated Balance Sheets (Amounts in Thousands) | ASSETS | March 31, 2025 (Unaudited) | December 31, 2024 | | :----------------------------------- | :-------------------------- | :------------------ | | Cash | $25,745 | $28,975 | | Accounts receivable, net | $9,311 | $11,579 | | Total current assets | $45,424 | $50,223 | | Net property and equipment | $21,395 | $21,133 | | Total assets | $92,853 | $97,248 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Total current liabilities | $20,792 | $21,940 | | Total long-term liabilities | $12,873 | $12,918 | | Total liabilities | $33,665 | $34,858 | | Total stockholders' equity | $59,188 | $62,390 | | Total liabilities and stockholders' equity | $92,853 | $97,248 | - Total assets decreased by $4,395 thousand from $97,248 thousand at December 31, 2024, to $92,853 thousand at March 31, 2025, primarily driven by a decrease in cash and accounts receivable[8] - Total liabilities decreased by $1,193 thousand from $34,858 thousand at December 31, 2024, to $33,665 thousand at March 31, 2025, mainly due to decreases in current liabilities like deferred revenue and disposal/transportation accrual[10] Condensed Consolidated Statements of Operations Reports the company's revenues, costs, and net loss for the three months ended March 31, 2025, and 2024 Condensed Consolidated Statements of Operations (Amounts in Thousands, Except for Per Share Amounts) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Revenues | $13,919 | $13,617 | | Cost of goods sold | $13,262 | $14,237 | | Gross profit (loss) | $657 | $(620) | | Selling, general and administrative expenses | $4,015 | $3,544 | | Loss from operations | $(3,736) | $(4,460) | | Net loss | $(3,573) | $(3,560) | | Net loss per common share | $(0.19) | $(0.26) | - Revenues increased by $302 thousand (2.2%) year-over-year, while gross profit significantly improved from a loss of $620 thousand in Q1 2024 to a profit of $657 thousand in Q1 2025[13] - Net loss per common share improved from $(0.26) in Q1 2024 to $(0.19) in Q1 2025, despite an increase in selling, general and administrative expenses[13] Condensed Consolidated Statements of Comprehensive Loss Presents the net loss and other comprehensive income/loss components for the three months ended March 31, 2025, and 2024 Condensed Consolidated Statements of Comprehensive Loss (Amounts in Thousands) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Net loss | $(3,573) | $(3,560) | | Foreign currency translation gain (loss) | $17 | $(56) | | Total other comprehensive income (loss) | $17 | $(56) | | Comprehensive loss | $(3,556) | $(3,616) | - Comprehensive loss improved to $(3,556) thousand in Q1 2025 from $(3,616) thousand in Q1 2024, primarily due to a foreign currency translation gain of $17 thousand in 2025 compared to a loss of $56 thousand in 2024[15] Condensed Consolidated Statements of Stockholders' Equity Details changes in stockholders' equity, including net loss and stock transactions, for the three months ended March 31, 2025, and 2024 Condensed Consolidated Statements of Stockholders' Equity (Amounts in Thousands, Except for Share Amounts) | Metric | Balance at Dec 31, 2024 | Net Loss | Foreign Currency Translation | Issuance of Common Stock for Services | Issuance of Common Stock upon Exercise of Options | Stock-Based Compensation | Balance at Mar 31, 2025 | | :----------------------------------- | :---------------------- | :------- | :--------------------------- | :------------------------------------ | :--------------------------------------------- | :----------------------- | :---------------------- | | Common Stock (Shares) | 18,384,879 | — | — | 10,565 | 40,591 | — | 18,436,035 | | Common Stock (Amount) | $18 | — | — | — | — | — | $18 | | Additional Paid-In Capital | $159,590 | — | — | $117 | $41 | $196 | $159,944 | | Accumulated Deficit | $(96,930) | $(3,573) | — | — | — | — | $(100,503) | | Accumulated Other Comprehensive Loss | $(200) | — | $17 | — | — | — | $(183) | | Total Stockholders' Equity | $62,390 | $(3,573) | $17 | $117 | $41 | $196 | $59,188 | - Total stockholders' equity decreased from $62,390 thousand at December 31, 2024, to $59,188 thousand at March 31, 2025, primarily due to a net loss of $3,573 thousand[17] - The company issued 10,565 shares of common stock for services and 40,591 shares upon exercise of options, contributing to additional paid-in capital[17] Condensed Consolidated Statements of Cash Flows Summarizes cash inflows and outflows from operating, investing, and financing activities for the three months ended March 31, 2025, and 2024 Condensed Consolidated Statements of Cash Flows (Amounts in Thousands) | Cash Flow Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Cash used in operating activities | $(2,104) | $(4,517) | | Cash used in investing activities | $(586) | $(318) | | Cash used in financing activities | $(396) | $(125) | | Decrease in cash and finite risk sinking fund | $(3,086) | $(4,978) | | Cash and finite risk sinking fund at end of period | $38,569 | $14,596 | - Cash used in operating activities significantly decreased from $(4,517) thousand in Q1 2024 to $(2,104) thousand in Q1 2025, indicating improved operational cash management[20] - Cash used in investing activities increased to $(586) thousand in Q1 2025 from $(318) thousand in Q1 2024, primarily due to increased purchases of property and equipment[20] Notes to Condensed Consolidated Financial Statements Provides detailed explanations and disclosures supporting the condensed consolidated financial statements 1. Basis of Presentation Outlines the preparation and presentation principles for the unaudited condensed consolidated financial statements - The condensed consolidated financial statements are unaudited and prepared in accordance with SEC rules, reflecting all necessary recurring adjustments[23] - Results for Q1 2025 are not necessarily indicative of the full fiscal year 2025[23] 2. Summary of Significant Accounting Policies Describes the key accounting policies and recent accounting pronouncements adopted or under evaluation by the company - The company adopted ASU 2023-05 on January 1, 2025, regarding joint venture formations, which had no impact on its financial statements[26] - The company is evaluating the impact of ASU 2024-03 (effective after December 15, 2026) and ASU 2023-09 (effective after December 31, 2025) on future disclosures related to expense disaggregation and income tax disclosures, respectively[27][29] 3. Revenue Details revenue disaggregation by contract type and generator, along with contract balances for the reporting periods Revenue by Contract Type (In thousands) | Contract Type | March 31, 2025 (Total) | March 31, 2024 (Total) | | :-------------- | :----------------------- | :----------------------- | | Fixed price | $12,116 | $13,023 | | Time and materials | $1,803 | $594 | | Total | $13,919 | $13,617 | Revenue by Generator (In thousands) | Generator | March 31, 2025 (Total) | March 31, 2024 (Total) | | :---------------- | :----------------------- | :----------------------- | | Domestic government | $9,784 | $10,064 | | Domestic commercial | $1,578 | $3,005 | | Foreign government | $2,261 | $79 | | Foreign commercial | $296 | $469 | | Total | $13,919 | $13,617 | - Foreign government revenue saw a significant increase from $79 thousand in Q1 2024 to $2,261 thousand in Q1 2025[31] Contract Balances (In thousands) | Metric | March 31, 2025 | December 31, 2024 | Change ($) | Change (%) | | :------------------------ | :------------- | :---------------- | :--------- | :--------- | | Unbilled receivables - current | $5,168 | $4,990 | $178 | 3.6% | | Deferred revenue | $5,881 | $6,711 | $(830) | -12.4% | 4. Leases Presents information on total lease costs, weighted average lease terms, and discount rates for operating and finance leases Total Lease Cost (In thousands) | Lease Type | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------- | :-------------------------------- | :-------------------------------- | | Operating Lease Cost | $121 | $143 | | Finance Leases Cost | $86 | $87 | | Short-term lease rent expense | $2 | $0 | | Total lease cost | $209 | $230 | Weighted Average Lease Terms and Discount Rates (March 31, 2025) | Lease Type | Weighted Average Remaining Lease Terms (years) | Weighted Average Discount Rate | | :----------- | :--------------------------------------------- | :----------------------------- | | Operating Leases | 4.5 | 7.7% | | Finance Leases | 3.7 | 9.4% | 5. Intangible Assets Provides details on definite-lived intangible assets, including patents and software, and related amortization expenses Definite-Lived Intangible Assets (In thousands) | Asset Type | March 31, 2025 (Net Carrying Amount) | December 31, 2024 (Net Carrying Amount) | | :----------- | :----------------------------------- | :-------------------------------------- | | Patents | $320 | $318 | | Software | $66 | $75 | | Total | $386 | $393 | - Amortization expenses for definite-lived intangible assets decreased from $25 thousand in Q1 2024 to $15 thousand in Q1 2025[43] 6. Capital Stock, Stock Plans, Warrants and Stock Based Compensation Outlines stock-based compensation, unrecognized costs, and details of stock option grants for employees and directors Stock-Based Compensation Recognized (In thousands) | Stock Options | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------- | :-------------------------------- | :-------------------------------- | | Employee Stock Options | $107 | $91 | | Director Stock Options | $89 | $61 | | Total | $196 | $152 | - Total unrecognized compensation costs related to unvested options for employees and directors were approximately $2,004 thousand as of March 31, 2025, expected to be recognized over approximately 3.1 years[47] - The company granted 50,000 stock options in Q1 2025 with an exercise price of $10.70 per share, vesting at 20% per year over five years[45][48] 7. Loss Per Share Reports basic and diluted net loss per common share, including weighted average shares outstanding Net Loss Per Common Share | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Loss from continuing operations, net of taxes | $(3,500) | $(3,458) | | Basic and diluted loss per share (Continuing operations) | $(0.19) | $(0.25) | | Net loss | $(3,573) | $(3,560) | | Basic and diluted net loss per share | $(0.19) | $(0.26) | | Weighted average shares outstanding (Basic/Diluted) | 18,424 | 13,676 | - Dilutive effects of stock options and warrants were excluded from diluted loss per share calculations for both periods as they were anti-dilutive[52][53] 8. Long Term Debt Details the company's long-term debt, including term loans, capital loans, and notes payable, along with credit facility information Long-Term Debt (Amounts in Thousands) | Debt Type | March 31, 2025 | December 31, 2024 | | :----------------------------------- | :------------- | :---------------- | | Term Loan | $1,708 | $1,834 | | Capital Loan | $227 | $253 | | Notes Payable | $401 | $406 | | Debt Issuance Costs | $(174) | $(178) | | Total debt | $2,162 | $2,315 | | Less current portion of long-term debt | $541 | $550 | | Long-term debt | $1,621 | $1,765 | - The company's Credit Facility, maturing May 15, 2027, includes a $12.5 million revolving credit, a $2.5 million Term Loan, and a $524 thousand Capital Loan[57] - As of March 31, 2025, the company had no outstanding borrowing under its revolving credit and its Liquidity was approximately $29,277 thousand[61] 9. Commitments and Contingencies Discusses potential liabilities from hazardous waste management, legal proceedings, and financial commitments like letters of credit and bonds - The company is involved in hazardous waste management and could be a potentially responsible party for cleanup costs at disposal sites[63] - The Tetra Tech EC, Inc. lawsuit, alleging negligence and other claims, has been resolved with the company formally released from all claims[65][69] - A shareholder complaint by Michael O'Neill, alleging breach of contract and fiduciary duty regarding a proxy statement, is being vigorously defended by the company[70][72] - The Board rejected a shareholder demand to remove a bylaw provision requiring indemnification for attorneys' fees, deeming it meritless[73][74] - As of March 31, 2025, standby letters of credit totaled approximately $3,200 thousand and bonds outstanding totaled approximately $21,481 thousand[76] 10. Discontinued Operations Provides financial information for discontinued operations, including net losses and assets/liabilities - Discontinued operations, comprising divested subsidiaries and closed locations from the previous Industrial Segment, incurred net losses of $73 thousand in Q1 2025 (vs. $102 thousand in Q1 2024) primarily due to administration and monitoring costs[77][78] Assets and Liabilities of Discontinued Operations (Amounts in Thousands) | Category | March 31, 2025 | December 31, 2024 | | :----------------------- | :------------- | :---------------- | | Total current assets | $36 | $20 | | Total long-term assets | $130 | $130 | | Total assets | $166 | $150 | | Total current liabilities | $258 | $244 | | Total long-term liabilities | $948 | $945 | | Total liabilities | $1,206 | $1,189 | 11. Segment Reporting Presents financial performance by operating segment: Treatment and Services, including revenue, cost of goods sold, and gross profit - The company operates in two reporting segments: Treatment (nuclear, low-level radioactive, mixed, hazardous, and non-hazardous waste treatment, processing, and disposal services, plus R&D) and Services (technical services including radiological measurement, occupational safety and health, consulting, engineering, project management, waste management, D&D, and equipment calibration)[83][88] Segment Reporting for the Quarter Ended March 31, 2025 (Amounts in Thousands) | Metric | Treatment | Services | Total Segments | Corporate | Consolidated Total | | :----------------------------------- | :-------- | :------- | :------------- | :-------- | :----------------- | | Revenue from external customers | $9,186 | $4,733 | $13,919 | $0 | $13,919 | | Total cost of goods sold | $8,936 | $4,326 | $13,262 | $0 | $13,262 | | Gross profit | $250 | $407 | $657 | $0 | $657 | | Total SG&A | $1,356 | $736 | $2,092 | $1,923 | $4,015 | | Research and development | $291 | $23 | $314 | $69 | $383 | | Loss from operations | $(1,397) | $(347) | $(1,744) | $(1,992) | $(3,736) | - The Treatment Segment generated a gross profit of $250 thousand in Q1 2025, a significant improvement from a gross loss of $(52) thousand in Q1 2024[87][89] - The Services Segment also improved its gross profit to $407 thousand in Q1 2025 from a gross loss of $(568) thousand in Q1 2024[87][89] 12. Income Taxes Reports income tax expense and the effective tax rate for continuing operations, noting the impact of valuation allowances - The company reported $0 income tax expense for continuing operations in Q1 2025, compared to an income tax benefit of $956 thousand in Q1 2024[93] - The effective tax rate was 0% in Q1 2025 due to the recognition of a full valuation allowance against U.S. federal and state deferred tax assets in Q3 2024[93] 13. Executive Compensation Details executive appointments, annual salaries, and the structure of the 2025 Management Incentive Plans - Mr. Troy Eshleman was appointed COO on January 23, 2025, with an annual salary of $320,000[94] - Mr. Richard Grondin was appointed EVP of Hanford and International Waste Operations with an annual salary of $315,267[95] - Management Incentive Plans (MIPs) for 2025 were approved, with potential target performance compensation ranging from 25% to 150% of base salary for the CEO and 25% to 100% for other executive officers[96] 14. Subsequent Events Confirms the evaluation of events occurring after the balance sheet date, with no material adjustments or disclosures identified - The company evaluated subsequent events through May 8, 2025, and identified no events requiring adjustment or disclosure in the consolidated financial statements[97] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's analysis of financial condition and operational results for Q1 2025, discussing performance drivers, liquidity, and future outlook Forward-looking Statements Highlights statements regarding future performance, demand, funding, and potential risks, including government funding and contract uncertainties - The report contains forward-looking statements regarding future performance, demand for services, government funding, waste receipts, investments, growth, and the West Valley Development Project[100][101] - Key risks include reductions in government funding, inability to obtain new contracts, changes in federal spending priorities, and uncertainties related to the new presidential administration[101] Overview Summarizes Q1 2025 financial performance, key impacts, waste backlog growth, and future project expectations - Q1 2025 financial results were impacted by seasonal slowdowns, project and waste shipment delays, operational readiness costs for a specific waste stream, and increased investment in PFAS technology[103][110] - Waste backlog increased by approximately $2,378 thousand (30.3%) to $10,237 thousand as of March 31, 2025, from $7,859 thousand at December 31, 2024[105] - The company expects revenue contribution from the West Valley Project in the second half of 2025 and anticipates the DFLAW program at Hanford to begin operations in Q3 2025[106] Key Financial Highlights (Q1 2025 vs. Q1 2024) | Metric | Q1 2025 (Thousands) | Q1 2024 (Thousands) | Change ($) | Change (%) | | :------------------- | :------------------ | :------------------ | :--------- | :--------- | | Revenues | $13,919 | $13,617 | $302 | 2.2% | | Treatment Segment Revenue | $9,186 | $8,709 | $477 | 5.5% | | Services Segment Revenue | $4,733 | $4,908 | $(175) | -3.6% | | Overall Gross Profit | $657 | $(620) | $1,277 | 206.0% | | SG&A Expenses | $4,015 | $3,544 | $471 | 13.3% | Business Environment Describes the company's reliance on federal government clients and the associated risks of funding fluctuations and contract terminations - The company's business heavily relies on services provided to federal governmental clients, subject to fluctuations from economic/political conditions and government funding levels[109] - Government contracts are generally subject to termination for convenience, posing a risk to financial performance[109] Results of Operations Analyzes the company's financial performance, including detailed breakdowns of revenues, costs, and profits by segment Revenues Provides a detailed breakdown of revenue by segment and category, highlighting changes year-over-year Revenue Breakdown (Q1 2025 vs. Q1 2024) | Category | 2025 (Thousands) | % Revenue 2025 | 2024 (Thousands) | % Revenue 2024 | Change ($) | % Change | | :------------------- | :--------------- | :------------- | :--------------- | :------------- | :--------- | :--------- | | Treatment - Government waste | $7,017 | 50.4 | $5,133 | 37.7 | $1,884 | 36.7 | | Treatment - Hazardous/non-hazardous | $1,067 | 7.7 | $1,337 | 9.8 | $(270) | -20.2 | | Treatment - Other nuclear waste | $1,102 | 7.9 | $2,239 | 16.5 | $(1,137) | -50.8 | | Total Treatment | $9,186 | 66.0 | $8,709 | 64.0 | $477 | 5.5 | | Services - Nuclear services | $3,375 | 24.2 | $4,569 | 33.5 | $(1,194) | -26.1 | | Services - Technical services | $1,358 | 9.8 | $339 | 2.5 | $1,019 | 300.6 | | Total Services | $4,733 | 34.0 | $4,908 | 36.0 | $(175) | -3.6 | | Total Consolidated | $13,919 | 100.0 | $13,617 | 100.0 | $302 | 2.2 | - Treatment Segment revenue increased by 5.5% due to higher government waste volume, partially offset by lower average prices and decreased other nuclear waste volume[114] - Services Segment revenue decreased by 3.6% due to a lack of projects and delays in procurement actions, particularly in nuclear services, despite a significant increase in technical services[114] Cost of Goods Sold Analyzes changes in cost of goods sold by segment, explaining the drivers behind the year-over-year variations Cost of Goods Sold (Q1 2025 vs. Q1 2024) | Segment | 2025 (Thousands) | % Revenue 2025 | 2024 (Thousands) | % Revenue 2024 | Change ($) | | :-------- | :--------------- | :------------- | :--------------- | :------------- | :--------- | | Treatment | $8,936 | 97.3 | $8,761 | 100.6 | $175 | | Services | $4,326 | 91.4 | $5,476 | 111.6 | $(1,150) | | Total | $13,262 | 95.3 | $14,237 | 104.6 | $(975) | - Total cost of goods sold decreased by $975 thousand (6.8%) year-over-year, primarily driven by a $1,150 thousand decrease in the Services Segment due to cost-cutting initiatives[115] - Treatment Segment's cost of goods sold increased by $175 thousand, mainly due to higher fixed costs from increased headcount and utility costs, partially offset by lower variable disposal costs[115] Gross profit (loss) Examines the gross profit and loss performance by segment, highlighting significant improvements from the prior year Gross Profit (Loss) (Q1 2025 vs. Q1 2024) | Segment | 2025 (Thousands) | % Revenue 2025 | 2024 (Thousands) | % Revenue 2024 | Change ($) | | :-------- | :--------------- | :------------- | :--------------- | :------------- | :--------- | | Treatment | $250 | 2.7 | $(52) | -0.6 | $302 | | Services | $407 | 8.6 | $(568) | -11.6 | $975 | | Total | $657 | 4.7 | $(620) | -4.6 | $1,277 | - Overall gross profit increased by $1,277 thousand (206.0%), moving from a consolidated gross loss of $(620) thousand in Q1 2024 to a gross profit of $657 thousand in Q1 2025[116] - Both Treatment and Services segments showed significant improvements in gross profit and gross margin, with Services benefiting from cost-cutting initiatives[116] SG&A Details the changes in selling, general, and administrative expenses, attributing increases to payroll, compensation, and marketing efforts SG&A Expenses (Q1 2025 vs. Q1 2024) | Category | 2025 (Thousands) | % Revenue 2025 | 2024 (Thousands) | % Revenue 2024 | Change ($) | | :----------- | :--------------- | :------------- | :--------------- | :------------- | :--------- | | Administrative | $1,923 | — | $1,687 | — | $236 | | Treatment | $1,356 | 14.8 | $1,065 | 12.2 | $291 | | Services | $736 | 15.6 | $792 | 16.1 | $(56) | | Total | $4,015 | 28.8 | $3,544 | 26.0 | $471 | - Total SG&A expenses increased by $471 thousand (13.3%), primarily due to higher administrative and Treatment Segment expenses[118] - Administrative SG&A increased due to higher salaries, payroll, stock option compensation (including new COO hiring), and increased legal/consulting fees[118] - Treatment Segment SG&A rose due to increased payroll for PFAS technology marketing initiatives and higher trade show expenses[118] R&D Reports the increase in research and development expenses, primarily driven by investments in PFAS technology - R&D expenses increased by approximately $87 thousand in Q1 2025 compared to Q1 2024, primarily due to investments in PFAS technology development[119] Interest Income Explains the increase in interest income, attributed to earnings from money market accounts following equity raises - Interest income increased by approximately $161 thousand in Q1 2025, driven by interest earned from funds in the money market deposit account following equity raises in May and December 2024[120] Income Taxes Discusses the income tax expense and effective tax rate for continuing operations, noting the impact of a valuation allowance - The company reported $0 income tax expense for continuing operations in Q1 2025 (0% effective tax rate) due to a full valuation allowance against deferred tax assets, compared to a $956 thousand income tax benefit (21.7% effective tax rate) in Q1 2024[121] Liquidity and Capital Resources Assesses the company's ability to meet short-term and long-term obligations, detailing cash flows, capital expenditures, and credit facilities Operating Activities Analyzes cash flows from operating activities, highlighting improvements due to changes in accounts receivable and deferred revenue - Cash used in continuing operations decreased from $4,358 thousand in Q1 2024 to $2,048 thousand in Q1 2025, primarily due to a decrease in accounts receivable and deferred revenue[123][124] - Cash used in discontinued operations decreased from $159 thousand in Q1 2024 to $56 thousand in Q1 2025, partially offset by rent payments received from a tenant[123][126] Investing Activities Examines cash flows used in investing activities, primarily driven by purchases of property and equipment, including PFAS technology investments - Cash used in investing activities for continuing operations increased from $318 thousand in Q1 2024 to $571 thousand in Q1 2025, mainly due to higher purchases of property and equipment, including investments in PFAS technology[123][129][132] - Cash used in investing activities for discontinued operations was $15 thousand in Q1 2025, related to regulatory permits[123][130] Capital Expenditures Outlines anticipated capital expenditures for 2025, including strategic project initiatives and funding sources - Anticipated capital expenditures for 2025 range from $2,000 thousand to $5,500 thousand, including strategic project initiatives like the installation of a second-generation PFAS technology unit[133] - Funding for capital expenditures will come from operations, liquidity under the Loan Agreement, and/or financing[133] Financing Activities Details cash flows from financing activities, including debt payments and costs associated with equity raises - Cash used in financing activities increased from $125 thousand in Q1 2024 to $396 thousand in Q1 2025, primarily due to principal payments on debt, finance leases, and offering costs from a December 2024 equity raise[123][134][135] Credit Facility Describes the company's loan agreement, including revolving credit, term loans, and recent amendments to covenants - The Loan Agreement with PNC, maturing May 15, 2027, includes a $12.5 million revolving credit, a $2.5 million Term Loan, and a $524 thousand Capital Loan[136] - An amendment on March 11, 2025, removed the quarterly fixed charge coverage ratio (FCCR) covenant testing unless daily liquidity falls below $5,000 thousand, and revised the Facility Fee[137][142] - The company met all financial covenant requirements in Q1 2025 and expects to continue meeting them for the next twelve months[137] Off Balance Sheet Arrangements Reports outstanding standby letters of credit, bonds, and environmental closure and post-closure requirements - As of March 31, 2025, outstanding standby letters of credit totaled approximately $3,200 thousand, and bonds outstanding totaled approximately $21,481 thousand[138] - Closure and post-closure requirements for certain Treatment Segment facilities, supported by an AIG financial assurance policy, were approximately $23,949 thousand[138] Critical Accounting Policies and Estimates Confirms no significant changes to critical accounting policies or estimates from the prior annual report - There were no significant changes in critical accounting policies or estimates from those discussed in the Annual Report on Form 10-K for the year ended December 31, 2024[139] Recent Accounting Pronouncements Refers to Note 2 for details on recently adopted and future accounting pronouncements - Refer to Note 2 for details on recently adopted and future accounting pronouncements[140] Known Trends and Uncertainties Discusses key trends and uncertainties impacting the business, including customer reliance, federal funding, and macroeconomic conditions Significant Customers Highlights the company's reliance on federal government clients and the associated risks of contract termination due to funding changes - Revenue from federal government clients (directly or indirectly) accounted for approximately $8,404 thousand (60.4%) of total revenue in Q1 2025, down from $9,373 thousand (68.8%) in Q1 2024[141] - Government contracts are subject to termination for convenience, posing a material adverse impact risk if funding is significantly reduced[141] Federal Funding Addresses the impact of continuing resolutions and federal spending cuts on government funding and procurement actions - A full-year Continuing Resolution (CR) signed on March 15, 2025, funds federal agencies at 2024 fiscal year budget levels through September 30, 2025[143] - The CR and the Department of Government Efficiency's (DOGE) mission to slash federal spending create uncertainties that could negatively impact financial results through delayed or canceled procurement actions[143] Market Trends and Uncertainties Examines macroeconomic conditions, including policy changes, interest rates, and labor markets, and their potential impact on the company - Macroeconomic conditions, including government policy changes, tariff actions, interest rate ambiguity, and softening labor markets, create significant uncertainty in the global economy[144] - The company is monitoring potential impacts on revenue and profitability from supply chain challenges, cost volatility, and economic pressures on customers, implementing strategic options to mitigate risks[144] New Processing Technology Details the deployment and future plans for the Perma-FAS system for PFAS destruction, a new revenue source - The company completed the installation and startup of its first full-scale commercial Perma-FAS system for PFAS destruction, a promising new revenue source[145] - The company has secured and is treating approximately 10,000 gallons of AFFF liquids and expects an additional 50,000 gallons in the coming months[145] - Plans include deploying a second-generation unit in Q4 2025 and advancing the technology into pilot-scale applications for soil, biosolids, and filter media by Q3 2025[146] Environmental Contingencies Discusses environmental regulations, potential liabilities as a responsible party, and accrued remediation liabilities - The company is subject to rigorous federal, state, and local environmental regulations in the waste management services segment[147] - Despite compliance efforts, the company could be liable for remedial costs as a potentially responsible party (PRP) at third-party disposal sites[148] - As of March 31, 2025, total accrued environmental remediation liabilities were $767 thousand, recorded as long-term, with expenses expected to be funded from operations[149] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Perma-Fix Environmental Services, Inc. is not required to provide quantitative and qualitative disclosures about market risk - Quantitative and qualitative disclosures about market risk are not required for smaller reporting companies[150] Item 4. Controls and Procedures The company's management, including the Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of its disclosure controls and procedures as of March 31, 2025, concluding they were effective. There were no material changes in internal control over financial reporting during the quarter - Disclosure controls and procedures were evaluated and deemed effective as of March 31, 2025[151] - No material changes in internal control over financial reporting occurred during the most recently completed fiscal quarter[152] PART II. OTHER INFORMATION Presents additional information not covered in the financial statements, including legal proceedings, risk factors, and exhibits Item 1. Legal Proceedings There are no new material legal proceedings pending against the company or its subsidiaries not previously reported. Updates to previously disclosed legal matters, specifically the Tetra Tech EC, Inc. lawsuit and a shareholder demand letter, are incorporated by reference from Note 9 - No new material legal proceedings are pending against the company[154] - Updates to the Tetra Tech EC, Inc. lawsuit and a shareholder demand letter are discussed in Note 9[154] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Form 10-K for the year ended December 31, 2024 - No material changes to risk factors previously disclosed in the 2024 Form 10-K[155] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including amendments to the credit agreement, 2025 incentive compensation plans for executive officers, an incentive stock option agreement, certifications by the CEO and CFO, and XBRL interactive data files - Includes the Tenth Amendment to the Second Amended and Restated Revolving Credit, Term Loan and Security Agreement dated March 11, 2025[157] - Lists 2025 Incentive Compensation Plans for the CEO, CFO, EVP of Strategic Initiatives, EVP of Hanford and International Waste Operations, and COO[157] - Contains certifications by the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) and 18 U.S.C. Section 1350[157]