Notes
to Consolidated Financial Statements
March
31, 2021
(Unaudited)
Reference
is made herein to the notes to consolidated financial statements included in our Annual Report on Form 10-K for the year ended December
31, 2020.
The
consolidated financial statements included herein have been prepared by the Company (which may be referred to as we, us or our), without
an audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“the Commission”). Certain information
and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in
the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations, although
the Company believes the disclosures which are made are adequate to make the information presented not misleading. Further, the consolidated
financial statements reflect, in the opinion of management, all adjustments (which include only normal recurring adjustments) necessary
to present fairly the financial position and results of operations as of and for the periods indicated. The results of operations for
the three months ended March 31, 2021 are not necessarily indicative of results to be expected for the fiscal year ending December 31,
2021.
The
Company suggests that these consolidated financial statements be read in conjunction with the consolidated financial statements and the
notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
The
consolidated financial statements include our accounts, those of our wholly-owned subsidiaries, and our majority-owned Polish subsidiary,
Perma-Fix Medical. Additionally, the Company’s financial statements include the account of a variable interest entity (“VIE”),
Perma-Fix ERRG for which we are the primary beneficiary (See “Note 13 - VIE” for a discussion of this VIE).
2.
|
Summary
of Significant Accounting Policies
|
Our
accounting policies are as set forth in the notes to the December 31, 2020 consolidated financial statements referred to above.
Recently
Adopted Accounting Standards
In
December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.
2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,” which is intended to simplify various aspects
related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies
and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within
those fiscal years, beginning after December 15, 2020, with early adoption permitted. The adoption of ASU No. 2019-12 by the Company
effective January 1, 2021 did not have a material impact on the Company’s financial statements.
In
January 2020, the FASB issued ASU 2020-01, “Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint
Ventures (Topic 323), and Derivatives and Hedging (Topic 815), clarifying the Interactions between Topic 321, Topic 323, and Topic 815.”
This guidance addresses accounting for the transition
into and out of the equity method and provides clarification of the interaction of rules for equity securities, the equity method of
accounting, and forward contracts and purchase options on certain types of securities. This standard is effective for fiscal years and
interim periods within those fiscal years beginning after December 15, 2020. Early adoption is permitted. The adoption of ASU No. 2020-01
by the Company effective January 1, 2021 did not have a material impact on the Company’s financial statements.
In
October 2020, the FASB issued ASU No 2020-10, “Codification Improvements.” ASU 2020-10 updates various codification topics
by clarifying or improving disclosure requirements. ASU 2020-10 is effective for public entities for fiscal years beginning after December
15, 2020, with early adoption permitted. The adoption of ASU No. 2020-01 by the Company effective January 1, 2021 did not have a material
impact on the Company’s financial statements or disclosures.
Recently
Issued Accounting Standards – Not Yet Adopted
In
June 2016, the FASB issued ASU No. 2016-13, “Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments
and subsequent amendments to the initial guidance: ASU 2018-19 “Codification Improvements to Topic 326, Financial Instruments -
Credit Losses,” ASU 2019-04 “Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives
and Hedging, and Topic 825, Financial Instruments,” ASU 2019-05 “Financial Instruments - Credit Losses (Topic 326): Targeted
Transition Relief,” ASU 2019-11 “Codification Improvements to Topic 326, Financial Instruments - Credit Losses” and
ASU 2020-02, “Financial Instruments—Credit Losses (Topic 326) and Leases (Topic 842)” (collectively, “Topic 326”).
Topic 326 introduces an approach, based on expected losses, to estimate credit losses on certain types of financial instruments and modifies
the impairment model for available-for-sale debt securities. The new approach to estimating credit losses (referred to as the current
expected credit losses model) applies to most financial assets measured at amortized cost and certain other instruments, including trade
and other receivables and loans. Entities are required to apply the standard’s provisions as a cumulative-effect adjustment to
retained earnings as of the beginning of the first reporting period in which the guidance is adopted. These ASUs are effective January
1, 2023 for the Company as a smaller reporting company. The Company is currently evaluating the impact of this ASU on its consolidated
financial statements.
In
August 2020, the FASB issued ASU No. 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives
and Hedging – Contracts in Entity’s Own Equity.” ASU 2020-06 simplifies the accounting for convertible instruments
by removing major separation models and removing certain settlement condition qualifiers for the derivatives scope exception for contracts
in an entity’s own equity, and simplifies the related diluted net income per share calculation for both Subtopics. ASU 2020-06
is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023, for the Company as a
smaller reporting company. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including
interim periods within those fiscal years. The Company is currently evaluating the impact of this ASU on its consolidated financial statements
and disclosures.
Disaggregation
of Revenue
In
general, the Company’s business segmentation is aligned according to the nature and economic characteristics of our services and
provides meaningful disaggregation of each business segment’s results of operations. The nature of the Company’s performance
obligations within our Treatment and Services Segments result in the recognition of our revenue primarily over time. The following tables
present further disaggregation of our revenues by different categories for our Services and Treatment Segments:
Revenue by Contract
Type
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In
thousands)
|
|
Three
Months Ended
|
|
|
Three
Months Ended
|
|
|
|
March
31, 2021
|
|
|
March
31, 2020
|
|
|
|
Treatment
|
|
|
Services
|
|
|
Total
|
|
|
Treatment
|
|
|
Services
|
|
|
Total
|
|
Fixed
price
|
|
$
|
7,495
|
|
|
$
|
2,581
|
|
|
$
|
10,076
|
|
|
$
|
9,563
|
|
|
$
|
1,392
|
|
|
$
|
10,955
|
|
Time
and materials
|
|
|
—
|
|
|
|
13,057
|
|
|
|
13,057
|
|
|
|
—
|
|
|
|
13,905
|
|
|
|
13,905
|
|
Total
|
|
$
|
7,495
|
|
|
$
|
15,638
|
|
|
$
|
23,133
|
|
|
$
|
9,563
|
|
|
$
|
15,297
|
|
|
$
|
24,860
|
|
Revenue by generator
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In
thousands)
|
|
Three
Months Ended
|
|
|
Three
Months Ended
|
|
|
|
March
31, 2021
|
|
|
March
31, 2020
|
|
|
|
Treatment
|
|
|
Services
|
|
|
Total
|
|
|
Treatment
|
|
|
Services
|
|
|
Total
|
|
Domestic
government
|
|
$
|
4,598
|
|
|
$
|
12,661
|
|
|
$
|
17,259
|
|
|
$
|
7,690
|
|
|
$
|
13,798
|
|
|
$
|
21,488
|
|
Domestic
commercial
|
|
|
2,265
|
|
|
|
590
|
|
|
|
2,855
|
|
|
|
1,873
|
|
|
|
462
|
|
|
|
2,335
|
|
Foreign
government
|
|
|
534
|
|
|
|
2,364
|
|
|
|
2,898
|
|
|
|
—
|
|
|
|
1,014
|
|
|
|
1,014
|
|
Foreign
commercial
|
|
|
98
|
|
|
|
23
|
|
|
|
121
|
|
|
|
—
|
|
|
|
23
|
|
|
|
23
|
|
Total
|
|
$
|
7,495
|
|
|
$
|
15,638
|
|
|
$
|
23,133
|
|
|
$
|
9,563
|
|
|
$
|
15,297
|
|
|
$
|
24,860
|
|
Contract
Balances
The
timing of revenue recognition, billings, and cash collections results in accounts receivable and unbilled receivables (contract assets).
The Company’s contract liabilities consist of deferred revenues which represents advance payment from customers in advance of the
completion of our performance obligation.
The
following table represents changes in our contract assets and contract liabilities balances:
|
|
|
|
|
|
|
|
Year-to-date
|
|
|
Year-to-date
|
|
(In
thousands)
|
|
March
31, 2021
|
|
|
December
31, 2020
|
|
|
Change
($)
|
|
|
Change
(%)
|
|
Contract
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Account
receivables, net of allowance
|
|
$
|
20,121
|
|
|
$
|
9,659
|
|
|
$
|
10,462
|
|
|
|
108.3
|
%
|
Unbilled
receivables - current
|
|
|
9,229
|
|
|
|
14,453
|
|
|
|
(5,224
|
)
|
|
|
(36.1
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
revenue
|
|
$
|
3,106
|
|
|
$
|
4,614
|
|
|
$
|
(1,508
|
)
|
|
|
(32.7
|
)%
|
During
the three months ended March 31, 2021 and 2020, the Company recognized revenue of $4,311,000 and $4,023,000, respectively, related to
untreated waste that was in the Company’s control as of the beginning of each respective year. Revenue recognized in each period
related to performance obligations satisfied within the respective period.
Remaining
Performance Obligations
The
Company applies the practical expedient in paragraph 606-10-50-14 and does not disclose information about remaining performance obligations
that have original expected durations of one year or less.
Within
our Services Segment, there are service contracts which provide that the Company has a right to consideration from a customer in an amount
that corresponds directly with the value to the customer of our performance completed to date. For those contracts, the Company has utilized
the practical expedient in ASC 606-10-55-18, which allows the Company to recognize revenue in the amount for which we have the right
to invoice; accordingly, the Company does not disclose the value of remaining performance obligations for those contracts.
At
the inception of an arrangement, the Company determines if an arrangement is, or contains, a lease based on facts and circumstances present
in that arrangement. Lease classifications, recognition, and measurement are then determined at the lease commencement date.
The
Company’s operating lease right-of-use (“ROU”) assets and operating lease liabilities represent primarily leases for
office and warehouse spaces used to conduct our business. Finance leases consist primarily of processing and transport equipment used
by our facilities’ operations and also include a building with land for our waste treatment operations.
The
components of lease cost for the Company’s leases were as follows (in thousands):
|
|
Three
Months Ended
|
|
|
|
March
31,
|
|
|
|
2021
|
|
|
2020
|
|
Operating
Lease:
|
|
|
|
|
|
|
|
|
Lease
cost
|
|
$
|
111
|
|
|
$
|
114
|
|
|
|
|
|
|
|
|
|
|
Finance
Leases:
|
|
|
|
|
|
|
|
|
Amortization
of ROU assets
|
|
|
59
|
|
|
|
26
|
|
Interst
on lease liablity
|
|
|
19
|
|
|
|
21
|
|
|
|
|
78
|
|
|
|
47
|
|
|
|
|
|
|
|
|
|
|
Short-term
lease rent expense
|
|
|
3
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
Total
lease cost
|
|
$
|
192
|
|
|
$
|
164
|
|
The
weighted average remaining lease term and the weighted average discount rate for operating and finance leases at March 31, 2021 were:
|
|
Operating
Leases
|
|
|
Finance
Leases
|
|
Weighted
average remaining lease terms (years)
|
|
|
7.8
|
|
|
|
3.4
|
|
|
|
|
|
|
|
|
|
|
Weighted average
discount rate
|
|
|
7.8
|
%
|
|
|
6.8
|
%
|
The
weighted average remaining lease term and the weighted average discount rate for operating and finance leases at March 31, 2020 were:
|
|
Operating
Leases
|
|
|
Finance
Leases
|
|
Weighted
average remaining lease terms (years)
|
|
|
8.6
|
|
|
|
1.6
|
|
|
|
|
|
|
|
|
|
|
Weighted average
discount rate
|
|
|
8.0
|
%
|
|
|
12.1
|
%
|
The
following table reconciles the undiscounted cash flows for the operating and finance leases at March 31, 2021 to the operating and finance
lease liabilities recorded on the balance sheet (in thousands):
|
|
Operating
Leases
|
|
Finance
Leases
|
|
2021
(Remaining)
|
|
$
|
296
|
|
$
|
458
|
|
2022
|
|
|
455
|
|
|
271
|
|
2023
|
|
|
463
|
|
|
150
|
|
2024
|
|
|
395
|
|
|
146
|
|
2025
|
|
|
304
|
|
|
146
|
|
2025
and thereafter
|
|
|
1,154
|
|
|
18
|
|
Total
undiscounted lease payments
|
|
|
3,067
|
|
|
1,189
|
|
Less:
Imputed interest
|
|
|
(782
|
)
|
|
(113
|
)
|
Present
value of lease payments
|
|
$
|
2,285
|
|
$
|
1,076
|
|
|
|
|
|
|
|
|
|
Current
portion of operating lease obligations
|
|
$
|
241
|
|
$
|
—
|
|
Long-term
operating lease obligations, less current portion
|
|
$
|
2,044
|
|
|
—
|
|
Current
portion of finance lease obligations
|
|
$
|
—
|
|
$
|
467
|
|
Long-term
finance lease obligations, less current portion
|
|
$
|
—
|
|
$
|
609
|
|
Supplemental
cash flow and other information related to our leases were as follows (in thousands):
|
|
Three
Months Ended
|
|
|
|
March
31,
|
|
|
|
2021
|
|
|
2020
|
|
Cash
paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
|
|
|
|
Operating
cash flow from operating leases
|
|
$
|
101
|
|
|
$
|
110
|
|
Operating
cash flow from finance leases
|
|
$
|
19
|
|
|
$
|
21
|
|
Financing
cash flow from finance leases
|
|
$
|
114
|
|
|
$
|
101
|
|
|
|
|
|
|
|
|
|
|
ROU
assets obtained in exchange for lease obligations for:
|
|
|
|
|
|
|
|
|
Finance
liabilities
|
|
$
|
—
|
|
|
$
|
82
|
|
Operating
liabilities
|
|
$
|
—
|
|
|
$
|
—
|
|
The
following table summarizes information relating to the Company’s definite-lived intangible assets:
|
|
|
|
|
March
31, 2021
|
|
|
December
31, 2020
|
|
|
|
Weighted
Average Amortization
|
|
|
Gross
|
|
|
|
|
|
Net
|
|
|
Gross
|
|
|
|
|
|
Net
|
|
|
|
Period
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Carrying
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Carrying
|
|
|
|
(Years)
|
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
Intangibles
(amount in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patent
|
|
|
12.5
|
|
|
$
|
746
|
|
|
$
|
(339
|
)
|
|
$
|
407
|
|
|
$
|
742
|
|
|
$
|
(334
|
)
|
|
$
|
408
|
|
Software
|
|
|
3
|
|
|
|
431
|
|
|
|
(411
|
)
|
|
|
20
|
|
|
|
418
|
|
|
|
(411
|
)
|
|
|
7
|
|
Customer
relationships
|
|
|
10
|
|
|
|
3,370
|
|
|
|
(2,955
|
)
|
|
|
415
|
|
|
|
3,370
|
|
|
|
(2,910
|
)
|
|
|
460
|
|
Total
|
|
|
|
|
|
$
|
4,547
|
|
|
$
|
(3,705
|
)
|
|
$
|
842
|
|
|
$
|
4,530
|
|
|
$
|
(3,655
|
)
|
|
$
|
875
|
|
The
intangible assets noted above are amortized on a straight-line basis over their useful lives with the exception of customer relationships
which are being amortized using an accelerated method.
The
following table summarizes the expected amortization over the next five years for our definite-lived intangible assets:
|
|
Amount
|
|
Year
|
|
(In
thousands)
|
|
|
|
|
|
2021
(Remaining)
|
|
162
|
|
2022
|
|
172
|
|
2023
|
|
132
|
|
2024
|
|
11
|
|
2025
|
|
11
|
|
Amortization
expenses relating to the definite-lived intangible assets as discussed above were $50,000 and $54,000 for the three months ended March
31, 2021 and 2020, respectively.
6.
|
Capital
Stock, Stock Plans, Warrants and Stock Based Compensation
|
The
Company has certain stock option plans under which it may award incentive stock options (“ISOs”) and/or non-qualified stock
options (“NQSOs”) to employees, officers, outside directors, and outside consultants. No stock options were granted in the
first quarter of 2021.
The
Company granted a NQSO to Robert Ferguson on July 27, 2017 from the Company’s 2017 Stock Option Plan (“2017 Plan”)
for the purchase of up to 100,000 shares of the Company’s Common Stock (“Ferguson Stock Option”) in connection with
his work as a consultant to the Company’s Test Bed Initiative (“TBI”) at our Perma-Fix Northwest Richland, Inc. (“PFNWR”)
facility at an exercise price of $3.65 per share, which was the fair market value of the Company’s Common Stock on the date of
grant. The term of the Ferguson Stock Option is seven years from the grant date. The vesting of the Ferguson Stock Option is subject
to the achievement of three separate milestones by certain dates. The 10,000 options under the first milestone were exercised by Robert
Ferguson in 2018. The vesting date for the second and third milestones for the purchase of up to 30,000 and 60,000 shares of the Company’s
Common Stock was previously extended to December 31, 2021 and December 31, 2022, respectively. The Company has not recognized compensation
costs (fair value of approximately $262,000 at March 31, 2021) for the remaining 90,000 Ferguson Stock Option under the remaining two
milestones since achievement of the performance obligation under each of the two remaining milestones is uncertain at March 31, 2021.
All other terms of the Ferguson Stock Option remain unchanged.
The
following table summarizes stock-based compensation recognized for the three months ended March 31, 2021 and 2020 for our employee and
director stock options.
|
|
Three
Months Ended
|
|
Stock
Options
|
|
March
31,
|
|
|
|
2021
|
|
|
2020
|
|
Employee
Stock Options
|
|
$
|
33,000
|
|
|
$
|
32,000
|
|
Director
Stock Options
|
|
|
12,000
|
|
|
|
12,000
|
|
Total
|
|
$
|
45,000
|
|
|
$
|
44,000
|
|
At
March 31, 2021, the Company has approximately $229,000 of total unrecognized compensation costs related to unvested options for employee
and directors. The weighted average period over which the unrecognized compensation costs are expected to be recognized is approximately
2.0 years.
The
summary of the Company’s total Stock Option Plans as of March 31, 2021 and March 31, 2020, and changes during the periods then
ended, are presented below. The Company’s Plans consist of the 2010 Stock Option Plan, the 2017 Plan and the 2003 Outside Directors
Stock Plan (“2003 Plan”):
|
|
Shares
|
|
|
Weighted
Average Exercise Price
|
|
|
Weighted
Average Remaining Contractual Term
(years)
|
|
|
Aggregate
Intrinsic Value (3)
|
|
Options
outstanding January 1, 2021
|
|
|
658,400
|
|
|
$
|
3.87
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
Forfeited/expired
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Options
outstanding end of period (1)
|
|
|
658,400
|
|
|
$
|
3.87
|
|
|
|
3.2
|
|
|
$
|
2,279,267
|
|
Options
exercisable at March 31, 2021(1)
|
|
|
392,400
|
|
|
$
|
4.08
|
|
|
|
3.4
|
|
|
$
|
1,274,287
|
|
|
|
Shares
|
|
|
Weighted
Average Exercise Price
|
|
|
Weighted
Average Remaining Contractual Term (years)
|
|
|
Aggregate
Intrinsic Value (3)
|
|
Options
outstanding January 1, 2020
|
|
|
681,300
|
|
|
$
|
3.84
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
6,000
|
|
|
|
7.00
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(12,000
|
)
|
|
|
3.48
|
|
|
|
|
|
|
|
14,600
|
|
Forfeited/expired
|
|
|
(20,000
|
)
|
|
|
3.45
|
|
|
|
|
|
|
|
|
|
Options
outstanding end of period (2)
|
|
|
655,300
|
|
|
$
|
3.88
|
|
|
|
4.0
|
|
|
$
|
962,189
|
|
Options
exercisable at March 31, 2020(2)
|
|
|
306,800
|
|
|
$
|
4.20
|
|
|
|
3.9
|
|
|
$
|
392,614
|
|
(1)
Options with exercise prices ranging from $2.79 to $7.29
(2)
Options with exercise prices ranging from $2.79 to $8.40
(3)
The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price
of the option.
During
the three months ended March 31, 2021, the Company issued a total of 11,837 shares of its Common Stock under the 2003 Plan to its outside
directors as compensation for serving on our Board of Directors (the “Board”). The Company recorded approximately $107,000
in compensation expenses (included in selling, general and administration (“SG&A”) expenses) in connection with the issuance
of shares of its Common Stock to outside directors. See “Note 16 – Subsequent Events - 2003 Plan” for a discussion
of a proposed amendment to the 2003 Plan as approved by the Company’s Board of Directors (the “Board”), subject to
the approval by the Company’s Stockholder at the Company’s 2021 Annual Meeting of Stockholders to be held on July 20, 2021.
In
connection with a $2,500,000 loan that the Company entered into with Mr. Robert Ferguson (the “Ferguson Loan”) on April 1,
2019, the Company issued a warrant to Mr. Ferguson for the purchase of up to 60,000 shares of our Common Stock at an exercise price of
$3.51 per share. The warrant is exercisable six months from April 1, 2019 and expires on April 1, 2024 and remains outstanding at March
31, 2021. The Ferguson Loan was paid-in-full in December 2020.
7.
|
(Loss)
Income Per Share
|
Basic
(loss) income per share is calculated based on the weighted-average number of outstanding common shares during the applicable period.
Diluted (loss) income per share is based on the weighted-average number of outstanding common shares plus the weighted-average number
of potential outstanding common shares. In periods where they are anti-dilutive, such amounts are excluded from the calculations of dilutive
(loss) earnings per shares. The following table reconciles the (loss) income and average share amounts used to compute both basic and
diluted (loss) income per share:
|
|
Three
Months Ended
|
|
|
|
(Unaudited)
|
|
|
|
March
31,
|
|
(Amounts
in Thousands, Except for Per Share Amounts)
|
|
2021
|
|
|
2020
|
|
Net
(loss) income attributable to Perma-Fix Environmental Services, Inc., common stockholders:
|
|
|
|
|
|
|
|
|
(Loss)
income from continuing operations, net of taxes
|
|
$
|
(1,038
|
)
|
|
$
|
1,308
|
|
Net
loss attributable to non-controlling interest
|
|
|
(30
|
)
|
|
|
(26
|
)
|
(Loss)
income from continuing operations attributable to Perma-Fix Environmental Services, Inc. common stockholders
|
|
|
(1,008
|
)
|
|
|
1,334
|
|
Loss
from discontinuing operations attributable to Perma-Fix Environmental Services, Inc. common stockholders
|
|
|
(115
|
)
|
|
|
(114
|
)
|
Net
(loss) income attributable to Perma-Fix Environmental Services, Inc. common stockholders
|
|
$
|
(1,123
|
)
|
|
$
|
1,220
|
|
|
|
|
|
|
|
|
|
|
Basic
(loss) income per share attributable to Perma-Fix Environmental Services, Inc. common stockholders
|
|
$
|
(.09
|
)
|
|
$
|
.10
|
|
|
|
|
|
|
|
|
|
|
Diluted
(loss) income per share attributable to Perma-Fix Environmental Services, Inc. common stockholders
|
|
$
|
(.09
|
)
|
|
$
|
.10
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding:
|
|
|
|
|
|
|
|
|
Basic weighted average
shares outstanding
|
|
|
12,165
|
|
|
|
12,122
|
|
Add:
dilutive effect of stock options
|
|
|
—
|
|
|
|
201
|
|
Add:
dilutive effect of warrants
|
|
|
—
|
|
|
|
23
|
|
Diluted
weighted average shares outstanding
|
|
|
12,165
|
|
|
|
12,346
|
|
|
|
|
|
|
|
|
|
|
Potential shares
excluded from above weighted average share
|
|
|
|
|
|
|
|
|
calculations
due to their anti-dilutive effect include:
|
|
|
|
|
|
|
|
|
Stock
options
|
|
|
30
|
|
|
|
14
|
|
Warrant
|
|
|
—
|
|
|
|
—
|
|
Long-term
debt consists of the following:
(Amounts
in Thousands)
|
|
March
31, 2021
|
|
|
December
31, 2020
|
|
Revolving
Credit facility dated May 8, 2020, borrowings based upon eligible accounts receivable, subject to monthly borrowing base calculation,
balance due on May 15, 2024.
Effective interest rate for the first quarter of 2021 was 5.3%. (1)
|
|
$
|
—
|
|
|
$
|
—
|
|
Term
Loan dated May 8, 2020, payable in equal monthly installments of principal, balance due on May 15, 2024. Effective interest rate
for the first quarter of 2021 was 4.5%. (1)
|
|
|
1,290
|
(2)
|
|
|
1,388
|
(2)
|
Promissory
Note dated April 14, 2020, balance subject to loan forgiveness. Interest accrues at annual rate of 1.0%. (3)
|
|
|
5,318
|
(4)
|
|
|
5,318
|
(4)
|
Notes
Payable to 2023 and 2025, annual interest rate of 5.6% and 9.1%.
|
|
|
49
|
|
|
|
23
|
|
Total
debt
|
|
|
6,657
|
|
|
|
6,729
|
|
Less
current portion of long-term debt
|
|
|
5,196
|
|
|
|
3,595
|
|
Long-term
debt
|
|
$
|
1,461
|
|
|
$
|
3,134
|
|
(1)
Our revolving credit facility is collateralized by our accounts receivable and our term loan is collateralized by our property,
plant, and equipment.
(2)
Net of debt issuance costs of ($97,000) and ($105,000) at March 31, 2021 and December 31, 2020, respectively.
(3)
Uncollateralized note.
(4)
Entered into with the Company’s credit facility lender under the PPP under the CARES Act (see “Paycheck Protection
Program (“PPP”) Loan” below for further information on this loan and its terms).
Revolving
Credit and Term Loan Agreement
The
Company entered into a Second Amended and Restated Revolving Credit, Term Loan and Security Agreement, dated May 8, 2020 (“Loan
Agreement”), with PNC National Association (“PNC”), acting as agent and lender. The Loan Agreement provides the Company
with the following credit facility with a maturity date of March 15, 2024: (a) up to $18,000,000 revolving credit (“revolving credit”)
and (b) a term loan (“term loan”) of approximately $1,742,000, requiring monthly installments of $35,547. The maximum that
the Company can borrow under the revolving credit is based on a percentage of eligible receivables (as defined) at any one time reduced
by outstanding standby letters of credit and borrowing reductions that our lender may impose from time to time.
Payment
of annual rate of interest due on the revolving credit is at prime (3.25% at March 31, 2021) plus 2% or London InterBank Offer Rate (“LIBOR”)
plus 3.00% and the term loan at prime plus 2.50% or LIBOR plus 3.50%. Under the LIBOR option of interest payment, a LIBOR floor of 0.75%
applies in the event that LIBOR falls below 0.75% at any point in time.
Pursuant
to the Loan Agreement, the Company may terminate the Loan Agreement upon 90 days’ prior written notice upon payment in full of
our obligations under the Loan Agreement. The Company has agreed to pay PNC 1.0% of the total financing in the event we pay off our obligations
on or before May 7, 2021 and 0.5% of the total financing if we pay off our obligations after May 7, 2021 but prior to or on May 7, 2022.
No early termination fee will apply if we pay off our obligations under the New Loan Agreement after May 7, 2022.
At
March 31, 2021, the borrowing availability under our revolving credit was approximately $10,280,000, based on our eligible receivables
and includes a reduction in borrowing availability of approximately $3,026,000 from outstanding standby letters of credit.
The
Company’s credit facility under its Loan Agreement with PNC contains certain financial covenants, along with customary representations
and warranties. A breach of any of these financial covenants, unless waived by PNC, could result in a default under our credit facility
allowing our lender to immediately require the repayment of all outstanding debt under our credit facility and terminate all commitments
to extend further credit. The Company met its financial covenant requirements in the first quarter of 2021. The Company’s fixed
charge coverage ratio (“FCCR”) calculation in the first quarter of 2021 included the add-back of approximately $5,318,000
in eligible expenses that were incurred and covered by the PPP Loan that the Company received in 2020. This add-back
was permitted by an amendment to our Loan Agreement that the Company entered into with our lender in May 2021 and was applied retroactively
to the second and third quarters of 2020 pursuant to the amendment (see “Note 16 – Subsequent Events – Credit Facility”
for a discussion of this amendment).
Paycheck
Protection Program (“PPP”) Loan
On
April 14, 2020, the Company entered into a promissory note under the PPP with PNC, our credit facility lender, which has a balance of
approximately $5,318,000 (the “PPP Loan”) at March 31, 2021. The PPP was established under the Coronavirus Aid, Relief, and
Economic Security Act (“CARES Act”) and is administered by the Small Business Administration (“SBA”). The CARES
Act was subsequently amended by the Paycheck Protection Program Flexibility Act of 2020 (“Flexibility Act”). The note evidencing
the PPP Loan contains events of default relating to, among other things, payment defaults, breach of representations and warranties,
and provisions of the promissory note.
Under
the terms of the Flexibility Act, the Company can apply for and be granted forgiveness for all or a portion of the PPP Loan. Such forgiveness
will be determined, subject to limitations, based on the use of loan proceeds by the Company for eligible payroll costs, mortgage interest,
rent and utility costs and the maintenance of employee and compensation levels for the covered period (which is defined as a 24-week
period, beginning April 14, 2020, the date in which proceeds from the PPP Loan was disbursed to the Company by PNC). On October 5, 2020,
the Company applied for forgiveness on repayment of the loan balance as permitted under the program, which is subject to the review and
approval of our lender and the SBA. If all or a portion of the PPP Loan is not forgiven, all or the remaining portion of the loan will
be for a term of two years but can be prepaid at any time prior to maturity without any prepayment penalties. The annual interest rate
on the PPP Loan is 1.0% and no payments of principal or interest are due until SBA remits the loan forgiveness amount to our lender.
While the Company’s PPP Loan currently has a two year maturity, the Flexibility Act permits the Company to request a five year
maturity with our lender. At March 31, 2021, the Company has not received a determination on potential forgiveness on any portion of
the PPP Loan balance; therefore, the Company has classified approximately $4,786,000 of the PPP Loan balance as “Current portion
of long-term debt,” on its Consolidated Balance Sheets, which was based on payment of the PPP Loan starting in July 2021 (10 months
from end of our covered period) in accordance with the terms of our PPP Loan agreement.
9.
|
Commitments
and Contingencies
|
Hazardous
Waste
In
connection with our waste management services, the Company processes both hazardous and non-hazardous waste, which we transport to our
own, or other, facilities for destruction or disposal. As a result of disposing of hazardous substances, in the event any cleanup is
required at the disposal site, the Company could be a potentially responsible party for the costs of the cleanup notwithstanding any
absence of fault on our part.
Legal
Matters
In
the normal course of conducting our business, we are involved in various litigation. We are not a party to any litigation or governmental
proceeding which our management believes could result in any judgments or fines against us that could would have a material adverse effect
on our financial position, liquidity or results of future operations.
During
July 2020, Tetra Tech EC, Inc. (“Tetra Tech”) filed a complaint in the United States District Court for the Northern District
of California against CH2M Hill, Inc. (“CH2M”) and four subcontractors of CH2M, including the Company (“Defendants”).
The complaint alleges claims for negligence, negligent misrepresentation and equitable indemnification against all defendants related
to alleged damages suffered by Tetra Tech in respect of certain draft reports prepared by defendants at the request of the U.S. Navy
as part of an investigation and review of certain whistleblower complaints about Tetra Tech’s environmental restoration at the
Hunter’s Point Naval Shipyard in San Francisco.
CH2M
was hired by the Navy in 2016 to review Tetra Tech’s work. CH2M subcontracted with environmental consulting and cleanup firms Battelle
Memorial Institute, Cabrera Services, Inc., SC&A, Inc. and the Company to assist with the review, according to the complaint.
The
complaint alleges that the subject draft reports were prepared negligently and in a biased manner, made public, and caused damage to
Tetra Tech’s reputation; triggering related lawsuits and costing it opportunities for both government and commercial contracts.
The
Company has provided notice of this lawsuit to our insurance carrier. Our insurance carrier is providing a defense on our behalf in connection
with this lawsuit, subject to a $100,000 self-insured retention and the terms and limitations contained in the insurance policy.
On
January 7, 2021, Defendants’ motion to dismiss the complaint in its entirety was granted without prejudice, with leave to amend.
Tetra Tech subsequently filed a First Amended Complaint (“FAC”) and Defendants filed a motion to dismiss Tetra Tech’s
FAC. Tetra Tech filed an opposition to Defendant’s motion to dismiss Tetra Tech’s FAC. Defendants, subsequently filed a joint
reply to Tetra Tech’s motion in opposition. A hearing on Defendants’ motion to dismiss is pending. At this time, the Company
continues to believe it does not have any liability to Tetra Tech.
Insurance
The
Company has a 25-year finite risk insurance policy entered into in June 2003 (“2003 Closure Policy”) with AIG Specialty Insurance
Company (“AIG”), which provides financial assurance to the applicable states for our permitted facilities in the event of
unforeseen closure. The 2003 Closure Policy, as amended, provides for a maximum allowable coverage of $28,177,000 which includes available
capacity to allow for annual inflation and other performance and surety bond requirements. Total coverage under the 2003 Closure Policy,
as amended, was $19,897,000 at March 31, 2021. At March 31, 2021 and December 31, 2020, finite risk sinking funds contributed by the
Company related to the 2003 Closure Policy which is included in other long term assets on the accompanying Consolidated Balance Sheets
totaled $11,464,000 and $11,446,000, respectively, which included interest earned of $1,993,000 and $1,975,000 on the finite risk sinking
funds as of March 31, 2021 and December 31, 2020, respectively. Interest income for the three months ended March 31, 2021 and 2020 was
approximately $18,000 and $56,000, respectively. If we so elect, AIG is obligated to pay us an amount equal to 100% of the finite risk
sinking fund account balance in return for complete release of liability from both us and any applicable regulatory agency using this
policy as an instrument to comply with financial assurance requirements.
Letter
of Credits and Bonding Requirements
From
time to time, the Company is required to post standby letters of credit and various bonds to support contractual obligations to customers
and other obligations, including facility closures. At March 31, 2021, the total amount of standby letters of credit outstanding was
approximately $3,026,000 and the total amount of bonds outstanding was approximately $42,973,000.
10.
|
Discontinued Operations
|
The
Company’s discontinued operations consist of all our subsidiaries included in our previous Industrial Segment which
encompasses subsidiaries divested in 2011 and prior and three previously closed locations.
The
Company’s discontinued operations had net losses of $115,000 and $114,000 for the three months ended March 31, 2021 and 2020 (net
of taxes of $0 for each period). The losses were primarily due to costs incurred in the administration and continued monitoring of our
discontinued operations. The Company’s discontinued operations had no revenues for each of the periods noted above.
The
following table presents the major class of assets of discontinued operations as of March 31, 2021 and December 31, 2020. No assets and
liabilities were held for sale at each of the periods noted.
|
|
March
31,
|
|
|
December
31,
|
|
(Amounts
in Thousands)
|
|
2021
|
|
|
2020
|
|
Current
assets
|
|
|
|
|
|
|
|
|
Other
assets
|
|
$
|
20
|
|
|
$
|
22
|
|
Total
current assets
|
|
|
20
|
|
|
|
22
|
|
Long-term
assets
|
|
|
|
|
|
|
|
|
Property,
plant and equipment, net (1)
|
|
|
81
|
|
|
|
81
|
|
Other
assets
|
|
|
—
|
|
|
|
—
|
|
Total
long-term assets
|
|
|
81
|
|
|
|
81
|
|
Total
assets
|
|
$
|
101
|
|
|
$
|
103
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
4
|
|
|
$
|
4
|
|
Accrued
expenses and other liabilities
|
|
|
154
|
|
|
|
150
|
|
Environmental
liabilities
|
|
|
659
|
|
|
|
744
|
|
Total
current liabilities
|
|
|
817
|
|
|
|
898
|
|
Long-term
liabilities
|
|
|
|
|
|
|
|
|
Closure
liabilities
|
|
|
144
|
|
|
|
142
|
|
Environmental
liabilities
|
|
|
152
|
|
|
|
110
|
|
Total
long-term liabilities
|
|
|
296
|
|
|
|
252
|
|
Total
liabilities
|
|
$
|
1,113
|
|
|
$
|
1,150
|
|
(1)
net of accumulated depreciation of $10,000 for each period presented.
In
accordance with ASC 280, “Segment Reporting”, the Company defines an operating segment as a business activity: (1) from which
we may earn revenue and incur expenses; (2) whose operating results are regularly reviewed by the chief operating decision maker (“CODM”)
to make decisions about resources to be allocated to the segment and assess its performance; and (3) for which discrete financial information
is available.
Our
reporting segments are defined as below:
TREATMENT
SEGMENT, which includes:
|
-
|
nuclear,
low-level radioactive, mixed waste (containing both hazardous and low-level radioactive constituents),
hazardous and non-hazardous waste treatment, processing and disposal services primarily through
four uniquely licensed and permitted treatment and storage facilities; and
|
|
-
|
Research
& Development (“R&D”) activities to identify, develop and implement innovative
waste processing techniques for problematic waste streams.
|
SERVICES
SEGMENT, which includes:
|
-
|
Technical
services, which include:
|
|
|
|
|
○
|
professional
radiological measurement and site survey of large government and commercial installations
using advanced methods, technology and engineering;
|
|
○
|
health
physics services including health physicists, radiological engineers, nuclear engineers and
health physics technicians support to government and private radioactive materials licensees
|
|
○
|
integrated
Occupational Safety and Health services including industrial hygiene (“IH”) assessments;
hazardous materials surveys, e.g., exposure monitoring; lead and asbestos management/abatement
oversight; indoor air quality evaluations; health risk and exposure assessments; health &
safety plan/program development, compliance auditing and training services; and Occupational
Safety and Health Administration (“OSHA”) citation assistance;
|
|
○
|
global
technical services providing consulting, engineering (civil, nuclear, mechanical, chemical,
radiological and environmental), project management, waste management, environmental, and
decontamination and decommissioning field, technical, and management personnel and services
to commercial and government customers; and
|
|
○
|
waste
management services to commercial and governmental customers.
|
|
-
|
Nuclear
services, which include:
|
|
|
|
|
○
|
decontamination
and decommissioning (“D&D”) of government and commercial facilities impacted
with radioactive material and hazardous constituents including engineering, technology applications,
specialty services, logistics, transportation, processing and disposal;
|
|
○
|
license
termination support of radioactive material licensed and federal facilities over the entire
cycle of the termination process: project management, planning, characterization, waste stream
identification and delineation, remediation/demo, final status survey, compliance demonstration,
reporting, transportation, disposal and emergency response.
|
|
|
|
|
-
|
A
company owned equipment calibration and maintenance laboratory that services, maintains,
calibrates, and sources (i.e., rental) health physics, IH and customized nuclear, environmental,
and occupational safety and health (“NEOSH”) instrumentation.
|
|
-
|
A
company owned gamma spectroscopy laboratory for the analysis of oil and gas industry solids
and liquids.
|
MEDICAL
SEGMENT, which is currently involved on a limited basis in the R&D of the Company’s medical isotope production technology,
has not generated any revenue and has substantially reduced R&D costs and activities due to the need for capital to fund these activities.
The Company anticipates that the Medical Segment will not resume full R&D activities until the necessary capital is obtained through
its own credit facility or additional equity raise, or obtains partners willing to provide funding for its R&D.
Our
reporting segments exclude our corporate headquarters and our discontinued operations (see “Note 10 – Discontinued Operations”)
which do not generate revenues.
The
table below presents certain financial information of our operating segments for the three months ended March 31, 2021 and 2020 (in thousands):
Segment
Reporting for the Quarter Ended March 31, 2021
|
|
|
Treatment
|
|
|
|
Services
|
|
|
|
Medical
|
|
|
|
Segments
Total
|
|
|
|
Corporate(1)
|
|
|
|
Consolidated
Total
|
|
Revenue
from external customers
|
|
$
|
7,495
|
|
|
$
|
15,638
|
|
|
|
—
|
|
|
$
|
23,133
|
|
|
$
|
—
|
|
|
$
|
23,133
|
|
Intercompany
revenues
|
|
|
660
|
|
|
|
7
|
|
|
|
—
|
|
|
|
667
|
|
|
|
—
|
|
|
|
—
|
|
Gross
profit
|
|
|
925
|
|
|
|
1,431
|
|
|
|
—
|
|
|
|
2,356
|
|
|
|
—
|
|
|
|
2,356
|
|
Research
and development
|
|
|
47
|
|
|
|
13
|
|
|
|
76
|
|
|
|
136
|
|
|
|
14
|
|
|
|
150
|
|
Interest
income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
18
|
|
|
|
18
|
|
Interest
expense
|
|
|
(19
|
)
|
|
|
(8
|
)
|
|
|
—
|
|
|
|
(27
|
)
|
|
|
(40
|
)
|
|
|
(67
|
)
|
Interest
expense-financing fees
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(8
|
)
|
|
|
(8
|
)
|
Depreciation
and amortization
|
|
|
310
|
|
|
|
85
|
|
|
|
—
|
|
|
|
395
|
|
|
|
5
|
|
|
|
400
|
|
Segment
(loss) income before income taxes
|
|
|
(119
|
)
|
|
|
555
|
|
|
|
(76
|
)
|
|
|
360
|
|
|
|
(1,415
|
)
|
|
|
(1,055
|
)
|
Income
tax benefit
|
|
|
(17
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(17
|
)
|
|
|
—
|
|
|
|
(17
|
)
|
Segment
(loss) income
|
|
|
(102
|
)
|
|
|
555
|
|
|
|
(76
|
)
|
|
|
377
|
|
|
|
(1,415
|
)
|
|
|
(1,038
|
)
|
Expenditures
for segment assets
|
|
|
357
|
|
|
|
4
|
|
|
|
—
|
|
|
|
361
|
|
|
|
—
|
|
|
|
361
|
(2)
|
Segment
Reporting for the Quarter Ended March 31, 2020
|
|
|
Treatment
|
|
|
|
Services
|
|
|
|
Medical
|
|
|
|
Segments
Total
|
|
|
|
Corporate(1)
|
|
|
|
Consolidated
Total
|
|
Revenue
from external customers
|
|
$
|
9,563
|
|
|
$
|
15,297
|
|
|
|
—
|
|
|
$
|
24,860
|
|
|
$
|
—
|
|
|
$
|
24,860
|
|
Intercompany
revenues
|
|
|
207
|
|
|
|
8
|
|
|
|
—
|
|
|
|
215
|
|
|
|
—
|
|
|
|
—
|
|
Gross
profit
|
|
|
2,745
|
|
|
|
1,895
|
|
|
|
—
|
|
|
|
4,640
|
|
|
|
—
|
|
|
|
4,640
|
|
Research
and development
|
|
|
94
|
|
|
|
66
|
|
|
|
66
|
|
|
|
226
|
|
|
|
6
|
|
|
|
232
|
|
Interest
income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
56
|
|
|
|
56
|
|
Interest
expense
|
|
|
(18
|
)
|
|
|
(6
|
)
|
|
|
—
|
|
|
|
(24
|
)
|
|
|
(96
|
)
|
|
|
(120
|
)
|
Interest
expense-financing fees
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(68
|
)
|
|
|
(68
|
)
|
Depreciation
and amortization
|
|
|
264
|
|
|
|
77
|
|
|
|
—
|
|
|
|
341
|
|
|
|
5
|
|
|
|
346
|
|
Segment
income (loss) before income taxes
|
|
|
1,547
|
|
|
|
1,318
|
|
|
|
(66
|
)
|
|
|
2,799
|
|
|
|
(1,477
|
)
|
|
|
1,322
|
|
Income
tax expense
|
|
|
14
|
|
|
|
—
|
|
|
|
—
|
|
|
|
14
|
|
|
|
—
|
|
|
|
14
|
|
Segment
income (loss)
|
|
|
1,533
|
|
|
|
1,318
|
|
|
|
(66
|
)
|
|
|
2,785
|
|
|
|
(1,477
|
)
|
|
|
1,308
|
|
Expenditures
for segment assets
|
|
|
679
|
|
|
|
214
|
|
|
|
—
|
|
|
|
893
|
|
|
|
3
|
|
|
|
896
|
(2)
|
(1)
Amounts reflect the activity for corporate headquarters not included in the segment information.
(2)
Net of financed amount of $29,000 and $82,000 for the three month ended March 31, 2021 and 2020, respectively.
The
Company uses an estimated annual effective tax rate, which is based on expected annual income, statutory tax rates and tax planning opportunities
available in the various jurisdictions in which the Company operates, to determine its quarterly provision for income taxes.
The
Company had income tax benefit of approximately $17,000 for continuing operations for the three months ended March 31, 2021 as compared
to income tax expense of approximately $14,000 for the corresponding period of 2020. The Company’s effective tax rate was approximately
1.6% and 1.0% for the three months ended March 31, 2021 and the corresponding period of 2020, respectively. The Company’s tax rate
for each of the periods discussed above was impacted by the Company’s full valuation on its net deferred tax assets.
13.
|
Variable Interest Entities (“VIE”)
|
The
Company and Engineering/Remediation Resources Group, Inc. (“ERRG”) previously entered into an unpopulated joint venture agreement
for project work bids within the Company’s Services Segment with the joint venture doing business as Perma-Fix ERRG, a general
partnership. The Company has a 51% partnership interest in the joint venture and ERRG has a 49% partnership interest in the joint venture.
The
Company determines whether joint ventures in which it has invested meet the criteria of a VIE at the start of each new venture and when
a reconsideration event has occurred. A VIE is a legal entity that satisfies any of the following characteristics: (a) the legal entity
does not have sufficient equity investment at risk; (b) the equity investors at risk as a group, lack the characteristics of a controlling
financial interest; or (c) the legal entity is structured with disproportionate voting rights.
The
Company consolidates a VIE if it is determined to be the primary beneficiary of the VIE. The primary beneficiary has both the power to
direct the activities of the VIE that most significantly impact the entity’s economic performance and the obligation to absorb
losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.
Based
on the Company’s evaluation of Perma-Fix ERRG and related agreements with Perma-Fix ERRG, the Company determined that Perma-Fix
ERRG continues to be a VIE in which we are the primary beneficiary. At March 31, 2021, Perma-Fix ERRG had total assets of $4,865,000
and total liabilities of $4,865,000 which are all recorded as current.
14.
|
Deferral of Employment Tax Deposits
|
The
Flexibility Act provides employers the option to defer the payment of an employer’s share of social security taxes beginning on
March 27, 2020 through December 31, 2020 with 50% of the amount of social security taxes deferred to become due on December 31, 2021
with the remaining 50% due on December 31, 2022. The Company elected to defer such taxes starting in mid-April 2020. At March 31, 2021,
the Company has deferred payment of approximately $1,252,000 in its share of social security taxes, of which approximately $626,000 is
included in “Other long-term liabilities,” with the remaining balance included in “Accrued expenses” within current
liabilities in the Company’s Consolidated Balance Sheets.
15.
|
Executive Officer and Board of Director Compensation
|
Management
Incentive Plans (“MIP”)
On
January 21, 2021, the Company’s Compensation and Stock Option Committee (the “Compensation Committee”) and the Board
approved individual MIP for the calendar year 2021 for each Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”),
Executive Vice President (“EVP”) of Strategic Initiatives, EVP of Nuclear and Technical Services and EVP of Waste Treatment
Operations. Each of the MIPs is effective January 1, 2021 and applicable for year 2021. Each MIP provides guidelines for the calculation
of annual cash incentive-based compensation, subject to Compensation Committee oversight and modification. Each MIP awards cash compensation
based on achievement of performance thresholds, with the amount of such compensation established as a percentage of the executive’s
2021 annual base salary at the time of the approval of the MIP. The potential target performance compensation ranges from 5% to 150%
of the base salary for the CEO ($17,220 to $516,600), 5% to 100% of the base salary for the CFO ($14,000 to $280,000), 5% to 100% of
the base salary for the EVP of Strategic Initiatives ($11,667 to $233,336), 5% to 100% of the base salary for the EVP of Nuclear and
Technical Services ($14,000 to $280,000) and 5% to 100% ($12,000 to $240,000) of the base salary for the EVP of Waste Treatment Operations.
Subsequent to the approval of the MIPs for fiscal year 2021 on January 21, 2021 as described above, in February 2021, the Compensation
Committee approved a cost of living adjustment of approximately 2.3% to each executive officer’s base salary, effective April 1,
2021. As such, compensation payable, if any, under each of the MIPs for fiscal year 2021 as discussed above for our executives will be
adjusted accordingly to reflect this cost of living adjustment.
Board
Compensation
On
January 21, 2021, the Company’s Compensation Committee and the Board approved the following revision to the annual compensation
of each non-employee Board member and the Board Committee(s) for which the Board member serves, effective January 1, 2021.
●
|
each
director is to be paid a quarterly fee of $11,500, compared to the previous quarterly fee
of $8,000;
|
●
|
the
Chairman of the Board is to be paid an additional quarterly fee of $8,750, compared to the
Chairman’s previous additional quarterly fee of $7,500;
|
●
|
the
Chairman of the Audit Committee is to be paid an additional quarterly fee of $6,250, compared
to the Audit Chairman’s previous additional quarterly fee of $5,500;
|
●
|
the
Chairman of each of the Compensation Committee, the Corporate Governance and Nominating Committee
(the “Nominating Committee”), and the Strategic Advisory Committee (the “Strategic
Committee”) is to receive $3,125 in additional quarterly fees. No additional quarterly
fees were previously paid to the Chairman of such committees. The Chairman of the Board is
not eligible to receive a quarterly fee for serving as the Chairman of any the aforementioned
committees ;
|
●
|
each
Audit Committee member (excluding the Chairman of the Audit Committee) is to receive an additional
quarterly fee of $1,250; and
|
●
|
each
member of the Compensation Committee, the Nominating Committee, and the Strategic Committee
is to receive a quarterly fee of $500. Such fee is payable only if the member does not serve
as the Chairman of the Audit Committee, the Nominating Committee, the Strategic Committee
or as the Chairman of the Board.
|
Each
non-employee Board member will continue to receive $1,000 for each board meeting attendance and a $500 fee for meeting attendance via
conference call. Also, each director will continue to receive an option to purchase up to 2,400 shares of the Company’s Common
Stock on the date of his re-election to the Board at the Company’s Annual Meeting of Stockholders, with each option having a 10-year
term and becoming fully vested after six months from grant date.
Each
director may continue to elect to have either 65% or 100% of such fees payable in Common Stock under the 2003 Plan, with the balance,
if any, payable in cash.
See
below “Note 16 – Subsequent Events - 2003 Plan” for a discussion of a proposed amendment to the 2003 Plan as approved
by the Board, subject to the approval by the Company’s Stockholder at the Company’s 2021 Annual Meeting of Stockholders to
be held on July 20, 2021.
Management
evaluated events occurring subsequent to March 31, 2021 through May 6, 2021, the date these consolidated financial statements were available
for issuance, and other than as noted below determined that no material recognizable subsequent events occurred.
Credit
Facility
On
May 4, 2021, the Company entered into an amendment to our Loan Agreement with our lender which provided the following, among other things:
|
●
|
revised
the Company’s FCCR calculation requirement which allows for the add-back of approximately
$5,318,000 in eligible expenses that were incurred and covered by the PPP
Loan that the Company received in 2020. The add-back is to be applied retroactively to the
second and third quarters of 2020. (see “Note 8 – Long Term Debt – Paycheck
Protection Program (“PPP”) Loan” for a discussion of the PPP Loan); and
|
|
●
|
a
capital expenditure line of up to $1,000,000 with advances on the line, subject to certain
limitations, permitted for up to twelve months starting May 4, 2021 (the “Borrowing
Period”). Only interest is payable on advances during the Borrowing Period at annual
rate of prime plus 2.50% or LIBOR (with minimum floor rate of 0.75%) plus 3.50%. At the end
of the Borrowing Period, the total amount advanced under the line will amortize equally based
on a five-year amortization schedule with principal payment due monthly plus interest. At
the maturity date of the Loan Agreement, any unpaid principal balance plus interest, if any,
will become due.
|
In
connection with the amendment, the Company paid our lender a fee of $15,000. All other terms of the Loan Agreement remains principally
unchanged.
2003
Plan
During
April 2021, the Company’s Board approved, subject to the Company’s Shareholder approval, a proposed amendment to the 2003
Plan that provides, among other things, the following:
|
●
|
The
number of shares of Common Stock available for issuance under the 2003 Plan be increased
by an additional 500,000 shares;
|
|
●
|
Each
outside director be granted an option to purchase up to 10,000 shares of Common Stock on
each date the director is reelected to the Board;
|
|
●
|
Each
newly-elected outside director be granted an option to purchase up to 20,000 shares of Common
Stock upon initial election to the Board; and
|
|
●
|
Changes
to the vesting schedule of each option granted under the 2003 Plan to outside directors subsequent
to the amendment becoming effective.
|
Preferred
Share Rights Plan (“Rights Plan”)
The
Company’s Rights Plan had a termination date of May 2, 2021. As previously reported, during April 2021, the Company’s Board
decided not to renew or extend the Rights Plan and, as a result, such Rights Plan terminated as of May 2, 2021.