PESI Perma Fix Environmental Services Inc - 10-K

ITEM 1A.

RISK FACTORS

The following are certain risk factors that could affect our business, financial performance, and results of operations. These risk factors should be considered in connection with evaluating the forward-looking statements contained in this Form 10-K, as the forward-looking statements are based on current expectations, and actual results and conditions could differ materially from the current expectations. Investing in our securities involves a high degree of risk, and before making an investment decision, you should carefully consider these risk factors as well as other information we include or incorporate by reference in the other reports we file with the Securities and Exchange Commission (the “Commission”).

Risks Relating to our Business and Operations:

The failure of Congress to approve appropriations bills in a timely manner for the federal government agencies and departments we support, or the failure of the Administration and Congress to reach an agreement on fiscal issues, could delay and reduce spending, cause us to lose revenue and profit, and affect our cash flow.

On an annual basis, Congress is required to approve appropriations bills that govern spending by each of the federal government agencies and departments we support. When Congress is, or Congress and the Administration are, unable to agree on budget priorities or specifics, and thus unable to pass annual appropriations bills on a timely basis, Congress typically enacts a continuing resolution (“CR”). CRs generally allow federal government agencies and departments to operate at spending levels based on the previous fiscal year. When agencies and departments operate on the basis of a CR, funding we expect to receive from clients for work we are already performing and for new initiatives may be delayed or canceled. Congress and the Administration have from time to time, failed to agree on a CR, resulting in temporary shutdowns of non-essential federal government functions and our work on such functions. Failures by Congress and the Administration to enact appropriations bills in a timely manner can force federal government agencies and departments to shut down or to cancel, change, or delay the implementation of existing or new initiatives. Such events may result in the loss of revenue and profit, or the deferral of revenue and profit to later periods.

There is also the possibility that Congress will fail to raise the U.S. debt ceiling when necessary which, in addition to resulting in federal government shutdowns, could significantly impact the U.S. and global economy, affecting the discretionary spending decisions of our non-governmental clients and affecting the capital markets and our access to sources of liquidity on terms that are acceptable to us.

Budget compromises that may be needed for future fiscal years may continue to be extraordinarily difficult given the complicated grassroots political environment, a closely divided Congress, an increasing federal deficit and debt load, and a challenged economy.

The budgets of many of our state and local government clients are also subject to similar divisions, risks, and uncertainties as are inherent in the federal budget process.

Changes in government regulation, policy and programs could impact our business, affecting our profitability and future growth.

A material amount of our revenue is derived from various federal government contracts or subcontracts. Continuous program and policy decision changes in the U.S. federal government could negatively impact our business. Recent program and policy changes since the beginning of the new Administration have included, among other things, a scaled down government workforce and further changes in policies related to tariffs. Continued trade tensions and restrictions on trade between the U.S. and other countries, including tariffs imposed by the U.S and other countries could negatively affect our business. These program and policy change effects may include disruption in supply chains, increased costs on products that we utilize in our business operations, reduce profitability on waste that we treat for international clients and increased cybersecurity threats, among other things. Shift in decreased priorities in government funding for remediation projects by the Administration may also negatively impact our results of operations and financial conditions.

Failure to maintain our financial assurance coverage that we are required to have in order to operate our permitted treatment, storage and disposal facilities could have a material adverse effect on us.

We maintain finite risk insurance policies and bonding mechanisms which provide financial assurance to the applicable states for our permitted facilities in the event of unforeseen closure of those facilities. We are required to provide and to maintain financial assurance that guarantees to the state that in the event of closure, our permitted facilities will be closed in accordance with the regulations. Although we have not had a problem as of the date of this report in maintaining our financial assurance coverage, in the event that we are unable to obtain or maintain our financial assurance coverage for any reason, this could materially impact our operations and our permits which we are required to have in order to operate our treatment, storage, and disposal facilities.

If we cannot maintain adequate insurance coverage, we will be unable to continue certain operations.

Our business exposes us to various risks, including claims for causing damage to property and injuries to persons that may involve allegations of negligence or professional errors or omissions in the performance of our services. Such claims could be substantial. We believe that our insurance coverage is presently adequate. If we are unable to obtain adequate or required insurance coverage in the future, or if our insurance is not available at affordable rates, we would violate our permit conditions and other requirements of the environmental laws, rules, and regulations under which we operate. Such violations would render us unable to continue certain of our operations. These events would have a material adverse effect on our financial condition.

The inability to maintain existing federal government contracts or win new government contracts over an extended period could have a material adverse effect on our operations and adversely affect our future revenues.

A material amount of our Treatment and Services Segments’ revenues are generated through various federal government contracts or subcontracts. Most of our federal government contracts or our subcontracts granted under federal government contracts are awarded through a regulated competitive bidding process. Some federal government contracts are awarded to multiple competitors, which increase overall competition and pricing pressure and may require us to make sustained post-award efforts to realize revenues under these government contracts. Contracts with, or subcontracts involving, federal government are generally terminable for convenience at any time at the option of the governmental agency. From time to time, we have experienced difficulty in obtaining new federal contracts or subcontracts. If we fail to maintain or replace these relationships, or if a material contract is terminated or renegotiated in a manner that is materially adverse to us, our revenues and future operations could be materially adversely affected.

Our existing and future customers may reduce or halt their spending on hazardous waste and nuclear services with outside vendors, including us.

A variety of factors may cause our existing or future customers to reduce, delay or halt their spending on hazardous waste and nuclear services from outside vendors, including us. These factors include, but are not limited to, the following. We have experienced certain of the below factors from time to time:

accidents, terrorism, natural disasters or other incidents occurring at nuclear facilities or involving shipments of nuclear materials;

failure of government to approve necessary budgets, or to reduce the amount of the budget necessary, to fund remediation sites, including DOE and DOW sites;

government shut downs or government Continuing Resolutions;

civic opposition to or changes in government policies regarding nuclear operations;

a reduction in demand for nuclear generating capacity;

failure to perform under existing contracts, directly or indirectly, with the government;

pandemic such as COVID; or

poor weather conditions.

These events could result in or cause government clients to terminate or cancel existing contracts involving us to treat, store or dispose of contaminated waste and/or to perform remediation projects, at one or more of government sites. These events also could adversely affect us to the extent that they result in the reduction or elimination of contractual requirements, lower demand for nuclear services, burdensome regulation, disruptions of shipments or production, increased operational costs or difficulties or increased liability for actual or threatened property damage or personal injury.

Economic downturns, reductions in federal government funding or other events beyond our control could have a material negative impact on our businesses.

Demand for our services has been, and we expect that demand will continue to be, subject to significant fluctuations due to a variety of factors beyond our control, including, without limitation, economic conditions, reductions in the budget for spending to remediate federal sites due to numerous reasons including, without limitation, the substantial deficits that the federal government has and is continuing to incur, domestic political environment, and competing demands for federal funds that can pressure various areas. During economic downturns, large budget deficits that the federal government and many states are experiencing, and other events beyond our control, including, but not limited to the impact from public health events or other unforeseen public health event, the ability of private and government entities to spend on waste services, including nuclear services, may decline significantly. Our operations depend, in large part, upon governmental funding (for example, the annual budget of the DOE) or specifically mandated levels for different programs that are important to our business could have a material adverse impact on our business, financial position, results of operations and cash flow.

The loss of one or a few customers could have an adverse effect on us.

One or a few governmental customers or governmental related customers have in the past, and may in the future, account for a significant portion of our revenue in any one year or over a period of several consecutive years. Because customers generally contract with us for specific projects, we may lose, and have in the past lost, these significant customers from year to year as their projects with us are completed. Our inability to replace the business with other similar significant projects could have an adverse effect on our business and results of operations.

We are a holding company and depend, in large part, on receiving funds from our subsidiaries to fund our indebtedness.

Because we are a holding company and operations are conducted through our subsidiaries, our ability to meet our obligations depends, in large part, on the operating performance and cash flows of our subsidiaries.

Our Treatment Segment has limited end disposal sites to utilize to dispose of its waste which could significantly impact our results of operations.

Our Treatment Segment has limited options available for disposal of our nuclear waste. Currently, there are only four commercial disposal sites for our low-level radioactive waste and six commercial disposal sites for our very low-level activity waste we receive from non-governmental sites, allowing us to take advantage of the pricing competition between these sites. If one or more of these commercial disposal sites ceases to accept waste or closes for any reason or refuses to accept the waste of our Treatment Segment, for any reason, we would have limited remaining site to dispose of our nuclear waste. With limited end disposal site to dispose of our waste, we could be subject to significantly increased costs which could negatively impact our results of operations.

Direct and indirect macroeconomic impacts resulting from natural disasters, public health events and/or world conflicts in various regions could continue to and may in the future negatively impact our business and results of operations.

Natural disasters such as hurricanes and severe weather conditions and public health threats and outbreaks such as the COVID pandemic have previously negatively impacted our results of operations. The direct impacts of these such events resulted in delayed waste shipments and temporary shut-down of projects by certain of our customers, and delays in procurement, contract awards and planning on behalf of our government clients which negatively impacted our revenue. Residual and lingering macroeconomic effects from these such events could again in the future impact supply chain, workforce availability, and/or increased costs which could have a downward effect on our business, financial condition and results of operations. Additionally, world conflicts occurring in various regions may lead to similar macroeconomic effects which could have a downward effect on our business, financial conditions and results of operations. We may attempt to increase our sales prices in order to maintain satisfactory margin; however, competitive pressures in our industry may have the effect of inhibiting our ability to reflect these increased costs in the prices of our services that we provide to our customers and therefore reduce our profitability.

Our operations are subject to seasonal factors, which cause our revenues to fluctuate.

We have historically experienced reduced revenues and losses during the first and fourth quarters of our fiscal years due to a seasonal slowdown in operations from poor weather conditions, overall reduced activities during these periods resulting from holiday periods, and finalization of government budgets during the fourth quarter of each year. During our second and third fiscal quarters there has historically been an increase in revenues and operating profits. If we do not continue to have increased revenues and profitability during the second and third fiscal quarters, this could have a material adverse effect on our results of operations and liquidity.

We are engaged in highly competitive businesses and typically must bid against other competitors to obtain major contracts.

We are engaged in highly competitive business in which most of our government contracts and some of our commercial contracts are awarded through competitive bidding processes. We compete with national, regional firms and some international firms with nuclear and/or hazardous waste services practices, as well as small or local contractors. Some of our competitors have greater financial and other resources than we do, which can give them a competitive advantage. In addition, even if we are qualified to work on a new government contract, we might not be awarded the contract because of existing government policies designed to protect certain types of businesses and under-represented minority contractors. Although we believe we have the ability to certify and bid government contract as a small business, there are a number of qualified small businesses in our market that will provide intense competition. For international business, which we continue to focus on, there are additional competitors, many from within the country the work is to be performed, making winning work in foreign countries more challenging. Competition places downward pressure on our contract prices and profit margins. From time to time, we have not been awarded a contract due to one or more of the above competitive conditions. If we are unable to meet these competitive challenges, resulting in our ability to be awarded contracts, we could lose market share and experience an overall reduction in our profits.

We bear the risk of cost overruns in fixed-price contracts. We may experience reduced profits or, in some cases, losses under these contracts if costs increase above our estimates.

Our revenues may be earned under contracts that are fixed-price or maximum price in nature. A number of contracts in our Services Segment are fixed-price or maximum price contracts. Fixed-price contracts expose us to a number of risks not inherent in cost-reimbursable contracts. Under fixed price and guaranteed maximum-price contracts, contract prices are established in part on cost and scheduling estimates which are based on a number of assumptions, including assumptions about future economic conditions, prices and availability of labor, equipment and materials, and other exigencies. If these estimates prove inaccurate, or if circumstances change such as unanticipated technical problems, difficulties in obtaining permits or approvals, changes in laws or labor conditions, supply chain interruptions, weather delays, cost of raw materials, our suppliers’ or subcontractors’ inability to perform, and/or other events beyond our control, such as the impact of public health events, cost overruns may occur and we could experience reduced profits or, in some cases, a loss for that project. Errors or ambiguities as to contract specifications can also lead to cost-overruns.

Adequate bonding is necessary for us to win certain types of new work and support facility closure requirements.

We are often required to provide performance bonds to customers under certain of our contracts, primarily within our Services Segment. These surety instruments indemnify the customer if we fail to perform our obligations under the contract. If a bond is required for a particular project and we are unable to obtain it due to insufficient liquidity or other reasons, we may not be able to pursue that project. In addition, we provide bonds to support financial assurance in the event of facility closure pursuant to state requirements. We currently have a bonding facility but, the issuance of bonds under that facility is at the surety’s sole discretion. Moreover, due to events that affect the insurance and bonding markets generally, bonding may be more difficult to obtain in the future or may only be available at significant additional cost. There can be no assurance that bonds will continue to be available to us on reasonable terms. Our inability to obtain adequate bonding and, as a result, to bid on new work could have a material adverse effect on our business, financial condition and results of operations.

If we cannot maintain our permits or cannot obtain required permits, we may not be able to continue or expand our operations.

We are a nuclear services and waste management company. Our business is subject to extensive, evolving, and increasingly stringent federal, state, and local environmental laws and regulations. Such federal, state, and local environmental laws and regulations govern our activities regarding the treatment, storage, recycling, disposal, and transportation of hazardous and non-hazardous waste and low-level radioactive waste. We must obtain and maintain permits or licenses to conduct these activities in compliance with such laws and regulations. Failure to obtain and maintain the required permits or licenses would have a material adverse effect on our operations and financial condition. If any of our facilities are unable to maintain currently held permits or licenses or obtain any additional permits or licenses which may be required to conduct its operations, we may not be able to continue those operations at these facilities, which could have a material adverse effect on us.

Risks Related to Laws and Regulations:

As a government contractor, we are subject to extensive government regulation, and our failure to comply with applicable regulations could subject us to penalties that may restrict our ability to conduct our business.

Our governmental contracts or subcontracts relating to DOE and DOW sites are a significant part of our business. Allowable costs under U.S. government contracts are subject to audit by the U.S. government. Although we believe that we have complied with applicable environmental regulations, if these audits result in determinations that costs claimed as reimbursable are not allowed costs or were not allocated in accordance with applicable regulations, we could be required to reimburse the U.S. government for amounts previously received.

Governmental contracts or subcontracts involving governmental facilities are often subject to specific procurement regulations, contract provisions and a variety of other requirements relating to the formation, administration, performance and accounting of these contracts. Many of these contracts include express or implied certifications of compliance with applicable regulations and contractual provisions. If we fail to comply with any regulations, requirements or statutes, our existing governmental contracts or subcontracts involving governmental facilities could be terminated or we could be suspended from government contracting or subcontracting. If one or more of our governmental contracts or subcontracts are terminated for any reason, or if we are suspended or debarred from government work, we could suffer a significant reduction in expected revenues and profits. Furthermore, as a result of our governmental contracts or subcontracts involving governmental facilities, claims for civil or criminal fraud may be brought by the government or violations of these regulations, requirements or statutes.

Changes in environmental regulations and enforcement policies could subject us to additional liability and adversely affect our ability to continue certain operations.

We cannot predict the extent to which our operations may be affected by future governmental enforcement policies as applied to existing environmental laws, by changes to current environmental laws and regulations, or by the enactment of new environmental laws and regulations. Any predictions regarding possible liability under such laws are complicated further by current environmental laws which provide that we could be liable, jointly and severally, for certain activities of third parties over whom we have limited or no control.

Our businesses subject us to substantial potential environmental liability.

Our business of rendering services in connection with management of waste, including certain types of hazardous waste, low-level radioactive waste, and mixed waste (waste containing both hazardous and low-level radioactive waste), subjects us to risks of liability for damages. Such liability could involve, without limitation:

claims for clean-up costs, personal injury or damage to the environment in cases in which we are held responsible for the release of hazardous or radioactive materials;

claims of employees, customers, or third parties for personal injury or property damage occurring in the course of our operations; and

claims alleging negligence or professional errors or omissions in the planning or performance of our services.

Our operations are subject to numerous environmental laws and regulations. We have in the past, and could in the future, be subject to substantial fines, penalties, and sanctions for violations of environmental laws and substantial expenditures as a responsible party for the cost of remediating any property which may be contaminated by hazardous substances generated by us and disposed at such property or transported by us to a site selected by us, including properties we own or lease.

As our operations expand, we may be subject to increased litigation, which could have a negative impact on our future financial results.

Our operations are highly regulated and we are subject to numerous laws and regulations regarding procedures for waste treatment, storage, recycling, transportation, and disposal activities, all of which may provide the basis for litigation against us. In recent years, the waste treatment industry has experienced a significant increase in so-called “toxic-tort” litigation as those injured by contamination seek to recover for personal injuries or property damage. We believe that, as our operations and activities expand, there will be a similar increase in the potential for litigation alleging that we have violated environmental laws or regulations or are responsible for contamination or pollution caused by our normal operations, negligence or other misconduct, or for accidents which occur in the course of our business activities. Such litigation, if significant and not adequately insured against, could adversely affect our financial condition and our ability to fund our operations. Protracted litigation would likely cause us to spend significant amounts of our time, effort, and money. This could prevent our management from focusing on our operations and expansion.

If environmental regulation or enforcement is relaxed, the demand for our services could decrease.

The demand for our services is substantially dependent upon the public’s concern with, and the continuation and proliferation of, the laws and regulations governing the treatment, storage, recycling, and disposal of hazardous, non-hazardous, and low-level radioactive waste. A decrease in the level of public concern, the repeal or modification of these laws, or any significant relaxation of regulations relating to the treatment, storage, recycling, and disposal of hazardous waste and low-level radioactive waste could significantly reduce the demand for our services and could have a material adverse effect on our operations and financial condition. We are not aware of any current federal or state government or agency efforts in which a moratorium or limitation has been, or will be, placed upon the creation of new hazardous or radioactive waste regulations that would have a material adverse effect on us; however, no assurance can be made that such a moratorium or limitation will not be implemented in the future.

We and our customers operate in a politically sensitive environment, and the public perception of nuclear power and radioactive materials can affect our customers and us.

We and our customers operate in a politically sensitive environment. Opposition by third parties to particular projects can limit the handling and disposal of radioactive materials. Adverse public reaction to developments in the disposal of radioactive materials, including any high-profile incident involving the discharge of radioactive materials, could directly affect our customers and indirectly affect our business. Adverse public reaction also could lead to increased regulation or outright prohibition, limitations on the activities of our customers, more onerous operating requirements or other conditions that could have a material adverse impact on our customers and our business.

The elimination or any modification of the Price-Anderson Act’s indemnification authority could have adverse consequences for our business.

The Atomic Energy Act of 1954, as amended, or the AEA, comprehensively regulates the manufacture, use, and storage of radioactive materials. The Price-Anderson Act (“PAA”) supports the nuclear services industry by offering broad indemnification to DOE contractors for liabilities arising out of nuclear incidents at DOE nuclear facilities. That indemnification protects DOE prime contractors, but also similar companies that work under contract or subcontract for a DOE prime contract or transports radioactive material to or from a site. Congress extended the indemnification authority under the PAA, including DOE’s ability to indemnify DOE contractors, to December 31, 2065, as part of the Further Consolidated Appropriations Act, 2024 (Public Law 118-47).

Under certain conditions, the PAA’s indemnification provisions may not apply to our processing of radioactive waste at governmental facilities and may not apply to liabilities that we might incur while performing services as a contractor for the DOE and the nuclear energy industry. If an incident or evacuation is not covered under PAA indemnification, we could be held liable for damages, regardless of fault, which could have an adverse effect on our results of operations and financial condition. If such indemnification is not available in the future, our business could be adversely affected if the owners and operators of new facilities fail to retain our services in the absence of adequate commercial insurance and indemnification.

Risks Relating to our Financial Performance and Position and Need for Financing:

If any of our permits, other intangible assets, and tangible assets become impaired, we may be required to record significant charges to earnings.

Under accounting principles generally accepted in the United States (“U.S. GAAP”), we review our intangible and tangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Our permits are tested for impairment at least annually. Factors that may be considered a change in circumstances, indicating that the carrying value of our permit, other intangible assets, and tangible assets may not be recoverable, include a decline in stock price and market capitalization, reduced future cash flow estimates, and slower growth rates in our industry. We may be required, in the future, to record impairment charges in our financial statements, in which any impairment of our permit, other intangible assets and tangible assets is determined. Such impairment charges could negatively impact our results of operations.

Breach of any of the covenants in our credit facility could result in a default, triggering repayment of outstanding debt under the credit facility and the termination of our credit facility.

Our credit facility with our bank contains financial covenants, including requirements to maintain minimum daily Liquidity (defined under our loan agreement as borrowing availability under our revolving credit plus cash in our money market deposit account (“MMDA”) maintained with our lender) amounts. We have met all of our financial covenant requirements during 2025. If we fail to meet any of our financial covenants going forward and our lender does not waive the non-compliance or revise our covenant requirement so that we are in compliance, our lender could accelerate the payment of our borrowings under our credit facility and terminate our credit facility. In such event, we may not have sufficient liquidity to repay our debt under our credit facility and other indebtedness and/or operate our business.

A lack of positive operating results could limit our borrowing capacity under our credit facility.

The maximum amount available for borrowing under the revolving portion of our credit facility is based on a percentage of our eligible accounts receivable outstanding at any given time, reduced by outstanding standby letters of credit and any discretionary borrowing base reductions imposed by our lender. As a result, our borrowing capacity fluctuates based on the level and quality of our receivables and the lender’s determinations. If we do not generate positive operating results, our accounts receivable and overall borrowing base could decline, which would reduce the amount available to us under the credit facility. A reduction in borrowing availability could limit our access to working capital and constrain our ability to fund operations, capital expenditures, and other business needs. Our ability to make scheduled principal and interest payments, refinance existing indebtedness, and borrow under our credit facility depends on our future operating performance and cash flows, which are subject to prevailing economic conditions and financial, competitive, business, and other factors, many of which are beyond our control. A limitation on our borrowing capacity could have a material adverse effect on our business, financial condition, and results of operations. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” for a discussion of management’s current liquidity expectations and assumptions.

If our financial and operating activities are limited, it could adversely affect our ability to incur additional debt to fund future needs.

In such an event, one or more of the following could occur:

We could be required to dedicate a substantial portion of our cash flow to the payment of principal and interest, thereby reducing the funds available for operations and future business opportunities;

Reduced cash flow and limited access to financing could make it more difficult for us to satisfy our obligations;

We could be limited in our ability to borrow additional money if needed for other purposes, including working capital, capital expenditures, debt service requirements, acquisitions and general corporate or other purposes, on satisfactory terms or at all;

We could be limited in our ability to adjust to changing economic, business and competitive conditions;

We could be placed at a competitive disadvantage with competitors who may have less indebtedness or greater access to financing;

We could become more vulnerable to an increase in interest rates, a downturn in our operating performance, or a decline in general economic conditions; and

We could experience adverse changes in our credit ratings, which could impact our ability to obtain financing in the future and increase the cost of such financing.

Any of the foregoing could adversely impact our operating results, financial condition, and liquidity. Our ability to continue our operations depends on our ability to generate profitable operations or complete equity or debt financings to increase our capital, when needed.

We may be unable to utilize loss carryforwards in the future.

The Company has estimated net operating loss carryforwards (“NOLs”) for federal, state and foreign income tax purposes. All of our NOLs can be carried forward and applied against future taxable income, if any, and expire in various amounts starting in 2026 with the exception of our federal NOLs which do not expire. Our net loss carryforwards are subject to various limitations. Our ability to use the net loss carryforwards depends on whether we are able to generate sufficient income in the future years. Due to our financial performances in recent years, we fully reserved these loss carryforwards in 2024. Further, our net loss carryforwards have not been audited or approved by the Internal Revenue Service.

We sustained losses in each of the years 2025 and 2024 and our inability to become profitable on an annual basis in the foreseeable future could have a material adverse effect on our operations, credit facility, liquidity and potential growth.

The Company sustained losses in each of the years 2025 and 2024. We believe that our results of operations should improve in 2026. If, however, we fail to become profitable on an annualized basis in the foreseeable future, this could have a material adverse effect on our operations, credit facility, liquidity and potential growth. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” for a discussion of management’s current liquidity expectations and assumptions.

Risks Relating to our Common Stock:

Issuance of substantial amounts of our common stock, par value $0.001 per share (the “Common Stock”) could depress our stock price or dilute the percentage ownership of our Common Stockholders.

Any sales of substantial amounts of our Common Stock in the public market could cause an adverse effect on the market price of our Common Stock and could impair our ability to raise capital through the sale of additional equity securities. The issuance of our Common Stock will result in dilution in the percentage equity interest of our stockholders and dilution in ownership value. Future sales of the shares issuable could also depress the market price of our Common Stock.

We do not intend to pay dividends on our Common Stock in the foreseeable future.

Since our inception, we have not paid cash dividends on our Common Stock, and we do not anticipate paying any cash dividends in the foreseeable future. Our credit facility prohibits us from paying cash dividends on our Common Stock without prior approval from our lender.

The price of our Common Stock may fluctuate significantly, which may make it difficult for our stockholders to resell our Common Stock when a stockholder wants or at prices a stockholder finds attractive.

The price of our Common Stock on the Nasdaq Capital Market constantly fluctuates. We expect that the market price of our Common Stock will continue to fluctuate. This may make it difficult for our stockholders to resell the Common Stock when a stockholder wants or at prices a stockholder finds attractive.

General Risk Factors:

Loss of certain key personnel could have a material adverse effect on us.

Our success depends on the contributions of our key management, environmental and engineering personnel. Our future success depends on our ability to retain and expand our staff of qualified personnel, including environmental specialists and technicians, sales personnel, and engineers. Without qualified personnel, we may incur delays in rendering our services or be unable to render certain services. We have in the past lost certain key personnel. We cannot be certain that we will be successful in our efforts to attract and retain qualified personnel as their availability is limited due to the demand for hazardous waste management services and the highly competitive nature of the hazardous waste management industry. We do not maintain key person insurance on any of our employees, officers, or directors.

We may not be successful in winning new business from our government, commercial or international customers.

We must be successful in winning business from our government, commercial and international customers to replace revenues from projects that we have completed or that are nearing completion and to increase our revenues. We bid on numerous projects and are not always successful in being selected as the winning bid. Our business and operating results can be adversely affected by the size and timing of a single material contract.

Our failure to maintain our safety record could have an adverse effect on our business.

Our safety record is critical to our reputation. We have from time to time, experienced incidents which impacted certain safety records. In addition, many of our government and commercial customers require that we maintain certain specified safety record guidelines to be eligible to bid for contracts with these customers. Furthermore, contract terms may provide for automatic termination in the event that our safety record fails to adhere to agreed-upon guidelines during performance of the contract. As a result, our failure to maintain our safety record could have a material adverse effect on our business, financial condition and results of operations.

Systems failures, interruptions or breaches of security and other cybersecurity risks could have an adverse effect on our financial condition and results of operations.

We are subject to certain operational risks to our information systems. Because of efforts on the part of computer hackers and cyberterrorists to breach data security of companies, we face risk associated with potential failures to adequately protect critical corporate, customer and employee data. As part of our business, we develop and retain confidential data about us and our customers, including the U.S. government. We also rely on the services of a variety of vendors to meet our data processing and communications needs.

Despite our implemented security measures and established policies, we cannot be certain that all of our systems are entirely free from vulnerability to attack or other technological difficulties or failures or failures on the part of our employees to follow our established security measures and policies. Information security risks have increased significantly. Our technologies, systems, and networks may become the target of cyber-attacks, computer viruses, malicious code, or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of our or our customers’ confidential, proprietary and other information and the disruption of our business operations. A security breach could adversely impact our customer relationships, reputation and operations, result in violations of applicable privacy and other laws and/or financial loss to us or to our customers or to our employees, and similar litigation exposure. While we maintain a system of internal controls and procedures, any breach, attack, or failure as discussed above could have a material adverse impact on our business, financial condition, and results of operations or liquidity.

There is also increasing attention on the importance of cybersecurity relating to infrastructure. This creates the potential for future developments in regulations relating to cybersecurity that may adversely impact us, our customers and how we offer our services to our customers.

Climate change could negatively impact the Company’s operations and financial condition.

Climate change may present both immediate and long-term risks to the Company and our customers and these risks may increase over time. Climate risks can arise from both physical risks (those risks related to the physical effects of climate change) and transition risks (risks related to governmental regulatory requirements, legal technology, market and reputational changes from a transition to a low carbon economy). Climate change could have a material, adverse effect on environmental companies like ours that are involved in the treatment, disposal and other services related to hazardous waste, radioactive waste and/or mixed (waste that contain both hazardous and radioactive) waste by changing or restricting how we perform our services or what services we can perform or taking action that materially increases our costs to do business in order to regulate or reduce climate change.

Failure to obtain intellectual property protection for our proprietary technologies could negatively affect us.

We believe that it is important that we maintain our proprietary technologies. There can be no assurance that our steps to protect our proprietary technologies will be adequate to prevent misappropriation of these technologies by third parties. Such misappropriation could adversely affect our operations and financial condition. Changes to current environmental laws and regulations also could limit the use of our proprietary technology.

Failure to maintain effective internal control over financial reporting or failure to remediate a material weakness in internal control over financial reporting could have a material adverse effect on our business, operating results, and stock price.

Maintaining effective internal control over financial reporting is necessary for us to produce reliable financial reports and is important in helping to prevent financial fraud. If we are unable to maintain adequate internal controls, our business and operating results could be harmed. We are required to satisfy the requirements of Section 404 of Sarbanes Oxley and the related rules of the Commission, which require, among other things, management to assess annually the effectiveness of our internal control over financial reporting. If we are unable to maintain adequate internal control over financial reporting or remediate any material weakness identified, there is a reasonable possibility that a misstatement of our annual or interim financial statements will not be prevented or detected in a timely manner. If we cannot produce reliable financial reports, investors could lose confidence in our reported financial information, the market price of our Common Stock could decline significantly, and our business, financial condition, and reputation could be harmed.

Delaware law, certain of our charter provisions, our stock option plans, outstanding warrants and our Preferred Stock may inhibit a change of control under circumstances that could give you an opportunity to realize a premium over prevailing market prices.

We are a Delaware corporation governed by the Delaware General Corporation Law. In general, Section 203 prohibits a Delaware public corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. As a result of Section 203, potential acquirers may be discouraged from attempting to effect acquisition transactions with us, thereby possibly depriving our security holders of certain opportunities to sell, or otherwise dispose of, such securities at above-market prices pursuant to such transactions. Further, certain of our option plans provide for the immediate acceleration of, and removal of restrictions from, options and other awards under such plans upon a “change of control” (as defined in the respective plans). Such provisions may also have the result of discouraging acquisition of us. All of our authorized preferred stock are available for issuance. Future sales of authorized and unissued shares could be used by our management to make it more difficult for, and thereby discourage, an attempt to acquire control of us.

ITEM 7.

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

Certain statements contained within Item 1 – “Business” and this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”) may be deemed “forward-looking statements” within the meaning of Section 27A of the Act, and Section 21E of the Securities Exchange Act of 1934, as amended (collectively, the “Private Securities Litigation Reform Act of 1995”). See “Special Note regarding Forward-Looking Statements” contained in this report.

Management’s discussion and analysis is based, among other things, on our audited consolidated financial statements and includes our accounts and the accounts of our wholly-owned subsidiaries.

The following discussion and analysis should be read in conjunction with our consolidated financial statements and the notes thereto included in Item 8 of this report.

Overview

In 2025, we generated modest consolidated revenue growth year-over-year, while delivering improvements in gross profit and operating performance compared to the prior year, driven primarily by a rebound in the Treatment Segment. The Treatment Segment benefited from higher waste volumes and higher averaged price waste mix, which included higher revenue generated from international and commercial clients. In contrast, the Services Segment experienced lower revenue, due in part to delays in project mobilization and delays in procurements that resulted from changes to the current presidential administration that began in January 2025 (the “Administration”) and supporting policies that occurred in the first half of 2025. The partial government shutdown that occurred effective October 1, 2025, also negatively impacted our revenue as procurement timing cycles were impacted.

Overall revenue increased by $2,557,000 or 4.3% to $61,674,000 in 2025 as compared to $59,117,000 in 2024. The increase was entirely from our Treatment Segment where revenue increased by $10,144,000 or approximately 29.0% to $45,097,000 for the twelve months ended December 31, 2025, from $34,953,000 in the same period of 2024. Services Segment revenue decreased $7,587,000 or 31.4% to $16,577,000 for the twelve months ended December 31, 2025, from $24,164,000 for the same period of 2024. Gross profit increased by $5,971,000 or approximately 298,550% for the twelve months ended December 31, 2025, as compared to the corresponding period of 2024. Selling, General, and Administrative (“SG&A”) expenses increased by $1,925,000 or 13.3% for twelve months ended December 31, 2025, as compared to the corresponding period of 2024. In spite of the improvement in gross profit, we experienced a loss from continuing operations of approximately $10,665,000 in 2025. While the loss was disappointing, it reflected an improvement of approximately 45.5% from the 2024 loss from continuing operations of $19,569,000.

See “Results of Operations” below for discussions of certain financial metrics pertaining to our operations, which includes our two reportable segments.

We believe we are positioned for potential improvements in our financial results in 2026. These expectations are based on management’s current assumptions regarding the timing and execution of anticipated waste treatment volumes, including the commencement and ramp-up of activities associated with the Direct-Feed-Low-Activity Waste (“DFLAW”) program at Hanford, Washington, as well as our ability to convert existing Treatment Segment backlog into revenue. Treatment Segment backlog as of December 31, 2025, was approximately $11,861,000, representing an increase of approximately 50.9% from Treatment Segment backlog of $7,859,000 as of December 31, 2024. However, Treatment Segment backlog does not guarantee immediate revenue, as the timing of backlog processing may vary based on waste complexity, customer requirements, and operational considerations. As noted above, however, we believe that our Perma-Fix Northwest Richland, Inc. (“PFNWR”) treatment facility, immediately adjacent to the Hanford Nuclear Site, is positioned to support the U.S. Department of Energy’s (“DOE”) DFLAW program at Hanford, which began hot commissioning of the Low-Activity Waste Vitrification Facility in October 2025. The subsequent operational phase of the DFLAW program is anticipated to begin in 2026, which will include generation of several effluent waste streams expected to be treated by our PFNWR facility. However, the commencement, scope, and timing of DFLAW-related waste streams are controlled by the DOE and subject to appropriations, procurement processes, and operational considerations beyond our control. Delays in anticipated waste treatment volumes, including DFLAW-related waste streams, could impact our results of operations as we continue to incur fixed operating costs and capital expenditures in anticipation of waste treatment volumes and program activities.

We continue to focus on expansion into international markets which is reflected in revenue generated from foreign entities of approximately $6,440,000 in 2025, as compared to $2,452,000 in the corresponding period of 2024, an increase of $3,988,000 or 162.6%. Additionally, we continue our aggressive research and development (“R&D”), sales and marketing efforts and capital expenditures relating to our new patent-pending technology for the destruction of Per- and polyfluoroalkyl substances (“PFAS”), which activities adversely impacted our results of operations in 2025 (See “Known Trends and Uncertainties – New Processing Technology” for a discussion of our new PFAS-destruction technology).

Finally, our continuing initiatives include, among other things, positioning ourselves for further large and mid-size procurements within the DOE and U.S. Department of War (“DOW”) and waste treatment in support of DOE’s Hanford closure strategy, continuing investments in our facilities and capabilities to allow for broader waste treatment (including PFAS) and continuing expansion of our waste treatment offerings within the commercial market.

We are continually monitoring our operating costs to ensure alignment with our revenue levels.

See “Known Trends and Uncertainties – Federal Funding” within this MD&A for a discussion of factors that could impact our results of operations in 2026.

Business Environment

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 and continuing resolutions (“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.

Results of Operations

The reporting of financial results and pertinent discussions are tailored to our two reportable segments: The Treatment Segment and Services Segment.

Summary - Years Ended December 31, 2025 and 2024

Below are the results of continuing operations for years ended December 31, 2025, and 2024 (amounts in thousands):

(Consolidated)

Net revenues

Cost of goods sold

Gross profit

Selling, general and administrative

Research and development

Loss on disposal of property and equipment

Loss from operations

Interest income

Interest expense

Interest expense – financing fees

Other income

Loss from continuing operations before taxes

Income tax expense

Loss from continuing operations

Revenue

Consolidated revenues increased $2,557,000 for the year ended December 31, 2025, compared to the year ended December 31, 2024, as follows:

(In thousands)

Revenue

Revenue

Change

% Change

Treatment

Government waste

Hazardous/non-hazardous (1)

Other nuclear waste

Total

Services

Nuclear

Technical

Total

Total

1) Includes waste generated by government clients of $2,269,000 and $2,898,000 for the twelve months ended December 31, 2025, and 2024, respectively.

Treatment Segment revenue increased by $10,144,000 or 29.0% for the twelve-months ended December 31, 2025, over the same period in 2024. The overall increase in revenue in the Treatment Segment revenue was primarily due to higher waste volume and higher averaged price waste mix. Our Treatment Segment revenue was also positively impacted by our international initiatives, which generated an increase in revenue of approximately $3,832,000 or 201.7%, to $5,732,000, as compared to $1,900,000, for the same period of last year. Services Segment revenue decreased by approximately $7,587,000 or 31.4%. The decrease in revenue in the Services Segment was due to reasons as discussed in the “Overview” section. Additionally, our Services Segment revenues are project based; as such, the scope, duration, and completion of each project vary.

Cost of Goods Sold

Cost of goods sold decreased $3,414,000 for the year ended December 31, 2025, as compared to the year ended December 31, 2024, as follows:

(In thousands)

Revenue

Revenue

Change

Treatment

Services

Total

Cost of goods sold for the Treatment Segment increased by approximately $4,240,000 or 11.8%. Treatment Segment’s overall variable costs increased by approximately $1,675,000 primarily due to the following: overall material and supplies, lab, transportation, and outside services costs were higher by approximately $3,371,000; variable payroll costs (overtime) were higher by approximately $426,000 due to increased waste volume production; and disposal costs were lower by approximately $2,122,000. Within our Treatment Segment, variable cost categories can fluctuate based on waste mix. Treatment Segment’s overall fixed costs were higher by approximately $2,565,000 resulting from the following: salaries and payroll related expenses were higher by $2,130,000 due to higher headcount and cost-of-living adjustments (“COLA”) effected during the third quarter of 2025; general expenses were higher by $376,000, mostly due to higher utility costs; travel expenses were higher by approximately $123,000; maintenance expenses were higher by approximately $59,000 from overall general maintenance of equipment and updates to facility security; depreciation expenses were higher by $106,000 due to more finance leases and equipment purchases; and regulatory expenses were lower by approximately $229,000 from fewer regulatory matters. Services Segment cost of goods sold decreased $7,654,000 or 33.2% primarily due to lower revenue. The decrease in cost of goods sold was primarily due to overall lower salaries/payroll related, outside services, and travel costs totaling approximately $7,180,000; lower depreciation expenses totaling approximately $44,000 as certain equipment became fully depreciated in 2025; lower general expenses of approximately $265,000 in various categories; and overall lower disposal, material and supplies and regulatory costs totaling approximately $165,000. Included within cost of goods sold is depreciation and amortization expense of $1,700,000 and $1,637,000 for the twelve months ended December 31, 2025, and 2024, respectively.

Gross Profit

Gross profit for the year ended December 31, 2025, was $5,971,000 higher than 2024 as follows:

(In thousands)

Revenue

Revenue

Change

Treatment

Services

Total

Treatment Segment gross profit increased by $5,904,000 or approximately 531.9% and gross margin increased to 10.6% % from (3.2)% primarily due to higher revenue from higher waste volume and higher averaged price waste mix. The increase in fixed costs within the Treatment Segment partially offset these improvements, negatively impacting gross profit and gross margin. Services Segment gross profit increased by $67,000 or approximately 6.0% and gross margin improved to 7.1% from 4.6%. The increases were attributed primarily to overall improved margin on projects and lower fixed costs which were offset by the impact of lower revenue. Our Services Segment gross margin is impacted by our current projects which are competitively bid on and will therefore, have varying margin structures.

SG& A expenses increased $1,925,000 for the year ended December 31, 2025, as compared to the corresponding period for 2024 as follows:

(In thousands)

% Revenue

% Revenue

Change

Administrative

Treatment

Services

Total

Administrative SG&A expenses were higher primarily due to higher salaries, payroll related expenses and stock option compensation expenses totaling approximately $558,000. The hiring of the Company’s COO in January 2025 and COLA increases to payroll effected during the third quarter of 2025 contributed to this increase. The remaining higher expenses in Administrative SG&A were primarily due to higher outside services expenses of approximately $425,000 from more legal and business-related matters and higher travel expenses of approximately $53,000 due to more travel by senior management. Treatment Segment SG&A expenses were higher primarily due to the following: salaries and payroll related expenses were higher by approximately $713,000 as more employee hours were allocated to marketing initiatives of our new PFAS technology and overall business development; general expense were higher by approximately $244,000 in various categories (which include higher tradeshow expenses of approximately $157,000); travel expenses were higher by $35,000; and outside services expenses were lower by approximately $14,000 from fewer consulting matters. Services Segment SG&A expenses were lower primarily due to the following: salaries and payroll related expenses were lower by approximately $57,000 as fewer employee hours were allocated in supporting administrative/marketing functions due to lower revenue; general expenses were lower by approximately $62,000 in various categories; outside services expenses were higher by approximately $10,000 due to more consulting matters; and travel expense were higher by approximately $20,000. Included in SG&A expenses is depreciation and amortization expense of $59,000 and $126,000 for the twelve months ended December 31, 2025 and 2024, respectively.

R&D expenses increased by $119,000 for the twelve months ended December 31, 2025, as compared to the corresponding period of 2024, primarily due to expenses incurred in connection with our new PFAS technology.

Interest Income

Interest income increased by approximately $202,000 for the twelve-months ended December 31, 2025, as compared to the corresponding period of 2024. The increase in interest income in 2025 as compared to 2024 was primarily due to higher interest income earned from funds deposited into our money market deposit account (“MMDA”) from the two equity raises that were completed in May 2024 and December 2024, offset by lower interest income earned from our finite risk sinking fund from lower interest rate.

Interest Expense

Interest expense decreased by approximately $243,000 for the twelve months ended December 31, 2025, as compared to the corresponding period of 2024. The decrease was primarily the result of capitalization of approximately $231,000 in interest costs incurred on debt on construction of projects for our use, particularly our PFAS reactors.

Income Taxes

We had income tax expenses of $0 and $4,435,000 for continuing operations for the twelve-months ended December 31, 2025 and 2024, respectively. Our effective tax rates were approximately 0% and (29.3%) for the twelve months ended December 31, 2025 and 2024, respectively. Our effective tax rate for the each of the periods above was impacted by our recognition of a full valuation allowance against our U.S federal and state deferred tax assets in the quarter ended September 30, 2024.

Backlog

Our Treatment Segment maintains a backlog of stored waste, which represents waste that has not been processed. The backlog is principally a result of the timing and complexity of the waste being brought into the facilities and the selling price per container. As of December 31, 2025, our Treatment Segment had a backlog of approximately $11,861,000, as compared to approximately $7,859,000 as of December 31, 2024. Additionally, the time it takes to process waste from the time it arrives may increase due to the types and complexities of the waste we are currently receiving. We use our best efforts to increase treatment of our waste backlog during period of lower incoming waste receipts to optimize facility utilization, which historically has occurred in the first and fourth quarters.

Discontinued Operations and Environmental Liabilities

Our discontinued operations consist of all our subsidiaries included in our former Industrial Segment which encompasses subsidiaries divested in 2011 and earlier, as well as three previously closed locations.

Our discontinued operations had no revenue for the twelve months ended December 31, 2025 and 2024. We incurred net losses of $3,119,000 (net of tax expense of $0) and $410,000 (net of tax benefit of $149,000) for our discontinued operations for the twelve months ended December 31, 2025, and 2024, respectively. Our net loss for 2025 included an increase to the environmental remediation reserve of approximately $2,721,000 for our Perma-Fix of South Geogia, Inc. (“PFSG”) subsidiary as discussed below. The remaining net loss for 2025 and net loss for 2024 were primarily due to costs incurred in connection with management of administrative and regulatory matters related to our remediation projects.

We have three remediation projects, which are currently in progress relating to our Perma-Fix of Dayton, Inc. (“PFD”), Perma-Fix of Memphis (“PFM”) and PFSG subsidiaries, all within our discontinued operations. We divested PFD in 2008; however, the environmental liability of PFD was retained by us upon the divestiture of PFD. These remediation projects principally entail the removal/remediation of contaminated soil and, in most cases, the remediation of surrounding ground water. The remediation activities are closely reviewed and monitored by the applicable state regulators.

As of December 31, 2025, we had total accrued environmental remediation liabilities of $3,485,000, an increase of $2,718,000 from the December 31, 2024, balance of $767,000. The net increase of approximately $2,718,000 reflects an increase of approximately $2,721,000 made to the reserve at our PFSG subsidiary following a reassessment of remediation cost estimates after clarification of the remediation plan from the state regulator, offset by payments of approximately $3,000 for our PFSG remediation project. As of December 31, 2025, approximately $76,000 of our total environmental remediation liabilities were recorded as current.

Liquidity and Capital Resources

Based on current operating conditions and the timing of anticipated waste receipts and program activities, we currently expect to incur a loss from operations during the first quarter of 2026. This expectation also reflects the timing of backlog processing, continued operating fixed costs and capital expenditures incurred in anticipation of program activities, including ongoing investments in new technology initiatives and with respect to the DFLAW program.

Despite the anticipated near-term operating loss, we believe that our existing cash, cash equivalents, borrowing availability under our Revolving Credit (see “Financing Activities – Credit Facility” below for a discussion of our Revolving Credit) and expected cash flows from operations will be sufficient to fund our operations for at least the next twelve months, based on management’s current assumptions regarding the timing and execution of anticipated waste treatment volumes.

Our cash flow requirements during the twelve months ended December 31, 2025, were financed by our Liquidity (defined under our Loan Agreement as borrowing availability under our Revolving Credit of our Credit Facility plus cash in our MMDA maintained with our lender). Our MMDA consists of cash received in connection with the sale of our Common Stock completed in 2024 as discussed below under “Financing Activities.”

We believe our cash flow requirements for the next twelve months will consist primarily of general working capital needs, scheduled principal payments on our debt obligations, administration and monitoring of our discontinued operations, R&D related to our PFAS technology and capital expenditures, including expenditures related to our PFAS technology (see “Known Trends and Uncertainties – New Processing Technology” within this MD&A for a discussion of this technology). We plan to fund these requirements from our operations and our Liquidity.

We continually review operating costs and evaluate opportunities to reduce operating costs and non-essential expenditures in order to align spending levels with revenue levels. 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.

The following table reflects the cash flow activity for the year ended December 31, 2025, and the corresponding period of 2024:

(In thousands)

Cash used in operating activities of continuing operations

Cash used in operating activities of discontinued operations

Cash used in investing activities of continuing operations

Cash used in investing activities of discontinued operations

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

Effect of exchange rate changes on cash

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

As of December 31, 2025, we were in a positive cash position with no Revolving Credit balance. As of December 31, 2025, we had cash on hand of approximately $11,768,000, which included cash from our foreign subsidiaries of approximately $153,000. The decline in our cash from 2024 to 2025 of approximately $17,207,000 was primarily due to funding of our operating losses and capital investment.

Operating Activities

Cash used in operating activities of our continuing operations during 2025 consisted mostly of the net loss that we incurred of approximately $10,665,000, adjusted for certain non-cash items, such as $818,000 of stock-based compensation expenses and $1,759,000 of depreciation and amortization expenses. Cash flow decrease of approximately $2,921,000 resulting from net change in assets and liabilities reflects an increase in unbilled receivables of approximately $3,791,000, a net decrease in accounts payables, accrued expenses, deferred revenue and other accruals totaling approximately $1,660,000, offset by a decreased in accounts receivable (net of provision for credit losses) of approximately $216,000 and a net decrease in inventories, prepaids and other assets totaling approximately of $2,314,000. Our accounts receivables are impacted by timing of invoicing and collections. Our contracts with our customers are subject to various payment terms and conditions. Our unbilled receivables are impacted by differences between invoicing timing and our revenue recognition methodology.

Cash used in operating activities of our continuing operations during 2024 consisted mostly of the significant net loss that we incurred of approximately $19,569,000, adjusted for certain non-cash items, such as $656,000 of stock-based compensation expense, $1,763,000 of depreciation and amortization expense and the deferred income tax expense of $4,448,000. Cash flow decrease of approximately $2,229,000 resulting from net change in assets and liabilities reflects an increase in accounts receivable of approximately $2,076,000 (net of provision for credit losses), a net decrease in accounts payables, accrued expenses, deferred revenue and other accruals totaling approximately $6,667,000, offset by a decreased in unbilled receivables of approximately $3,442,000 and a net decrease in inventories, prepaids and other assets totaling approximately of $3,072,000.

Cash used in operating activities of our discontinued operations during 2025 and 2024 consisted primarily of expenses incurred in connection with management of administrative and regulatory matters related to our remediation projects.

We had working capital of $13,803,000 (which included working capital of our discontinued operations) as of December 31, 2025, as compared to working capital of $28,283,000 as of December 31, 2024. The decrease in our working capital was primarily driven by the losses incurred from our operations during 2025 as previously discussed and increase in capital expenditures as discussed below.

Investing Activities

Cash used in investing activities of our continuing operations during 2025 consisted mostly of our purchases of property and equipment totaling approximately $5,172,000, of which $464,000 was financed. Our capital expenditures for 2025 included expenditures made for our PFAS treatment systems, which include our second-generation unit. The remaining cash used in investing activities consisted of cash outlays of approximately $217,000 made in connection with our operating permits and certain intangible assets. Total cash used in investing activities of our continuing operations was partially offset by approximately $28,000 from our sale of idle equipment.

Cash used in investing activities of our continuing operations during 2024 consisted mostly of our purchases of property and equipment totaling approximately $3,811,000, of which $406,000 was financed. Our capital expenditures for 2024 included expenditures made for our prototype PFAS treatment unit. The remaining cash used in investing activities consisted of cash outlays made in connection with our operating permits and certain intangible assets.

Cash used in investing activities of our discontinued operations during 2025 consisted of payments made in connection with a certain regulatory permit at our Perma-Fix South Georgia, Inc. (“PFSG”) subsidiary and improvements made to the existing building. Cash used in investing activities of our discontinued operations in 2024 was primarily for roof replacement at our PFSG location.

Capital Expenditures

We anticipate making capital expenditures of approximately $3,000,000 to $5,000,000 in 2026 to maintain operations and regulatory compliance requirements and support revenue growth, including the completion of our second-generation unit for our PFAS technology. We plan to fund our capital expenditures for 2026 from cash from operations, Liquidity under our Credit Facility and/or financing. The initiation and timing of our capital expenditures are subject to a number of factors which include, among other things, cost/benefit analysis, the pace of our strategic project initiatives and improvement in our operations.

Financing Activities

Our cash used in financing during 2025 consisted mostly of principal payments of approximately $631,000 primarily for our Term and Capital Loans under our Credit Facility, principal payments of $308,000 for our finance leases and payments of $195,000 of offering costs from the equity raise that we completed in December 2024, partially offset by proceeds received from option exercises of approximately $172,000.

Our cash provided by financing during 2024 consisted mostly of net proceeds of $41,859,000 received from the sales of our Common Stock in May 2024 and December 2024 and proceeds received from option and warrant exercises totaling approximately $292,000, partially offset by principal payments of approximately $832,000 primarily for our Term Loans and Capital Loan under our Credit Facility and $291,000 for our finance leases.

Credit Facility

We entered into a Second Amended and Restated Revolving Credit, Term Loan and Security Agreement, dated May 8, 2020, which has since been amended, with PNC National Association (“PNC” and “lender”), acting as agent and lender (the “Loan Agreement”). The Loan Agreement provides us with a credit facility with a maturity date of May 15, 2027 (the “Credit Facility”) which consists of the following as of December 31, 2025: (a) up to $12,500,000 revolving credit (“Revolving Credit”), which borrowing capacity is subject to eligible receivables (as defined) and reduced by outstanding standby letters of credit ($3,350,000 as of December 31, 2025) and borrowing reductions that our lender may impose from time to time ($750,000 as of December 31, 2025); (b) a term loan (“Term Loan”) of $2,500,000, requiring monthly installments of $41,667, with a balance due under the Term Loan of approximately $1,333,000 as of December 31, 2025; and (c) a capital expenditure loan (“Capital Loan”) of approximately $524,000, requiring monthly installments of principal of approximately $8,700 plus interest, with a balance due under the Capital Loan of approximately $149,000 as of December 31, 2025.

On March 11, 2025, we entered into an amendment to our Loan Agreement with our lender which provided the following, among other things:

removed the quarterly fixed charge coverage ratio (“FCCR”) covenant testing requirement utilizing a twelve-month trailing basis; however, such FCCR testing requirement will be triggered on the day we fail to meet a minimum of $5,000,000 in daily Liquidity. If triggered, we will be required to show compliance with an FCCR ratio of not less than 1.15 to 1.00 utilizing a trailing twelve-month period ended starting with the most recently reported fiscal quarter and each fiscal quarter thereafter. The FCCR testing requirement can be removed again once we are able to achieve a minimum of $5,000,000 in daily Liquidity for a thirty-consecutive-day period from the trigger date;

revised the Facility Fee (as defined) from 0.375% to 0.500%. Such fee percentage will revert back to 0.375% at such time that we are able to achieve a minimum 1.15 to 1.00 ratio in FCCR on a twelve-month trailing basis; and

required payment by the Company of an amendment fee of $12,500, which is being amortized over the remaining term of the Loan Agreement as interest expense-financing fees.

As amended, our Loan Agreement with PNC contains certain financial covenant requirements, along with customary representations and warranties. A breach of any of these financial covenant requirements, unless waived by PNC, could result in a default under our Loan Agreement allowing our lender to immediately require the repayment of all outstanding debt under our Loan Agreement and terminate all commitments to extend further credit. We met all of our financial covenant requirements in 2025. We expect to meet our covenant requirements under our Loan Agreement for the next twelve months.

Off Balance Sheet Arrangements

From time to time, we are required to post standby letters of credit and various bonds to support contractual obligations to customers and other obligations, including facility closures. As of December 31, 2025, the total amount of standby letters of credit outstanding was approximately $3,350,000 and the total amount of bonds outstanding was approximately $11,556,000. We also provide closure and post-closure requirements through a financial assurance policy for certain of our Treatment Segment facilities through American International Group, Inc. (“AIG”). As of December 31, 2025, the closure and post-closure requirements for these facilities were approximately $23,951,000.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared based upon the selection and application of US GAAP, which may require us to make estimates, judgments and assumptions that affect amounts reported in our financial statements and accompanying notes. The accounting policies below are those we believe affect the more significant estimates and judgments used in preparation of our financial statements. Our other accounting policies are described in the accompanying notes to our consolidated financial statements of this Form 10-K (see “Item 8 – Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 2 – Summary of Significant Accounting Policies”):

Revenues. Our revenues are generated from our two reportable segments, Treatment and Services. Certain contracts within our Services Segment are generated from long-term fixed price contracts. Under fixed price contracts, the objective of the project is not attained unless all scope items within the contract are completed and all of the services promised within fixed fee contracts constitute a single performance obligation. Transaction price is determined based on fixed price outline within the contract. Revenue from fixed price contracts is recognized over time primarily using the input method. For the input method, revenue is recognized based on costs incurred on the project relative to the total estimated costs of the project.

Contracts in our Treatment Segment primarily have a single performance obligation as the promise to receive, treat and dispose of waste is not separately identifiable in the contract and, therefore, not distinct. Revenue for Treatment Segment performance obligations are generally satisfied over time using the input method. For the input method, revenue is recognized based on the costs incurred. Transaction price for Treatment Segment contracts is determined by the stated fixed rate per unit price as stipulated in the contract.

Some of our contracts have multiple performance obligations, most commonly when we provide additional services to the customer under a waste treatment contract. For a contract with multiple performance obligations, the contract’s transaction price is allocated to each performance obligation using our best estimate of the standalone selling price of each distinct good or service in the contract. Generally, we use the observable selling prices from an observable price list, but when a price list is not available, the standalone selling price is determined by the cost plus margin approach.

Within our Treatment Segment, we periodically enter into arrangements with customers for transportation of wastes to either our facility or to non-company owned disposal sites. Revenue from this arrangement is recognized at a point in time, upon the transfer of control. Control transfers when the waste is picked up by us.

Our contracts generally do not give rise to variable consideration. However, from time to time, we may submit requests for equitable adjustments under certain of our government contracts for price or other modifications that are determined to be variable consideration. We estimate the amount of variable consideration to include in the estimated transaction price based on historical experience with government contracts, anticipated performance and management’s best judgment at the time and to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. These estimates are re-assessed each reporting period as required.

Intangible Assets . Intangible assets consist primarily of the recognized value of the permits required to operate our business. We continually monitor the propriety of the carrying amount of our permits to determine whether current events and circumstances warrant adjustments to the carrying value.

Indefinite-lived intangible assets are not amortized but are reviewed for impairment annually as of October 1, or when events or changes in the business environment indicate that the carrying value may be impaired. We perform a quantitative test to determine if the fair value of the assets is less than the carrying value. The impairment loss, if any, is measured as the excess of the carrying value of the asset over its fair value. Significant judgments are inherent in these analyses and include assumptions for, among other factors, forecasted revenue, gross margin, growth rate, operating income, timing of expected future cash flows, and the determination of appropriate long-term discount rates.

Impairment testing of our permits related to our Treatment reporting unit as of October 1, 2025, and 2024 resulted in no impairment charges.

Intangible assets that have definite useful lives are amortized using the straight-line method over the estimated useful lives and are excluded from our annual intangible asset valuation review as of October 1. Intangible assets with definite useful lives are tested for impairment whenever events or changes in circumstances indicate that the asset’s carrying value may not be recoverable.

Our future cash flow assumptions and conclusions with respect to asset impairments could be impacted by changes arising from (i) a sustained period of economic and industrial slowdowns (ii) inability to scale our operations and implement cost reduction efforts during reduced demand and/or (iii) a significant decline in our share price for a sustained period of time. These factors, among others, could significantly impact the impairment analysis and may result in future asset impairment charges that, if incurred, could have a material adverse effect on our financial condition and results of operations. We believe that the assumptions and estimates utilized for the reporting periods are appropriate based on the information available to management.

Accrued Closure Costs and Asset Retirement Obligations (“ARO”). Accrued closure costs represent our estimated environmental liability to clean up our facilities as required by our permits, in the event of closure. Accounting Standards Codification (“ASC”) 410, “Asset Retirement and Environmental Obligations” requires that the discounted fair value of a liability for an ARO be recognized in the period in which it is incurred with the associated ARO capitalized as part of the carrying cost of the asset. The recognition of an ARO requires that management make numerous estimates, assumptions and judgments regarding such factors as estimated probabilities, timing of settlements, material and service costs, current technology, laws and regulations, and credit adjusted risk-free rate to be used. We develop estimates for the cost of these activities based on our evaluation of site-specific facts and circumstances, such as the existence of structures and other improvements that would need to be dismantled and the length of the post-closure period as determined by the applicable regulatory agency, among other things. Included in our cost estimates are our interpretation of current regulatory requirements and any proposed regulatory changes. These cost estimates may change in the future due to various circumstances including, but not limited to, permit modifications, changes in legislation or regulations, technological changes and results of environmental studies. Our cost estimates are calculated using internal sources as well as input from third-party experts. This estimate is inflated, using an inflation rate, to the expected time at which the closure will occur, and then discounted back, using a credit adjusted risk free rate, to the present value. AROs are included within buildings as part of property and equipment and are depreciated over the estimated useful life of the property. In periods subsequent to initial measurement of the ARO, we must recognize period-to-period changes in the liability resulting from the passage of time and revisions to either the timing or the amount of the original estimate of undiscounted cash flow. Increases in the ARO liability due to passage of time impact net income as accretion expense and are included in cost of goods sold in our Consolidated Statements of Operations. Changes in the estimated future cash flows costs underlying the obligations (resulting from changes or expansion at the facilities) require adjustment to the ARO liability calculated and are capitalized and charged as depreciation expense, in accordance with our depreciation policy.

Environmental Liabilities . We have three remediation projects in progress (all within discontinued operations). These remediation projects principally entail the removal/remediation of contaminated soil and, in most cases, the remediation of surrounding ground water. These remediation activities are closely reviewed and monitored by the applicable state regulators and often span multiple years. Remediation liabilities include costs for investigation, assessment, remediation, post-remediation monitoring, and related legal and consulting services. Estimates are developed using internal and third-party environmental studies, engineering cost analyses, remediation plans, and discussions with regulatory authorities. The current and long-term accrual amounts for our remediation projects are our best estimates based on proposed or approved processes for clean-up and are site-specific. Environmental remediation liabilities are estimated using the undiscounted method when the timing and/or pattern of expected cash outflows cannot be reliably determined. Under this approach, we record a liability equal to our best estimate of the total probable and reasonably estimable costs to remediate contaminated sites without reducing such amounts for the time value of money. In developing these estimates, we consider current site conditions, existing technology, present laws and regulations, prior experience in remediation of similar sites, and incorporates an estimated inflation factor to reflect anticipated increases in labor, material, and other project-related costs over the expected remediation period. These environmental remediation estimates are subject to revision as additional information becomes available or as conditions change. The circumstances that could affect the outcome range from new technologies that are being developed to reduce our overall costs, to increased contamination levels that could arise as we complete remediation which could increase our costs. In addition, significant changes in regulations could adversely or favorably affect our costs to remediate our sites. Our environmental remediation liabilities are reviewed and adjusted quarterly to reflect changes in projected expenditures and reductions as a result of actual expenditures incurred during each quarter. While we believe our accruals are reasonable based on information currently available, due to the significant uncertainties inherent in environmental remediation matters, future adjustments to these estimates could materially impact on our results of operations, financial position, and cash flows in the period in which such adjustments are recorded.

Income Taxes. The provision for income tax is determined in accordance with ASC 740, “Income Taxes.” As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. We record this amount as a provision or benefit for taxes . This process involves estimating our actual current tax exposure, including assessing the risks associated with tax audits, and assessing temporary differences resulting from different treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities.

We regularly review deferred tax assets by jurisdiction to assess their potential realization and establish a valuation allowance for portions of such assets that we believe will not be realized. In performing this review, we make estimates and assumptions regarding projected future taxable income, the expected timing of the reversals of existing temporary differences and the implementation of tax planning strategies. A change in these assumptions could cause an increase or decrease to the valuation allowance which could materially impact our results of operations.

Recent Accounting Pronouncements

See “Item 8 – Financial Statements and Supplementary Data” – Notes to Consolidated Financial Statements – Note 2 – Summary of Significant Accounting Policies” for accounting pronouncement that was adopted in 2025 and accounting pronouncements that will be adopted in future periods.

Known Trends and Uncertainties

Significant Customers . Our Treatment and Services Segments have significant relationships with federal government authorities. A significant amount of our revenues from our Treatment and Services Segments are generated indirectly as subcontractors for others who are contractors to federal government authorities, or directly as the prime contractor to federal government authorities. The contracts that we are a party to with others as subcontractors to 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 federal government authorities (directly or indirectly as a subcontractor) or significant reductions in the level of federal governmental funding in any given year could have a material adverse impact on our operations and financial condition. Our revenue derived from federal government entities, either directly as a prime contractor or indirectly for others as subcontractor to federal government entities, totaled $39,243,000, or 63.6% of total revenue in 2025, compared to $40,550,000, or 68.6% of total revenue in 2024.

Federal Funding. As discussed above, a significant portion of our revenue is generated through contracts entered into indirectly as subcontractors for others who are prime contractors or directly as the prime contractor to federal government authorities. The timeliness of annual appropriations for U.S. government departments and agencies remains a recurrent risk for us. Uncertainties exist regarding how future federal government budgets and program and policy decisions will unfold, which include, the spending priorities of Congress, passage of federal government fiscal year annual budgets and potential for enactment of continuing resolutions to keep government departments and agencies in operations. The full impact of these uncertainties could negatively impact our financial results by impairing our ability to perform work on existing contracts, delaying or cancelling procurement actions by government entities, and/or cause other disruptions or delays, including payment delays.

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.

New Processing Technology. With significant upgrades to our prototype Perma-FAS system (“System”) for PFAS destruction substantially completed in the latter part of 2025, our System has achieved commercial operational status at our PFF facility. PFAS, commonly known as “forever chemicals,” is the acronym for Perfluoroalkyl and Polyfluoroalkyl Substances, a diverse group of thousands of human-made chemical pollutants that have the potential to persist in both the environment and the human body. An increasing number of studies have documented adverse health risks that are associated with PFAS exposure, including increased risks of some cancers, reduced immune function, and developmental delays in children.

Federal and state actions addressing PFAS have accelerated in recent years, including restrictions and bans on the use of Aqueous Film-Foaming Foam (“AFFF”), an effective fire suppressant for petroleum-based fires but which contains high levels of PFAS, as well as requirements governing the collection, handling, and disposal of existing AFFF inventories. These measures have contributed to an increasing volume of PFAS-containing materials requiring treatment or destruction rather than reuse or conventional disposal.

We believe these regulatory developments may support increased demand over time for technologies capable of permanently destroying PFAS compounds, including technologies designed to address concentrated PFAS waste streams generated from AFFF phase-outs, remediation activities, and downstream treatment processes.

Accordingly, we believe that 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 are processing 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.

With commercial operation of our System, we anticipate deployment of our second-generation unit in the second half of 2026 at our Environmental Waste Operations Center (“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 which will 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.

We continue to monitor evolving federal and state regulatory initiatives addressing PFAS-containing materials, including restrictions on the use of AFFF and requirements governing the disposition of legacy AFFF inventories. These developments may result in the generation of PFAS-impacted waste streams for which destruction-based treatment options are evaluated by customers.

While we believe our existing treatment capabilities may be applicable to certain PFAS-containing materials, the timing and magnitude of any related demand are uncertain and will depend on factors such as regulatory implementation and enforcement, customer selection among available treatment alternatives, contract awards, and our ability to obtain necessary permits, approvals, and operational capacity. As a result, any potential increase in PFAS-related service activity may not be immediate and may not have a material impact on results of operations in any particular period.

Related Party Transactions

See a discussion of our related party transactions in “Item 8 – Financial Statements and Supplementary Data – Notes to Consolidate Financial Statements – Note 15 – Related Party Transactions.”