Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-looking Statements

Certain statements contained within this report may be deemed "forward-looking statements" within the meaning of the "Private Securities Litigation Reform Act of 1995." All statements in this report other than a statement of historical fact are forward-looking statements that are subject to known and unknown risks, uncertainties, and other factors, which could cause actual results and performance of the Company to differ materially from such statements. The words "believe," "expect," "anticipate," "intend," "will," and similar expressions identify forward-looking statements. Forward-looking statements contained herein relate to, among other things,

	●	demand for our services;
	●	effect of reductions in the level of government funding or government programs;
	●	impact of One Big Beautiful Bill Act ("OBBBA");
	●	continued improvement in financial results in the fourth quarter of 2025 and in 2026;
	●	revenue contribution from the West Valley Development Project to ramp up in 2026;
	●	approvals of scope attributable to the Company under the West Valley Development Project contract;
	●	impact from prolonged government shutdown;
	●	effect of prolonged government shutdown to our operations lessened by our backlog and increased commercial and international waste receipts;
	●	operations of the West Valley Development Project and potential value thereunder;
	●	full waste treatment operations of Direct-Feed Low-Activity Waste ("DFLAW");
	●	reducing operating costs and non-essential expenditures;
	●	ability to meet loan agreement financial covenant requirements;
	●	cash flow requirements for the next twelve months;
	●	sufficient cash flow and Liquidity to fund operations for the next twelve months;
	●	reduction in Liquidity;
	●	expansion of international initiatives and market;
	●	amount of capital expenditures;
	●	manner in which the applicable government will be required to spend funding to remediate various sites;
	●	effect of additional losses;
	●	maintain skilled and stabilized labor force under the Bargaining Collective Agreement;
	●	funding of operating and capital expenditures from cash from operations, Liquidity under our Loan Agreement, and/or financing;
	●	our PFAS (Per- and polyfluoroalkyl) technology process will exceed other performance methods;
	●	receipt of an additional 50,000 gallons of aqueous film-forming foam ("AFFF") liquid;
	●	deployment of the second-generation unit;
	●	triple our production capacity under our second-generation PFAS System;
	●	strategy for our Perma-Fix PFAS System;
	●	advancement of our PFAS technology;
	●	funding of remediation expenditures for sites from funds generated internally;
	●	compliance with environmental regulations;
	●	potential effect of being a potentially responsible party ("PRP"); and
	●	potential violations of environmental laws and attendant remediation at our facilities.

While the Company believes the expectations reflected in such forward-looking statements are reasonable, it can give no assurance such expectations will prove to be correct. There are a variety of factors which could cause future outcomes to differ materially from those described in this report, including, but not limited to:

	●	general economic conditions and uncertainties;
	●	impact of government shutdown;
	●	inability to properly bid contracts;
	●	reduction in or inability to obtain new contracts with federal, state and local governments, agencies and departments, resulting in a reduction in revenue;
	●	changes in federal government budgeting and spending priorities;
	●	failure by Congress or other governmental bodies to approve budgets and debt ceiling increases in a timely fashion and related reductions in government spending;
	●	uncertainties relating to the new presidential administration (the "Administration") and failure of the Administration to spend Congressionally mandated appropriations, which may result in the failure to realize the full amount of our backlog;
	●	tariff actions and uncertainties related to trade wars;
	●	inability to meet PNC covenant requirements;
	●	inability to collect in a timely manner a material amount of receivables;
	●	increased competitive pressures;
	●	inability to maintain and obtain required permits and approvals to conduct operations;
	●	inability to develop new and existing technologies in the conduct of operations;
	●	inability to maintain and obtain closure and operating insurance requirements;
	●	discovery of additional contamination or expanded contamination at any of the sites or facilities leased or owned by us or our subsidiaries which would result in a material increase in remediation expenditures;
	●	refusal of third-party disposal sites to accept our waste;
	●	changes in federal, state and local laws and regulations, especially environmental laws and regulations, or in interpretation of such;
	●	new or additional requirements to handle low-level radioactive and hazardous waste materials;
	●	management retention and development;
	●	financial valuation of intangible assets is substantially more/less than expected;
	●	the need to use internally generated funds for purposes not presently anticipated;
	●	inability of the Company to maintain the listing of its Common Stock on the Nasdaq;
	●	terminations of contracts with government agencies or subcontracts involving government agencies or reduction in amount of waste delivered to the Company under the contracts or subcontracts;
	●	failure of our Italian team partner to perform its requirements in connection with the Italian project;
	●	changes in the scope of work relating to existing contracts;
	●	occurrence of an event similar to COVID-19 having adverse effects on the U.S. and world economics;
	●	renegotiation or termination of contracts involving government agencies;
	●	disposal expense accrual could prove to be inadequate in the event the waste requires re-treatment;
	●	inability to raise capital on commercially reasonable terms;
	●	inability to increase profitable revenue;
	●	risks resulting from expanding our service offerings and client base;
	●	non-acceptance of our new technology;
	●	adjustments to our valuation allowance;
	●	supply chain difficulties;
	●	pricing adjustments;
	●	cost reduction measures;
	●	new governmental regulations; and
	●	risk factors and other factors set forth in "Special Note Regarding Forward-Looking Statements" contained in the Company's 2024 Form 10-K and the "Forward-Looking Statements" contained in the Management's Discussion and Analysis of Financial Condition and Results of Operations" ("MD&A") of the first and second quarters of 2025 and this third quarter 2025 10-Q.

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

Overview

Our revenue for the third quarter of 2025 reflects improvements from the corresponding period of 2024. Overall revenue increased by $642,000 or 3.8% to $17,454,000 for the three months ended September 30, 2025, from $16,812,000 in the same period of 2024. The increase was entirely from our Treatment Segment where revenue increased by $4,050,000 or approximately 44.7% to $13,114,000 for the three months ended September 30, 2025, from $9,064,000 in the same period of 2024. The increase in Treatment Segment revenue was primarily due to increased waste volume and higher averaged price waste from waste mix, which included increased revenue generated from both international and commercial clients. Services Segment revenue decreased $3,408,000 or 44.0% to $4,340,000 for the three months ended September 30, 2025, from $7,748,000 for the same period of 2024. The decrease in revenue in the Services Segment was attributed in part, to delays in project mobilizations from certain existing contracts along with delays in project awards primarily from government related entities. Gross profit increased $1,223,000 or 91.7% for the three months ended September 30, 2025, as compared to the corresponding period of 2024. Selling, General, and Administrative ("SG&A") expenses increased by $451,000 or 12.4% for the three months ended September 30, 2025, as compared to the corresponding period of 2024.

Our overall revenue increased by $1,544,000 or 3.5% to $45,959,000 for the nine months ended September 30, 2025, from $44,415,000 for the corresponding period of 2024. Similar to the third quarter of 2025, the increase was entirely from our Treatment Segment where revenue increased by $7,580,000 or approximately 29.0% to $33,696,000 for the nine months ended September 30, 2025, from $26,116,000 in the same period of 2024. The increase in Treatment Segment revenue was primarily due to increased waste volume and higher averaged price waste from waste mix, which included increased revenue generated from both international and commercial clients. Services Segment revenue decreased $6,036,000 or 33.0% to $12,263,000 for the nine months ended September 30, 2025, from $18,299,000 for the same period of 2024 due in part, to delays in project mobilizations from certain existing contracts and delays in procurements that resulted from changes to the new Administration and supporting policies that occurred in the first half of 2025. We generated an overall gross profit of $4,761,000 for the nine months ended September 30, 2025, as compared to a gross loss of $592,000 for the corresponding period of 2024, reflecting an increase in gross profit of $5,353,000 or 904.2%. SG&A expenses increased by $1,597,000 or 15.0% for the nine months ended September 30, 2025, as compared to the corresponding period of 2024.

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

We have seen steady improvements in our revenue and results of operations in each of the quarters in 2025. We believe we are positioned for improvements in the fourth quarter of 2025 and in 2026 (see a discussion of the recent federal government shutdown that may impact our results of operations below). Our Treatment Segment backlog stands at approximately $15,396,000 as of September 30, 2025, an increase of $7,537,000 or 95.9% from the December 31, 2024, balance of $7,859,000. In December 2024, BWXT Technologies and its team, of which we are a member, were awarded the West Valley Project contract for the cleanup operations at the West Valley Development Project in West Valley, New York. The contract has a 10-year ordering period with a maximum value of up to $3 billion for all of the services rendered by all members of the team that are performed for up to 15 years. Revenue contributed from this contract has been and is expected to be limited in 2025; however, we expect revenue to ramp up in 2026 as our scope under the contract is further defined, approved and transitions into operation. Also, we believe that our Perma-Fix Northwest Richland, Inc. ("PFNWR") facility is positioned to support the DFLAW program at Hanford, Washington as hot commissioning of the Low-Activity Waste Vitrification Facility at Hanford has begun and is working toward full waste treatment operations. We continue to focus on increasing our expansion into the international markets which is reflected in revenue generated from foreign entities of approximately $4,893,000 for the nine months ended September 30, 2025, as compared to $1,377,000 for the corresponding period of 2024, an increase of $3,516,000 or 255.3%. Finally, we continue our aggressive approach in research and development ("R&D"), sales and marketing efforts and capital expenditures of our new PFAS technology which adversely impacted our results of operations for the first nine months of 2025 (See "Known Trends and Uncertainties - New Processing Technology" for a discussion of our new technology). We are continually monitoring our operating costs to ensure alignment with our revenue level.

Effective October 1, 2025, the federal government went into a partial shutdown from failure to pass a new fiscal year funding bill. As a result of the government shutdown, we have been recently informed by certain government related clients that waste shipments are likely to be delayed until the government shutdown is resolved. Although the impact of the government shutdown has been limited at this time, a prolonged shutdown may materially impact our results of operations and liquidity (See "Known Trends and Uncertainties - Federal Funding" within this MD&A for a discussion of the impacts that a prolonged federal government shutdown may have on our results of operations). We believe that potential negative impact to our results of operations and liquidity from a prolonged government shutdown may be lessened by our Treatment Segment backlog, along with increased receipts from international and commercial clients.

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, government budget issues, government shutdown 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 - Three and Nine Months Ended September 30, 2025, and 2024

		Three Months Ended																Nine Months Ended
		September 30,																September 30,
Consolidated (amounts in thousands)		2025				%				2024				%				2025				%				2024				%
Net revenues		$	17,454				100.0			$	16,812				100.0			$	45,959				100.0			$	44,415				100.0
Cost of goods sold			14,897				85.4				15,478				92.1				41,198				89.6				45,007				101.3
Gross profit (loss)			2,557				14.6				1,334				7.9				4,761				10.4				(592	)			(1.3	)
Selling, general and administrative			4,083				23.4				3,632				21.6				12,228				26.6				10,631				23.9
Research and development			342				2.0				303				1.8				1,037				2.3				872				2.0
Loss (gain) on disposal of property and equipment			4				-				-				-				(2	)			-				1				-
Loss from operations			(1,872	)			(10.8	)			(2,601	)			(15.5	)			(8,502	)			(18.5	)			(12,096	)			(27.2	)
Interest income			266				1.5				292				1.7				901				1.9				679				1.5
Interest expense			(116	)			(.6	)			(121	)			(.7	)			(351	)			(.8	)			(346	)			(.8	)
Interest expense-financing fees			(22	)			(.1	)			(18	)			(.1	)			(63	)			(.1	)			(47	)			(.1	)
Other			(18	)			(.1	)			59				.4				171				.4				61				.1
Loss from continuing operations before taxes			(1,762	)			(10.1	)			(2,389	)			(14.2	)			(7,844	)			(17.1	)			(11,749	)			(26.5	)
Income tax expense			-				-				6,417				38.2				-				-				4,300				9.6
Loss from continuing operations, net of taxes		$	(1,762	)			(10.1	)		$	(8,806	)			(52.4	)		$	(7,844	)			(17.1	)		$	(16,049	)			(36.1	)

Revenues

Consolidated revenues increased $642,000 for the three months ended September 30, 2025, compared to the three months ended September 30, 2024, as follows:

(In thousands)		2025				% Revenue				2024				% Revenue				Change				% Change
Treatment
Government waste		$	9,503				54.4			$	5,794				34.5			$	3,709				64.0
Hazardous/non-hazardous (1)			1,375				7.9				1,199				7.1				176				14.7
Other nuclear waste			2,236				12.8				2,071				12.3				165				8.0
Total			13,114				75.1				9,064				53.9				4,050				44.7
Services
Nuclear services			2,422				13.9				6,433				38.3				(4,011	)			(62.4	)
Technical services			1,918				11.0				1,315				7.8				603				45.9
Total			4,340				24.9				7,748				46.1				(3,408	)			(44.0	)
Total		$	17,454				100.0			$	16,812				100.0			$	642				3.8

⁽¹⁾ Includes waste generated by government clients of $560,000 and $784,000 for the three months ended September 30, 2025, and the corresponding period of 2024, respectively.

Treatment Segment revenue increased by $4,050,000 or 44.7% for the three months ended September 30, 2025, over the same period in 2024. The overall increase in revenue in the Treatment Segment was primarily due to higher waste volume and higher averaged price waste from waste mix. Our Treatment Segment revenue was also positively impacted by our international initiatives, which resulted in an increase in revenue from international customers of approximately $798,000 or 310.5% as compared to the same period of last year. Services Segment revenue decreased by approximately $3,408,000 or 44.0%. 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.

Consolidated revenues increased $1,544,000 for the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024, as follows:

(In thousands)		2025				% Revenue				2024				% Revenue				Change				% Change
Treatment
Government waste		$	23,715				51.6			$	16,668				37.5			$	7,047				42.3
Hazardous/non-hazardous (1)			3,848				8.4				3,829				8.6				19				0.5
Other nuclear waste			6,133				13.3				5,619				12.7				514				9.1
Total			33,696				73.3				26,116				58.8				7,580				29.0
Services
Nuclear services			7,478				16.3				15,563				35.0				(8,085	)			(52.0	)
Technical services			4,785				10.4				2,736				6.2				2,049				74.9
Total			12,263				26.7				18,299				41.2				(6,036	)			(33.0	)
Total		$	45,959				100.0			$	44,415				100.0			$	1,544				3.5

⁽¹⁾ Includes waste generated by government clients of $1,569,000 and $2,330,000 for the nine months ended September 30, 2025, and the corresponding period of 2024, respectively.

Treatment Segment overall revenue increased by $7,580,000 or 29.0% for the three months ended September 30, 2025, over the same period in 2024. The overall increase in revenue in the Treatment Segment was primarily due to higher waste volume and higher averaged price waste from waste mix. Our Treatment Segment revenue was also positively impacted by our international initiatives, which generated an increase in revenue of approximately $3,378,000 or 314.5% as compared to the same period of last year. Services Segment revenue decreased by approximately $6,036,000 or 33.0%. 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 $581,000 for the quarter ended September 30, 2025, as compared to the quarter ended September 30, 2024, as follows:

						%								%
(In thousands)		2025				Revenue				2024				Revenue				Change
Treatment		$	10,848				82.7			$	8,654				95.5			$	2,194
Services			4,049				93.3				6,824				88.1				(2,775	)
Total		$	14,897				85.4			$	15,478				92.1			$	(581	)

Cost of goods sold for the Treatment Segment increased by approximately $2,194,000 or 25.4%, primarily due to increased revenue. Treatment Segment's variable costs increased by approximately $1,544,000 primarily due to overall higher material and supplies, disposal and transportation costs. Within our Treatment Segment, variable cost categories can fluctuate based on waste mix. Treatment Segment's overall fixed costs were higher by approximately $650,000 resulting from the following: salaries and payroll related expenses were higher by approximately $471,000 which included higher salary expenses from cost of living adjustments ("COLA") that became effective during the quarter; overall general expenses were higher by approximately $261,000 in various categories which included higher utility expenses of approximately $103,000; travel expense were higher by $66,000; and maintenance expenses were lower by approximately $148,000 as in the second and third quarter of 2024, the Treatment Segment experienced unexpected equipment breakdowns that required replacements or repairs. Services Segment cost of goods sold decreased $2,775,000 or 40.7% 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 $2,480,000; lower depreciation expenses of approximately $16,000; and overall lower material and supplies, disposal, regulatory and lab costs totaling approximately $279,000. Included within cost of goods sold is depreciation and amortization expense of $412,000 and $408,000 for the three months ended September 30, 2025, and 2024, respectively.

Cost of goods sold decreased $3,809,000 for the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024, as follows:

						%								%
(In thousands)		2025				Revenue				2024				Revenue				Change
Treatment		$	29,614				87.9			$	26,955				103.2			$	2,659
Services			11,584				94.5				18,052				98.7				(6,468	)
Total		$	41,198				89.6			$	45,007				101.3			$	(3,809	)

Cost of goods sold for the Treatment Segment increased by approximately $2,659,000 or 9.9%. Treatment Segment's variable costs increased by approximately $784,000 primarily due to the following: overall material and supplies, lab, and transportation costs were higher by approximately $2,281,000; variable payroll costs (overtime) were higher by approximately $323,000 due to increased waste volume production; and disposal costs were lower by approximately $1,820,000. Within our Treatment Segment, variable cost categories can fluctuate based on waste mix. Treatment Segment's overall fixed costs were higher by approximately $1,875,000 resulting from the following: salaries and payroll related expenses were higher by $1,691,000 due to higher headcount and COLA effected during the third quarter of 2025; general expenses were higher by $378,000 primarily due to higher utility costs; travel expenses were higher by approximately $70,000; depreciation expenses were higher by $62,000 due to more finance leases and equipment purchases; maintenance expenses were lower by approximately $97,000 as the in the prior year, the Treatment Segment experienced unexpected equipment breakdowns that required replacements and repairs; and regulatory expenses were lower by approximately $229,000 from fewer regulatory matters. Services Segment cost of goods sold decreased $6,468,000 or 35.8% 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 $6,492,000; lower depreciation expenses totaling approximately $24,000 as certain equipment became fully depreciated in 2025; lower general expenses of approximately $106,000 in various categories; and overall higher material and supplies, disposal, and regulatory costs totaling approximately $154,000. Included within cost of goods sold is depreciation and amortization expense of $1,256,000 and $1,218,000 for the nine months ended September 30, 2025, and 2024, respectively.

Gross Profit (Loss)

Gross profit for the quarter ended September 30, 2025, increased $1,223,000 over the same period of 2024, as follows:

						%								%
(In thousands)		2025				Revenue				2024				Revenue				Change
Treatment		$	2,266				17.3			$	410				4.5			$	1,856
Services			291				6.7				924				11.9				(633	)
Total		$	2,557				14.6			$	1,334				7.9			$	1,223

Treatment Segment gross profit increased by $1,856,000 or approximately 452.7% and gross margin increased to 17.3% % from 4.5% primarily due to higher revenue from higher waste volume and higher averaged price from waste mix. The increase in fixed costs within the Treatment Segment negatively impacted gross profit and gross margin. Services Segment gross profit decreased by $633,000 or approximately 68.5% and gross margin decreased to 6.7% from 11.9%. The decreases were attributed primarily to 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.

Gross profit for the nine months ended September 30, 2025, increased $5,353,000 over the same period in 2024, as follows:

						%								%
(In thousands)		2025				Revenue				2024				Revenue				Change
Treatment		$	4,082				12.1			$	(839	)			(3.2	)		$	4,921
Services			679				5.5				247				1.3				432
Total		$	4,761				10.4			$	(592	)			(1.3	)		$	5,353

Treatment Segment gross profit increased by $4,921,000 or approximately 586.5% and gross margin increased to 12.1% % from (3.2)% primarily due to higher revenue from higher waste volume and higher averaged price from waste mix. The increase in fixed costs within the Treatment Segment negatively impacted gross profit and gross margin. Services Segment gross profit increased by $432,000 or approximately 174.9% and gross margin improved from 1.3% to 5.5%. 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

SG&A expenses increased $451,000 for the three months ended September 30, 2025, as compared to the corresponding period for 2024, as follows:

(In thousands)		2025				% Revenue				2024				% Revenue				Change
Administrative		$	2,004				-			$	1,733				-			$	271
Treatment			1,333				10.2				1,084				12.0				249
Services			746				17.2				815				10.5				(69	)
Total		$	4,083				23.4			$	3,632				21.6			$	451

Administrative SG&A expenses were higher primarily due to higher salaries, payroll related expenses and stock option compensation expenses totaling approximately $149,000. The hiring of the Company's Chief Operation Officer ("COO") in January 2025 and COLA effected during the third quarter of 2025 contributed to this increase. The remaining higher expenses in Administrative SG&A expenses were primarily due to higher outside services expenses of approximately $93,000 from more legal and business-related matters, higher general expenses by approximately $10,000 in various categories and higher travel expenses of approximately $19,000 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 $204,000 as more employee hours were allocated to marketing initiatives of our new PFAS technology and overall business development; general expense were higher by approximately $37,000 in various categories; travel expenses were higher by $16,000; and outside services expenses were lower by approximately $8,000 from fewer consulting matters. Services Segment SG&A expenses were lower primarily due to lower salaries and payroll related expenses of approximately $96,000 as fewer employee hours were allocated in supporting administrative/marketing functions due to lower revenue. The lower expenses were offset by overall higher outside services, general and travel expense totaling approximately $27,000. Included in SG&A expenses is depreciation and amortization expenses of $14,000 and $25,000 for the three months ended September 30, 2025, and 2024, respectively.

SG&A expenses increased $1,597,000 for the nine months ended September 30, 2025, as compared to the corresponding period for 2024, as follows:

(In thousands)		2025				% Revenue				2024				% Revenue				Change
Administrative		$	5,884				-			$	5,134				-			$	750
Treatment			4,039				12.0				3,224				12.3				815
Services			2,305				18.8				2,273				12.4				32
Total		$	12,228				26.6			$	10,631				23.9			$	1,597

Administrative SG&A expenses were higher primarily due to higher salaries, payroll related expenses and stock option compensation expenses totaling approximately $352,000. The hiring of the Company's COO in January 2025 and COLA effected during the third quarter of 2025 contributed to this increase. The remaining higher expenses in Administrative SG&A expenses were primarily due to higher outside services expenses of approximately $321,000 from more legal and business-related matters, higher general expenses of approximately $31,000 in various categories and higher travel expenses of approximately $46,000 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 $618,000 as more employee hours were allocated to marketing initiatives of our new PFAS technology and overall business development; general expense were higher by approximately $159,000 in various categories (which include higher tradeshow expenses of approximately $77,000); travel expenses were higher by $27,000; bad debt expenses were higher by approximately $29,000; and outside services expenses were lower by approximately $18,000 from few consulting matters. Services Segment SG&A expenses were higher primarily due to the following: general expenses were higher by approximately $48,000 in various categories; outside services expenses were higher by approximately $45,000 due to more consulting matters; travel expense were slightly higher by approximately $6,000; and salaries and payroll related expenses were lower by approximately $67,000 as fewer employee hours were allocated in supporting administrative/marketing functions due to lower revenue. Includedin SG&A expenses is depreciation and amortization expenses of $43,000 and $77,000 for the nine months ended September 30, 2024, and 2023, respectively.

Interest Income

Interest income decreased by approximately $26,000 and increased by approximately $222,000 for the three and nine months ended September 30, 2025, respectively, as compared to the corresponding period of 2024. The decrease in interest income for the third quarter of 2025 as compared to the corresponding quarter of 2024 was primarily due to lower interest income earned from our finite risk sinking fund from lower interest rate. The increase in interest income for the nine months ended September 30, 2025, as compared to the corresponding period of 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.

Income Taxes

We use an estimated annual effective tax rate, which is based on expected annual income, statutory tax rates and tax planning opportunities available in the various jurisdictions in which we operate, to determine our quarterly provision for income taxes.

We had income tax expenses of $0 and $6,417,000 for continuing operations for the three months ended September 30, 2025, and the corresponding period of 2024, respectively, and income tax expenses of $0 and $4,300,000 for continuing operations for the nine months ended September 30, 2025, and the corresponding period of 2024, respectively. Our effective tax rates were approximately 0% and 268.6% for the three months ended September 30, 2025, and the corresponding period of 2024, respectively, and 0% and 36.6% for the nine months ended September 30, 2025, and the corresponding period of 2024, respectively. Our effective tax rate for the each of the periods above was impacted by our recognition of a full valuation allowance against its U.S federal and state deferred tax assets in the quarter ended September 30, 2024.

On July 4, 2025, the United States enacted tax reform legislation through the OBBBA, which changes existing U.S. tax laws, including extending or making permanent certain provisions of the Tax Cuts and Jobs Act, repealing certain clean energy initiatives, in addition to other changes. We evaluated the provisions of the OBBBA and determined that the enactment of the legislation had no material impact to our condensed consolidated financial statements for the interim period ended September 30, 2025. Additionally, we do not expect OBBBA to have a material impact to our full year 2025 effective tax rate and our consolidated financial statements for the year ended December 31, 2025, due to our valuation allowance position, among other things. We continue to monitor the potential future impacts of the OBBBA on the Company's consolidated financial statements.

Liquidity and Capital Resources

Our cash flow requirements during the nine months ended September 30, 2025, were financed by our Liquidity (defined under our Loan Agreement as borrowing availability under the revolving credit plus cash in our MMDA maintained with our lender). Our MMDA consist 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, remediation projects, R&D on our PFAS technology and capital expenditures (which include our PFAS technology) (see "Known Trends and Uncertainties - New Processing Technology" within this MD&A for a discussion of this technology). We plan to fund these requirements from our operations and our Liquidity. We are continually reviewing operating costs and reviewing the possibility of further reducing operating costs and non-essential expenditures to bring them in line with revenue levels. As of September 30, 2025, we had no outstanding borrowing under our Revolving Credit and our Liquidity was approximately $23,844,000. We believe that our cash flows from operations and our Liquidity should be sufficient to fund our operations for the next twelve months. Assuming the federal government shutdown is quickly resolved, we believe our operations should improve in the fourth quarter of 2025 and in 2026. If we continue to incur losses such as in the first nine months of 2025, this could cause a reduction in our Liquidity and have a material adverse effect on our results of operations and our business.

The following table reflects the cash flow activities during the first nine months of 2025 and 2024.

		Nine Months Ended
		September 30,
(In thousands)		2025				2024
Cash used in operating activities of continuing operations		$	(8,312	)		$	(10,971	)
Cash used in operating activities of discontinued operations			(317	)			(468	)
Cash used in investing activities of continuing operations			(2,683	)			(2,800	)
Cash used in investing activities of discontinued operations			(36	)			(49	)
Cash (used in) provided by financing activities of continuing operations			(832	)			17,805
Effect of exchange rate changes in cash			21				1
(Decrease) increase in cash and finite risk sinking fund (restricted cash)		$	(12,159	)		$	3,518

As of September 30, 2025, we were in a positive cash position with no revolving credit balance. As of September 30, 2025, we had cash on hand of approximately $16,412,000.

Operating Activities

Cash used in operating activities of our continuing operations during the first nine months of 2025 consisted mostly of the net loss that we incurred of approximately $7,844,000, adjusted for certain non-cash items, such as $597,000 of stock-based compensation expenses and $1,299,000 of depreciation and amortization expenses. Cash flow decrease of approximately $2,838,000 resulting from net change in assets and liabilities reflects increases in unbilled and accounts receivable (net of provision for credit losses) totaling approximately $3,771,000, a net decrease in accounts payables, accrued expenses, deferred revenue and other accruals totaling approximately $745,000, offset by a net decrease in inventories, prepaids and other assets totaling approximately of $1,678,000. Our accounts receivables are impacted by timing of invoicing and collections. Our contracts with our customers are subject to various payment terms and conditions.

Cash used in operating activities of our continuing operations during the first nine months of 2024 consisted primarily of the significant net loss that we incurred of approximately $16,049,000, adjusted for certain non-cash items, which included $466,000 of stock-based compensation expenses, $1,295,000 of depreciation and amortization expenses and $4,300,000 of deferred income tax expenses. Cash flow decrease of approximately $1,383,000 resulting from net change in assets and liabilities included a net decrease in accounts payables, accrued expenses, deferred revenue and other accruals totaling approximately $5,805,000, offset by decreases in accounts receivable (net of recovery in credit losses) and unbilled receivables totaling approximately $2,145,000, and a net decrease in inventories and prepaid and other assets totaling approximately of $2,277,000.

Cash used in operating activities of our discontinued operations in the first nine months of 2025 and 2024 consisted primarily of expenses incurred in connection with management and administration of regulatory matters for the Company's remediation projects.

We had working capital of $18,393,000 (which included working capital of our discontinued operations) as of September 30, 2025, as compared to working capital of $28,283,000 as of December 31, 2024. The decrease in our working capital was primarily due to the losses incurred from our operations during the nine months of 2025 as previously discussed.

Investing Activities

Cash used in investing activities of our continuing operations in the first nine months of 2025 consisted mostly of our purchases of property and equipment totaling approximately $2,770,000, of which $162,000 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 $103,000 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 discontinued operations in the first nine months of 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 continuing operations in the first nine months of 2024 consisted mostly of our purchases of property and equipment totaling approximately $2,630,000, of which $406,000 was financed. Our capital expenditures for 2024 included expenditures made for the construction of our first PFAS treatment system. The remaining cash used in investing activities of $577,000 consisted of cash outlays made in connection with our operating permits and certain intangible assets.

Cash used in investing activities of our discontinued operations in the first nine months of 2024 consisted of payments made for roof replacement at our PFSG location.

Capital Expenditures

We anticipate making capital expenditures of up to approximately $3,230,000 for the remainder of 2025 to maintain operations and regulatory compliance requirements and support revenue growth. Our remaining anticipated capital expenditures for 2025 include certain strategic project initiatives which include our second-generation unit for our PFAS technology (see "Known Trends and Uncertainties - New Processing Technology"). We plan to fund our capital expenditures for the remainder of 2025 from cash from operations, Liquidity and/or financing. The initiation and timing of our capital expenditures for the remainder of 2025 are subject to a number of factors which include, among other things, cost/benefit analysis, the pace of our strategic project initiatives, improvement in our operations and resolution of the federal government shutdown.

Financing Activities

Our cash used in financing during the first nine months of 2025 consisted mostly of principal payments of approximately $470,000 primarily for our Term and Capital Loans under our Credit Facility (see below for a discussion of our Credit Facility) principal payments of $228,000 for our finance leases, payments of $194,000 of offering costs from the equity raise that we completed in December 2024, partially offset by proceeds received from option exercises of approximately $79,000.

As previously reported, during 2024, we had two offerings of our Common Stock which increased our cash position. As discussed below, in May 2024, we had the first offering. In December 2024, we completed the second securities offering in which we received net proceeds of approximately $23,208,000 after deducting offering fees and expenses.

Our cash provided in financing during the first nine months of 2024 consisted primarily of net proceeds of $18,495,000 received from the sale of our Common Stock in May 2024 and proceeds received from option and warrant exercises totaling approximately $264,000, partially offset by principal payments of approximately $675,000 for our Term and Capital Loans under our Credit Facility and principal payments of $218,000 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 September 30, 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 September 30, 2025) and borrowing reductions that our lender may impose from time to time ($750,000 as of September 30, 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 $1,458,000 as of September 30, 2025; and (c) a capital expenditure loan ("Capital Loan") of approximately $524,000, requiring monthly installments of principal of approximately $8,700 plus interest.

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 a compliance of a 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 .375% to .500%. Such fee percentage will revert back to .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 of an amendment fee of $12,500 by the Company, which is being amortized over the remaining term of the Loan Agreement as interest expense-financing fees.

Our Loan Agreement, as amended, 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 the first, second and third quarters of 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 September 30, 2025, the total amount of standby letters of credit outstanding totaled approximately $3,350,000, and the total amount of bonds outstanding totaled approximately $16,044,000. We also provide closure and post-closure requirements through a financial assurance policy for certain of our Treatment Segment facilities through AIG. As of September 30, 2025, the closure and post-closure requirements for these facilities were approximately $23,951,000.

Critical Accounting Policies and Estimates

There were no significant changes in our accounting policies or critical accounting estimates that are discussed in our Annual Report on Form 10-K for the year ended December 31, 2024.

Recent Accounting Pronouncements

See "Note 2 - Summary of Significant Accounting Policies" in the "Notes to Condensed Consolidated Financial Statements" for the recent accounting pronouncement that was adopted in the first nine months of 2025 and recent accounting pronouncements that will be adopted in future periods.

Collective Bargaining Agreement

On September 25, 2025, our PFNWR, entered into a Collective Bargaining Agreement (the "CBA") that became effective October 1, 2025, with the United Association of Plumbers and Steamfitters Local Union 598 (the "Union"). The CBA covers seventy-one (71) production employees ("Covered Employees") at our PFNWR facility, and its purpose is to attempt to maintain a skilled and stabilized labor force for its waste treatment operations.

The CBA generally governs, among other things, the Covered Employees' compensation, vacation/holiday/sick pay, and working conditions. The CBA provides for annual base hourly wage increases for Covered Employees equal to one percent (1%) plus the annual percentage change in the Consumer Price Index for All Urban Consumers (CPI-U), Western Region Average. We continue to offer our healthcare benefits and 401k plan to the Covered Employees under the CBA.

The term of the CBA is October 1, 2025 through October 1, 2030, and the CBA renews automatically on an annual basis thereafter, unless either PFNW or the Union gives written notice at least sixty (60) days prior to October 1, 2030 of its intent to modify or terminate the CBA.

Known Trends and Uncertainties

Significant Customers. The contracts that we are a party to with others as subcontractors to the federal government or directly with the federal government generally provide that the government may terminate the contract at any time for convenience at the government's option. Our inability to continue under existing contracts that we have with the federal government authorities (directly or indirectly as a subcontractor) or significant reductions in the level of governmental funding in any given year could have a material adverse impact on our operations and financial condition. We performed services relating to waste generated by federal government clients, either directly as a prime contractor or indirectly for others as a subcontractor to federal government entities, representing approximately $11,666,000 or 66.8% and $29,275,000 or 63.7% of our total revenues generated during the three and nine months ended September 30, 2025, respectively, as compared to $11,749,000 or 69.9% and $31,748,000 or 71.5% of our total revenues generated during the three and nine months ended September 30, 2024, respectively.

Federal Funding. As previously disclosed, a significant portion of our revenue is generated through contracts entered into indirectly as subcontractors for prime contractors or directly as a prime contractor to federal government. Government funding levels in general have uncertainties associated with planned federal projects and procurements. On October 1, 2025, the U.S. federal government entered into a partial shutdown as Congress failed to pass a new fiscal year funding bill. As a result of the government shutdown, we have been recently informed by certain government related clients that waste shipments are likely to be delayed until the government shutdown is resolved. Although the impact of the government shutdown has been limited at this time, a prolonged shutdown may create uncertainty and disruption for us from additional delayed and/or cancelled waste shipments, suspension and/or slowdown of active projects, and/or delayed/cancelled procurement requests. Additionally, the recent government shutdown has resulted in furloughed and terminated employees which may result in contract award delays, delayed payments for services already rendered and restricted communication with agency counterparts who may not be working. These aforementioned impacts could negatively impact our result of operations and liquidity, the extent of which is unknown at this time. However, we believe that negative impact to our results of operations and liquidity from a prolonged government shutdown may be lessened by our Treatment Segment backlog, along with increased receipts from international and commercial clients.

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, 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. We have completed the fabrication, installation, commissioning and startup of our first full scale commercial Perma-FAS system ("System") for PFAS destruction, located at our Perma-Fix Florida, Inc. 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. Commercial destruction of PFAS offers a promising new source of revenue for us, as it complements our core waste remediation technologies, and we have filed patent applications relating to our System technology for PFAS destruction. We have already processed commercial quantities of PFAS-containing waste materials with our pilot System. We believe there are limited current treatment options for these materials, and we expect that our process will exceed the performance of other methods. Some of the sizable markets for PFAS include AFFF firefighting foams, both expired concentrate and flushing liquids, contaminated liquids from PFAS systems, and other water-based separation products from a variety of industrial systems. We have already secured and treated approximately 15,000 gallons of AFFF liquids through the prototype reactor and have approximately 20,000 gallons in backlog. We believe that we will receive an additional 50,000 gallons in the coming months.

Our strategy for our System includes continued treatment of PFAS liquids over the coming months and targeting engineering refinements to support larger-scale Systems. With significant upgrades to our prototype currently being completed, we anticipate deployment of the second-generation unit in the first quarter of 2026 at one of our other existing treatment facilities. We believe our second-generation system will allow us to triple our production capacity. In the next several calendar quarters, we expect to advance the 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.

Environmental Contingencies

We are engaged in the waste management services segment of the pollution control industry. As a participant in the on-site treatment, storage and disposal market and the off-site treatment and services market, we are subject to rigorous federal, state and local regulations. These regulations mandate strict compliance and therefore are a cost and concern to us. Because of their integral role in providing quality environmental services, we make every reasonable attempt to maintain complete compliance with these regulations; however, even with a diligent commitment, we, along with many of our competitors, may be required to pay fines for violations or investigate and potentially remediate our waste management facilities.

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

We have three environmental remediation projects, all within our discontinued operations, which principally entail the removal/remediation of contaminated soil, and, in most cases, the remediation of surrounding ground water. We expect to fund the expenses to remediate these sites from funds generated from operations. As of September 30, 2025, we had total accrued environmental remediation liabilities of $764,000, a decrease of $3,000 from the December 31, 2024 balance of $767,000. The decrease represents payments for our PFSG remediation project. As of September 30, 2025, $630,000 of the total accrued environmental remediation liabilities was recorded as current.