=================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
Form 10-K/A
Amendment No. 1
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
______________________
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File No. 1-11596
_________
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
_____________________________________________________
(Exact Name of Registrant as Specified in its Charter)
Delaware 58-1954497
(State or other jurisdiction (IRS Employer Identification
of incorporation or organization) Number)
1940 N.W. 67th Place
Gainesville, FL 32653
(Address of Principal (Zip Code)
Executive Offices)
(352) 373-4200
(Registrant's telephone number)
Securities registered pursuant to Section 12(g) of the Act:
Class B Warrants
Name of each exchange
Title of each class on which registered
___________________ _____________________
Common Stock, $.001 Par Value Boston Stock Exchange
Redeemable Warrants Boston Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Class B Warrants
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
_____ ______
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained to the best of the Registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by
nonaffiliates of the Registrant as of March 14, 1997, based on the
closing sale price of such stock as reported by NASDAQ on such day,
was $13,521,998. The Company is listed on the Small-Cap Market on
NASDAQ.
As of March 14, 1997, there were 10,095,948 shares of the
registrant's common stock, $.001 par value, outstanding, excluding
920,000 shares held as treasury stock.
Documents Incorporated by reference: None
_____
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<PAGE>
This amendment No.1 amends Items 8 and 14 of the registrant's
Form 10-K for the fiscal year ending December 31, 1996, as a result
of BDO Seidman, LLP performing reaudits of the Company's financial
statements for the years ended December 31, 1994 and 1995, and
replacing the opinion for the Company's financial statements for
the fiscal years ended December 31, 1994 and 1995 performed by
Arthur Anderson, LLP with the reaudits for such periods performed
by BDO Seidman, LLP.
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements
Consolidated Financial Statements: Page No.
__________________________________ _______
Report of Independent Certified Public
Accountants BDO Seidman, LLP 2
Consolidated Balance Sheets as of December 31,
1996 and 1995 3
Consolidated Statements of Operations for
the years ended December 31, 1996, 1995
and 1994 5
Consolidated Statements of Cash Flows for the
years ended December 31, 1996, 1995 and 1994 6
Consolidated Statements of Stockholders' Equity
for the years ended December 31, 1996, 1995
and 1994 7
Notes to Consolidated Financial Statements 8
Financial Statement Schedules:
_____________________________
II Valuation and Qualifying Accounts for the
years ended December 31, 1996, 1995 and
1994 35
Schedules Omitted
_________________
In accordance with the rules of Regulation S-X, other schedules
are not submitted because (a) they are not applicable to or
required by the Company, or (b) the information required to be set
forth therein is included in the consolidated financial statements
or notes thereto.
<PAGE>
Report of Independent Certified Public Accountants
Board of Directors
Perma-Fix Environmental Services, Inc.
We have audited the accompanying consolidated balance sheets of
Perma-Fix Environmental Services, Inc. and subsidiaries as of
December 31, 1996 and 1995, and the related consolidated statements
of operations, stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 1996. We have also
audited the schedule listed in the accompanying index. These
consolidated financial statements and schedule are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these consolidated financial statements
and schedule based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements and schedule are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements and schedule. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the
financial statements and schedule. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Perma-Fix Environmental Services, Inc. and subsidiaries
at December 31, 1996 and 1995, and the results of their operations
and their cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted
accounting principles.
Also, in our opinion, the schedule presents fairly, in all material
respects, the information set forth therein.
BDO Seidman, LLP
Orlando, Florida
September 11, 1997, except
Note 15 which is as of October 7, 1997
2
<PAGE>
<TABLE>
<CAPTION>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
As of December 31
(Amounts in Thousands,
Except for Share Amounts) 1996 1995
___________________________________________________________________
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 45 $ 201
Restricted cash equivalents
and investments 448 380
Accounts receivable, net of
allowance for doubtful accounts
of $383 and $392, respectively 5,549 5,031
Inventories 107 183
Prepaid expense 549 414
Other receivables 545 134
_________ ________
Total current assets 7,243 6,343
Property and equipment:
Buildings and land 4,894 6,055
Equipment 6,429 5,874
Vehicles 1,421 1,589
Leasehold improvements 289 143
Office furniture and equipment 1,136 1,252
Construction in progress 3,028 1,435
_________ ________
17,197 16,348
Less accumulated depreciation (1,593) (3,378)
_________ ________
Net property and equipment 12,604 12,970
Intangibles and other assets:
Permits, net of accumulated
amortization of $598 and
$366, respectively 3,949 4,036
Goodwill, net of accumulated
amortization of $435 and
$289, respectively 4,846 4,992
Covenant not to compete, net of
accumulated amortization of
$383 and $304, respectively 9 87
Other assets 385 445
________ ________
Total assets $ 29,036 $ 28,873
======== ========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED BALANCE SHEETS, CONTINUED
As of December 31
(Amounts in Thousands,
Except for Share Amounts) 1996 1995
___________________________________________________________________
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,677 $ 5,402
Accrued expenses 2,860 2,951
Revolving loan and term note
facility 500 5,259
Equipment financing agreement 646 1,778
Current portion of long-term debt 333 325
_________ _______
Total current liabilities 8,016 15,715
Long-term debt, less current portion 4,881 1,116
Environmental accruals 2,460 3,063
Accrued closure costs 1,094 1,041
_________ _______
Total long-term liabilities 8,435 5,220
Commitments and contingencies
(see Notes 3, 5, 7 and 10) - -
Stockholders' equity:
Preferred stock, $.001 par value;
2,000,000 shares authorized,
5,500 and 0 shares issued and
outstanding, respectively - -
Common Stock, $.001 par value;
50,000,000 shares authorized,
10,399,947 and 7,872,384 shares
issued, including 920,000 and
0 shares held as treasury
stock, respectively 10 8
Redeemable warrants 140 269
Additional paid-in capital 28,495 21,546
Accumulated deficit (14,290) (13,885)
________ _______
14,355 7,938
Less Common Stock in treasury at
cost; 920,000 and 0 shares issued
and outstanding, respectively (1,770) -
________ _______
Total stockholders' equity 12,585 7,938
________ _______
Total liabilities and
stockholders' equity $ 29,036 $ 28,873
======== ========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31
(Amounts in Thousands,
Except for Share Amounts) 1996 1995 1994
___________________________________________________________________
<S> <C> <C> <C>
Net revenues $ 31,037 $ 34,891 $ 28,075
Cost of goods sold 21,934 26,564 22,301
________ ________ ________
Gross profit 9,103 8,327 5,774
Selling, general and
administrative
expenses 6,922 8,132 5,298
Depreciation and
amortization 2,252 2,431 1,545
Permit write-down
(see Note 13) - 4,712 -
Nonrecurring charges
(see Note 14) - 987 -
________ _______ ________
Loss from operations (71) (7,935) (1,069)
Other income (expense):
Interest income 65 70 65
Interest expense (812) (952) (373)
Other 558 (235) (109)
________ ________ ________
Net loss before
provision for
income taxes (260) (9,052) (1,486)
Provision for income taxes - - 30
________ ________ ________
Net loss (260) (9,052) (1,516)
Preferred stock dividends 145 - -
________ ________ ________
Net loss applicable
to Common Stock $ (405) $ (9,052) $ (1,516)
======== ======== ========
Net loss per common share $ (.05) $ (1.15) $ (.25)
======== ======== ========
Weighted average number of
common and common equiva-
lent shares outstanding 8,761 7,872 5,988
======== ======== ========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31
(Amounts in Thousands) 1996 1995 1994
___________________________________________________________________
<S> <C> <C> <C>
Cash flows from operating
activities:
Net loss $ (405) $ (9,052) $ (1,516)
Adjustments to reconcile
net loss to cash pro-
vided by (used in)
operations:
Depreciation and amorti-
zation 2,252 2,431 1,718
Permit write-down 4,712
Divestiture reserve 450
Provision for bad debt
and other reserves 17 844 114
(Gain) loss on sale of
plant, property and
equipment (4) 8 9
Changes in assets and
liabilities, net of
effects from business
acquisitions:
Accounts receivable (535) 957 (779)
Prepaid expenses, inven-
tories and other assets (531) (42) 246
Accounts payable and
accrued expenses (2,085) (246) (2,210)
_______ ________ ________
Net cash provided by
(used in) operations (1,291) 62 (2,418)
________ ________ ________
Cash flows from investing
activities:
Proceeds of short-term
investments 2,384
Purchases of property and
equipment, net (2,082) (2,953) (1,914)
Proceeds from sale of
plant, property and
equipment 1,214 14 4
Effect of acquisitions 9 292
Change in restricted cash,
net (95) 171 63
_________ ________ _______
Net cash provided by
(used in) investing
activities (963) (2,759) 829
_________ ________ _______
Cash flows from financing
activities:
Borrowings (repayments)
from revolving loan
and term note facility (997) 2,162 -
Borrowings on long-term
debt and equipment
financing agreement - 1,573 668
Principal repayments on
long-term debt (1,502) (1,327) (2,279)
Proceeds from issuance
of stock 6,367 - 3,641
Purchase of treasury stock (1,770) - -
________ ________ ________
Net cash provided
by financing
activities 2,098 2,408 2,030
________ ________ ________
(Decrease) increase in cash and
cash equivalents (156) (289) 441
Cash and cash equivalents at
beginning of period 201 490 49
________ _______ _______
Cash and cash equivalents at
end of period $ 45 $ 201 $ 490
========= ======= =======
___________________________________________________________________
Supplemental disclosure:
Interest paid $ 844 $ 923 $ 435
Income taxes paid - - -
<PAGE>
Non-cash investing and financing
activities:
Issuance of Common Stock
for services $ 462 $ - $ -
Long-term debt incurred
for purchase of property
and equipment 424 - 228
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
<PAGE>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the years ended December 31
Preferred Stock Common Stock
(Amounts in Thousands, ___________________ ____________________
Except for Share Amounts) Shares Amount Shares Amount
_________________________________________________________________________
<S> <C> <C> <C> <C>
Balance at December 31, 1993 - $ - 4,473,208 $ 4
Net loss - - - -
Issuance of stock for
acquisitions - - 575,659 1
Issuance of stock and
warrants for cash - - 1,400,000 1
Issuance of stock for
note conversion - - 78,140 -
Issuance of stock for
transaction costs - - 210,000 1
Amortization of deferred
compensation - - - -
______ _______ _________ _______
Balance at December 31, 1994 - - 6,737,007 7
Net loss - - - -
Issuance of stock for
acquisitions - - 1,135,377 1
Amortization of deferred
compensation - - - -
______ _______ _________ _______
Balance at December 31, 1995 7,872,384 8
Net loss - - - -
Preferred stock dividend - - - -
Issuance of stock for cash
and services - - 573,916 -
Issuance of preferred stock
for cash 6,930 - - -
Conversion of preferred stock
to common (1,430) - 1,953,647 2
Expiration of redeemable
warrants - - - -
Redemption of common shares
to treasury stock - - - -
_______ ______ __________ _______
Balance at December 31, 1996 5,500 $ - 10,399,947 $ 10
======== ====== ========== =======
Common
Additional Stock
Redeemable Paid-In Accumulated Held in Deferred
Warrants Capital Deficit Treasury Comp.
_______________________________________________________________________
<C> <C> <C> <C> <C>
$ 121 $13,982 $ (3,317) $ - $ (76)
- - (1,516) - -
- 3,217 - - -
140 3,500 - - -
8 220 - - -
- 630 - - -
- - - - 46
_________ _______ ________ ________ ________
269 21,549 (4,833) - (30)
- - (9,052) - -
- (3) - - -
- - - - 30
_________ _______ ________ ________ ________
269 21,546 (13,885) - -
- - (260) - -
- - (145) - -
- 693 - - -
- 6,129 - - -
- (2) - - -
(129) 129 - - -
- - - (1,770) -
_________ _______ ________ ________ _________
$ 140 $28,495 $ (14,290) $ (1,770) $ -
========= ======= ======== ======== =========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
7
<PAGE>
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
Notes to Consolidated Financial Statements
December 31, 1996, 1995 and 1994
_____________________________________________________
NOTE 1
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Perma-Fix Environmental Services, Inc. (the "Company") is a
Delaware corporation engaged in the treatment, storage, processing
and disposal of hazardous and non-hazardous industrial and
commercial wastes, and provides consulting engineering services to
industry and government for broad-scope environmental problems.
The Company has grown through both acquisitions and internal
development. The Company's present objective is to focus the
operations and to maximize the profitability of its existing
businesses.
The Company is subject to certain risks: (1) It is involved
in the transportation, treatment, handling and storage of hazardous
and non-hazardous, mixed and industrial wastes. Such activities
contain risks against which the Company believes it is adequately
insured, and (2) in general, the industries in which the Company
operates are characterized by intense competition among a number of
larger, more established companies with significantly greater
resources than the Company.
The consolidated financial statements of the Company for the
years 1994 through 1996 include the accounts of Perma-Fix
Environmental Services, Inc. ("PESI") and its wholly-owned
subsidiaries, Perma-Fix, Inc. ("PFI") and subsidiaries, Industrial
Waste Management, Inc. ("IWM") and subsidiaries, Perma-Fix
Treatment Services, Inc. ("PFTS"), Perma-Fix of Florida, Inc.
("PFF"), Perma-Fix of Dayton, Inc. ("PFD"), Perma-Fix of Ft.
Lauderdale, Inc. ("PFL"), Perma-Fix of Memphis, Inc. ("PFM") and
Perma-Fix Recycling, Inc. ("Re-Tech"). The Perma-Fix Recycling,
Inc. (Re-Tech) plastic recycling subsidiary was, however, sold
effective March 15, 1996.
_____________________________________________________
NOTE 2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries after elimination of
all significant intercompany accounts and transactions. See Note
3 for acquisitions.
Reclassifications
Certain prior year amounts have been reclassified to conform
with the 1996 presentation.
Business Segments
The Company provides services and products through two
business segments -- Waste Management Services and Consulting
Engineering Services. See Note 12 for a further description of
these segments and certain business information.
Use of Estimates
In preparing financial statements in conformity with generally
accepted accounting principles, management makes estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at
the date of the financial statements as well as the reported
amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
8
<PAGE>
Cash Equivalents
The Company considers short-term investments with an initial
maturity date of three months or less at the date of purchase to be
cash equivalents.
Restricted Cash Equivalents and Investments
Restricted cash equivalents and investments include
certificates of deposit ($145,000 and $289,000 at December 31, 1996
and 1995, respectively) and amounts deposited in cash collateral
accounts ($645,000 and $406,000 at December 31, 1996 and 1995,
respectively). As of December 31, 1996, $234,000 of the restricted
cash balance was pledged as collateral for the Company's secured
letters of credit, as compared to $226,000 at December 31, 1995.
Of the total restricted cash for 1996 and 1995 ($790,000 and
$695,000, respectively), $448,000 of the 1996 total is classified
as a current asset, as compared to $380,000 in 1995. The long-term
portion totaling $342,000 for 1996 ($315,000 in 1995) reflects cash
held for long-term commitments related to the RCRA closure action
at a facility affiliated with PFD as further discussed in Note 7.
The remainder of the restricted cash, as recorded as a current
asset, represents secured collateral relative to the various
financial assurance instruments guaranteeing the standard RCRA
closure bonding requirements for the PFM, PFD and PFTS TSD
facilities. The letters of credit secured by this restricted cash
renew annually, and the Company plans to replace the letters of
credit with other alternative financial assurance instruments.
Inventories
Inventories consist of fly ash, cement kiln dust and treatment
chemicals. Inventories are valued at the lower of cost or market
with cost determined by the first-in, first-out method.
Property and Equipment
Property and equipment expenditures are capitalized and
depreciated using the straight-line method over the estimated
useful lives of the assets for financial statement purposes, while
accelerated depreciation methods are principally used for tax
purposes. Generally, annual depreciation rates range from ten to
forty years for buildings (including improvements) and three to
seven years for office furniture and equipment, vehicles, and
decontamination and processing equipment. Maintenance and repairs
are charged directly to expense as incurred. The cost and
accumulated depreciation of assets sold or retired are removed from
the respective accounts, and any gain or loss from sale or
retirement is recognized in the accompanying consolidated
statements of operations. Renewals and improvements which extend
the useful lives of the assets are capitalized.
Intangible Assets
Intangible assets relating to acquired businesses consist
primarily of the cost of purchased businesses in excess of the
estimated fair value of net assets acquired ("goodwill") and the
recognized permit value of the business. Goodwill is generally
amortized over 40 years and permits are amortized over 20 years.
Amortization expense approximated $455,000, $686,000 and $573,000
for the years ended 1996, 1995 and 1994, respectively. The Company
continually reevaluates the propriety of the carrying amount of
permits and goodwill as well as the amortization period to
determine whether current events and circumstances warrant
adjustments to the carrying value and estimates of useful lives.
The Company uses an estimate of the related undiscounted operating
income over the remaining lives of goodwill and permit costs in
measuring whether they are recoverable. At December 31, 1995, the
Company recognized a permit impairment charge of approximately
$4,712,000 related to the December 1993 acquisition of Perma-Fix of
Memphis, Inc. See Note 13 for further discussion of this charge.
At this time, the Company believes that no additional impairment of
goodwill or permits has occurred and that no reduction of the
estimated useful lives of the remaining assets is warranted. This
evaluation policy is in accordance with SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of," which is effective for fiscal years beginning
after December 15, 1995. Adoption of this pronouncement did not
have a material impact on the financial statements.
9
<PAGE>
Accrued Closure Costs
Accrued closure costs represent the Company's estimated
environmental liability to clean up their facilities in the event
of closure.
Income Taxes
The Company accounts for income taxes under Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for
Income Taxes", which requires use of the liability method. SFAS
No. 109 provides that deferred tax assets and liabilities are
recorded based on the differences between the tax bases of assets
and liabilities and their carrying amounts for financial reporting
purposes, referred to as temporary differences. Deferred tax
assets or liabilities at the end of each period are determined
using the currently enacted tax rates to apply to taxable income in
the periods in which the deferred tax assets or liabilities are
expected to be settled or realized.
Net Revenues
Revenues for services and reimbursable costs are recognized at
the time services are rendered or, in the case of fixed price
contracts, under the percentage-of-completion method of accounting.
No customer accounted for more than ten percent (10%) of
consolidated net revenues.
Self-Insurance
During June of 1994, the Company began a self-insurance
program for certain health benefits, which was implemented
initially at only three (3) locations. As of January 1, 1995, all
employees were included in this program. The Company has stop-loss
coverage of $60,000 per individual per occurrence with an annual
aggregate limitation of approximately $776,000 per year. However,
as the employment of the Company increases or decreases, the
aggregate limitation rises or falls proportionally. The cost of
such benefits is recognized as expense in the period in which the
claim occurred, including estimates of claims incurred but not
reported. The claims expense for 1996 was approximately $748,000,
as compared to $693,000 for 1995. This increase principally
reflects the full implementation of this program, to include all
employees of the corporation, and the occurrence of several larger
claims during 1996.
Net Loss Per Share
Net loss per share has been presented using the weighted
average number of common shares outstanding. Common Stock
equivalents (stock options and warrants) have not been included in
the net loss per share calculations since their effects would be
antidilutive. Net loss per share for the fiscal year ended
December 31, 1994 has been restated, in accordance with Accounting
Principles Board Opinion No. 15, "Earnings Per Share", to reflect
the issuance of contingent shares to Quadrex during 1995.
Fair Value of Financial Instruments
The book values of cash, trade accounts receivable, trade
accounts payable, and financial instruments included in current
assets and other assets approximate their fair values principally
because of the short-term maturities of these instruments. The
fair value of the Company's long-term debt is estimated based on
the current rates offered to the Company for debt of similar terms
and maturities. Under this method, the Company's fair value of
long-term debt was not significantly different from the stated
value at December 31, 1996 and 1995.
_____________________________________________________
NOTE 3
ACQUISITIONS
During the second quarter of 1995, the Company completed the
acquisition of substantially all of the assets and certain
liabilities of Industrial Compliance and Safety, Inc. ("ICS") of
Kansas City, Missouri. ICS has provided environmental, remedial,
emergency response and waste management services for clients across
the U.S. since 1989, and has been consolidated with the Company's
existing waste management operations in Kansas City. The assets of
10
<PAGE>
ICS were acquired through the forgiveness of indebtedness to the
Company and assumption of certain liabilities. The acquisition was
accounted for using the purchase method effective June 1, 1995 and,
accordingly, the assets and liabilities as of this date and the
statement of operations from the effective date were included in
the accompanying consolidated financial statements. The Company
performed a purchase price allocation as of June 30, 1995, which
resulted in an unallocated excess purchase price over net assets
acquired, or goodwill, of $177,000, to be amortized over 10 years.
The forgiven debt by the Company totaled $376,000 and was recorded
against the respective bad debt reserve, and not utilized in
determination of the purchase price. ICS assets of $233,000 were
acquired through the assumption of accounts payable, debt and other
liabilities of $358,000, and transaction costs of $52,000. The
acquisition of ICS had an insignificant impact on historical
financial data and, thus, pro forma financial information giving
effect to the acquisition has not been provided.
On June 17, 1994, the Company acquired three treatment,
storage and disposal facilities (the "Quadrex Facilities") from
Quadrex Corporation ("Quadrex"), acquiring all of the outstanding
stock of two facilities and purchasing certain assets and assuming
certain liabilities of one facility. The acquisition was accounted
for under the purchase method of accounting. Accordingly, the
purchase price has been allocated to the net assets acquired based
on their estimated fair values. This allocation has resulted in
goodwill and intangible permit costs of $3,359,000 and $3,335,000,
respectively. The goodwill is being amortized over 40 years and
the intangible permit costs over 20 years, both on a straight-line
basis. The results of operations of the Quadrex Facilities have
been included in the consolidated statements of operations since
June 30, 1994. The Quadrex Facilities were acquired for a
combination of debt assumed ($5,532,000), accounts payable and
other liabilities assumed ($8,141,000) and shares of the Company's
Common Stock ($3,217,000). The value of the Common Stock reflected
the market value of the Company's Common Stock adjusted to account
for restrictions common to unregistered securities. Under the
terms of the acquisition agreement, the Company held back issuance
of certain shares contingent upon Quadrex's satisfying certain
conditions. As of December 31, 1994, 576,000 shares had been
recorded as issued and outstanding, and during 1995 the Company
issued approximately 1,135,000 shares of Common Stock in full and
complete settlement of all shares due Quadrex.
_____________________________________________________
NOTE 4
PREFERRED STOCK ISSUANCE AND CONVERSION
The Company issued, during February 1996, to RBB Bank
Aktiengesellschaft, located in Graz, Austria ("RBB Bank"), 1,100
shares of newly created Series 1 Class A Preferred Stock ("Series
1 Preferred") at a price of $1,000 per share, for an aggregate
sales price of $1,100,000, and paid placement and closing fees of
$180,000. During February 1996, the Company also issued 330 shares
of newly created Series 2 Class B Convertible Preferred Stock
("Series 2 Preferred") to RBB Bank at a price of $1,000 per share,
for an aggregate sales price of $330,000, and paid placement and
closing fees of $35,000. The Series 1 Preferred and Series 2
Preferred accrued dividends on a cumulative basis at a rate per
share of five percent (5%) per annum, payable at the option of the
Company in cash or Company Common Stock. All dividends on the
Series 1 Preferred and Series 2 Preferred were paid in Common
Stock. The Series 1 Preferred and Series 2 Preferred were
convertible, at any time, commencing forty-five (45) days after
issuance into shares of the Company's Common Stock at a conversion
price equal to the aggregate value of the shares of the Preferred
Stock being converted, together with all accrued but unpaid
dividends thereon, divided by the "Average Stock Price" per share
(the "Conversion Price"). The Average Stock Price means the lesser
of (i) seventy percent (70%) of the average daily closing bid
prices of the Common Stock for the period of five (5) consecutive
trading days immediately preceding the date of subscription by the
holder or (ii) seventy percent (70%) of the average daily closing
bid prices of the Common Stock for a period of five (5) consecutive
trading days immediately preceding the date of conversion of the
Preferred Stock. During the second quarter of 1996, a total of 722
shares of the Series 1 Preferred were converted into approximately
1,034,000 shares of the Company's Common Stock and the associated
11
<PAGE>
accrued dividends were paid in the form of approximately 16,000
shares of the Company's Common Stock. Pursuant to a subscription
and purchase agreement for the issuance of Series 3 Class C
Convertible Preferred Stock, as discussed below, the remaining 378
shares of the Series 1 Preferred and the 330 shares of the Series
2 Preferred were converted during July 1996 into 920,000 shares of
the Company's Common Stock. By terms of the subscription
agreement, the 920,000 shares of Common Stock were purchased by the
Company at a purchase price of $1,770,000 and are included in
Treasury Stock as of December 31, 1996. As a result of such
conversions, the Series 1 Preferred and the Series 2 Preferred are
no longer outstanding.
On July 17, 1996, the Company issued to RBB Bank 5,500 shares
of newly-created Series 3 Class C Convertible Preferred Stock
("Series 3 Preferred") at a price of $1,000 per share, for an
aggregate sales price of $5,500,000, and paid placement and closing
fees as a result of such transaction of approximately $586,000. As
part of the sale of the Series 3 Preferred, the Company also issued
to RBB Bank two (2) Common Stock purchase warrants entitling RBB
Bank to purchase, after December 31, 1996, until July 18, 2001, an
aggregate of up to 2,000,000 shares of Common Stock, with 1,000,000
shares exercisable at an exercise price equal to $2.00 per share
and 1,000,000 shares exercisable at an exercise price equal to
$3.50 per share. The Series 3 Preferred accrues dividends on a
cumulative basis at a rate of six percent (6%) per annum, and is
payable semi-annually when and as declared by the Board of
Directors. Dividends shall be paid, at the option of the Company,
in the form of cash or Common Stock of the Company. The holder of
the Series 3 Preferred may convert into Common Stock of the Company
up to (i) 1,833 shares of the Series 3 Preferred on and after
October 1, 1996, (ii) 1,833 shares of the Series 3 Preferred on and
after November 1, 1996, and (iii) the balance of the Series 3
Preferred on and after December 1, 1996. The conversion price
shall be the product of (i) the average closing bid quotation for
the five (5) trading days immediately preceding the conversion date
multiplied by (ii) seventy-five percent (75%). The conversion
price shall be a minimum of $.75 per share or a maximum of $1.50
per share, with the minimum conversion price to be reduced by $.25
per share each time, if any, after July 1, 1996, the Company
sustains a net loss, on a consolidated basis, in each of two (2)
consecutive quarters. At no time shall a quarter that has already
been considered in such determination be considered in any
subsequent determination. The Common Stock issuable on the
conversion of the Series 3 Preferred is subject to certain
registration rights pursuant to the subscription agreement. The
subscription agreement also provides that the Company utilize
$1,770,000 of the net proceeds to purchase from RBB Bank 920,000
shares of the Company's Common Stock owned by RBB Bank. As
discussed above, RBB Bank had previously acquired from the Company
1,100 shares of Series 1 Preferred and 330 shares of Series 2
Preferred and, as of the date of the subscription agreement, was
the owner of record and beneficially owned all of the issued and
outstanding shares of Series 1 Preferred and Series 2 Preferred,
which totaled 378 shares of Series 1 Preferred and 330 shares of
Series 2 Preferred. Pursuant to the terms of the subscription
agreement relating to the Series 3 Preferred, RBB Bank converted
all of the remaining outstanding shares of Series 1 Preferred and
Series 2 Preferred into Common Stock of the Company (920,000
shares) pursuant to the terms, provisions, restrictions and
conditions of the Series 1 Preferred and Series 2 Preferred, which
were in turn purchased by the Company pursuant to the terms of such
subscription agreement. As of September 11, 1997, the holder of
the Series 3 Preferred has converted 1,500 shares of the Series 3
Preferred into Common Stock of the Company. The accrued dividends
for the period July 17, 1996 through December 31, 1996 were paid in
January 1997, in the form of approximately 101,000 shares of the
Company's Common Stock.
12
<PAGE>
<TABLE>
<CAPTION>
_____________________________________________________
NOTE 5
LONG-TERM DEBT
Long-term debt at December 31 includes the following (in
thousands):
<S> <C> <C>
Revolving loan facility dated January 27,
1995, collateralized by eligible accounts
receivable, subject to monthly borrowing
base calculation, variable interest paid
monthly at base rate (prime) plus 1 1/2. $ 2,879 $ 3,176
Term loan agreement dated January 27, 1995,
payable in monthly principal installments
of $42, due in January 1998, variable
interest paid monthly at base rate (prime)
plus 1 3/4. Secured by real property. 1,383 2,083
Mortgage note payable under an installment
agreement, payable in monthly principal
and interest installments of $5 (interest
at 8%), collateralized by certain real
estate. - 582
Mortgage note agreement payable in quarterly
installments of $15 plus accrued interest
at 10%. Secured by real property. 123 184
Mortgage note payable in monthly principal
and interest payments of $8, interest at
7.25%, due October 1996. Secured by real
property. - 79
Equipment financing agreements, secured by
equipment, interest ranging from 10.2%
to 13.05%, principal and interest due in
equal installments of $62 through June
1999. 1,257 1,778
Various capital lease and promissory note
obligations, payable 1997 to 2001,
interest at rates ranging from 8.0% to
36.4%. 718 596
_______ _______
6,360 8,478
Less current portion of long-term debt 333 325
Less current portion of revolving loan and
term note facility 500 5,259
Less current portion of equipment financing
agreements 646 1,778
_______ _______
$ 4,881 $ 1,116
======= =======
</TABLE>
On January 27, 1995, the Company, as parent and guarantor, and
all direct and indirect subsidiaries of the Company, as co-
borrowers and cross-guarantors, entered into a Loan and Security
Agreement ("Agreement") with Heller Financial, Inc. ("Heller").
The Agreement provides for a term loan in the amount of $2,500,000,
which requires principal repayments based on a five-year level
principal amortization over a term of 36 months, with monthly
principal payments of $42,000. Payments commenced on February 28,
1995, with a final balloon payment in the amount of $846,000 due on
January 31, 1998. The Agreement also provides for a revolving loan
facility in the amount of $7,000,000. At any point in time the
aggregate available borrowings under the facility are reduced by
any amounts outstanding under the term loan and are also subject to
the maximum credit availability as determined through a monthly
borrowing base calculation, equal to 80% of eligible accounts
receivable accounts of the Company as defined in the Agreement.
The termination date on the revolving loan facility is also the
third anniversary of the closing date. The Company expensed during
13
<PAGE>
1995 approximately $281,000 in financing fees relative to the
solicitation and closing of this loan agreement (principally
investment banking, legal and closing fees).
During the second quarter of 1995, the Company became in
violation of certain of the restrictive financial ratio covenants
of the Agreement. During the second quarter of 1996, the Company
negotiated and subsequently entered into an amendment ("Third
Amendment") to the Loan and Security Agreement, whereby, among
other things, Heller waived the existing events of default, amended
the financial covenants and amended certain other provisions of the
Loan Agreement as set forth therein. Applicable interest rate
provisions were also amended, whereby the term loan shall bear
interest at a rate of interest per annum equal to the base rate
plus 2 1/4%, and the revolving loan shall bear interest equal to
the base rate plus 2%. The Amendment also contains a performance
price adjustment which provides that upon the occurrence of an
"equity infusion," applicable interest rates on the loans shall be
reduced, in each instance by 1/2% per annum. Due to the equity
infusion as discussed in Note 4, applicable interest rates on the
loans were reduced pursuant to the terms of the Third Amendment
effective August 16, 1996, and were subsequently increased during
the First Quarter of 1997 back to the base rate plus 2 1/4% on the
term loan, and the base rate plus 2% on the revolving loan. Also,
during the first quarter of 1997, Heller extended to the Company an
overformula line in an amount not to exceed $300,000, for a period
ending the earliest of 90 days after the date of first advance or
May 20, 1997.
As disclosed at December 31, 1995, Heller had agreed to
forebear from exercising any rights and remedies under the
Agreement as a result of these previous defaults and continued to
make normal advances under the revolving loan facility. However,
in compliance with generally accepted accounting principles, and
since there was no waiver or reset, the Company, at December 31,
1995, reclassified as a current liability $3,882,000 outstanding
under the Agreement that would otherwise have been classified as
long-term debt. The Company was in default of the "fixed charge
coverage" and "capital expenditures" financial covenants for the
year ending December 31, 1996. The Company obtained a waiver from
Heller for the year ended December 31, 1996 and reset certain
covenants for 1997 under the Sixth Amendment to the Agreement
(effective April 14, 1997). Therefore, $3,762,000 of such loans
with Heller is classified as long-term debt at December 31, 1996,
in compliance with generally accepted accounting principles.
Pursuant to the Sixth Amendment, the Company was obligated to raise
an additional $700,000 on or before August 15, 1997, of which
$150,000 was to be received by June 15, 1997. During the second
quarter of 1997 and July, 1997, the Company fully satisfied this
covenant obligation, having raised approximately $3,042,000
principally through insurance proceeds with regard to the vandalism
at the Perma-Fix of Ft. Lauderdale, Inc. ("PFL") facility in 1996
and from the issuance of the 2,500 shares of newly-created Series
4 Class D Convertible Preferred Stock ("Series 4 Preferred"), as
further discussed in Note 15 to Notes to Consolidated Financial
Statements, and the issuance of 350 shares of newly created Series
5 Class E Convertible Preferred Stock ("Series 5 Preferred"), as
further discussed in Note 6 to Notes to Consolidated Financial
Statements.
Pursuant to the initial agreement, the term loan bears
interest at a floating rate equal to the base rate (prime) plus 1
3/4% per annum The revolving loan bears interest at a floating
rate equal to the base rate (prime) plus 1 1/2% per annum. The
loans also contain certain closing, management and unused line fees
payable throughout the term. As discussed above, in conjunction
with the Third and Sixth Amendments, applicable interest rates were
amended. Both the revolving loan and term loan were prime based
loans at December 31, 1996, bearing interest at a rate of 9.75% and
10.00%, respectively.
As of December 31, 1996, the borrowings under the revolving
loan facility total $2,879,000, a decrease of $297,000 from the
December 31, 1995 balance of $3,176,000, with borrowing
availability of $958,000. The balance on the term loan totaled
$1,383,000, as compared to $2,083,000 at December 31, 1995. Total
indebtedness under the Heller Agreement as of December 31, 1996 was
$4,262,000, a reduction of $997,000 from the December 31, 1995
balance of $5,259,000.
14
<PAGE>
During October 1994, the Company entered into a $1,000,000
equipment financing agreement with Ally Capital Corporation
("Ally"), which provides lease commitments for the financing of
certain equipment through June 1995. During 1995, the Company
negotiated an increase in the total lease commitment to $1,600,000.
The agreement provides for an initial term of 42 months, which may
be extended to 48, and bears interest at a fixed interest rate of
11.3%. As of December 31, 1995, the Company had utilized
$1,496,000 of this credit facility to purchase capital equipment
and subsequently drew down an additional $57,000 in January 1996,
bringing the total financing under this agreement to $1,553,000.
In conjunction with a 1994 acquisition, the Company also assumed
$679,000 of debt obligations with Ally Capital Corporation, which
had terms expiring from September 1997 through August 1998, at a
rate ranging from 10.2% to 13.05%. At December 31, 1995, the
Company was not in compliance with the minimum tangible net worth
covenant of this agreement and Ally had waived compliance with this
covenant and no acceleration was demanded by the lender. However,
in compliance with generally accepted accounting principles, the
Company, at December 31, 1995, reclassified as a current liability
$1,778,000 outstanding under the agreement, which would otherwise
have been classified as long-term debt. During the second quarter
of 1996, the Company negotiated and subsequently entered into an
amendment to the equipment financing agreement, whereby, among
other things, Ally waived the existing event of default and amended
the required covenants. The Company was in default of the "fixed
charge coverage" and "capital expenditures" financial covenants for
the year ending December 31, 1996. Pursuant to an amendment to the
Lease Agreement dated April 14, 1997, the Company obtained a waiver
from Ally for the year ended December 31, 1996 and reset certain
covenants for 1997. The outstanding balance on these equipment
financing agreements at December 31, 1996 is $1,257,000, as
compared to $1,778,000 at December 31, 1995. As a result of the
above discussed waiver and amendment and the resetting of certain
covenants for 1997, $611,000 has been classified as long-term debt
at December 31, 1996, pursuant to generally accepted accounting
principles.
The aggregate amount of the maturities of long-term debt
maturing in future years as of December 31, 1996 is $1,479,000 in
1997; $4,507,000 in 1998; $234,000 in 1999; $130,000 in 2000; and
$10,000 in 2001.
_____________________________________________________
NOTE 6
ACCRUED EXPENSES
<TABLE>
<CAPTION>
Accrued expenses at December 31 include the following (in
thousands):
1996 1995
______ _______
<S> <C> <C>
Salaries and employee benefits $ 808 $ 818
Accrued sales, property and other tax 365 548
Waste disposal and other related expenses 667 657
Accrued environmental 482 338
Other 538 590
______ ______
Total accrued expenses $2,860 $2,951
====== ======
</TABLE>
_____________________________________________________
NOTE 7
ACCRUED CLOSURE COSTS AND ENVIRONMENTAL LIABILITIES
The Company accrues for the estimated closure costs of its fixed-
based RCRA regulated facilities upon cessation of operations. The
amount recorded in 1993 in accordance with EPA approved closure
plans was $290,000. With the 1994 acquisition of two RCRA
regulated facilities from Quadrex, the Company increased its
liability to $935,000 as of December 31, 1994, which was
subsequently increased to $1,041,000 in 1995. During 1996, the
accrued closure cost increased by $53,000 to a total of $1,094,000,
15
<PAGE>
principally as a result of inflationary factors. The closure costs
will increase in the future, as indexed to an inflationary factor,
and may also increase or decrease as the Company changes its
current operations at these regulated facilities. Additionally,
unlike solid waste facilities, the Company, consistent with EPA
regulations, does not have post-closure liabilities that extend
substantially beyond the effective life of the facility.
At December 31, 1996 the Company had accrued environmental and
acquisition related liabilities totaling $2,460,000, which reflects
a decrease of $603,000 from the December 31, 1995 balance of
$3,063,000. This amount principally represents management's best
estimate of the costs to remove contaminated sludge and soil, and
to undergo groundwater remediation activities at one of its RCRA
facilities and one former RCRA facility that is under a closure
action from 1989 that its wholly-owned subsidiary, PFD, leases.
Perma-Fix of Memphis, Inc., acquired December 30, 1993, is
currently remediating gasoline contamination from a shallow aquifer
on its property. The Company expects this activity to continue
into the foreseeable future. Perma-Fix of Dayton, Inc. is the
owner of a RCRA facility currently under closure since it ceased
operations in 1989. This facility has pursued remedial activities
for the last five years with additional studies forthcoming, and
potential groundwater restoration which could extend five (5) to
ten (10) years. The Company has estimated the potential liability
related to the remedial activity of the above properties to
approximate $2,085,000 (PFD $925,000 and PFM $1,160,000), which has
been included in the above accrued environmental total.
_____________________________________________________
NOTE 8
INCOME TAXES
<TABLE>
<CAPTION>
The components of the provision for income taxes are as follows
(in thousands):
1996 1995 1994
_______ _______ _______
<S> <C> <C> <C>
Current
Federal $ - $ - $ -
State - - 30
_______ _______ ________
$ - $ - $ 30
Deferred - - -
_______ _______ ________
Provision for income taxes $ - $ - $ 30
======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
At December 31, 1996 and 1995 the Company had temporary
differences and net operating loss carryforwards which gave rise to
deferred tax assets and liabilities at December 31, as follows (in
thousands):
1996 1995
_______ ______
<S> <C> <C>
Net operating losses $3,376 $2,770
Environmental reserves 980 1,131
Other 172 453
Valuation allowance (4,034) (3,849)
_______ ______
Deferred tax assets 494 505
_______ ______
Depreciation 466 493
Other 28 12
_______ ______
Deferred tax liability 494 505
_______ ______
Net deferred tax asset (liability) $ - $ -
======= ======
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
A reconciliation between the expected tax benefit using the
federal statutory rate of 34% and the provision for income taxes as
reported in the accompanying consolidated statements of operations
is as follows (in thousands):
1996 1995 1994
_______ ________ _______
<S> <C> <C> <C>
Tax benefit at statutory rate $ (137) $ (3,077) $ (505)
Permit impairment charge and
goodwill amortization 43 1,811 -
Other 85 97 -
State income taxes - - 30
Increase in valuation
allowance 9 1,169 505
________ _________ ________
Provision for income taxes $ - $ - $ 30
======== ========= ========
</TABLE>
The Company's valuation allowance increased by approximately
$185,000 and $1,169,000 for the years ended December 31, 1996 and
1995, respectively, which represents the effect of changes in the
temporary differences and net operating losses (NOLs), as amended.
The Company has recorded a valuation allowance to state its
deferred tax assets at estimated net realizable value due to the
uncertainty related to realization of these assets through future
taxable income.
The Company had estimated net operating loss carryforwards for
federal income tax purposes of approximately $9,900,000 at
December 31, 1996. These net operating losses can be carried
forward and applied against future taxable income, if any, and
expire in the years 2006 through 2011. However, as a result of
various stock offerings and certain acquisitions, the use of
$7,800,000 of these NOLs will be limited to approximately
$1,500,000 per year under the provisions of Section 382 of the
Internal Revenue Code of 1986, as amended. Additionally, NOLs may
be further limited under the provisions of Treasury Regulation
1.1502-21 regarding Separate Return Limitation Years.
_____________________________________________________
NOTE 9
CAPITAL STOCK, EMPLOYEE STOCK PLAN AND INCENTIVE COMPENSATION
In February 1996, the Company issued 1,100 shares of newly
created Series 1 Class A Preferred Stock at a price of $1,000 per
share, for net proceeds of $924,000. The Company also issued 330
shares of newly created Series 2 Class B Preferred Stock at a price
of $1,000 per share, for net proceeds of $297,000. Both of the
Series 1 and Series 2 Preferred Stock were fully converted into
1,953,467 shares of the Company's Common Stock. During July 1996,
the Company issued 5,500 shares of newly created Series 3 Class C
Convertible Preferred Stock at a price of $1,000 per share for an
aggregate sales price of $5,500,000. See Note 4 for further
discussion.
In March 1996, the Company entered into a Stock Purchase
Agreement with Dr. Centofanti, the President, Chief Executive
Officer, Chairman of the Board of the Company, whereby the Company
sold, and Dr. Centofanti purchased, 133,333 shares of the Company's
Common Stock for 75% of the closing bid price of such Common Stock
as quoted on the NASDAQ on the date that Dr. Centofanti notified
the Company of his desire to purchase such stock, as authorized by
the Board of Directors of the Company. During February 1996, Dr.
Centofanti tendered to the Company $100,000 for such 133,333 shares
by delivering to the Company $86,028.51 and forgiving $13,971.49
that was owing to Dr. Centofanti by the Company for expenses
incurred by Dr. Centofanti on behalf of the Company. On the date
that Dr. Centofanti notified the Company of his desire to purchase
such shares, the closing bid price as quoted on the NASDAQ for the
Company's Common Stock was $1.00 per share.
In June 1996, the Company entered into a second Stock Purchase
Agreement with Dr. Centofanti, whereby the Company sold, and Dr.
Centofanti purchased, 76,190 shares of the Company's Common Stock
17
<PAGE>
for 75% of the closing bid price of such Common Stock as quoted on
the NASDAQ on the date that Dr. Centofanti notified the Company of
his desire to purchase such stock (closing bid of $1.75 on June 11,
1996), as previously authorized by the Board of Directors of the
Company. Dr. Centofanti tendered to the Company $100,000 for such
76,190 shares of Common Stock. During 1996, the Company also
issued 347,912 shares of Common Stock to outside consultants of the
Company for past and future services, valued at approximately
$462,000.
At the Company's Annual Meeting of Stockholders ("Annual
Meeting") as held on December 12, 1996, the stockholders approved
the adoption of the Perma-Fix Environmental Services, Inc. 1996
Employee Stock Purchase Plan. This plan provides eligible
employees of the Company and its subsidiaries, who wish to become
stockholders, an opportunity to purchase Common Stock of the
Company through payroll deductions. The maximum number of shares
of Common Stock of the Company that may be issued under the plan
will be 500,000 shares. The plan provides that shares will be
purchased two (2) times per year and that the exercise price per
share shall be eighty-five percent (85%) of the market value of
each such share of Common Stock on the offering date on which such
offer commences or on the exercise date on which the offer period
expires, whichever is lowest. Also approved at the Annual Meeting
was the amendment to the Company's Restated Certificate of
Incorporation, as amended, to increase from 20,000,000 to
50,000,000 shares the Company's authorized Common Stock, par value
$.001 per share.
In June 1994, the Company acquired from Quadrex Corporation
("Quadrex") and its wholly-owned subsidiary, Quadrex Environmental
Company ("QEC"), three businesses ("Quadrex Acquisitions").
Quadrex and QEC are collectively referred to as "Quadrex". As
consideration for the Quadrex Acquisitions, the Company assumed
certain debts of Quadrex and QEC and issued to Quadrex 575,659
shares of the Company's Common Stock and agreed to issue to Quadrex
up to an additional 1,479,413 shares of Company Common Stock upon
certain conditions being met, with such balance being subject to
reductions under certain conditions.
Subsequent to the closing of the Quadrex Acquisitions, the
Company issued to Quadrex during the first quarter of 1995 an
additional 94,377 shares of Common Stock upon certain conditions
having been met. However, certain disputes and disagreements had
arisen among the parties whether under the terms of the Quadrex
Acquisitions the conditions required for delivery of the balance of
such shares had been met, and even if conditions were met, the
amount of such shares subject to reduction. In February 1995,
Quadrex filed for federal bankruptcy protection. The Company and
Quadrex negotiated and entered into a Settlement Agreement
resolving their differences as a result of the Quadrex Acquisitions
without resorting to litigation. Under the terms of the Settlement
Agreement, the Company issued to Quadrex in November 1995 an
additional 1,041,000 shares of Common Stock in full and complete
settlement of any and all claims which the parties may have against
each other relating to the Quadrex Acquisitions.
During July 1994, the Company completed the private placement
of 140 units, with each unit consisting of 10,000 shares of its
unregistered Common Stock and Class B Warrants to purchase up to
20,000 shares of the Company's Common Stock for $5.00 per share.
The Company closed the private placement on July 30, 1994 and
received total proceeds of $4,200,000, which resulted in the
issuance of 1,400,000 shares of unregistered Common Stock and Class
B Warrants to purchase 2,800,000 shares of Common Stock, as
described above. Of the issuance costs of $559,000, the Company
paid approximately $391,000 in fees to brokers, representatives or
finders in connection with the private placement. In addition, the
Company granted two warrants to purchase up to 331,000 shares of
Common Stock to two investment banking corporations. Each of the
warrants is for a term of five years and provides for an exercise
price of $3.625 per share.
On August 31, 1994, in connection with the conversion of
certain of the Company's notes then outstanding in the principal
amount of $225,000 and accrued interest of $9,000, the Company
18
<PAGE>
issued 78,140 shares of its unregistered Common Stock and issued
three warrants to purchase 156,280 shares of Common Stock. The
warrants are exercisable for five years at a price of $5.00 per
share.
On December 30, 1994, the Company registered the above
mentioned shares of Common Stock and warrants issued during 1994,
as well as previously unregistered shares of Common Stock and
warrants issued in prior years.
Stock Options
On December 16, 1991, the Company adopted a Performance Equity
Plan (the "Plan"), under which 500,000 shares of the Company's
Common Stock are reserved for issuance, pursuant to which officers,
directors and key employees are eligible to receive incentive or
nonqualified stock options. Incentive awards consist of stock
options, restricted stock awards, deferred stock awards, stock
appreciation rights and other stock-based awards. Incentive stock
options granted under the Plan are exercisable for a period of up
to ten years from the date of grant at an exercise price which is
not less than the market price of the Common Stock on the date of
grant, except that the term of an incentive stock option granted
under the Plan to a stockholder owning more than 10% of the then-
outstanding shares of Common Stock may not exceed five years and
the exercise price may not be less than 110% of the market price of
the Common Stock on the date of grant. To date, all grants of
options under the Performance Equity Plan have been made at an
exercise price not less than the market price of the Common Stock
at the date of grant.
Effective September 13, 1993, the Company adopted a
Nonqualified Stock Option Plan pursuant to which officers and key
employees can receive long-term performance-based equity interests
in the Company. The maximum number of shares of Common Stock as to
which stock options may be granted in any year shall not exceed
twelve percent (12%) of the number of common shares outstanding on
December 31 of the preceding year, less the number of shares
covered by the outstanding stock options issued under the Company's
1991 Performance Equity Plan as of December 31 of such preceding
year. The option grants under the plan are exercisable for a
period of up to ten years from the date of grant at an exercise
price which is not less than the market price of the Common Stock
at date of grant.
Effective December 12, 1993, the Company adopted the 1992
Outside Directors Stock Option Plan, pursuant to which options to
purchase an aggregate of 100,000 shares of Common Stock had been
authorized. This Plan provides for the grant of options on an
annual basis to each outside director of the Company to purchase up
to 5,000 shares of Common Stock. The options have an exercise
price equal to the closing trading price, or, if not available, the
fair market value of the Common Stock on the date of grant. The
Plan also provides for the grant of additional options to purchase
up to 10,000 shares of Common Stock on the foregoing terms to each
outside director upon election to the Board. During the Company's
annual meeting held on December 12, 1994, the stockholders approved
the second amendment to the Company's 1992 Outside Directors Stock
Option Plan which, among other things, (i) increased from 100,000
to 250,000 the number of shares reserved for issuance under the
Plan, and (ii) provides for automatic issuance to each director of
the Company, who is not an employee of the Company, a certain
number of shares of Common Stock in lieu of sixty-five percent
(65%) of the cash payment of the fee payable to each director for
his services as director of the Company. The Third Amendment to
the Outside Directors Plan, as approved at the December 1996 Annual
Meeting, provided that each eligible director shall receive, at
such eligible director's option, either sixty-five percent (65%) or
one hundred percent (100%) of the fee payable to such director for
services rendered to the Company as a member of the Board in Common
Stock. In either case, the number of shares of Common Stock of the
Company issuable to the eligible director shall be determined by
valuing the Common Stock of the Company at seventy-five percent
(75%) of its fair market value as defined by the Outside Directors
Plan.
The Company applies APB Opinion 25, "Accounting for Stock
Issued to Employees," and related interpretations in accounting for
options issued to employees. Accordingly, no compensation cost has
been recognized for options granted to employees at exercise prices
which equal or exceed the market price of the Company's Common
19
<PAGE>
Stock at the date of grant. Options granted at exercise prices
below market prices are recognized as compensation cost measured as
the difference between market price and exercise price at the date
of grant.
Statement of Financial Accounting Standards No. 123 (FAS 123)
"Accounting for Stock-Based Compensation," requires the Company to
provide pro forma information regarding net income and earnings per
share as if compensation cost for the Company's employee stock
options had been determined in accordance with the fair market
value based method prescribed in FAS 123. The Company estimates
the fair value of each stock option at the grant date by using the
Black-Scholes option-pricing model with the following weighted-
average assumptions used for grants in 1996 and 1995, respectively:
no dividend yield for both years; an expected life of ten years for
both years; expected volatility of 46.8% and 47.0%; and risk-free
interest rates of 6.63% and 7.69%.
Under the accounting provisions of FASB Statement 123, the
Company's net loss and loss per share would have been reduced to
the pro forma amounts indicated below:
<TABLE>
<CAPTION>
Under the accounting provisions of FASB Statement 123, the
Company's net loss and loss per share would have been reduced to
the pro forma amounts indicated below:
1996 1995
____________ ___________
<S> <C> <C>
Net loss applicable
to common stock
As reported $ (405,000) $ (9,052,000)
Pro forma (758,000) $ (9,553,000)
Net loss per share
As reported $ (.05) $ (1.15)
Pro forma (.09) (1.21)
</TABLE>
<TABLE>
<CAPTION>
A summary of the status of options under the plans as of
December 31, 1996 and 1995, and changes during the years ending on
those dates are presented below:
1996 1995
__________________________________________
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
_________ _________ _________ ________
<S> <C> <C> <C> <C>
Performance Equity Plan:
Balance at beginning
of year 263,282 $3.22 361,615 $3.31
Granted 110,000 1.00 15,000 2.47
Exercised - - - -
Forfeited (57,056) 3.32 (113,333) 3.41
________ ________
Balance at end
of year 316,226 2.43 263,282 3.22
======== ========
Options exercisable
at year end 183,609 3.14 158,874 3.17
Options granted during
the year at exercise
prices which equal
market price of stock
at date of grant:
Weighted average
exercise price 110,000 1.00 15,000 2.47
Weighted average
fair value 110,000 .68 15,000 1.69
20
<PAGE>
Nonqualified Stock Option
Plan:
Balance at beginning
of year 263,995 $3.17 119,295 $3.72
Granted 345,000 1.00 193,000 2.88
Exercised - - - -
Forfeited (133,600) 2.88 (48,300) 3.40
________ ________
Balance at end
of year 475,395 1.68 263,995 3.17
======== ========
Options exercisable
at year end 34,158 3.77 8,079 4.75
Options granted during
the year at exercise
prices which equal
market price of stock
at date of grant:
Weighted average
exercise price 345,000 1.00 193,000 2.88
Weighted average
fair value 345,000 .68 193,000 2.23
Outside Directors Stock
Option Plan:
Balance at beginning
of year 110,000 $3.08 90,000 $3.05
Granted 35,000 1.75 20,000 3.25
Exercised - - - -
Forfeited - - - -
________ ________
Balance at end
of year 145,000 2.76 110,000 3.08
======== ========
Options exercisable
at year end 110,000 3.08 110,000 3.08
Options granted during
the year at exercise
prices which equal
market price of stock
at date of grant:
Weighted average
exercise price 35,000 1.75 20,000 3.25
Weighted average
fair value 35,000 1.25 20,000 2.27
</TABLE>
<TABLE>
<CAPTION>
The following table summarizes information about options under
the plan outstanding at December 31, 1996:
Options Outstanding
________________________________________
Weighted
Average Weighted
Description and Number Remaining Average
Range of Outstanding at Contractual Exercise
Exercise Price Dec. 31, 1996 Life Price
________________________ ______________ ___________ ________
<S> <C> <C> <C>
Performance Equity Plan:
1991/1992 Awards ($3.02) 190,226 5.3 years $3.02
1993 Awards ($5.25) 16,000 6.8 years 5.25
1996 Awards ($1.00) 110,000 9.4 years 1.00
_________
316,226 2.43
=========
Nonqualified Stock
Option Plan:
1994 Awards ($4.75) 40,395 7.7 years $4.75
1995 Awards ($2.88) 90,000 8.0 years 2.88
1996 Awards ($1.00) 345,000 9.4 years 1.00
_________
475,395 1.68
=========
21
<PAGE>
Outside Directors Stock
Option Plan:
1993 Awards ($3.02) 45,000 5.5 years $3.02
1994 Awards ($3.00-$3.22) 45,000 7.5 years 3.07
1995 Awards ($3.25) 20,000 8.0 years 3.25
1996 Awards ($1.75) 35,000 9.9 years 1.75
_________
145,000 2.76
=========
<PAGE>
Options Exercisable
_______________________________
Weighted
Number Average
Exercisable at Exercise
Dec. 31, 1996 Price
_______________ ________
<C> <C>
174,009 $3.02
9,600 5.25
- -
__________
183,609 3.14
==========
16,158 $4.75
18,000 2.88
- 1.00
__________
34,158 3.77
==========
45,000 $3.02
45,000 3.07
20,000 3.25
-
________
110,000 3.08
</TABLE>
Warrants
The Company has issued various warrants pursuant to
acquisitions, private placements, debt and debt conversion and to
facilitate certain financing arrangements. The warrants
principally are for a term of five years and entitle the holder to
purchase one share of Common Stock for each warrant at the stated
exercise price. Also, the Company had issued certain Redeemable
Warrants (Class A) which entitled the holder to purchase one-
quarter share of Common Stock at an exercise price of $1.50 per
quarter share ($6 per whole share) commencing on December 8, 1993,
all of which expired on December 7, 1996. During 1996, pursuant to
the issuance of the Series 3 Class C Convertible Preferred Stock,
as further discussed in Note 4, the Company issued to RBB Bank two
(2) Common Stock purchase warrants entitling RBB Bank to purchase,
after December 31, 1996, until July 18, 2001, an aggregate of up to
2,000,000 shares of Common Stock, with 1,000,000 shares exercisable
at an exercise price equal to $2.00 per share and 1,000,000 at
$3.50 per share. In connection with the Preferred Stock issuance
as discussed fully in Note 4, the Company issued additional
warrants during 1996 for the purchase of 1,420,000 shares of Common
Stock which are included in other financing warrants. Certain of
the warrant agreements contain antidilution provisions which have
been triggered by the various stock and warrant transactions as
entered into by the Company since the issuance of such warrants by
the Company. The impact of these antidilution provisions was the
reduction of certain warrant exercise prices and the increase in
the total number of underlying shares for all warrants issued prior
to 1996 from their initial amount of 5,902,060 as of December 31,
1995, to an amended total of 6,893,697, of which 1,126,579 expired
during 1996.
<TABLE>
<CAPTION>
The following details the warrants currently outstanding as of
December 31, 1996, after giving effect to antidilution provisions:
Number of
Underlying Exercise Expiration
Warrant Series Shares Price Date
______________ _________ ________ __________
<S> <C> <C> <C>
Class A Warrants 291,316 $4.12 12/97
Class B Warrants 3,963,258 $3.53 6/99
Acquisition Warrants 487,814 $2.15 2/97
Debt Conversion Warrants 219,684 $3.56 8/99
Financing Warrants
(Preferred Stock) 1,000,000 $2.00 7/01
Financing Warrants
(Preferred Stock) 1,000,000 $3.50 7/01
Other Financing Warrants 2,225,046 $.73-$3.63 6/99-9/00
_________
9,187,118
==========
</TABLE>
The above noted acquisition warrants, which were originally
set to expire in February of 1997, were amended and subsequently
exercised in their entirety. See Note 15 for further discussion of
these amended warrants.
Shares Reserved
At December 31, 1996, the Company has reserved approximately
14,300,000 shares of Common Stock for future issuance under all of
the above arrangements and the convertible Series 3 Preferred Stock
using the maximum conversion price (see Note 4).
22
<PAGE>
Deferred Compensation
The stock grants issued in 1992 in connection with the IWM
acquisition have been accounted for as deferred compensation and
were amortized over three years, the period over which the
respective employees must earn their respective grant.
Compensation expense was $5,000 and $40,000 for 1995 and 1994,
respectively, related to these grants.
During 1993, 25,000 shares of the Company's Common Stock were
granted to a key employee of the Company at no cost as deferred
compensation. Upon issuance, 8,000 shares vested immediately,
9,000 shares vested on January 1, 1994, and 8,000 shares vested on
January 1, 1995. Compensation expense was $25,000 and $6,000 for
1995 and 1994, respectively, related to this grant.
_____________________________________________________
NOTE 10
COMMITMENTS AND CONTINGENCIES
Hazardous Waste
In connection with the Company's waste management services,
the Company handles both hazardous and non-hazardous waste which it
transports to its own or other facilities for destruction or
disposal. As a result of disposing of hazardous substances, in the
event any cleanup is required, the Company could be a potentially
responsible party for the costs of the cleanup notwithstanding any
absence of fault on the part of the Company.
Legal
During September 1994, PFM, formerly American Resource
Recovery Corporation ("ARR"), was sued by Community First Bank
("Community First") to collect a note in the principal sum of
$341,000 that was allegedly made by ARR to CTC Industrial Services,
Inc. ("CTC") in February 1987 (the "Note"), and which was allegedly
pledged by CTC to Community First in December 1988 to secure
certain loans to CTC. This lawsuit, styled Community First Bank v.
American Resource Recovery Corporation, was instituted on
September 14, 1994, and is pending in the Circuit Court, Shelby
County, Tennessee. The Company was not aware of either the Note or
its pledge to Community First at the time of the Company's
acquisition of PFM in December 1993. The Company intends to
vigorously defend itself in connection therewith. PFM has filed a
third party complaint against Billie Kay Dowdy, who was the sole
shareholder of PFM immediately prior to the acquisition of PFM by
the Company, alleging that Ms. Dowdy is required to defend and
indemnify the Company and PFM from and against this action under
the terms of the agreement relating to the Company's acquisition of
PFM. Ms. Dowdy has stated in her answer to the third party
complaint that if the Note is determined to be an obligation
enforceable against PFM, she would be liable to PFM, assuming no
legal or equitable defenses. Management believes that the final
outcome of these proceedings will not have a material adverse
effect on the Company's financial position, liquidity or results of
operations. This matter was settled on August 29, 1997. PFM and
Dowdy each agreed to pay the plaintiff $45,000 in exchange for a
full and complete release and dismissal of the above matter.
In May 1995, Perma-Fix of Memphis, Inc. ("PFM"), a subsidiary
of the Company, became aware that the U.S. District Attorney for
the Western District of Tennessee and the Department of Justice
were investigating certain prior activities of W. R. Drum Company,
its successor, First Southern Container Company, and any other
facility owned or operated, in whole or in part, by Johnnie
Williams. PFM used W. R. Drum Company to dispose of certain of
its used drums. In May 1995, PFM received a Grand Jury Subpoena
which demanded the production of any documents in the possession of
PFM pertaining to W. R. Drum Company, First Southern Container
Company, or any other facility owned or operated, and holder in
part, by Johnnie Williams. PFM complied with the Grand Jury
Subpoena. Thereafter, in September of 1995, PFM received another
Grand Jury Subpoena for documents from the Grand Jury investigating
W. R. Drum Company, First Southern Container Company and/or Johnnie
Williams. PFM complied with the Grand Jury Subpoena. In December
1995, representatives of the Department of Justice advised PFM that
it was also currently a subject of the investigation involving
23
<PAGE>
W. R. Drum Company, First Southern Container Company, and/or Johnnie
Williams. Since that time, however, PFM has had no contact with
representatives of either the United States District Attorney's
office for the Western District of Tennessee or the Department of
Justice, and is not aware of why it is also a subject of such
investigation. In accordance with certain provisions of the
Agreement and the Plan of Merger relating to the prior acquisition
of PFM, on or about January 2, 1996, PFM notified Ms. Billie K.
Dowdy of the foregoing, and advised Ms. Dowdy that the Company and
PFM would look to Ms. Dowdy to indemnify, defend and hold the
Company and PFM harmless from any liability, loss, damage or
expense incurred or suffered as a result of, or in connection with,
this matter. Management believes that the final outcome of these
proceedings will not have a material adverse effect on the
Company's financial position, liquidity or results of operations.
In addition to the above matters and in the normal course of
conducting its business, the Company is involved in various other
litigation. The Company is not a party to any litigation or
governmental proceeding which its management believes could result
in any judgments or fines against it that would have a material
adverse affect on the Company's financial position, liquidity or
results of operations.
Permits
The Company is subject to various regulatory requirements,
including the procurement of requisite licenses and permits at its
facilities. These licenses and permits are subject to periodic
renewal without which the Company's operations would be adversely
affected. The Company anticipates that, once a license or permit
is issued with respect to a facility, the license or permit will be
renewed at the end of its term if the facility's operations are in
compliance with the applicable regulatory requirements.
Accrued Closure Costs and Environmental Liabilities
The Company maintains closure cost funds to insure the proper
decommissioning of its RCRA facilities upon cessation of
operations. Additionally, in the course of owning and operating
on-site treatment, storage and disposal facilities, the Company is
subject to corrective action proceedings to restore soil and/or
groundwater to its original state. These activities are governed
by federal, state and local regulations and the Company maintains
the appropriate accruals for restoration. As discussed in Note 7,
the Company has recorded accrued liabilities for estimated closure
costs and identified environmental remediation costs.
Insurance
The business of the Company exposes it to various risks,
including claims for causing damage to property or injuries to
persons or claims alleging negligence or professional errors or
omissions in the performance of its services, which claims could be
substantial. The Company carries general liability insurance which
provides coverage in the aggregate amount of $2 million and an
additional $6 million excess umbrella policy and carries $1 million
per occurrence and $2 million annual aggregate of errors and
omissions/professional liability insurance coverage, which includes
pollution control coverage.
The Company also carries specific pollution liability
insurance for operations involved in the Waste Management Services
segment. The Company believes that this coverage, combined with
its various other insurance policies, is adequate to insure the
Company against the various types of risks encountered.
Expansion of PFD Facility
The Company is in the process of expanding the PFD waste
management facility. The expansion is expected to be completed
during the Fourth Quarter of 1997 at an estimated additional cost
of approximately $300,000.
Operating Leases
The Company leases certain facilities and equipment under
operating leases. Future minimum rental payments as of
December 31, 1996, required under these leases are $941,000 in
1997, $848,000 in 1998, $504,000 in 1999, $308,000 in 2000 and
$95,000 in 2001.
24
<PAGE>
Net rent expense relating to the Company's operating leases
was $1,657,000, $1,982,000 and $1,349,000 for 1996, 1995 and 1994,
respectively.
_____________________________________________________
NOTE 11
PROFIT SHARING PLAN
The Company adopted the Perma-Fix Environmental Services, Inc.
401(k) Plan (the "401(k) Plan") in 1992, which is intended to
comply under Section 401 of the Internal Revenue Code and the
provisions of the Employee Retirement Income Security Act of 1974.
All full-time employees of the Company and its subsidiaries who
have attained the age of 21 are eligible to participate in the
401(k) Plan. Participating employees may make annual pre-tax
contributions to their accounts up to 15% of their compensation, up
to a maximum amount as limited by law. The Company, at its
discretion, may make matching contributions based on the employee's
elective contributions. Company contributions vest over a period
of six years. The Company elected not to provide any matching
contributions for the years ended December 31, 1996, 1995 and 1994.
_____________________________________________________
NOTE 12
BUSINESS SEGMENT INFORMATION
The Company provides services through two business segments.
The Waste Management Services segment, which provides off-site
waste treatment, recycling and disposal services through its five
treatment, storage and disposal facilities (TSD facilities); Perma-
Fix Treatment Services, Inc., Perma-Fix of Dayton, Inc., Perma-Fix
of Memphis, Inc., Perma-Fix of Ft. Lauderdale, Inc. and Perma-Fix
of Florida, Inc. The Company also provides through this segment:
(i) on-site waste treatment services to convert certain types of
characteristic hazardous wastes into non-hazardous waste, through
its Perma-Fix, Inc. subsidiary; and (ii) the supply and management
of non-hazardous and hazardous waste to be used by cement plants as
a substitute fuel or raw material source. Effective June 30, 1994,
the Company acquired Perma-Fix of Dayton, Inc., Perma-Fix of Ft.
Lauderdale, Inc. and Perma-Fix of Florida, Inc., which are included
in the results during 1994.
The Company also provides services through the Consulting
Engineering Services segment. The Company provides environmental
engineering and regulatory compliance consulting services through
Schreiber, Grana & Yonley, Inc. in St. Louis, Missouri, and
Mintech, Inc. in Tulsa, Oklahoma. These engineering groups provide
oversight management of environmental restoration projects, air and
soil sampling and compliance reporting, surface and subsurface
water treatment design for removal of pollutants, and various
compliance and training activities.
The table below shows certain financial information by
business segment for 1996, 1995 and 1994. Income (loss) from
operations includes revenues less operating costs and expenses.
Marketing, general and administrative expenses of the corporate
headquarters have not been allocated to the segments. Identifiable
assets are those used in the operations of each business segment,
including intangible assets. Corporate assets are principally
cash, cash equivalents and certain other assets.
25
<PAGE>
<TABLE>
<CAPTION>
Waste Consulting Corporate
Management Engineering and
Dollars in Thousands Services Services Other Consolidated
__________________________________________________________________________
<S> <C> <C> <C> <C>
1996
Net revenues $ 25,493 $ 5,544 $ - $ 31,037
Depreciation and amortization 2,075 156 21 2,252
Income (loss) from operations 722 505 (1,298) (71)
Identifiable assets 26,403 2,565 68 29,036
Capital expenditures, net 1,301 (5) - 1,296
1995
Net revenues $ 28,843 $ 6,048 $ - $ 34,891
Depreciation and amortization 2,242 169 20 2,431
Permit write-down 4,712 - - 4,712
Nonrecurring charges 762 - 225 987
Income (loss) from operations (6,260) $ 350 (2,025) (7,935)
Identifiable assets 25,524 2,884 465 28,873
Capital expenditures, net 2,765 69 97 2,931
(exclusive of acquisitions)
1994
Net revenues $ 21,031 $ 7,044 $ - $ 28,075
Depreciation and amortization 1,518 186 14 1,718
Income (loss) from operations 172 283 (1,524) (1,069)
Identifiable assets 31,295 3,237 535 35,067
Capital expenditures, net 1,499 105 300 1,904
(exclusive of acquisitions)
</TABLE>
_____________________________________________________
NOTE 13
PERMIT WRITE-DOWN
During December 1995, the Company recognized a permit impairment charge
of $4,712,000, related to the December 1993 acquisition of Perma-Fix of
Memphis, Inc. ("PFM")(f/k/a American Resource Recovery, Inc.). The
acquisition was accounted for under the purchase method of accounting and
the related intangible permit represents the excess of the purchase price
over the fair value of the net assets of the acquired company and the
intrinsic value related to the Resource Conservation and Recovery Act
("RCRA") permits maintained by the facility. Subsequent to the
acquisition, PFM, as reported under the waste management services segment
of the Company, has consistently reflected operating losses. As a result,
during late 1994 and the first six (6) months of 1995, PFM had undergone a
series of restructuring programs aimed at the reduction of operating and
overhead costs, and increased gross margin and revenues. However, PFM
continued to experience intense competition for its services, and a decline
in market share and operating losses. Therefore, as a result of the
continued decline in operating results, the detailed strategic and
operational review, and the application of the Company's objective
measurement tests, an evaluation of the permit for possible impairment was
completed in December 1995.
The evaluation of such impairment included the development of the
Company's best estimate of the related undiscounted operating income over
the remaining life of the intangible permit. Consequently, the results of
the Company's best estimate of forecasted future operations, given the
consistent prior losses and uncertainty of the impact of the restructuring
programs, was that they do not support the recoverability of this permit.
As a result of these estimates and related uncertainties, the permit was
deemed to be impaired and a charge was recorded to write-down the full
value of the intangible permit of approximately $5,235,000, net of the
26
<PAGE>
accumulated amortization totaling approximately $523,000. This net charge
of $4,712,000 was recorded through the consolidated statement of operations
in December 1995 as "Permit write-down".
_____________________________________________________
NOTE 14
NONRECURRING CHARGES
During 1995, the Company recorded several nonrecurring charges totaling
$987,000, for certain unrelated events. Of this amount, $450,000
represents a divestiture reserve as related to the sale of a wholly-owned
subsidiary and $537,000 are one-time charges resulting from restructuring
programs.
As previously disclosed, the Company decided in 1994 to divest its
wholly-owned subsidiary, Re-Tech Systems, Inc., which is engaged in post-
consumer plastics recycling. Effective March 15, 1996, the Company
completed the sale of Re-Tech Systems, Inc., its plastics recycling
subsidiary in Houston, Texas. The sale transaction included all real and
personal property of the subsidiary, for a total consideration of $970,000.
Net cash proceeds to the Company were approximately $320,000, after the
repayment of a mortgage obligation of $595,000 and certain other closing
and real estate costs. In conjunction with this transaction, the Company
also made a prepayment of $50,000 to Heller Financial, Inc. for application
to the term loan. The Company recorded during 1995 a nonrecurring charge
of $450,000 (recorded as an asset reduction) for the estimated loss on the
sale of this subsidiary, which, based upon the closing balances, the
Company recognized a small gain on this sale after the asset write-down.
The Company sold total assets of approximately $1,346,000, while retaining
certain assets totaling approximately $94,000 and certain liabilities
totaling approximately $48,000.
The Company also executed restructuring programs within the waste
management services segment. A one-time charge of $237,000 was recorded to
provide for costs, principally severance and lease termination fees,
associated with the restructuring of the Perma-Fix, Inc. service center
group. This program entailed primarily the consolidation of offices in
conjunction with the implementation of a regional service center concept,
and the related closing of seven (7) of the nine (9) offices. A one-time
charge of $75,000 was also recorded during the second quarter of 1995 to
provide for consolidation costs, principally severance, associated with the
restructuring of the Southeast Region, which is comprised of Perma-Fix of
Florida and Perma-Fix of Ft. Lauderdale. These restructuring costs were
principally incurred and funded during 1995.
In December of 1995, in conjunction with the above referenced
restructuring program, the Company and Mr. Robert W. Foster, Jr. ("Foster")
agreed to Foster's resignation as President, Chief Executive Officer and
Director of the Company, thereby terminating his employment agreement with
the Company effective March 15, 1996. The Company agreed to severance
benefits of $30,000 in cash, the continuation of certain employee benefits
for a period of time and the issuance of $171,000 in the form of Common
Stock, par value $.001, of the Company. Pursuant to the above, the Company
recorded a nonrecurring charge at December 31, 1995 of $215,000. In
addition, severance costs of approximately $10,000 were incurred upon the
termination of several corporate executives. These restructuring costs
were principally incurred and funded during the first six months of 1996.
_____________________________________________________
NOTE 15
SUBSEQUENT EVENTS
Effective February 7, 1997, the Company amended five (5) warrants with
an original issuance date of February 10, 1992 to purchase an aggregate of
487,814 shares of the Company's Common Stock ("Acquisition Warrants"). The
Acquisition Warrants were amended to (i) reduce the exercise price from
27
<PAGE>
$2.1475 per share of Common Stock to $1.00 per share of Common Stock, and
(ii) extend the expiration date of the warrants from February 10, 1997 to
March 3, 1997. All Acquisition Warrants were subsequently exercised prior
to this March 3, 1997 date, which resulted in $487,814 of additional
capital/equity.
On January 27, 1997, an explosion and resulting tank fire occurred at the
Perma-Fix of Memphis, Inc. ("PFM") facility, a hazardous waste storage,
processing and blending facility, located in Memphis, Tennessee, which
resulted in damage to certain hazardous waste storage tanks located on the
facility and caused certain limited contamination at the facility. Such
occurrence was caused by welding activity performed by employees of an
independent contractor at or near the facility s hazardous waste tank farm
contrary to instructions by PFM. The facility was non-operational from the
date of this event until May, 1997, at which time it began limited
operations. However, PFM has accepted and will continue to accept waste
for processing and disposal, but has arranged for other facilities owned by
the Company or subsidiaries of the Company or others not affiliated with
the Company to process such waste. The utilization of other facilities to
process such waste results in higher costs to PFM than if PFM were able to
store and process such waste at its Memphis, Tennessee, TSD facility, along
with the additional handling and transportation costs associated with these
activities. PFM is in the process of repairing and/or removing the damaged
storage tanks and any contamination resulting from the occurrence. The
extent of PFM's activities at the facility is presently being evaluated by
the Company. The Company and PFM have property and business interruption
insurance and have provided notice to its carriers of such loss. The
Company has settled its property and contents claim for $522,000. The
Company is in the process of determining the amount of business
interruption insurance that may be recoverable by PFM as a result thereof.
On or about June 11, 1997, the Company issued to RBB Bank
Aktiengesellschaft, located in Graz, Austria ( RBB Bank"), 2,500 shares of
newly-created Series 4 Class D Convertible Preferred Stock, par value $.001
per share ("Series 4 Preferred"), at a price of $1,000 per share, for an
aggregate sales price of $2,500,000. The sale to RBB Bank was made in a
private placement under Rule 506 of Regulation D under the Securities Acts
of 1933, as amended, pursuant to the terms of a Subscription and Purchase
Agreement, dated June 9, 1997, between the Company and RBB Bank
("Subscription Agreement"). The Series 4 Preferred has a liquidation
preference over the Company's Common Stock, par value $.001 per share
("Common Stock"), equal to $1,000 consideration per outstanding share of
Series 4 Preferred (the "Liquidation Value"), plus an amount equal to all
unpaid dividends accrued thereon. The Series 4 Preferred accrues dividends
on a cumulative basis at a rate of four percent (4%) per annum of the
Liquidation Value ("Dividend Rate"), and is payable semi-annually when and
as declared by the Board of Directors. No dividends or other distributions
may be paid or declared or set aside for payment on the Company's Common
Stock until all accrued and unpaid dividends on all outstanding shares of
Series 4 Preferred have been paid or set aside for payment. Dividends shall
be paid, at the option of the Company, in the form of cash or Common Stock
of the Company. If the Company pays dividends in Common Stock, such is
payable in the number of shares of Common Stock equal to the product of (a)
the quotient of (i) four percent (4%) of $1,000 divided by (ii) the average
of the closing bid quotation of the Common Stock as reported on the NASDAQ
for the five trading days immediately prior to the applicable dividend
declaration date, times (b) a fraction, the numerator of which is the
number of days elapsed during the period for which the dividend is to be
paid and the denominator of which is 365.
The holder of the Series 4 Preferred may convert into Common Stock up
to 1,250 shares of the Series 4 Preferred on and after October 5, 1997, and
the remaining 1,250 shares of the Series 4 Preferred on and after November
5, 1997. The conversion price per share is the lesser of (a) the product of
the average closing bid quotation for the five (5) trading days immediately
preceding the conversion date multiplied by eighty percent (80%) or (b)
$1.6875. The minimum conversion price is $.75, which minimum will be
eliminated from and after September 6, 1998. The Company will have the
option to redeem the shares of Series 4 Preferred (a) between June 11,
1998, and June 11, 2001, at a redemption price of $1,300 per share if at
28
<PAGE>
any time the average closing bid price of the Common Stock for ten
consecutive trading days is in excess of $4.00, and (b) after June 11,
2001, at a redemption price of $1,000 per share. The holder of the Series
4 Preferred will have the option to convert the Series 4 Preferred prior to
redemption by the Company.
As part of the sale of the Series 4 Preferred, the Company also issued
to RBB Bank two Common Stock purchase warrants (collectively, the "Warrants
") entitling RBB Bank to purchase, after December 31, 1997 and until
June 9, 2000, an aggregate of up to 375,000 shares of Common Stock, subject
to certain anti-dilution provisions, with 187,500 shares exercisable at a
price equal to $2.10 per share and 187,500 shares exercisable at a price
equal to $2.50 per share. A certain number of shares of Common Stock
issuable on the conversion of the Series 4 Preferred and on the exercise of
the Warrants is subject to certain registration rights pursuant to the
Subscription Agreement.
The Company paid fees (excluding legal and accounting) of $200,000 in
connection with the placement of Series 4 Preferred to RBB Bank and issued
to the investment banking firm that handled the placement two (2) Common
Stock purchase warrants entitling the investment banking firm to purchase
an aggregate of up to 300,000 shares of Common Stock, subject to certain
anti-dilution provisions, with one warrant for a five year term to purchase
up to 200,000 shares at an exercise price of $2.00 per share and the second
warrant for a three year term to purchase up to 100,000 shares of Common
Stock at an exercise price of $1.50 per share, subject to certain anti-
dilution provisions. Under the terms of each warrant, the investment
banking firm is entitled to certain registration rights with respect to the
shares of Common Stock issuable on the exercise of each warrant.
As of the date of this Form 10-K/A, the Company is negotiating an
Exchange Agreement with RBB Bank ("RBB Exchange Agreement") which is
anticipated to provide that the 2,500 shares of Series 4 Preferred and the
RBB Series 4 Warrants will be tendered to the Company in exchange for (i)
2,500 shares of a newly created Series 6 Class F Preferred Stock, par value
$.001 per share ("Series 6 Preferred"), (ii) two warrants each to purchase
187,500 shares of Common Stock exercisable at $1.8125 per share, and (iii)
one warrant to purchase 281,250 shares of Common Stock exercisable at
$2.125 per share (collectively, the "RBB Series 6 Warrants"). The RBB
Series 6 Warrants will be for a term of three (3) years and may be
exercised at any time after December 31, 1997, and until June 9, 2000.
As contemplated, the conversion price of the Series 6 Preferred shall be
$1.8125 per share, unless the closing bid quotation of the Common Stock is
lower than $2.50 in twenty (20) out of any thirty (30) consecutive trading
days after March 1, 1998, in which case, the conversion price per share
shall be the lesser of (A) the product of the average closing bid quotation
for the five (5) trading days immediately preceding the conversion date
multiplied by eighty percent (80%) or (B) $1.8125 with the minimum
conversion price being $.75, which minimum will be eliminated from and
after September 6, 1998. It is contemplated the remaining terms of the
Series 6 Preferred will be substantially the same as the terms of the
Series 4 Preferred.
The RBB Exchange Agreement has not been entered into by the parties and
it is subject to change pending the approval by the Company and RBB Bank of
definitive documents. No assurances can be made that the RBB Exchange
Agreement will be consummated in its contemplated form as of the date of
this Form 10-K/A or at all.
On or about July 14, 1997, the Company issued to the Infinity Fund. L.P.
("Infinity"), 350 shares of newly-created Series 5 Class E Convertible
Preferred Stock, par value $.001 per share ("Series 5 Preferred"), at a
price of $1,000 per share, for an aggregate sales price of $350,000. The
sale to Infinity was made in a private placement under Rule 506 of
Regulation D under the Securities Acts of 1933, as amended, pursuant to
the terms of a Subscription and Purchase Agreement, dated July 7, 1997,
29
<PAGE>
between the Company and Infinity ("Infinity Subscription Agreement"). The
Company intends to utilize the proceeds received on the sale of Series 5
Preferred for the payment of debt and general working capital.
The Series 5 Preferred has a liquidation preference over the Company's
Common Stock, par value $.001 per share ("Common Stock"), equal to $1,000
consideration per outstanding share of Series 5 Preferred (the "Liquidation
Value"), plus an amount equal to all unpaid dividends accrued thereon. The
Series 5 Preferred accrues dividends on a cumulative basis at a rate of
four percent (4%) per annum of the Liquidation Value ("Dividend Rate").
Dividends are payable semi-annually when and as declared by the Board of
Directors. No dividends or other distributions may be paid or declared or
set aside for payment on the Company's Common Stock until all accrued and
unpaid dividends on all outstanding shares of Series 5 Preferred have been
paid or set aside for payment. Dividends may be paid, at the option of the
Company, in the form of cash or Common Stock of the Company. If the
Company pays dividends in Common Stock, such is payable in the number of
shares of Common Stock equal to the product of (a) the quotient of (i) the
Dividend Rate divided by (ii) the average of the closing bid quotation of
the Common Stock as reported on the NASDAQ for the five trading days
immediately prior to the date the dividend is declared, multiplied by (b)
a fraction, the numerator of which is the number of days elapsed during the
period for which the dividend is to be paid and the denominator of which is
365.
The holder of the Series 5 Preferred may convert into Common Stock up to
175 shares of the Series 5 Preferred on and after November 3, 1997, and the
remaining 175 shares of the Series 5 Preferred on and after December 3,
1997. The conversion price per share is the lesser of (a) the product of
the average closing bid quotation for the five trading days immediately
preceding the conversion date multiplied by 80% or (b) $1.6875. The
minimum conversion price is $.75, which minimum will be eliminated from and
after September 6, 1998. The Company will have the option to redeem the
shares of Series 5 Preferred (a) between July 14, 1998, and July 13, 2001,
at a redemption price of $1,300 per share if at any time the average
closing bid price of the Common Stock for ten consecutive trading days is
in excess of $4.00, and (b) after July 13, 2001, at a redemption price of
$1,000 per share. The holder of the Series 5 Preferred will have the option
to convert the Series 5 Preferred prior to redemption by the Company. A
certain number of shares of Common Stock issuable upon conversion of the
Series 5 Preferred is subject to certain registration rights pursuant to
the Infinity Subscription Agreement.
As of the date of this Form 10-K/A, the Company is negotiating an
Exchange Agreement with Infinity ( Infinity Fund Exchange Agreement )
which is anticipated to provide that the 350 shares of Series 5 Preferred
will be tendered to the Company in exchange for (i) 350 shares of a newly
created Series 7 Class G Preferred Stock, par value $.001 per share
("Series 7 Preferred"), and (ii) one Warrant to purchase up to 35,000
shares of Common Stock exercisable at $1.8125 per share ("Series 7
Warrant"). The Series 7 Warrant will be for a term of three (3) years and
may be exercised at any time after December 31, 1997, and until July 7,
2000.
As contemplated, the conversion price of the Series 7 Preferred shall be
$1.8125 per share, unless the closing bid quotation of the Common Stock is
lower than $2.50 per share in twenty (20) out of any thirty (30)
consecutive trading days after March 1, 1998, in which case, the conversion
price per share shall be the lesser of (i) the product of the average
closing bid quotation for the five (5) trading days immediately preceding
the conversion date multiplied by eighty percent (80%) or (ii) $1.8125,
with the minimum conversion price being $.75, which minimum will be
eliminated from and after September 6, 1998. It is contemplated that the
remaining terms of the Series 7 Preferred will be substantially the same as
the terms of the Series 5 Preferred.
The Infinity Fund Exchange Agreement has not been entered into by the
parties and is subject to change pending the approval by the Company and
Infinity of definitive documents. No assurance can be made that the
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<PAGE>
Infinity Fund Exchange Agreement will be consummated in its contemplated
form as of the date of this Form 10-K/A or at all.
On June 30, 1997, the Company entered into a Stock Purchase Agreement
("Centofanti Agreement") with Dr. Louis F. Centofanti, whereby the Company
sold, and Dr. Centofanti purchased, 24,381 shares of the Company's Common
Stock. The purchase price was $1.6406 per share representing 75% of the
$2.1875 closing bid price of the Common Stock as quoted on the NASDAQ on
the date that Dr. Centofanti notified the Company of his desire to
purchase such shares. Pursuant to the terms of the Centofanti Agreement,
Dr. Centofanti is to pay the Company the aggregate purchase price of
$40,000 for the 24,381 shares of Common Stock. Dr. Centofanti purchased
12,190 shares, during July for $20,000, and during October, the Agreement
was amended to reduce the number of shares of Common Stock that Dr.
Centofanti is to acquire under the Centofanti Agreement to the 12,190
shares already acquired by Dr. Centofanti under the Centofanti Agreement,
upon consideration of the certain recent accounting pronouncements related
to stock based compensation. The sale of the shares pursuant to the
Centofanti Agreement and its subsequent amendment dated October 7, 1997,
for the sale of 12,190 shares were authorized by the Company's Board of
Directors.
On July 30, 1997, the Company entered into a Stock Purchase Agreement
("Gorlin Agreement") with Mr. Steve Gorlin, a Director of the Company,
whereby the Company sold, and Mr. Gorlin agreed to purchase, 200,000 shares
of the Company s Common Stock. The purchase price was $2.125 per share
representing the closing bid price of the Common Stock as quoted on the
NASDAQ on July 30, 1997. Pursuant to the terms of the Gorlin Agreement,
Mr. Gorlin agreed to pay the Company the aggregate purchase price of
$425,000 for the 200,000 shares of Common Stock. Mr. Gorlin agreed to
tender $425,000 during August, 1997, however, pursuant to an amendment to
the Gorlin Agreement, which was entered into on October 7, 1997, the
payment schedule was modified such that Mr. Gorlin agreed to tender the
$425,000 on or before November 30, 1997. In order to induce Mr. Gorlin to
enter into the amendment to the Gorlin Agreement, and to purchase the
Common Stock on the terms and subject to the conditions thereof, PESI
agreed to issue a three (3) year Warrant to Mr. Gorlin for the purchase of
100,000 shares of Common Stock at $2.40 per share.
In consideration of certain investment banking services as performed for
the Company, a warrant was issued to J.W. Charles Financial Services, Inc.
("Charles") during September 1996. This warrant was subsequently assigned
by Charles to certain partners, officers or broker and, during July 1997,
one of the assigned warrants was exercised which resulted in the issuance
of 155,000 shares of the Company's Common Stock and raised $232,000 in
equity or capital for the Company.
In March 1997, the Financial Accounting Standards Board issued a
Statement of Financial Accounting Standards No. 128, Earnings per Share,
(FAS 128). FAS 128, which is effective for financial statements issued for
periods ending after December 15, 1997, simplifies the standards for
computing earnings per share and makes them comparable to international
earnings per share standards. This statement replaces the presentation of
primary EPS and fully diluted EPS with a presentation of basic EPS and
diluted EPS, respectively. Basic EPS excludes dilution and is computed by
dividing earnings available to Common Stockholders by the weighted-average
number of common shares outstanding for the period. Similar to fully
diluted EPS, diluted EPS reflects the potential dilution of securities that
could share in the earnings. This statement is not expected to have a
material effect on the Company's reported earnings per share amounts.
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130, Reporting Comprehensive
Income, (FAS 130) and No. 131, Disclosure about Segments of an Enterprise
and Related Information, (FAS 131). FAS 130 establishes standards for
reporting and displaying comprehensive income, its components and
accumulated balances. FAS 131 establishes standards for the way that
public companies report information about operating segments in annual
31
<PAGE>
financial statements and requires reporting of selected information about
operating segments in interim financial statements issued to the public.
Both FAS 130 and FAS 131 are effective for periods beginning after
December 15, 1997. The Company has not determined the impact that the
adoption of these new accounting standards will have on its future
financial statements and disclosures.
On October 1, 1997, Dr. Centofanti entered into a three (3) year
Employment Agreement with the Company which provided for, among other
things, an annual salary of $110,000 and the issuance of Non-Qualified
Stock Options ("Non-Qualified Stock Options"). The Non-Qualified Stock
Options provide Dr. Centofanti with the right to purchase an aggregate of
300,000 shares of Common Stock in the form of (i) after one year 100,000
shares of Common Stock at a price of $2.25 per share, (ii) after two years
100,000 shares of Common Stock at a price of $2.50 per share, and (iii)
after three years 100,000 shares of Common Stock at a price of $3.00 per
share. The Non-Qualified Stock Options expire ten years after the date of
the Employment Agreement.
32
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
The following documents are filed as a part of this report:
(a)(1) Consolidated Financial Statements
See Item 8 for the Index to Consolidated Financial Statements.
(a)(2) Financial Statement Schedules
See Item 8 for the Index to Consolidated Financial Statements
(which includes the Index to Financial Statement Schedules)
(a)(3) Exhibits
The Exhibits listed in the Exhibit Index are filed or
incorporated by reference as a part of this report.
(b) Reports on Form 8-K
A current report on Form 8-K (Item 4 -- Changes in Registrant's
Certifying Accountant) was filed on November 21, 1996 reporting
that on November 15, 1996 Arthur Andersen LLP, the outside
independent auditors of the Registrant, notified the Registrant
that it was resigning, effective immediately, as the
Registrant's independent auditors.
A current report on Form 8-K (Item 4 -- Changes in Registrant's
Certifying Accountant) was filed on December 20, 1996 reporting
that on December 18, 1996 the Registrant's Board of Directors
approved the employment of BDO Seidman, LLP as the Registrant's
new independent auditors.
33
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Perma-Fix Environmental Services, Inc.
By: /s/ Dr. Louis F. Centofanti Date: October 15, 1997
______________________________ __________________
Dr. Louis F. Centofanti
Chairman of the Board
Chief Executive Officer
By: /s/ Richard T. Kelecy Date: October 15, 1997
______________________________ ___________________
Richard T. Kelecy
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in capacities and on the dates indicated.
/s/ Mark A. Zwecker Date: October 15, 1997
_________________________ __________________
Mark A. Zwecker, Director
/s/ Steve Gorlin Date: October 15, 1997
_________________________ __________________
Steve Gorlin, Director
/s/ Jon Colin Date: October 15, 1997
________________________ _________________
Jon Colin, Director
<PAGE>
/s/ Dr. Louis F. Centofanti Date: October 15, 1997
__________________________ __________________
Dr. Louis F. Centofanti, Director
34
<PAGE>
SCHEDULE II
PERMA-FIX ENVIRONMENTAL SERVICES, INC.
<TABLE>
<CAPTION>
VALUATION AND QUALIFYING ACCOUNTS
For the years ended December 31, 1996, 1995 and 1994
(Dollars in thousands)
Additions
Charged to
Balance at Costs, Balance
Beginning Expenses at End
Description of Year and Other Deductions of Year
___________________________________________________________________
<S> <C> <C> <C> <C>
Year ended December 31,
1996:
Allowance for
doubtful accounts $ 392 $ 17 $ 26 $ 383
Divestiture reserve 450 - 450 -
Restructuring reserve 257 - 257 -
Year ended December 31,
1995:
Allowance for doubtful
accounts $ 689 $ 610(1) $ 907 $ 392
Divestiture reserve - 450(2) - 450
Restructuring reserve - 537(3) 280 257
Year ended December 31,
1994:
Allowance for doubtful
accounts $ 414 $ 311(4) $ 36 $ 689
<FN>
(1) Includes $26 recorded in conjunction with the asset purchase
of Industrial Compliance and Safety, Inc. on June 1, 1995.
(2) Reflects the divestiture reserve for the Company's wholly-
owned subsidiary Re-Tech Systems, Inc., recorded as a
reduction to the asset value in the second quarter of 1995.
The sale transaction was completed in the first quarter of
1996.
(3) Includes one-time charges resulting from restructuring charges
within the waste management services segment.
(4) Includes $197 acquired in the acquisition of Perma-Fix of
Florida, Inc., Perma-Fix of Dayton, Inc. and Perma-Fix of Ft.
Lauderdale, Inc. on June 30, 1994.
</FN>
</TABLE>
35
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
_______ ___________
3(i) Restated Certificate of Incorporation, as amended, and
all Certificates of Designations.
3(ii) Bylaws, as incorporated by reference from to the Company's
Registration Statement, No. 33-51874.
4.1 Warrant Agreement, dated May 15, 1994, between the
Company and Continental Stock Transfer & Trust Company,
as Warrant Agent, as incorporated by reference from
Exhibit 4.2 to the Company's Form 10-Q for the quarter
ended June 30, 1994.
4.2 Specimen Warrant Certificate relating to Class B
Warrants, as incorporated by reference from Exhibit 4.9
to the Company's Registration Statement, No. 33-85118.
4.3 Specimen Common Stock Certificate as incorporated by
reference from Exhibit 4.3 to the Company's Registration
Statement, No. 33-51874.
4.4 Loan and Security Agreement, dated January 31, 1995,
between the Company, subsidiaries of the Company, and
Heller Financial, Inc., as incorporated by reference from
Exhibit 4.4 to the Company's Form 10-K for the year ended
December 31, 1994. The Loan and Security Agreement
contains a list briefly identifying the schedules and
exhibits included therein, all of which are omitted from
this filing, and the Company agrees to furnish
supplementally a copy of any omitted schedule and exhibit
to the Commission upon request.
4.5 First Amendment to Loan and Security Agreement with
Heller Financial, Inc. and forbearance letter dated
March 31, 1996 from Heller Financial, Inc., as
incorporated by reference from Exhibit 4.5 to the
Company's Form 10-K for the year ended December 31,
1995.
4.6 Second Amendment to Loan and Security Agreement with
Heller Financial, Inc. and forbearance letter, dated
May 10, 1996, from Heller Financial, Inc., as
incorporated by reference from Exhibit 4.1 and Exhibit
4.2, respectively, to the Company's Form 10-Q for the
quarter ended March 31, 1996.
4.7 Third Amendment to Loan and Security Agreement with
Heller Financial, Inc. and Letter Agreement with Heller
Financial, Inc., dated June 19, 1996, as incorporated by
reference from Exhibit 4.1 and Exhibit 4.2, respectively,
to the Company's Form 10-Q for the quarter ended June 30,
1996.
4.8 Fourth Amendment to Loan and Security Agreement with
Heller Financial, Inc., as incorporated by reference from
Exhibit 4.4 to the Company's Form 10-Q for the quarter
ended September 30, 1996.
4.9* Fifth Amendment to Loan and Security Agreement with
Heller Financial, Inc., dated December 5, 1996.
4.10* Letter Agreement with Heller Financial, Inc., dated
February 25, 1997.
4.11* Sixth Amendment to Loan and Security Agreement with
Heller Financial, Inc., dated April 14, 1997.
36
<PAGE>
4.12 Amendment to Ally Capital Corporation Lease Agreement
dated August 16, 1996, as incorporated by reference from
Exhibit 4.3 to the Company's Form 10-Q for the quarter
ended June 30, 1996.
4.13 Amendment to Ally Capital Corporation Lease Agreement
dated November 14, 1996, as incorporated by reference
from Exhibit 4.5 to the Company's Form 10-Q for the
quarter ended September 30, 1996.
4.14* Amendment to Ally Capital Corporation Lease Agreement
dated April 14, 1997.
4.15 Warrant Agreement between the Company and the Warrant
Agent, dated December 8, 1992, as incorporated by
reference from Exhibit 4.2 to the Company's Registration
Statement, No. 33-51874.
4.16 Form of Subscription Agreement, as incorporated by
reference from Exhibit 4.1 to the Company's Form 10-Q for
the quarter ended June 30, 1994.
4.17 Offshore Securities Subscription Agreement, dated
February 9, 1996, between the Company and RBB Bank
Aktiengesellschaft, as incorporated by reference from
Exhibit 4.10 to the Company's Form 10-K for the year
ended December 31, 1995.
4.18 Offshore Securities Subscription Agreement, dated
February 22, 1996, between the Company and RBB Bank
Aktiengesellschaft, as incorporated by reference from
Exhibit 4.11 to the Company's Form 10-K for the year
ended December 31, 1995.
4.19 Subscription and Purchase Agreement dated July 17, 1996,
between the Company and RBB Bank Aktiengesellschaft, as
incorporated by reference from Exhibit 4.4 to the
Company's Form 10-Q for the quarter ended June 30, 1996.
4.20 Form of Certificate for Series 3 Preferred, as
incorporated by reference from Exhibit 4.6 to the
Company's Form 10-Q for the quarter ended June 30,
1996.
10.1 Note and Warrant Purchase Agreement, dated February 10,
1992, between the Company and Al Warrington, Productivity
Fund II, L.P. ("Productivity Fund"), Environmental
Venture Fund, L.P. ("Environmental Venture Fund"), and
Steve Gorlin, as incorporated by reference from Exhibit
4.1 of the Company's Registration Statement, No. 33-
85118.
10.2 Investors' Rights Agreement, dated February 10, 1992,
between the Company and Al Warrington, Productivity Fund,
Environmental Venture Fund, and Steve Gorlin, as
incorporated by reference from Exhibit 4.2 of the
Company's Registration Statement, No. 33-85118.
10.3 Warrant to Purchase Common Stock, dated February 10,
1992, issued by the Company to Al Warrington, as
incorporated by reference from Exhibit 4.3 of the
Company's Registration Statement, No. 33-85118.
10.4 Warrant to Purchase Common Stock, dated February 10,
1992, issued by the Company to Productivity Fund, as
incorporated by reference from Exhibit 4.4 of the
Company's Registration Statement, No. 33-85118.
10.5 Warrant to Purchase Common Stock, dated February 10,
1992, issued by the Company to Environmental Venture
Fund, as incorporated by reference from Exhibit 4.5 of
the Company's Registration Statement, No. 33-85118.
37
<PAGE>
10.6 Warrant to Purchase Common Stock, dated February 10,
1992, issued by the Company to Steve Gorlin, as
incorporated by reference from Exhibit 4.6 to the
Company's Registration Statement, No. 33-85118.
10.7 Warrant to Purchase Common Stock, dated February 10,
1992, issued by the Company to D.H. Blair Investment
Banking Corporation, as incorporated by reference from
Exhibit 4.1 to the Company's Form 8-K dated February 7,
1997.
10.8 Amendments, dated February 7, 1997, to Common Stock
Warrants for the Purchase of Shares of Common Stock,
dated February 10, 1992, between the Company and each of
Alfred C. Warrington, IV, Productivity Fund II, L.P.,
Environmental Venture Fund II, L.P., Steve Gorlin, and
D.H. Blair Investment Banking Corporation, as
incorporated by reference from, respectively, Exhibits
4.2, 4.3, 4.4, 4.5 and 4.6 to the Company's Form 8-K
dated February 7, 1997.
10.9 1991 Performance Equity Plan of the Company, as
incorporated herein by reference from Exhibit 10.3 to the
Company's Registration Statement, No. 33-51874.
10.10 Warrant, dated September 1, 1994, granted by the Company
to Productivity Fund, as incorporated herein by reference
from Exhibit 4.12 to the Company's Registration Statement
No. 33-85118.
10.11 Warrant, dated September 1, 1994, for the Purchase of
Common Stock granted by the Company to Environmental
Venture Fund, as incorporated by reference from Exhibit
4.14 to the Company's Registration Statement No. 33-
85118.
10.12 Warrant, dated September 1, 1994, for the Purchase of
Common Stock granted by the Company to Warrington, as
incorporated by reference from Exhibit 4.16 to the
Company's Registration Statement No. 33-85118.
10.13 Warrant, dated September 1, 1994, for the Purchase of
Common Stock granted by the Company to Joseph Stevens &
Company, L.P. ("Stevens"), as incorporated by reference
from Exhibit 4.17 to the Company's Registration Statement
No. 33-85118.
10.14 Warrant, dated October 6, 1994, for the Purchase of
Common Stock granted by the Company to Stevens, as
incorporated by reference from Exhibit 4.20 to the
Company's Registration Statement No. 33-85118.
10.15 Agreement, dated September 30, 1994, between AEC,
Quadrex, QEC, and the Company, as incorporated by
reference from Exhibit 4.21 to the Company's Registration
Statement No. 33-85118.
10.16 Restricted Stock Award between the Company and Dominic
Grana, as incorporated by reference from Exhibit 4.23 to
the Company's Registration Statement No. 33-85118.
10.17 Restricted Stock Award between the Company and Robert
Schreiber, as incorporated by reference from Exhibit 4.25
to the Company's Registration Statement No. 33-85118.
10.18 Restricted Stock Award between the Company and Carolyn
Yonley, as incorporated by reference from Exhibit 4.26 to
the Company's Registration Statement No. 33-85118.
38
<PAGE>
10.19 Warrant, dated September 30, 1994, for the Purchase of
Shares of Common Stock granted by the Company to Ally
Capital Management, Inc., as incorporated by reference
from Exhibit 4.27 to the Company's Registration Statement
No. 33-85118.
10.20 Warrant, dated June 17, 1994, for the purchase of Common
Stock granted by the Company to Sun Bank, National
Association, as incorporated by reference from Exhibit
4.2 to the Company's Form 8-K dated June 17, 1994.
10.21 Warrant, dated September 1, 1994, for the Purchase of
Shares of Common Stock granted by the Company to D. H.
Blair Investment Banking Corporation, as incorporated by
reference from Exhibit 10.24 to the Company's Form 10-K
for the year ended December 31, 1994. Blair assigned a
portion of its initial warrant to certain officers and
directors of Blair. The warrants issued to such officers
and directors are substantially similar to the warrant
issued to Blair, except as to name of the warrant holder
and the number of shares covered by each such warrant, as
follows:
J. Morton Davis 9,775 shares
Martin A. Bell 8,000 shares
Alan Stahler 39,100 shares
Kalman Renov 39,100 shares
Richard Molinsky 25,125 shares
Jeff Berns 25,500 shares
Nick DiFalco 21,000 shares
Richard Molinsky 50,250 shares
and the Company agrees to file copies of the omitted
documents to the Commission upon the Commission's
request.
10.22 1992 Outside Directors' Stock Option Plan of the Company,
as incorporated by reference from Exhibit 10.4 to the
Company's Registration Statement, No. 33-51874.
10.23 First Amendment to the Company's 1992 Outside Directors'
Stock Option Plan, as incorporated by reference from
Exhibit 10.29 to the Company's Form 10-K for the year
ended December 31, 1994.
10.24 Second Amendment to the Company's 1992 Outside Directors'
Stock Option Plan, as incorporated by reference from the
Company's Proxy Statement, dated November 4, 1994.
10.25 Third Amendment to the Company's 1992 Outside Directors'
Stock Option Plan, as incorporated by reference from the
Company's Proxy Statement, dated November 8, 1996.
10.26 1993 Nonqualified Stock Option Plan, as incorporated by
reference from the Company's Proxy Statement, dated
October 12, 1993.
10.27 401(K) Profit Sharing Plan and Trust of the Company, as
incorporated by reference from Exhibit 10.5 to the
Company's Registration Statement, No. 33-51874.
39
<PAGE>
10.28 Stock Purchase Agreement between the Company and Dr.
Louis F. Centofanti, dated March 1, 1996, as incorporated
by reference from Exhibit 10.30 to the Company's Form 10-
K for the year ended December 31, 1995.
10.29* Stock Purchase Agreement between the Company and Dr.
Louis F. Centofanti, dated June 11, 1996.
10.30 Termination and Severance Agreement, dated March 15,
1996, between the Company and Robert W. Foster, Jr., as
incorporated by reference from Exhibit 10.31 to the
Company's Form 10-K for the year ended December 31, 1995.
10.31 Consulting Agreement, dated March 15, 1996, between the
Company and Robert W. Foster, Jr., as incorporated by
reference from Exhibit 10.32 to the Company's Form 10-K
for the year ended December 31, 1995.
10.32 Consulting Agreement with Bobby Meeks, as incorporated by
reference from Exhibit 99.2 to the Company's Registration
Statement No. 333-3664.
10.33 Consulting Agreement with Gary Myers, as incorporated by
reference from Exhibit 99.3 to the Company's Registration
Statement No. 333-3664.
10.34 Consulting Agreement with David Cowherd, as incorporated
by reference from Exhibit 99.4 to the Company's
Registration Statement No. 333-3664.
10.35 Common Stock Purchase Warrant Certificate, dated July 19,
1996, granted to RBB Bank Aktiengesellschaft, as
incorporated by reference from Exhibit 10.1 to the
Company's Form 10-Q for the quarter ended June 30, 1996.
10.36 Common Stock Purchase Warrant Certificate, dated July 19,
1996, between the Company and RBB Bank
Aktiengesellschaft, as incorporated by reference from
Exhibit 10.2 to the Company's Form 10-Q for the quarter
ended June 30, 1996.
10.37 Common Stock Purchase Warrant Certificate No. 1-9-96,
dated September 16, 1996, between the Company and J. P.
Carey Enterprises, Inc., as incorporated by reference
from Exhibit 4.8 to the Company's Registration Statement,
No. 333-14513.
10.38 Common Stock Purchase Warrant Certificate No. 2-9-96,
dated September 16, 1996, between the Company and J. P.
Carey Enterprises, Inc., as incorporated by reference
from Exhibit 4.9 to the Company's Registration Statement,
No. 333-14513.
10.39 Common Stock Purchase Warrant Certificate No. 3-9-96,
dated September 16, 1996, between the Company and J W
Charles Financial Services, Inc., as incorporated by
reference from Exhibit 4.10 to the Company's Registration
Statement, No. 333-14513.
10.40 Common Stock Purchase Warrant Certificate No. 4-9-96,
dated September 16, 1996, between the Company and Search
Group Capital, Inc., as incorporated by reference from
Exhibit 4.11 to the Company's Registration Statement, No.
333-14513.
40
<PAGE>
10.41 Common Stock Purchase Warrant Certificate No. 5-9-96,
dated September 16, 1996, between the Company and Search
Group Capital, Inc., as incorporated by reference from
Exhibit 4.12 to the Company's Registration Statement, No.
333-14513.
10.42 Common Stock Purchase Warrant Certificate No. 6-9-96,
dated September 16, 1996, between the Company and Search
Group Capital, Inc., as incorporated by reference from
Exhibit 4.13 to the Company's Registration Statement, No.
333-14513.
10.43 Common Stock Purchase Warrant Certificate No. 7-9-96,
dated September 16, 1996, between the Company and Marvin
S. Rosen, as incorporated by reference from Exhibit 4.14
to the Company's Registration Statement, No. 333-14513.
10.44 Common Stock Purchase Warrant Certificate No. 8-9-96,
dated September 16, 1996, between the Company and D. H.
Blair Investment Banking Corporation, as incorporated by
reference from Exhibit 4.15 to the Company's Registration
Statement, No. 333-14513.
10.45 Common Stock Purchase Warrant Certificate No. 9-9-96,
dated September 16, 1996, between the Company and Steve
Gorlin, as incorporated by reference from Exhibit 4.16 to
the Company's Registration Statement, No. 333-14513.
10.46 Consulting Agreement with C. Lee Daniel, Jr., as
incorporated by reference from Exhibit 99.1 to the
Company's Registration Statement No. 333-17899.
10.47 Consulting Agreement with Rita D. Durocher, as
incorporated by reference from Exhibit 99.2 to the
Company's Registration Statement No. 333-17899.
10.48 Consulting Agreement with Sam Elam, as incorporated by
reference from Exhibit 99.3 to the Company's Registration
Statement No. 333-17899.
10.49 Consulting Agreement with R. Keith Fetter, as
incorporated by reference from Exhibit 99.4 to the
Company's Registration Statement No. 333-17899.
10.50 Consulting Agreement with John Henderson, as incorporated
by reference from Exhibit 99.5 to the Company's
Registration Statement No. 333-17899.
10.51 Consulting Agreement with Robert Hicks, as incorporated
by reference from Exhibit 99.6 to the Company's
Registration Statement No. 333-17899.
10.52 Consulting Agreement with Dr. Jeffrey Sherman, as
incorporated by reference from Exhibit 99.7 to the
Company's Registration Statement No. 333-17899.
10.53 Consulting Agreement with Gary Thomas, as incorporated by
reference from Exhibit 99.8 to the Company's Registration
Statement No. 333-17899.
22.1* List of Subsidiaries.
23.1 Consent of BDO Seidman, LLP.
27.1* Financial Data Schedule.
* - Filed as an Exhibit with the original Form 10-K for the
year end December 31, 1996, and, as a result, such are
incorporated herein by reference.
41
BDO SEIDMAN, LLP
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Perma-Fix Environmental Services, Inc.
Gainesville, Florida
We hereby consent to the incorporation by reference of our report
dated September 11, 1997, except for Note 15 which is as of
October 7, 1997, relating to the consolidated financial statements
and schedule of Perma-Fix Environmental Services, Inc. appearing in
the Company s Annual Report on Form 10-K/A for the year ended
December 31, 1996, into the Company's previously filed Form S-3 and
S-8 Registration Statements, File Nos. 33-85118 (S-3), 333-14513
(S-3), 33-80580 (S-8), 333-3664 (S-8), 333-17899 (S-8) and 333-
25835 (S-8).
BDO Seidman, LLP
Orlando, Florida
October 13, 1997
