PERMA FIX ENVIRONMENTAL SERVICES INC Stock Compensation Disclosure
CAPITAL STOCK, STOCK PLANS, WARRANTS AND STOCK BASED COMPENSATION
Stock Option Plans
The Company’s 2003 Outside Directors Stock Plan, as amended (the “2003 Plan”) provides for the grant of Non-Qualified Stock Options (“NQSOs”) to member of the Company’s Board of Directors (the “Board”) who is not an employee of the Company or its subsidiaries (“Eligible Director”). The 2003 Plan also provides for the grant of an NQSO to purchase up to shares of the Company’s Common Stock for each Eligible Director upon each re-election to the Board, and the grant of an NQSO to purchase up to shares of the Company’s Common Stock upon initial election. NQSOs granted prior to July 20, 2021 have a vesting period of from the date of grant and a term of years, with an exercise price equal to the closing trade price on the date prior to grant date. NQSOs granted on and after July 20, 2021 vest % per year, beginning on the first anniversary date of the grant and also have a term of years, with an exercise price equal to the closing trade price on the date prior to grant date. Additionally, the 2003 Plan provides for the issuance to each Eligible Director a number of shares of the Company’s Common Stock in lieu of 65% or 100% (based on option elected by each director) of the fee payable to the Eligible Director for services rendered as a member of the Board. The number of shares issued to each Eligible Director is determined based on 75% of the market value as defined in the plan (the Company recognizes 100% of the market value of the shares issued). As of December 31, 2024, the 2003 Plan had available for issuance shares.
The Company’s 2017 Stock Option Plan, as amended (the “2017 Plan”), authorizes the grant of options to officers and employees of the Company, including any employee who is also a member of the Board, as well as to consultants of the Company. The 2017 Plan authorizes an aggregate grant of NQSOs and Incentive Stock Options (“ISOs”). Consultants of the Company can only be granted NQSOs. The exercise price of any NQSOs granted under the plan shall not be less than the fair market value of the shares at the time of grant. As of December 31, 2024, the 2017 Plan had available for issuance shares.
Stock Options to Employees and Outside Director
On January 18, 2024, the Company granted ISOs to certain employees under the 2017 Plan, for the purchase of up to an aggregate of shares of the Company’s Common Stock. Each ISO granted is for a contractual term of with . The exercise price of the ISO is $ per share, which was equal to the fair market value of the Company’s Common Stock on the date of grant.
On July 18, 2024, the Company granted ISOs to certain employees under the 2017 Plan, for the purchase of up to an aggregate of shares of the Company’s Common Stock. Each ISO granted is for a contractual term of with . The exercise price of the ISO is $ per share, which was equal to the fair market value of the Company’s Common Stock on the date of grant.
On July 18, 2024, the Company issued a NQSO to each of the Company’s seven reelected outside (non-management) directors for the purchase, under the Company’s 2003 Outside Directors Stock Plan (the “2003 Plan”), of up to shares of the Company’s Common Stock. Dr. Louis Centofanti and Mark Duff, each an executive officer of the Company as well as a director, were not eligible to receive an option under the 2003 Plan. Each NQSO granted is for a contractual term of with . The exercise price of each NQSO is $ per share, which was equal to the fair market value of the Company’s Common Stock on the day preceding the grant date, in accordance with the 2003 Plan.
On January 19, 2023, the Company granted ISOs to certain employees under the 2017 Plan, for the purchase of up to an aggregate shares of the Company’s Common Stock. The total ISOs granted included an ISO for each of the Company’s executive officers for the purchase set forth in his respective ISO Agreement, as follows: shares for the Chief Executive Officer (“CEO”); shares for the Chief Financial Officer (“CFO”); shares for the Executive Vice President (“EVP”) of Strategic Initiatives; shares for the EVP of Waste Treatment Operations; and shares for the EVP of Nuclear and Technical Services. Each of the ISOs granted has a contractual term of with . The exercise price of each ISO is $ per share, which was equal to the fair market value of the Company’s Common Stock on the date of grant.
On July 20, 2023, the Company issued a NQSO to each of the Company’s seven reelected outside (non-management) directors under the 2003 Plan, for the purchase of up to shares of the Company’s Common Stock. The CEO and EVP of Strategic Initiatives, each an executive officer of the Company as well as a director, were not eligible to receive an option under the 2003 Plan. Each NQSO granted is for a contractual term of with . The exercise price of each NQSO is $ per share, which was equal to the fair market value of the Company’s Common Stock on the day preceding the grant date, in accordance with the 2003 Plan.
On October 19, 2023, the Company granted an ISO to an employee under the 2017 Plan, for the purchase of up to shares of the Company’s Common Stock. The ISO granted is for a contractual term of with . The exercise price of the ISO is $ per share, which was equal to the fair market value of the Company’s Common Stock on the date of grant.
During 2024, the Company issued an aggregate shares of its Common Stock from cashless exercises of options for the purchase of shares of the Company’s Common Stock ranging from $ per share to $ per share. Additionally, the Company issued shares of its Common Stock from the cash exercises of options for the purchase of shares of the Company’s Common Stock, at exercise prices ranging from $ per share to $ per share, resulting in proceeds of approximately $187,000. Income tax benefit associated with stock options exercised with cash during 2024 was approximately $17,000.
During 2023, the Company issued an aggregate shares of its Common Stock from cashless exercises of options for the purchases of shares of the Company’s Common Stock, at exercise prices ranging from $ per share to $ per share. Additionally, the Company issued shares of its Common Stock from the cash exercise of options for the purchase of shares of the Company’s Common Stock, at exercise prices ranging from at $ per share to $ per share resulting in proceeds of approximately $164,000. Income tax benefit associated with stock options exercised with cash during 2023 was approximately $25,000.
The Company estimates fair value of stock options using the Black-Scholes valuation model. Assumptions used to estimate the fair value of stock options granted include the exercise price of the award, the expected term, the expected volatility of the Company’s stock over the option’s expected term, the risk-free interest rate over the option’s expected term, and the expected annual dividend yield. The fair value of the options granted during 2024 and 2023, and the related assumptions used in the Black-Scholes option model used to value the options granted were as follows:
| Employee Stock Options Granted | ||||||||
| 2024 | 2023 | |||||||
| Weighted-average fair value per share | $ | 4.90 | 2.07 | |||||
| Risk -free interest rate (1) | %- | % | %- | % | ||||
| Expected volatility of stock (2) | %- | % | %- | % | ||||
| Dividend yield (3) | ||||||||
| Expected option life (years) (4) | - | - | ||||||
| Outside Director Stock Options Granted | ||||||||
| 2024 | 2023 | |||||||
| Weighted-average fair value per share | $ | 6.87 | $ | 6.46 | ||||
| Risk -free interest rate (1) | % | % | ||||||
| Expected volatility of stock (2) | % | % | ||||||
| Dividend yield (3) | ||||||||
| Expected option life (years) (4) | ||||||||
| (1) | The risk-free interest rate is based on the U.S. Treasury yield in effect at the grant date over the expected term of the option. |
| (2) | The expected volatility is based on historical volatility from the Company’s traded Common Stock over the expected term of the option. |
| (3) | The Company has never paid any dividends on its Common Stock. Our Loan Agreement prohibits the Company from paying any cash dividends without prior approval from our lender. |
| (4) | The expected option life is based on historical exercises and post-vesting data. |
| Year Ended | ||||||||
| 2024 | 2023 | |||||||
| Employee Stock Options | $ | 358,000 | $ | 367,000 | ||||
| Director Stock Options | 298,000 | 181,000 | ||||||
| Total | $ | 656,000 | $ | 548,000 | ||||
Income tax benefits associated with stock-based compensation expense were approximately $71,000 and $45,000, respectively, for the years ended December 31, 2024, and 2023.
As December 31, 2024, the Company had approximately $ of total unrecognized compensation costs related to unvested options for employee and directors. The weighted average period over which the unrecognized compensation costs are expected to be recognized is approximately 3.0 years.
Summary of Stock Option Plans
The summary of the Company’s total plans as of December 31, 2024, and 2023, and changes during the period then ended are presented as follows:
| Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (years) | Aggregate Intrinsic Value (4) | |||||||||||||
| Options outstanding January 1, 2024 | 994,500 | $ | 5.57 | |||||||||||||
| Granted | 150,500 | $ | 9.43 | |||||||||||||
| Exercised | (97,700 | ) | $ | 5.16 | $ | 662,524 | ||||||||||
| Forfeited | (46,400 | ) | $ | 5.93 | ||||||||||||
| Options outstanding end of period (1) | 1,000,900 | $ | 6.18 | $ | 4,894,634 | |||||||||||
| Options exercisable at December 31, 2024(2) | 401,000 | $ | 5.62 | $ | 2,183,072 | |||||||||||
| Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (years) | Aggregate Intrinsic Value (4) | |||||||||||||
| Options outstanding January 1, 2023 | 1,018,400 | $ | 5.02 | |||||||||||||
| Granted | 370,000 | $ | 3.15 | |||||||||||||
| Exercised | (320,400 | ) | $ | 3.72 | $ | 2,335,042 | ||||||||||
| Forfeited/expired | (73,500 | ) | $ | 3.77 | ||||||||||||
| Options outstanding end of period (2) | 994,500 | $ | 5.57 | $ | 2,417,081 | |||||||||||
| Options exercisable at December 31, 2023(3) | 319,300 | $ | 5.46 | $ | 766,037 | |||||||||||
| (1) | Options with exercise prices ranging from $ to $ |
| (2) | Options with exercise prices ranging from $ to $ |
| (3) | Options with exercise prices ranging from $ to $ |
| (4) | The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price |
The summary of the Company’s nonvested options as of December 31, 2024, and changes during the period then ended are presented as follows:
| Weighted Average | ||||||||
| Grant-Date | ||||||||
| Shares | Fair Value | |||||||
| Non-vested options January 1, 2024 | 675,200 | $ | 3.12 | |||||
| Granted | 150,500 | 5.81 | ||||||
| Vested | (181,800 | ) | 3.15 | |||||
| Forfeited | (44,000 | ) | 2.06 | |||||
| Non-vested options at December 31, 2024 | 599,900 | $ | 3.79 | |||||
Warrant
In connection with a $2,500,000 loan that the Company received from Mr. Robert Ferguson (the “Ferguson Loan”) on April 1, 2019, the Company issued a warrant to Mr. Ferguson (the “Ferguson Warrant”) for the purchase of up to 60,000 shares of our Common Stock at an exercise price of $3.51 per share. The Ferguson Loan was paid in full in December 2020. Upon Mr. Ferguson’s death, the Ferguson Warrant was transferred equally to Mr. Ferguson’s two heirs with each holding a Warrant for the purchase of up to 30,000 shares of the Company’s Common Stock, as permitted under the Ferguson Warrant. One of the Warrant was exercised in the fourth quarter of 2023 and the remaining Warrant was exercised in the first quarter of 2024. Proceeds received by the Company was approximately $105,000 for each of the Warrants exercised.
In connection with the Company’s sales of its Common Stock in May 2024 and December 2024, the Company issued warrants to purchase an aggregate 188,038 shares of its Common Stock at exercise prices of $11.50 and $12.19 per share (see “Note 17 – Sales of Common Stock” for a discussion of these warrants). These warrants remained outstanding as of December 31, 2024.
Common Stock Issued for Services
The Company issued a total of and shares of its Common Stock in 2024 and 2023, respectively, under the Company’s 2003 Plan to its outside directors as compensation for serving on its Board. As a member of the Board, each director elects to receive either 65% or 100% of the director’s fee in shares of the Company’s Common Stock. The number of shares received is calculated based on 75% of the fair market value of our Common Stock determined on the business day immediately preceding the date that the quarterly fee is due. The balance of each director’s fee, if any, is payable in cash. The Company recorded approximately $ and $ in years ended 2024 and 2023, respectively, in compensation expense (included in SG&A expenses) for the portion of director fees earned in the Company’s Common Stock.
Shares Reserved
As of December 31, 2024, the Company has reserved approximately shares of its Common Stock for future issuance under all of the option arrangements.
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.