Perma-Fix Environmental Services, Inc. (PESI) Q4 2013 Earnings Report, Transcript and Summary

Greetings, and welcome to the Fourth Quarter And Year-End 2013 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, David Waldman, with Crescendo Communications. Thank you. Mr. Waldman, you may begin.

Thank you. Good morning, everyone, and welcome to Perma-Fix Environmental Services fourth quarter conference call. On the call with us this morning are Dr. Lou Centofanti, Chairman and CEO; and Ben Naccarato, Chief Financial Officer. The company issued a press release this morning containing fourth quarter and 2013 year-end financial results, which is also posted on the company's website. If you have any questions after the call or would like any additional information about the company, please contact Crescendo Communications at (212) 671-1020. I'd also like to remind everyone that certain statements contained within this conference call may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements on this conference call, other than a statement of historical fact, are forward-looking statements that are subject to known and unknown risks, uncertainties and other factors, which could cause actual results and performance of the company to differ materially from such statements. These risks and uncertainties are detailed in the company’s filings with the U.S. Securities and Exchange Commission. The company makes no commitment to disclose any revisions to forward-looking statements or any facts, events or circumstances after the date hereof that bear upon forward-looking statements. I'd now like to turn the call over to Dr. Lou Centofanti. Please go ahead, Lou.

Thank you, David, and welcome, everyone. As you have said in the past, 2013 has been, by far, one of the most challenging environments in the company's history because of reduced government spending and DOE's focus on 2 large construction projects. In response to these challenges, we've dramatically reduced our fixed expenses and for the year, cleaned up our balance sheet and wrote off our goodwill. Although we're still feeling the effects of delayed government spending in the first half of 2014, we are finally seeing an improvement in waste shipments. I'd like to point out that in January '14, the Congress approved a spending bill, the President signed it. This budget was the first approved in several years restoring federal government funding cuts instituted in '13 from sequestration and a lot of renewed spending on projects that were not allowed under continuing resolution. '14 budget provides about $5.8 billion for DOE's Office of Environmental Management, which is an increase in funding of approximately $600 million. The real effect of this is more dramatic considering the -- that there's a fixed cost of about $3 billion to $4 billion of the total budget is required just to meet minimum safety requirements so that the work is actually done on the difference. Therefore, this increase in incremental dollars has a fairly significant impact on companies like Perma-Fix that has allowed the government agencies to spend on cleanup and waste treatment projects. Although I can never give you any insurance -- assurances, we believe these factors will result in increased revenue of positive cash flow beginning in the second quarter of '14. We expect this effect to be magnified in the third quarter as it coincides with the end of the government's fiscal year when they'll have to spend the remaining dollars or risk losing funding in future years. We are -- in addition, we are active on a number of fronts that could significantly propel the company forward, including both Service and Treatment segments. Also, as well as the medical isotope production and other technologies, which I'll discuss later in the call. Within the Service segment, we are actively bidding, as I've said in the past, on a large number of very -- of sizable products -- projects, including government, commercial and international. Our service pipeline is significant and it's just a matter of waiting for these projects to be issued. We have better visibility on the pipeline than in the past, and believe some of these contracts are forthcoming. In fact, we have been notified that we've won several of these contracts and should be able to talk about these in the very near future. Within the Treatment segment, there is pent-up demand due to delayed treatment in the number deal we signed and funding for these projects has slowly begun to return. Probably nowhere is this more obvious than at Hanford. As you know, it has always been a major source of material for our treatment facility, and we continue to make major strides to position ourselves for the treatment of higher activity waste and also potentially the tank waste at Hanford. The leaks from the tank waste at Hanford has focused a lot of attention and created increased political pressure on DOE to accelerate tank cleanup. At Hanford, we've continued to see a variety of opportunities, true waste, tank waste and a variety of other higher-activity waste. And we believe that in '14, we should see a significant pickup in material coming from Hanford to our facilities. As I've said in the past, Perma-Fix's facilities is the only commercial facility that can take true waste throughout the complex. Probably the most exciting and positive events of the last several months, last 6 months, has been our progress on medical isotope production. We've made significant progress in further validating the technology. We recently formed a wholly-owned subsidiary, Perma-Fix Medical Corporation, to accelerate the commercialization of our technology to produce Technetium-99 for the medical industry. We've seen a growing interest in our technology from within the industry, and we're working closely with a variety of nuclear research institutes in the U.S. and Europe. We've recently announced the validation of our technology through test conducted both at POLATOM in Warsaw, Poland and at University of Missouri reactor in Missouri. Test at POLATOM demonstrated our system is able to produce Tech-99 in commercial quantities, while meeting existing security standards. The second test at the University of Missouri's Research Reactor in Columbia reinforced the POLATOM results demonstrated much higher efficiencies on Tech-99 recovery and brought us very close to a commercial system. It's an aggressive push within the company to commercialize our technology since our process can meet market needs for Tech-99 without the use of weapons-grade uranium or low and rich uranium. Our process will also help reduce environmental concerns with the current production method and other issues, such as reprocessing and the production of high-level waste with the current processes. With the help of our advisories, we have now greater access to capital, especially within Europe for the technology. And in Europe, there has been a lot more attention to the supply chain and the risk of shortages related to Tech-99 due to the efforts to halt the production leaving enriched -- highly enriched uranium. We have received a lot of questions from investors in terms of our specific financing plans for this technology, and at this stage, we have several options we're pursuing vigorously. And it's a little premature to comment on specifics, but I would suffice to say, we have seen very significant interest and are optimistic that we will be able to raise money for the technology. The Tech-99 process was a result of our work on advanced resin technologies for waste management. And we've also now specifically developed a new series of resin technologies that are extremely low cost, versatile and robust. As an example, the -- one of the resins we've developed is ideal for sulfate removal. We see a niche market for in-water treatment for sulfate and see a significant market opportunity there, mostly in the mining and metal processing industry where there is high concentration for sulfate. As environmental regulations continues to become stricter globally, the leading mining and metallurgical companies are forced to look for ways to enhance their sustainability at their operations and reduce liability. Recently, we signed an LOI with a venture capital fund in Europe, which plans to license, and in turn, finance the development and commercialization of our sulfate technology. I would caution it's still in LOI stage and is subject to a final definitive agreement. That being said though, this partnership, we would hope accelerate commercialization of our technology treats salt [ph] phase and other materials using our specialized resins. On another note, I'd like to thank Jim Blakenhorn, our former COO, for all his hard work and significant contributions to the company. Jim is, as you all said in our -- as you all probably have seen in our announcements, was recruited to lead the recovery efforts at the Department of Energy's Waste Isolation Pilot Plant in Carlsbad, New Mexico. Very critical operation for the nuclear industry in terms of disposal of, today, true waste, but eventually one of the leading contenders for higher-activity waste. We look forward to working closely with Jim and helping in any way we can with him and his mission there, since it's so critical to the nuclear industry. We are -- and wish him the best of luck. We are pleased to announce also then the promotion of John Lash to our Chief Operating Officer. John joined in Perma-Fix Environmental Services in 2001 and he has been an invaluable member of our senior management team and will be a significant contributor to the company as we move ahead. So to wrap up, 2013 was a very challenging year due to reduced government spending. Look ahead to '14, we see enormous opportunities on the service side, especially in the non-DOE areas, as well as a growing opportunity in higher-activity more complex waste on the treatment side. We continue to diversify our revenue stream; we've cut significant operating expenses out of our business. We've cleaned up our balance sheet and expect to achieve profitability and cash flow -- positive cash flow in '14. Although the first quarter showed continued weakness, we expect to see much better results beginning in the second quarter. We've demonstrated in the past the inherent leveragability, scalability and earnings potential for the business, and I strongly believe we'll return to that and we'll surpass those levels in coming years. We appreciate the patience of our investors and remain extremely optimistic and confident in the outlook of business. We look forward to unlocking the huge potential and significant value for our shareholders in the years ahead. At this point, I'd like to turn the call over to Ben, who will give a little more detail in the numbers and I'll be back to answer questions at the conclusion of the formal remarks.

Great. Thank you, Lou. Let me begin with revenue. The total revenue from continuing operations for the fourth quarter was $12.7 million compared to $26.7 million in the fourth quarter of 2012, a decrease of $14 million or 53.4%. Revenue in the Services segment decreased by $11.5 million or 76.4%, with $5.2 million of that decrease in revenue coming from the completion of our Hanford contract, which terminated on September 30. In the remainder of the Service segment, delays in the new project awards also contributed to lower segment revenue. On the Treatment side, revenue decreased by $2.5 million or 21%. This decrease was the direct result of lower waste received by our government customers, primarily with DOE, where the value of our shipments received for the quarter was down approximately 30% from prior year. And for the year, we saw a decrease of about 13%. Revenue for the year ended 12/31 decreased by $53.1 million or 41.6% with the reduction of revenue of $10.3 million from the Treatment segment and $42.8 million from the Service segment. The reduction at the Treatment segment, as discussed, was primarily due to the lower waste received by our government customers, while the reduction in the Service segment was primarily due to the completion of the Hanford subcontract, the completion of certain other contracts in the DOE and the completion of our CECRA contract in the third quarter of 2012. Reduction by our government clients impacted revenue decrease in both segments. Turning to cost of sales. Our total cost of sales was $10.6 million in the fourth quarter compared to $23.4 million in the same period last year. Cost of sales in the Service segment was down $11.1 million or 78.5% from the fourth quarter of '12. The majority of this variance was due to lower cost from fewer projects that also included lower indirect expenses as we continue to look at streamlining our service group support structure. Our Treatment segment cost of sales was down $1.7 million or 18.2%. Most of this cost reduction came from reduced fixed cost at our plants, a result of both workforce and other facility-related reductions. Variable expenses related to revenue were also down from the prior year due to the lower revenue. Our cost of sales for the full year of 2013 was below prior year by $47.1 million or 42%, which was consistent with the significant drop in revenue. Our gross profit for the quarter was $2.1 million or 16.7% of revenue, a decrease of $1.2 million or 35%. Our gross profit from the Service segment decreased by $393,000, primarily due to the completion of the Hanford contract. However, gross margin did increase to 14.6% from 6.1%, which reflected the cost reduction initiatives that we implemented during the year. Our gross profit in the Treatment segment decreased by $759,000, with the gross margin of 17.5% compared to 20.4% in the prior year. Lower revenue in the fixed cost structure of our Treatment facility was the main reason for that shortfall. Gross profit for the year ended December 31, 2013, was below prior year by $6 million as lower revenue in both segments and our fixed cost structure impacted our gross profit. On the G&A side, costs for the quarter were $3.5 million or 27.8% of revenue, down from $4.6 million or 17% of revenue last year. Lower salaries and payroll-related expenses, lower outside services and lower bad debt expenses contributed to the decrease in G&A for the quarter. For the 12 months ended, our G&A costs were $14.4 million or 19% of revenue, down approximately $4 million from the $18.4 million in the prior year. As with the quarter, lower salaries, payroll-related and outside services and lower bad debt expenses contributed to the decrease in the G&A. Our loss from continuing operations for the quarter was $30 million, compared to a loss of $861,000 in prior year. Our loss from continuing operations, as Lou mentioned, included a goodwill impairment charge of $26.7 million, which represented total goodwill at our Treatment and SEC reporting. Our loss from continuing operations also included a tax expense charge of $3.6 million to provide for a full valuation allowance on our net deferred tax asset. For the year ended December 31, 2013, the loss was $34.5 million compared to a loss of $3.1 million in prior year. In addition to the $26.7 million charge and the tax expense mentioned in the fourth quarter, we also had a loss for the year -- our loss for the year also included a goodwill charge taken in the second quarter related to the termination or completion of the H contract, the Hanford contract. Our loss applicable to shareholders for the quarter was $31.4 million compared to last year's net loss of $6.33 million. For the year, loss was $36 million compared to $3.4 million in prior year. And of course, these results include the goodwill and tax expenses we just discussed. Our loss per share is $2.75 compared to $0.06 last year and our loss for the year compared to last year was $3.18 versus $0.30 in the prior year. Our adjusted EBITDA was a negative $1.5 million compared to $76,000 in 2012 for the quarter. For the year, EBITDA was a negative $1.3 million compared to $3.3 million in 2012. Turning to our balance sheet. Our cash and cash equivalents were down $4 million, primarily reflecting the year-to-date operating losses. Our accounts receivable were down $3.3 million reflecting reduced revenues at both of our segments. Our goodwill decreased by $27.9 million due to the total write-down, as we've discussed. Our backlog was down approximately $1.2 million and finished at $7.7 million, and also down about $973,000 from prior year. Our total debt was $14.3 million, of which PNC makes up $11.2 million of that debt. We had a working capital debt for about $3 million, compared to working capital of $2.7 million in the prior year. Finally, I'll summarize our cash flow. Our cash from continuing operations -- used by continuing operations was $1.7 million, while our cash used by discontinued operations was $1 million. Cash used for capital spending was $944,000 and an additional $508,000 was used to pay out in the minority interest position. And our cash provided by financing -- from continuing operations was $204,000. With that, operator, we'll now open the call for questions.

[Operator Instructions] Our first question comes from Walter Schenker with MAZ Capital Advisors.

Actually, it's 2 questions, both relating to cash. The first question is, insurance proceeds from the fire in Georgia, did those proceeds have to be used to rebuild the facility, can you do whatever you want them? And the second question is, in regard to your receivables credit line, what availability now exists as your receivables have shrunk fairly significantly since the cash position at the end of the quarter was fairly low?

On your first question, Walter, we are looking at all options with the facility. We are -- there was 3 phases to the facility. The first was, of course, the emergency response portion getting the fire out, and that took up a lot of the resources from the -- or a lot of the cash from the insurance policy. The second was to remove the pad, and then the third phase is the rebuild. We are in the completion of the pad removal portion, and then the rebuild estimates are currently being received. To answer your question, I think we have the flexibility to do either, but the policy has got some specifics as far as what they will pay out fully depreciated value versus rebuild value. So that obviously would come into play in the decision.

And you have still $2 million, $3 million left to receive?

Yes. There's the -- I mentioned the $1 million of cash from Disco. There was more spend and some receivable at year end. So yes, there is cash to be received still.

Okay. And on the receivable line and availability of cash once the business turns up?

Yes, the availability at year end was $6.6 million.

Of which, you're using how much?

That's what's available. So we had no revolver at the time.

Our next question comes from Doug Dyer with Heartland Advisors.

With the last call, which I believe was done in mid-December, it kind of seemed like maybe things would turn here and what we're looking at, at that time was in the Services segment, you were starting to see more contracts, and it seems like Canada was starting to come through a little bit better. And you had been contracted directly through the DOE as a sub and it's -- did those things not come through or have they been delayed? What's the status on some of the positives that we were seeing a couple of months ago?

Actually, the -- most of those things are coming through. We've seen some more of the delays in Canada, but we've had very good success. We are somewhat limited in what we're allowed to talk about with our work in Canada, but it is going very well and we see a great opportunity in the Canadian market as we sit today. And in the -- we see a very good opportunities, as I said, is we've had some success and have been notified even on the DOE side of some successes. So we're waiting for a very official announcement, and we're -- but the greatest success we've had has been our focus on commercial, international -- the commercial and international markets, which hopefully, I'll be able to talk about in the near future. So we're seeing successes on the -- fairly significant successes on the service side and they're starting to move. Never fast enough, but they are moving as we sit today.

When does some of these things start to hit the revenue line? We're already past Q1 here so...

We're -- as we -- we're actually on several projects ramping up as we sit here even though we don't have complete -- a complete contract. We've been given the go ahead and -- to start ramping up and preparing for many of these. So as we've said, we're adding people as we sit today on the service side.

Our next question comes from Justin Putnam [ph], private investor.

I just want to follow up on that -- the last question there. Can you just review and give us maybe an order of magnitude for the DOE project you see on the horizon now? I know the timing has been changed on some of those, but go over the magnitude you see in over the next [indiscernible]

Well, notifications, I would say, we've been notified in the last month of approximately $20 million of revenue over the 1 year, 1.5 years projects. So it's -- and we still have a lot that are sitting out there. So we're expecting our service group to start ramping up here fairly significantly over the next couple of months, and it's already starting as we've said.

Okay, okay, okay. And the next question, to change gears a little bit, I know you haven't discussed too much, but does your Perma-Fix medical [indiscernible]

Well, let me -- yes, I don't know if -- in terms of detail, we've set up a new corporation, which is a subsidiary of Perma-Fix. We've placed the technology we -- Perma-Fix has licensed the technology to the medical company because we have a variety of other technologies that come out of our resin work, and we're in the process -- we have several paths we're going down to raise money in the subsidiary. So the good thing about it is from an investor point of view, and I'm fairly optimistic as we sit that things are going well that from a money-raising point of view, that you'll be able to value. Up to now, it's been hard to put any value on our Tech-99 process. I think when we complete this process, you'll be able to see a rough idea what people valued the technology. It's still early stage. We still got a long way to go with it, but, again, this is one of those technologies that's defining. It is the heart of the diagnostic industry. It's like my granddaughter is in the -- had a minor accident and had to get a scan here in the emergency room over the weekend, and I sat there while they injected her with Tech-99. So it's very widely used. It's a multibillion-dollar industry, and the production of Tech-99 is at the heart of that whole industry. So we think we have something very valuable, and hopefully, here in the near future, the investors -- our investors will be able to see some sort of value placed on it at this -- even at this early stage because we do have a long hard road ahead in terms of FDA approval and EU regulatory approval. So there's a variety of steps we'll have to go through to create the value for this isotope. But we think we really have something here on the Tech-99, and the last tests were pretty dramatic in demonstrating its -- and I know it's -- probably means Greek to most of the investors, but those press releases were as much to notify the whole industry of just where we are, and what we're doing and what kind of results we're actually seeing.

Right, right, right. Yes, I mean, I guess what we're interested from the investment community, specifically about the strategic direction of that product. And as you commercialize it, I mean, the 2 obvious paths would be, are you going to manufacture this through Perma-Fix Corporation or you're going to license it or...

Yes. Well, we're fairly open at this stage to any -- to multiple tasks. What we think is very important is to go through the process to demonstrate an FDA approval for the material. Once you do that, then, I think, the industry will really create a tremendous value because you then have a commercial product, which you can actually sell. And basically, we would have to demonstrate a device so it's -- and we would mimic existing generators so that we think there's a -- from an approval process, it could be 1 to 2-year process, would be normal for an approval process, which hopefully will start in the very near future if we can raise a little bit of money here.

Okay, okay. So the fund race will be the next milestone that we would probably [indiscernible]

Yes, the next milestone on the medical one is to really raise some cash into the sub, which then will help drive and also build it into a little more free-standing company where it can run a little more on its own without our -- with less of our support.

[Operator Instructions] Our next question comes from Sam Rebotsky with SER Asset Management.

I came on late. I was -- if you answered any of these questions, I'll listen back. But I don't know if you discussed, it's April 15, the first quarter, ending March 31, what your expectations, sales or whether you expect to break even or what your expectations are there?

I hinted at it in that the first quarter is nothing to brag about, and so don't expect anything spectacular in the first quarter.

So presumably, you expect losses, and when do the numbers come out there?

Mid-May.

Mid-May.

Okay, okay. And the write-down of the goodwill, you're left with about $40-odd million left. What is that -- pardon? What does that relate to, and what's the -- is that safe in any security on that goodwill not being written down?

No, the goodwill is down to about $1 million. It's just our engineer -- our Engineering segment. Most of the goodwill, we were at about $29 million and we took about -- about $28 million out. Now what you may be looking at is we have permits and intangible assets with valuation of our permits, and we believe that's really where all the value is.

Okay, so you have the intangibles for $44 million and other assets, but the $44 million is what -- just intangibles? They're all intangibles, basically.

Yes, yes.

Okay. So you think there's a value here.

Right.

And did -- you talked about the $20 million DOE 1 year to 1.5 years, and -- how large -- and do you have the ability to break even in the second quarter?

Yes, we believe so.

You believe so?

Yes. I mean, again, the risk is always in this business, is timing, as we see a tremendous amount of backlog on the waste side and we see the Service business actually moving as we sit. So it's -- it will all depend on timing. As you all know, this is not an industry that -- where things move very rapidly because of just the nature of the business. But as we sit today, we've seen it ramping up on the Service side, and I gave some indication of what we've already been notified. And we still have a lot of other contracts sitting out there that have been -- actually been sitting there for a long time. So we're -- what we see so far, it makes us optimistic.

So at this point in time, the -- you could sort of forecast based on what you're seeing a profitable 3 quarters going forward after this first quarter? Or is there anything that's unusual about a particular quarter that's seasonal that prevents you from being profitable in any of the 3 subsequent quarters?

Yes, basically, on our run rate, we will be. The risk is the -- again, timing.

Yes, and Sam, if I can add, with the budget being approved and we're seeing the improvement of weight, which was a little slow out of the gate in the first quarter, you should see second, third and fourth the pretty good quarters. You always have a first quarter kind of fallback for the usual reasons. It's a new budget -- it's a new fiscal year for the DOE, and so the sites get a little slow in their spending plan. But I think to answer your question, the next 3, we hope, with budgeting working right, we should start to see much better results. I wanted to clarify one other thing, Sam, for you, the number you were looking at, the $44 million, that is after the impairment, and that includes $21 million of our finite risk cash, restricted cash, at about $16 million of permits and intangibles, and then about $21 million of restricted cash.

Okay. That's good. Good to know. And as far as -- there's been a lot of discussion relative to changes with nuclear waste, a lot of disappointments, the way things are done. Is this good for you, bad for you, does that improve your position? It's sort of, could you address, if you haven't, what has been going on in the industry and et cetera? Has that created any opportunities for you or any negatives?

Well, we've seen the creation of a lot of opportunities. The -- as I mentioned earlier, the problem we always have is that things are not always fast to move in this industry because of various reasons, whether it be regulatory or political or whatever. The -- we've seen -- right now, the waste industry, in general, is moving well. I mean, I think the only -- the big pause bill [ph] is Anadarko signed a consent decree, setting aside about $5 billion to start cleaning up a variety of their sites. Most of that is -- add to this that a lot -- there are several big nuclear sites there. We don't know how that will create a variety of opportunities for us. We've seen a desire to increase the treatment of higher activity waste, especially true waste even with the problems at WIPP. The roadblock to WIPP was always certification in getting it treated, not acceptance at the facility. So there's a variety of ways to store that waste while they're waiting for WIPP to reopen. So we see, at the moment -- actually, probably the biggest thing is one, a stable budget at DOE, which we're beginning to see the positive effects of. Two, as the commercial industry went through a slowdown in general when the -- because of natural gas and other things. That is now reversing. And we've seen movement in Canada, which we have targeted as a major opportunity for us, a major market, and that is beginning to move. So as we sit today, the macro stuff is much better than we've seen in probably 2 years, the macro environment. They have stable DOE budget with no risk of a shutdown over the next few years. We've got a commercial side that's beginning to move. We've got Canada, which is moving, and you have some other international opportunities, which are moving. So as we sit, the macro environment has changed and it improved. Long answer for a short question. Yes?

[indiscernible] what is your bonding capacity? Has it been reduced significantly because of your reduced balance sheet, et cetera?

No. Remember, we have a very special policy for waste treatment that allows us to bond the waste treatment side, and that we have plenty of capacity there. That's about $42 million or so on the waste treatment side.

Over the [indiscernible]

No, total. And on the service side -- in one way, we don't have a lot of bonding needs. We don't bond very many projects. So that is not a big requirement in -- on the nuclear side.

Yes. We've seen very few [indiscernible] bonding over the past few years. The projects are less and less. Not very many of the contractors are requiring it anymore, but we have been notified of a reduction through our capacity right now. So improved results will support improved bonding of capacity, obviously.

Yes, yes.

Did you quantify the amount of money you need to raise for the new project? And is there a dollar amount that you might need? You spoke of your $6 million. Do you need any additional funds and sort of quantify what you might need?

We will probably need more than what we raised, but we feel that there'll be milestones in between, which that will further demonstrate the technology and raise its value and make it easier. Simpler to raise it even through the grant side or through other means with strategics or whatever. So there's a variety of ways we feel after we get it set up, and operating that we could access more funds at a much cheaper cost.

Is there any thought of spending it out?

We are, well, it is a freestanding company.

Yes.

So we will be a -- the majority shareholder and we'll then -- it all will depend on just the progress of it. It -- we'll always have the potential to be -- to spun out at some point if we feel that makes sense.

Yes, what percentage will you own of this?

Well, when we started, we owned 100%, and we'll go through a process of capital raise. It's kind of hard to tell you until that's done, yes, where we end up, but it will -- yes, yes.

Hopefully, you achieve some of your goals. I'm growing a big beard here.

Well, I -- myself, also, but I'm pretty optimistic you'll see something very soon.

Well, hopefully, there's significant buying of the stock. And the one disappointment I've had, the options that the Members of the Board, they seem to get are very cheap, I would like everybody to get higher options and not get such cheap stock. And I'd like everybody who's on the board start buying the stock. I mean, and if the window is closed, there should be a 10b-5 plan. So everybody has the skin in the game because it's very frustrating to see the options or the stock they get that are much below the market and that would be very helpful. So hopefully, something comes alive and some -- and the shareholders get rewarded.

Thank you, Stan. I'll pass that on. The board does -- instead of getting cheese, most of them do convert their cheese into stock, and so they -- in one way, they do, do that, but I will pass your comment on. Thank you.

Our next question is a follow-up question from Doug Dyer with Heartland Advisors.

Lou, I would like to know what types of entities you're pursuing to invest in Tech-99. And also, with the current supplies of Tech-99 that are in the market, how are those distributed? Do those go through normal pharmaceutical distribution or is there some other type of entity in there since it's radioactive material?

Yes, the first question was on...

What entities you're pursuing?

Oh, what entities we're pursuing. Well, we're -- at this stage, we're pursuing a variety of different options. That's why it's a little hard to talk about, and that's everything from a private investment, into the material, into all the way at the other extreme of actual public offering. So in the near future, we'll decide which one is best and move in that way. The -- about your other question, it's -- so I'm not sure I can answer it because we have so many options available there. The other is the industry is basically controlled by 2 players today, a company called Covidien and a company called Lantheus. They distribute to the nuclear pharmacies through -- in North America and also in Europe. So the -- those are the 2 major players and it's -- so our approach is really working with some of the independents and also trying to get them more interested in our process. At some point, I believe they will or we'll deal with the more independents that are out there. We're very interested in more working though with the pharmacies. They're the control here in this industry. You have a variety of nuclear pharmacies or large hospitals that get their material from those 2 sources.

Our next question comes from Howard Brous with Wunderlich Securities.

Just -- thank you for the unqualified opinion that includes a going concern explanatory paragraph?

Yes. We have an unqualified opinion from our auditors. But given the environment in the SEC and some significant losses the past couple of years, it was prudent to put a going concern language in the doss.

And it reads how?

I don't have it in front of me. So there were -- there is substantial doubt of remaining as a going concern. It's kind of standard.

Okay.

When the auditors do their testing and their reviews, and it's all kind of tied to the same goodwill discussions, et cetera. And it's kind of standard, and self explanatory, substantial doubt about the company's ability to going concern, but no more details in that. And [indiscernible]

And when will the K be out?

When will it come out?

Yes.

Well, we don't do it on quarters so we won't -- we likely will not do a 10-K/A to remove it. We'll just hope for quarters to start showing better results and...

No, but you have an 10-K/A out. When is your 10-K coming out?

Oh, 10-K, I'm sorry, it's coming out today. We're going to -- we'll file it today, yes.

The next question comes from Charles Robinson [ph], private investor.

2 questions. One, you're already into the second quarter, at least, a couple of weeks into the second quarter, and you had mentioned, I believe, based on the receivables that you had cash availability at year end of about $6.6 million. Given that you're looking at, hopefully, the second quarter being sort of a cash flow breakeven and having that cash availability, can I assume that there is no need to raise cash for the parent company itself? I'm not talking about the isotope project. I'm talking about the parent company. Is there any need either offer more debt or offer securities to raise more cash to provide breathing room or do you think you're okay at this point?

We're real close. We think we'll be okay, but it's very close, and we will always look at -- try to keep options available if it's necessary, but all depends on -- as we look ahead, we see revenue and income improving dramatically here over the next quarter. So it's -- we're husbanding our cash as best we can, but we're playing it day to day.

[indiscernible] Yes, I was just going to add, a breakeven usually means a pretty decent positive cash because we carry about $1 million, $2 million, $4 million of noncash DNA-type money. So we anticipate with the results we hope to see a positive in the cash in the second quarter, but the first quarter was weak and so we're just keeping our options open, yes.

No, it sounds like you're sort of on a nice edge in that regard given the first quarter, and the turn into the second quarter that you just sort of watch them. But if you did have to raise something, and there's -- and you may not, but if you did, it sounds like it's not a sizable portion, given what you're seeing in the business here in the mix.

That's very correct. If we had to, it would be a fairly small -- very small method. We see things improving fairly rapidly in the second quarter just [indiscernible].

Now would there be a preference should that eventually toward not diluting shareholders further, and looking given that it's a -- we're a small amount that it would be more amenable to do it on the debt side?

We have worked real hard over the last many years to not dilute shareholders, and that's always our first preference.

My only other question has to do with Chalk River to -- what is your sense of 2016 in Chalk River being shut down versus would there be a last-minute reprieve or they'd renew that facility for yet another 5 years? I mean, the positioning seems to be pretty clear that they want to shut this down as of 2016. You have a read on that?

If you care -- if you read their statements, they're pretty emphatic, and it sort of goes back if you see the history, right now, Chalk River, it's -- they have collected a tremendous amount of high level nuclear waste. That nuclear waste is also weapons-grade material. It's sitting there, they're trying to ship it back to the U.S., and causing very severe problems. They have very high cost in running that reactor and making Tech-99. Everything I see says they will end. Now when they ordered the statement, they left themselves a little wiggle room, but it's more in -- I would imagine if somebody came in and said, “We'll pay all the costs through cost.” But I think that number is so dramatic that I doubt if anyone will do that. You've got a very old reactor, and right now, the -- now they're not really going to shut Chalk River down. They're going to stop producing Tech-99. They will keep running Chalk River for several years of the research reactor which it was designed for. But right now, I don't see any indications that they're going to back off, and the industry is -- in general, the present users are working hard to open new avenues. And I must admit, not with a lot of success, but in the short run. So we will see a fairly major disruption when Chalk River goes down.

There are no further questions at this time. I would like to turn the floor back over to Dr. Lou Centofanti for closing comments. Thank you.

Well, I'd like to thank you, all, for participating. As I mentioned earlier, we're very encouraged by the outlook for the business. We're working closely with DOE to develop solutions, some of the more pressing challenges, including tank waste at Hanford. We're expanding our efforts into our medical isotope technology and other application for our resins. And we look forward to keeping you appraised of new developments as they unfold. Thank you, and look forward to talking to you in the next quarter.

This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.