UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 31, 2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the ~~quarterly~~transition period ~~ended~~ ~~July 31, 2020~~.from ________ to ________

Commission File No. ~~0-18370~~001-32530

Perma-Pipe International Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware	36-3922969
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

6410 W. Howard Street, Niles, Illinois	60714
(Address of principal executive offices)	(Zip Code)

(847) 966-1000

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.01 par value per share	PPIH	The ~~NASDAQ~~Nasdaq Stock Market LLC

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation ~~S-T(§~~S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☒ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

On September ~~4, 2020,~~3, 2021, there were ~~8,164,989~~8,144,404 shares of the registrant's common stock outstanding.

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Perma-Pipe International Holdings, Inc.

FORM 10-Q

For the fiscal quarter ended July 31, ~~2020~~2021

TABLE OF CONTENTS

Item		Page		Page

Part I	Financial Information		Financial Information

1.	Financial Statements		Financial Statements
	Consolidated Statements of Operations (Unaudited) for the Three and Six Months Ended July 31, 2020 and 2019	2	Consolidated Statements of Operations (Unaudited) for the Three and Six Months Ended July 31, 2021 and 2020	2
	Consolidated Statements of Comprehensive Income/(Loss) (Unaudited) for the Three and Six Months Ended July 31, 2020 and 2019	3	Consolidated Statements of Comprehensive Income/(Loss) (Unaudited) for the Three and Six Months Ended July 31, 2021 and 2020	3
	Consolidated Balance Sheets as of July 31, 2020 (Unaudited) and January 31, 2020	4	Consolidated Balance Sheets as of July 31, 2021 (Unaudited) and January 31, 2021	4
	Consolidated Statements of Stockholders' Equity (Unaudited) for the Three and Six Months Ended July 31, 2020 and 2019	5	Consolidated Statements of Stockholders' Equity (Unaudited) for the Three and Six Months Ended July 31, 2021 and 2020	5
	Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended July 31, 2020 and 2019	6	Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended July 31, 2021 and 2020	6
	Notes to Consolidated Financial Statements (Unaudited)	7	Notes to Consolidated Financial Statements (Unaudited)	7

2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	19	Management's Discussion and Analysis of Financial Condition and Results of Operations	19

4.	Controls and Procedures	26	Controls and Procedures	26

Part II	Other Information		Other Information

6.	Exhibits	27	Exhibits	27

Signatures	Signatures	28	Signatures	28

Table of Contents

PART I FINANCIAL INFORMATION

Item 1.

Financial Statements

PERMA-PIPE INTERNATIONAL HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(In thousands, except per share data)

	Three Months Ended July 31,						Six Months Ended July 31,					*Three Months Ended July 31,*					*Six Months Ended July 31,*
	2020			2019			2020			2019		*2021*		*2020*			*2021*		*2020*
Net sales	$	20,364		$	36,667		$	43,106		$	60,943	$	39,804	$	20,364		$	64,227	$	43,106
Cost of sales		18,000			27,014			37,275			46,568		29,061		18,000			48,979		37,275
Gross profit		2,364			9,653			5,831			14,375		10,743		2,364			15,248		5,831

Operating expenses
General and administrative expenses		4,488			4,814			8,792			9,271		5,602		4,488			10,008		8,792
Selling expenses		1,331			1,416			2,978			2,676		1,053		1,331			2,094		2,978
Total operating expenses		5,819			6,230			11,770			11,947		6,655		5,819			12,102		11,770

Income/(loss) from operations		(3,455	)		3,423			(5,939	)		2,428		4,088		(3,455	)		3,146		(5,939	)

Interest expense, net		118			209			304			419		268		118			446		304
Other income		3,739			241			3,674			256
Other income, net													457		3,739			899		3,674
Income/(loss) from operations before income taxes		166			3,455			(2,569	)		2,265		4,277		166			3,599		(2,569	)

Income tax (benefit)/expense		(101	)		(265	)		(315	)		47
Income tax expense/(benefit)													861		(101	)		1,026		(315	)

Net income/(loss)	$	267		$	3,720		$	(2,254	)	$	2,218	$	3,416	$	267		$	2,573	$	(2,254	)

Weighted average common shares outstanding
Basic		8,126			7,887			8,087			7,937		8,151		8,126			8,158		8,087
Diluted		8,278			8,202			8,087			8,122		8,321		8,278			8,290		8,087

Income/(loss) per share
Earnings/(loss) per share
Basic		0.03			0.47			(0.28	)		0.28		0.42		0.03			0.32		(0.28	)
Diluted		0.03			0.45			(0.28	)		0.27		0.41		0.03			0.31		(0.28	)

Note 4 - Revenue recognition

The Company accounts for its revenues under Accounting Standards Codification ("ASC") Topic 606, "Revenue from Contracts with Customers".

Revenue from contracts with customers:

The Company defines a contract as an agreement that has approval and commitment from both parties, defined rights and identifiable payment terms, which ensures the contract has commercial substance and that collectability is reasonably assured.

The Company’s standard revenue transactions are classified into two main categories:

1)1)

Systems and Coating - which include all bundled products in which ~~the Company~~Perma-Pipe designs, engineers, and manufactures pre-insulated specialty piping systems, insulates subsea flowline pipe, subsea oil production equipment, and land-lines. Additionally, this systems classification also includes coating applied to pipes and structures.

2)2)

Products - which include cables, leak detection products, heat trace products, ~~sold under the PermAlert brand name,~~ material/goods not bundled with piping or flowline systems, and field services not bundled into a project contract.

In accordance with ~~Accounting Standards Codification ("ASC") 606-10-25-27~~ASC 606-10-25-27 through 29, the Company recognizes specialty piping and coating systems revenue over time as the manufacturing process progresses because one of the following conditions exist:

1)1)

the customer owns the material that is being insulated or coated, so the customer controls the asset and thus the work-in-process; or

2)2)

the customer controls the work-in-process due to the custom nature of the pre-insulated, fabricated system being manufactured as evidenced by the Company’s right to payment for work performed to date plus seller’s profit margin for products that have no alternative use for the Company.

Products revenue is recognized when goods are shipped or services are performed (ASC ~~606-10-25-30)~~606-10-25-30).

A breakdown of the Company's revenues by revenue class for the three and six months ended July 31, ~~2020~~ 2021 and ~~2019~~2020 are as ~~follows:~~follows (in thousands):

	Three Months Ended July 31,										Six Months Ended July 31,										*Three Months Ended July 31,*										*Six Months Ended July 31,*
	2020					2019					2020					2019					*2021*					*2020*					*2021*					*2020*
	Sales		% to Total			Sales		% to Total			Sales		% to Total			Sales		% to Total			*Sales*		*% to Total*			*Sales*		*% to Total*			*Sales*		*% to Total*			*Sales*		*% to Total*
Products	$	1,703		8	%	$	5,860		16	%	$	6,168		14	%	$	10,757		18	%	$	4,548		11	%	$	1,703		8	%	$	7,135		11	%	$	6,168		14	%

Specialty Piping Systems and Coating
Revenue recognized under input method		9,784		48	%		15,451		42	%		18,346		43	%		24,238		40	%		13,999		35	%		9,784		48	%		23,952		37	%		18,346		43	%
Revenue recognized under output method		8,877		44	%		15,356		42	%		18,592		43	%		25,948		42	%		21,257		54	%		8,877		44	%		33,140		52	%		18,592		43	%
Total	$	20,364		100	%	$	36,667		100	%	$	43,106		100	%	$	60,943		100	%	$	39,804		100	%	$	20,364		100	%	$	64,227		100	%	$	43,106		100	%

The input method, as noted in ASC ~~606-10-55-20,~~606-10-55-20, is used by the U.S. operating entities to measure revenue by the costs incurred to date relative to the estimated costs to satisfy the contract ~~using the percentage-of-completion method.~~over time. Generally, these contracts are considered a single performance obligation satisfied over time and due to the custom nature of the goods and services, the ~~percentage-of-completion~~input method is the most faithful depiction of the Company’s performance as it measures the value of the goods and services transferred to the customer. Costs include all material, labor and direct costs incurred to satisfy the performance obligations of the contract. Revenue recognition begins when projects costs are incurred.

The output method, as noted in ASC ~~606-10-55-17,~~606-10-55-17, is used by all other operating entities to measure revenue by the direct measurement of the outputs produced relative to the remaining goods promised under the contract. Due to the types of end customers, generally these contracts require formal inspection protocols or specific export documentation for units produced, or produced and shipped, therefore, the output method is the most faithful depiction of the Company’s performance. Depending on the conditions of the contract, revenue may be recognized based on units produced, inspected and held by the Company prior to shipment or on units produced, inspected and shipped.

Some of the Company’s operating entities invoice and collect milestones or other contractual obligations prior to the transfer of goods and services, but do not recognize revenue until the performance obligations are satisfied under the methods discussed above.

Contract modifications that occur prior to the start of the manufacturing process will supersede the original contract and revenue is recognized using the modified contract value. Contract modifications that occur during the manufacturing process (changes in scope of work, job performance, material costs, and/or final contract settlements) are recognized in the period in which the revisions are known. Provisions for losses on uncompleted contracts are made in contract liabilities account in the period such losses are identified.

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Contract assets and liabilities:

Contract assets represent revenue recognized in excess of amounts billed (unbilled receivables) for contract work in progress for which the Company has a valid contract and an enforceable right to payment for work completed. Contract liabilities represent billings in excess of costs (unearned revenue) for contract work in progress for which the Company has a valid contract and an enforceable right to payment for work completed. Both customer billings and the satisfaction (or partial satisfaction) of the performance obligation(s) occur throughout the manufacturing process and impacts the period end balances in these accounts.

The Company anticipates that substantially all costs incurred for uncompleted contracts as of July 31, ~~2020~~2021 will be billed and collected within one year.

During the year ended January 31, 2021, one of the Company's customers in Qatar made a call on a performance bond held to secure one of the Company's contracts. The Company believes the customer's claims of non-performance under the contract are invalid and that the customer's actions were themselves a breach of the contract. The Company has engaged local counsel to seek reimbursement as well as additional compensation for lost profits suffered as a result of cancellation of certain work orders under the contract. The Company has recorded the expense related to the encashment of approximately $0.6 million in other income in the consolidated statement of operations for the year ended January 31, 2021. No receivable has been recorded related to the potential reimbursement in the consolidated financial statements as of July 31, 2021.

The following ~~tables set forth~~table shows the ~~changes~~reconciliation of the cost in excess of billings:

(In thousands)	*July 31, 2021*	*January 31, 2021*
Costs incurred on uncompleted contracts	$ 20,705	$ 17,543
Estimated earnings	10,986	9,651
Earned revenue	31,691	27,194
Less billings to date	31,759	23,949
Costs in excess of billings, net	$ (68)	$ 3,245
Balance sheet classification
Contract assets: Costs and estimated earnings in excess of billings on uncompleted contracts	$ 1,713	$ 4,007
Contract liabilities: Billings in excess of costs and estimated earnings on uncompleted contracts	(1,781)	(762)
Costs in excess of billings, net	$ (68)	$ 3,245

Substantially all of the ~~Company's~~$1.2 million contract liabilities balance as of January 31, 2020 was recognized in revenues during 2020 and substantially all of the $0.8 million contract liabilities balance as of January 31, 2021 is expected to be recognized in revenues during 2021.

Additionally, included in prepaid expenses and other current assets ~~and liabilities for~~on the ~~periods indicated. In addition to these amounts,~~consolidated balance sheet, the Company has recorded ~~$3.3~~$3.4 million and $0.2 million of unbilled receivables as of July 31, 2021 and January 31, 2021, respectively, from ~~one of~~revenues generated by its ~~subsidiaries in the~~ Middle East ~~in other assets on its consolidated balance sheet as of July 31, 2020.~~subsidiaries.

Contract Assets

Balance January 31, 2019 $ 1,653
Costs and gross profit recognized during the period for uncompleted contracts from the prior period
(1,038 )
Costs and deferred gross profit incurred on uncompleted contracts not billed at the end of the current period
1,368
Closing Balance at April 30, 2019 $ 1,983
Costs and gross profit recognized during the period for uncompleted contracts from the prior period (1,509 )
Costs and deferred gross profit incurred on uncompleted contracts not billed at the end of the current period 3,000
Closing Balance at July 31, 2019 $ 3,474

Balance January 31, 2020
$ 2,166
Costs and gross profit recognized during the period for uncompleted contracts from the prior period (2,896 )
Costs and deferred gross profit incurred on uncompleted contracts not billed at the end of the current period 3,630
Closing Balance at April 30, 2020 $ 2,900
Costs and gross profit recognized during the period for uncompleted contracts from the prior period (1,743 )
Costs and deferred gross profit incurred on uncompleted contracts not billed at the end of the current period 593
Closing Balance at July 31, 2020 $ 1,750

Contract Liabilities

Balance January 31, 2019 $ 1,569
Revenue recognized during the period for uncompleted contracts from the prior period
(444 )
New contracts entered into that are uncompleted at the end of the current period
721
Closing Balance at April 30, 2019 $ 1,846
Revenue recognized during the period for uncompleted contracts from the prior period (1,250 )
New contracts entered into that are uncompleted at the end of the current period 545
Closing Balance at July 31, 2019 $ 1,141

Balance January 31, 2020
$ 1,173
Revenue recognized during the period for uncompleted contracts from the prior period (17 )
New contracts entered into that are uncompleted at the end of the current period (95 )
Closing Balance at April 30, 2020 $ 1,061
Revenue recognized during the period for uncompleted contracts from the prior period 631
New contracts entered into that are uncompleted at the end of the current period (925 )
Closing Balance at July 31, 2020 $ 767

	Contract Liabilities
Balance January 31, 2019	$	1,569
Revenue recognized during the period for uncompleted contracts from the prior period		(444	)
New contracts entered into that are uncompleted at the end of the current period		721
Closing Balance at April 30, 2019	$	1,846
Revenue recognized during the period for uncompleted contracts from the prior period		(1,250	)
New contracts entered into that are uncompleted at the end of the current period		545
Closing Balance at July 31, 2019	$	1,141

Balance January 31, 2020	$	1,173
Revenue recognized during the period for uncompleted contracts from the prior period		(17	)
New contracts entered into that are uncompleted at the end of the current period		(95	)
Closing Balance at April 30, 2020	$	1,061
Revenue recognized during the period for uncompleted contracts from the prior period		631
New contracts entered into that are uncompleted at the end of the current period		(925	)
Closing Balance at July 31, 2020	$	767

Practical expedients:

Costs to obtain a contract are not considered project costs as they are not usually incremental, nor does job duration span more than one year. The Company applies the practical expedient for these types of costs and as such are expensed in the period incurred.

As the Company's contracts are less than one year, the Company has applied the practical expedient regarding disclosure of the aggregate amount and future timing of performance obligations that are unsatisfied or partially satisfied as of the end of the reporting period.

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Note 6 - Impairment of long-lived assets

The Company's assessment of long-lived assets, and other identifiable intangibles is based upon factors that market participants would use in accordance with the accounting guidance for the fair value measurement of assets. At July 31, ~~2020,~~2021, the Company performed a qualitative analysis assessment to determine if it was more likely than not that the fair values of the Company's long-lived assets exceeded their carrying values. The Company assessed three asset groups as part of this analysis: United States, Canada and Middle East. The qualitative assessment indicated that it was more likely than not that the fair values of the Company's long-lived assets exceeded their carrying values for ~~the United States and Middle East~~all three asset groups. ~~However, triggering events were identified related to the Company's Canada asset group, indicating potential impairment of the asset group's long-lived assets.~~ Therefore, ~~the Company performed a quantitative assessment to determine any potential impairment. After completion of this additional assessment,~~ it was determined that there was no0 impairment of the Company's long-lived assets for the three and six months ended July 31, ~~2020~~ 2021 and ~~2019~~2020. The Company will continue testing for potential impairment at least annually or as otherwise required by applicable accounting standards.

Goodwill. The purchase price of an acquired company is allocated between intangible assets and the net tangible assets of the acquired business with the residual of the purchase price recorded as goodwill. All identifiable goodwill as of July 31, ~~2020~~ 2021 and January 31, ~~2020~~2021 was attributable to the purchase of Perma-Pipe Canada, Ltd., which occurred in 2016.

January 31, 2020

Foreign exchange change effect

July 31, 2020

Goodwill
$ 2,254 $ (32 ) $ 2,222

(In thousands)			*January 31, 2021*				*Foreign exchange change effect*				*July 31, 2021*
Goodwill		$	2,332			$	56			$	2,388

The Company performs an impairment assessment of goodwill annually as of January 31, or more frequently if triggering events occur, based on the estimated fair value of the related reporting unit or intangible asset. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. At July 31, ~~2020,~~2021, the Company elected to perform a ~~Step 0~~ qualitative analysis assessment to determine if it was more likely than not that the fair value of the Company's ~~goodwill~~Canadian reporting unit exceeded its carrying ~~value.~~value, including goodwill. The qualitative assessment ~~identified~~did not identify any triggering events that ~~indicated~~would indicate potential impairment of the Company's ~~goodwill.~~Canadian reporting unit. Therefore, the Company proceeded to complete the Step 1 analysis to determine any potential impairment. The Step 1 analysis involved a quantitative fair valuation of the reporting unit associated with the Company's goodwill, including a market approach, transaction approach and discounted cash flow analysis. After completion of the Step 1 analysis, it was determined that the fair value of the reporting unit exceeded its carrying value, resulting in no0 impairment for the three and six months ended July 31, ~~2020~~ 2021 and ~~2019~~2020. The Company will continue testing for potential impairment at least annually or as otherwise required by applicable accounting standards.

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Note 7 - Stock-based compensation

The Company’s 2017 Omnibus Stock Incentive Plan dated June 13, 2017, as amended, which the Company's stockholders approved in June 2017 ("("2017 Plan"), expired in June 2020. ~~Prior to the 2017 Plan's expiration, grants were made to the Company's employees, officers and independent directors, as described below.~~

The Company has prior incentive plans under which previously granted awards remain outstanding, including the 2017 Plan, but under which no new awards may be granted. At July 31, ~~2020~~2021 the Company had reserved a total of ~~534,670~~433,119 shares for grants and issuances under these incentive stock plans, which includes a reserve for issuances pursuant to unvested or unexercised prior awards.

While the 2017 Plan provided for the grant of deferred shares, non-qualified stock options, incentive stock options, restricted shares, restricted stock units, and performance-based restricted stock units intended to qualify under section 422 of the Internal Revenue Code, the Company issued only restricted shares and restricted stock units under the 2017 Plan. The 2017 Plan authorized awards to officers, employees, consultants and independent directors.

The Company's 2021 Omnibus Stock Incentive Plan dated May 26, 2021 was approved by the Company's stockholders in May 2021 ("2021 Plan"). The 2021 Plan will expire in May 2024. The 2021 Plan authorizes awards to officers, employees, consultants and independent directors. Grants were made to the Company's employees, officers and independent directors under the 2021 Plan, as described below.

Stock-based compensation expense

The Company has granted stock-based compensation awards to eligible employees, officers or independent directors. The following were the Company's stock-based compensation expenses for the periods presented:

	Three Months Ended July 31,				Six Months Ended July 31,				*Three Months Ended July 31,*				*Six Months Ended July 31,*
	2020		2019		2020		2019
(In thousands)									*2021*		*2020*		*2021*		*2020*
Stock-based compensation expense	$	1	$	3	$	3	$	8	$	0	$	1	$	0	$	3
Restricted stock-based compensation expense		259		403		476		552		276		259		548		476
Total stock-based compensation expense	$	260	$	406	$	479	$	560	$	276	$	260	$	548	$	479

Stock Options

The Company did not grant any stock options during the three or six months ended July 31, ~~2020~~2021. The following tables summarizes the Company's stock option activity:

Option activity
No. of Shares Underlying Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value
Outstanding at January 31, 2020
132 $ 8.98 3.2 $ 160
Exercised - - - -
Expired or forfeited (13 ) - - -
Outstanding at July 31, 2020
119 9.20 2.9 4

Exercisable at July 31, 2020
119 $ 9.20 2.9 $ 4

(Shares in thousands)	*Options*			*Weighted Average Exercise Price*		*Weighted Average Remaining Contractual Term*		*Aggregate Intrinsic Value*
Outstanding at January 31, 2021		107		$	9.24		2.5	$	5
Exercised		0			0		-		-
Expired or forfeited		(15	)		7.69		-		-
Outstanding at July 31, 2021		92			9.50		2.2		17

Options exercisable at July 31, 2021		92		$	9.50		2.2	$	17

NoNaN stock options were exercised during the six months ended July 31, ~~2020~~2021.

Unvested option activity
No. of Shares Underlying Options Weighted Average Grant Date Fair Value Aggregate Intrinsic Value
Outstanding at January 31, 2020
3 $ 7.33 $ 4
Vested (3 ) - -
Expired or forfeited - - -
Outstanding at July 31, 2020
- $ - $ -

~~Table~~There was 0 vesting, expiration or forfeiture of ~~Contents~~

previously unvested stock options during the six months ended July 31, 2021. As of July 31, ~~2020~~, 2021, there were no0 remaining unvested stock options outstanding, and therefore no0 unrecognized compensation expense related to unvested stock options.

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Restricted stock

The following table summarizes the Company's restricted stock activity for the six months ended July 31, ~~2020~~2021:

Restricted stock activity	Restricted Shares			Weighted Average Grant Price Per Share		Aggregate Intrinsic Value
Outstanding at January 31, 2020		321		$	8.89	$	2,857
(Shares in thousands)								*Restricted Shares*			*Weighted Average Price*		*Aggregate Intrinsic Value*
Outstanding at January 31, 2021									372		$	7.62	$	2,843
Granted		156			5.88				120			7.14
Vested and issued		(63	)		8.96				(113	)		7.51
Forfeited or retired for taxes		(36	)		8.72				(39	)		7.28
Outstanding at July 31, 2020		378		$	7.63	$	2,884
Outstanding at July 31, 2021									340		$	7.50	$	2,561

As of July 31, ~~2020~~2021, there was ~~$1.9~~$1.6 million of unrecognized compensation expense related to unvested restricted stock granted under the ~~2017 Plan.~~plans. That cost is expected to be recognized over a weighted average period of ~~2.1~~1.9 years.

Note 9 - Debt

Debt totaled $~~10.5~~$8.6 million and ~~$16.9~~$13.2 million at July 31, ~~2020~~2021 and January 31, ~~2020~~2021, respectively.

Paycheck Protection Program Loan. On May 1, 2020, the Company entered into a loan agreement under the Small Business Administration's Paycheck Protection Program ("PPP") and received proceeds of approximately $3.2 million. Interest on the loan accrued at a fixed interest rate of 1.0%, and the loan had a maturity date of April 28, 2022. Under Section 1106 of the ~~CARES~~Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"), borrowers are eligible for forgiveness of principal and accrued interest on the loans to the extent that the proceeds are used to cover eligible payroll costs, mortgage interest costs, rent and utility costs, otherwise described as qualified expenses. During the three months ended July 31, 2020, the Company used all of the PPP loan proceeds to pay for qualified expenses, 100% of which were used for payroll related expenses. The Company ~~believes~~submitted its application and supporting documentation for forgiveness to its bank, which submitted the application and supporting documents to the Small Business Administration ("SBA"). On June 24, 2021, the Company was notified by its lender that its PPP loan ~~proceeds will be~~had been forgiven ~~under~~by the ~~terms of the CARES Act program.~~SBA.

Guidance from the American Institute of Certified Public Accountants' ("AICPA") Technical Question and Answer Section 3200.18 states that if a company expects to meet the PPP’s eligibility criteria and concludes that the PPP loan represents, in substance, a grant that is expected to be forgiven, it may analogize to International Accounting Standards ("IAS") 20 - Accounting for Government Grants and Disclosure of Government Assistance to account for the PPP loan. The ~~Company believes the PPP loan proceeds will be forgiven under the terms of the CARES Act program, although no assurance to that effect can be provided. Therefore, the~~ Company has recognized the earnings impact on a systematic basis over the periods in which the Company recognized as expenses the related costs for which the grants were intended to compensate. We noted that all of these expenses, and thus the related earnings impact, were incurred during the ~~three months~~year ended ~~July~~January 31, ~~2020.~~ 2021.

The IAS 20 guidance allows for recognition in earnings either separately under a general heading such as other income, or as a reduction of the related expenses. The Company has elected the former option, to make a more clear distinction in its financial statements between its operating income and the amount of net income resulting from the PPP loan and subsequent ~~expected~~ forgiveness. As such, we have recognized the proceeds in earnings during the ~~three months~~year ended ~~July~~January 31, ~~2020.~~2021. The amounts ~~are~~were recognized in other income in the consolidated statements of operations.

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Revolving lines - North America. On September 20, 2018, the Company and certain of its U.S. and Canadian subsidiaries (collectively, together with the Company, the “North American Loan Parties”) entered into a Revolving Credit and Security Agreement (the “Credit Agreement”) with PNC Bank, National Association ("PNC"), as administrative agent and lender, providing for a ~~three-year $18~~three-year $18.0 million Senior Secured Revolving Credit Facility, subject to a borrowing base including various reserves (the “Senior Credit Facility”).

The Company has used proceeds from the Senior Credit Facility for on-going working capital needs, and expects to continue using this facility to fund future capital expenditures, working capital needs and other corporate purposes. Borrowings under the Senior Credit Facility bear interest at a rate equal to an alternate base rate or London Interbank Offered Rate ("LIBOR"), plus, in each case, an applicable margin. The applicable margin is based on average quarterly undrawn availability with respect to the Senior Credit Facility. Interest on alternate base rate borrowings are generally payable monthly in arrears and interest on LIBOR borrowings are generally payable in arrears on the last day of each interest period. Additionally, the Company is required to pay a 0.375% per annum facility fee on the unused portion of the Senior Credit Facility. The facility fee is payable quarterly in arrears.

Subject to certain exceptions, borrowings under the Senior Credit Facility are secured by substantially all of the assets of the Company and certain of the assets of its North American subsidiaries. The North American Loan Parties’ obligations under the Senior Credit Facility are guaranteed by Perma-Pipe Canada, Inc. The Senior Credit Facility will mature on September 20, 2021. The Company has engaged a consultant to assist with the search for, communication with and selection of a new lender or a replacement facility with PNC. We have been in communications and shared data with PNC and others. The Company expects to negotiate a renewal to or replacement for its existing credit facility prior to maturity.

Subject to certain qualifications and exceptions, the Senior Credit Facility contains covenants that, among other things, restrict the North American Loan Parties’ ability to create liens, merge or consolidate, consummate acquisitions, make investments, dispose of assets, incur debt, and pay dividends and other distributions. In addition, the North American Loan Parties cannot allow capital expenditures to exceed $3.0 million annually (plus a limited carryover of unused amounts).

The Senior Credit Facility also contains financial covenants requiring (i) the North America Loan Parties to achieve a ratio of its EBITDA (with certain additional adjustments) to the sum of scheduled cash principal payments on indebtedness for borrowed money and interest payments on the advances under the Senior Credit Facility (excluding from the calculation items related to the financial performance of the Company’s foreign subsidiaries not party to the Credit Agreement) ("fixed charge coverage ratio") to be not less than 1.10 to 1.00 at each quarter end on a trailing ~~four-quarter~~four-quarter basis; and ~~(iii)~~(ii) the Company and its subsidiaries (including the Company’s foreign subsidiaries not party to the Credit Agreement) to achieve a fixed charge coverage ratio of its EBITDA (with certain additional adjustments) to the sum of scheduled cash principal payments on indebtedness for borrowed money and interest payments on the advances under the Senior Credit Facility of not less than 1.10 to 1.00 at each quarter end on a trailing ~~four-quarter~~four-quarter basis.

As of October 31, 2020, the Company and its subsidiaries failed to achieve the necessary fixed charge coverage ratio of 1.10 to 1.00 for the trailing four-quarters ended October 31, 2020 under its Credit Agreement for both the North American Loan Parties and the Company and its subsidiaries. On December 18, 2020, the Company entered into the First Amendment and Waiver to the Revolving Credit and Security Agreement (“Amendment and Waiver”) with PNC, which (i) reflected PNC’s waiver of the Company’s failure to maintain a fixed charge coverage ratio of 1.10 to 1.00 as of October 31, 2020 on a trailing four quarter basis as required under the Company’s Credit Agreement and (ii) further amended certain future fixed charge coverage ratio covenants requirements under the Credit Agreement as described below. Additionally, the Company was also required to have received, and applied to reduce the outstanding balance under the Credit Agreement, $1.0 million from one of its foreign subsidiaries, Perma-Pipe Middle East FZC, in the UAE. The transfer and repayment occurred on December 17, 2020 and did not cause the Company to incur any additional fees or taxes, nor did it force the Company to change any of its assertions with regards to permanent reinvestment in any of its foreign subsidiaries. The Company will incur additional fees over the remainder of the Amendment and Waiver of approximately $0.1 million. The Amendment and Waiver also eliminates the Company’s ability to make LIBOR borrowings and reduces the overall availability by $2.0 million until maturity.

The amended fixed charge coverage ratio requirements for the Company and its subsidiaries under the Amendment and Waiver are 1.25 to 1.00 for the nine-month period ending July 31, 2021. The amended fixed charge coverage ratio requirements for the North American Loan Parties under the Amendment and Waiver are 1.10 to 1.00 for the nine-month period ending July 31, 2021. In order to cure any future breach of the fixed charge coverage ratio covenant by the North American Loan Parties, the Company may repatriate cash from any of its foreign subsidiaries that are otherwise not a party to the Credit Agreement in an amount which, when added to the amount of the Company’s Consolidated EBITDA, would result in pro forma compliance with the covenant. The Company was in compliance with these covenants as of July 31, ~~2020~~. 2021.

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As of July 31, ~~2020,~~ 2021, the Company had $3 thousand in borrowings and had $10.3 million available under the Senior Credit Facility, before application of the $2.0 million availability block noted above in connection with the Amendment and Waiver. As of January 31, 2021, the Company had borrowed an aggregate of ~~$2.5~~$2.8 million ~~at rates of 6.25% and 4.17% resulting in a weighted average rate of 4.56%~~ and had ~~$5.2~~$1.7 million available under the Senior Credit Facility.

~~Table~~

Finance obligation - buildings and land. On April 14, 2021, the Company entered into a purchase and sale agreement (the "Purchase and Sale Agreement"). Pursuant to the terms of ~~Contents~~

the Purchase and Sale Agreement, the Company sold its land and buildings in Lebanon, Tennessee (the "Property") for a purchase price of $10.4 million. The transaction generated net cash proceeds of $9.1 million, following the release of the escrowed amount in June 2021 discussed below. The Company used a portion of the proceeds to repay its borrowings under the Senior Credit Facility. The Company expects to use its liquidity for strategic investments and general corporate needs. Concurrent with the sale of the Property, the Company entered into a fifteen-year lease agreement (the “Lease Agreement”), whereby the Company will lease back the Property at an annual rental rate of approximately $0.8 million, subject to annual rent increases of 2.0%. Under the Lease Agreement, the Company has four consecutive options to extend the term of the lease by five years for each such option.

In accordance with ASC Topic 842, "Leases", this transaction was recorded as a failed sale and leaseback as the present value of lease payments exceeded substantially all of the fair value of the underlying asset. The Company utilized an incremental borrowing rate of 8.0% to determine the finance obligation to record for the amounts received and will continue to depreciate the assets. The current portion of the finance obligation of $0.1 million is recognized in current maturities of long-term debt and the long-term portion of $9.4 million is recognized in long-term finance obligation on the Company's consolidated balance sheet as of July 31, 2021. The net carrying amount of the financial liability and remaining assets will be zero at the end of the lease term. Concurrently with the sale, the Company paid off the approximately $0.9 million mortgage note on the Property to its lender. At closing, $0.4 million was placed in a short-term escrow account to cover certain post-closing contingencies that may arise. The contingencies were resolved in May 2021 and the Company received the escrowed funds in June 2021.

Revolving lines - foreign. The Company also has credit arrangements used by its Middle Eastern subsidiaries in the ~~United Arab Emirates (the "U.A.E.")~~U.A.E. and Egypt as discussed further below.

The Company has a revolving line for 8.0 million Dirhams (approximately $2.2 million at July 31, ~~2020)~~2021) from a bank in the U.A.E. The facility has an interest rate of approximately ~~3.8%~~3.58% and ~~expires~~was originally set to expire in November ~~2020.~~2020, however, the expiration was extended due to the COVID-19 pandemic and inability to finalize renewal documentation prior to that time. The Company has submitted final documentation to complete the renewal process, and is awaiting official notification from the bank of the renewal completion. This process is expected to be completed in September 2021.

The Company has a second revolving line for 19.5 million Dirhams (approximately $5.3 million at July 31, ~~2020)~~2021) from a bank in the U.A.E. The facility has an interest rate of approximately ~~4.3%~~4.5% and ~~was originally~~is set to expire in January 2022.

The Company has a third revolving line for 3.0 million Dirhams (approximately $0.8 million at July ~~2020, however,~~31, 2021) from a bank in the ~~expiration~~U.A.E. The facility has ~~been extended~~an interest rate of approximately 4.5% and is set to ~~September 2020 due to the global pandemic and inability to finalize renewal documentation prior to that time.~~expire in January 2022.

These credit arrangements are in the form of overdraft facilities and project financing at rates competitive in the countries in which the Company operates. The lines are secured by certain equipment, certain assets (such as accounts receivable and inventory), and a guarantee by the Company. Some credit arrangement covenants require a minimum tangible net worth to be maintained, including maintaining certain levels of intercompany subordinated debt. In addition, some of the revolving credit facilities restrict payment of dividends or undertaking of additional debt.

In ~~November 2019,~~ June 2021, the Company's Egyptian subsidiary entered into a credit arrangement with a bank in Egypt for a revolving line of ~~200.0~~100.0 million Egyptian Pounds (approximately ~~$12.5~~$6.2 million at July 31, ~~2020)~~2021). This credit arrangement is in the form of project financing at rates competitive in Egypt. The line was secured by certain assets (such as accounts receivable) of the Company's Egyptian subsidiary. Among other covenants, the credit arrangement established a maximum leverage ratio allowable and restricted the Company's Egyptian subsidiary's ability to undertake any additional debt. The facility has an interest rate of approximately 11.0% and is set to expire in August 2022.

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In January 2021, the Company entered into a second credit arrangement for project financing with a bank in Egypt for 46.2 million Egyptian Pounds (approximately $2.9 million at July 31, 2021). This credit arrangement is in the form of project financing at rates competitive in Egypt. The line is secured by ~~certain assets (such as accounts receivable). Among other covenants,~~ the ~~credit arrangement establishes~~contract for a ~~maximum leverage ratio allowable and restricts~~project being financed by the ~~ability to undertake any additional debt.~~Company's Egyptian subsidiary. The facility has an interest rate of approximately ~~12.8%~~8.0% and ~~was originally set~~is expected to expire in ~~June 2020, however,~~September 2021 in connection with the ~~expiration has been extended to September 2020 due to~~completion of the ~~global pandemic and inability to finalize renewal documentation prior to that time.~~project.

The Company’s credit arrangements used by its Middle Eastern subsidiaries renew on an annual basis. The Company guarantees the subsidiaries' debt including all foreign debt.

The Company was in compliance with the covenants under the credit arrangements in the U.A.E. and Egypt as of July 31, ~~2020~~2021. On July 31, ~~2020~~2021, interest rates were based on the Emirates Inter Bank Offered Rate ~~("EIBOR")~~ plus 3.0% to 3.5% per annum ~~with~~for the U.A.E. credit arrangements, two of which have a minimum interest rate of 4.5% per annum, ~~for the U.A.E. credit arrangements~~ and based on the ~~Central Bank of Egypt corridor~~stated interest rate ~~plus 1.5% per annum~~in the agreement for the Egypt credit arrangement. Based on these base rates, as of July 31, ~~2020~~2021, the Company's interest rates ranged from ~~3.8%~~3.57% to ~~12.8%~~8.0%, with a weighted average rate of ~~3.76%~~5.89%, and the Company ~~could borrow $20.0~~had facility limits totaling $17.6 million under these credit arrangements. As of July 31, ~~2020~~2021, ~~$4.3~~$5.1 million of availability was used to support letters of credit to guarantee amounts committed for inventory purchases and for performance guarantees. Additionally, as of July 31, ~~2020~~2021, the Company had borrowed ~~$1.0~~$2.5 million, and had an additional ~~$14.7~~$10.1 million of borrowing remaining available under the foreign revolving credit arrangements. The foreign revolving lines balances as of July 31, ~~2020~~ 2021 and January 31, ~~2020~~2021, were included as current maturities of long-term debt in the Company's consolidated balance sheets.

Mortgages. On July 28,2016, the Company borrowed CAD 8.0 million (approximately $6.1 million at the prevailing exchange rate on the transaction date) from a bank in Canada under a mortgage note secured by the Company's manufacturing facility located in Alberta, Canada that matures on December 23,2042. The interest rate is variable, and was 4.55% at July 31, ~~2020.~~2021. Principal payments began in January 2018.

On June 19,2012, the Company borrowed $1.8 million under a mortgage note secured by its manufacturing facility in Lebanon, Tennessee. The proceeds were used for ~~payment~~repayment of amounts borrowed. ~~The loan bears interest at 4.5%~~On April 14, 2021, the Company entered into the Purchase and Sale Agreement, discussed further in Note 9 - Debt, above. Concurrently with ~~monthly payments of $13 thousand for both principal and interest and matures July 1, 2027. On June 19, 2022, and~~the sale, the Company paid off the approximately $0.9 million remaining on the ~~same day of each year thereafter,~~mortgage note on the ~~interest rate shall adjust~~Property to ~~the prime rate, provided that the applicable interest rate shall not adjust more than 2.0% per annum and shall be subject to a ceiling of 18.0% and a floor of 4.5%.~~its lender.

Note 10 - Leases

~~Table~~

Operating Leases. In August 2020, the Company entered into a new lease in Abu Dhabi for land upon which the Company intends to build a facility. The annual payments are initially expected to be approximately 1.2 million Dirhams (approximately $0.3 million at October 31, 2020), inclusive of ~~Contents~~

~~Note 10 - Leases~~rent and common charges, with escalation clauses in the agreement. Rent payments are deferred until August 2022. The lease expires in August 2050.

Finance Leases. In 2019, the Company obtained two finance leases for a total of CAD 1.1 million (approximately $0.8 million at the prevailing exchange rates on the transaction dates) to finance vehicle equipment. The interest rates for these finance leases were 8.0% per annum with monthly principal and interest payments of less than $0.1 million. These leases mature in August 2023. In 2017, the Company obtained three finance leases for a total of CAD 1.1 million (approximately $0.8 million at the prevailing exchange rates on the transaction dates) to finance vehicle equipment. The interest rates for these finance leases range from 4.0% to 7.8% per annum with monthly principal and interest payments of less than $0.1 million. ~~These~~Two of these leases ~~mature between~~ matured in April 2021 and new leases have been entered into in May 2021 to replace the matured leases. The remaining lease matures in September 2022.

In August 2016, the Company obtained a finance lease for 0.6 million Indian Rupees (approximately $8 thousand at the prevailing exchange rate on the transaction date) to finance vehicle equipment. The interest rate for this finance lease was 15.6% per annum with monthly principal and interest payments of less than $1 thousand. This lease expired in July 2019.

The Company has several significant operating lease agreements, with lease terms of one to 1430 years, which consist of real estate, vehicles and office equipment leases. These leases do not require any contingent rental payments, impose any financial restrictions or contain any residual value guarantees. Certain of the Company’s leases include renewal options and escalation clauses; renewal options have not been included in the calculation of the lease liabilities and ~~ROU~~right-of-use ("ROU") assets as the Company is not reasonably certain to exercise the options. Variable expenses generally represent the Company’s share of the landlord’s operating expenses. The Company does not have any arrangements where it acts as a lessor, other than one sub-lease arrangement.

At July 31, ~~2020~~2021, the Company had total operating lease liabilities of ~~$11.9~~$13.3 million and total operating ROU assets of ~~$10.9~~$11.8 million, which are reflected in the consolidated balance sheet. At July 31, ~~2020~~2021, the Company also had total finance lease liabilities of $~~0.9~~$0.7 million included in current maturities of long-term debt and long-term debt less current maturities, and total finance ROU assets of $~~1.0~~$0.9 million which were included in property plant and equipment, net of accumulated depreciation in the consolidated balance sheet.

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Supplemental balance sheet information related to leases is as ~~follows:~~follows (in thousands):

*Operating and Finance leases:*	July 31, 2020			January 31, 2020			*July 31, 2021*			*January 31, 2021*
Finance leases assets:
Property and Equipment - gross	$	1,659		$	1,696		$	1,245		$	879
Accumulated depreciation and amortization		(640	)		(551	)		(371	)		(96	)
Property and Equipment - net	$	1,019		$	1,145		$	874		$	783

Finance lease liabilities:
Finance lease liability short-term	$	375		$	417		$	361		$	300
Finance lease liability long-term		502			677			356			401
Total finance lease liabilities	$	877		$	1,094		$	717		$	701

Operating lease assets:
Operating lease ROU assets	$	10,889		$	11,475		$	11,848		$	13,384

Operating lease liabilities:
Operating lease liability short-term	$	1,338		$	1,040		$	1,367		$	1,402
Operating lease liability long-term		10,563			11,214			11,890			13,174
Total operating lease liabilities	$	11,901		$	12,254		$	13,257		$	14,576

Total lease costs consist of the ~~following:~~following (in thousands):

Lease costs	Consolidated Statements of Operations Classification	Three Months Ended July 31, 2020			Three Months Ended July 31, 2019			Six Months Ended July 31, 2020			Six Months Ended July 31, 2019			*Consolidated Statements of Operations Classification*	*Three Months Ended July 31, 2021*			*Three Months Ended July 31, 2020*			*Six Months Ended July 31, 2021*			*Six Months Ended July 31, 2020*
Finance Lease Costs
Amortization of ROU assets	Cost of sales	$	53		$	51		$	101		$	102		Cost of sales	$	65		$	53		$	119		$	101
Interest on lease liabilities	Interest expense		18			8			37			17		Interest expense		15			18			28			37
Operating lease costs	Cost of sales, SG&A expenses		610			581			1,222			1,132		Cost of sales, SG&A expenses		625			610			1,273			1,222
Short-term lease costs (1)	Cost of sales, SG&A expenses		213			82			236			266		Cost of sales, SG&A expenses		102			213			195			236
Sub-lease income	SG&A expenses		(20	)		(20	)		(40	)		(40	)	SG&A expenses		(20	)		(20	)		(40	)		(40	)
Total Lease costs	Total Lease costs	$	874		$	702		$	1,556		$	1,477		*Total Lease costs*	$	787		$	874		$	1,575		$	1,556

~~(1)~~(1) Includes variable lease costs, which are immaterial

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Supplemental cash flow information related to leases is as ~~follows:~~follows (in thousands):

Six Months Ended July 31, 2020

Six Months Ended July 31, 2019

Cash paid for amounts included in the measurement of lease liabilities:

Financing cash flows from finance leases
$ 202 $ 103
Operating cash flows from finance leases
$ 37 17
Operating cash flows from operating leases
$ 1,385 1,127

	*Six Months Ended July 31, 2021*		*Six Months Ended July 31, 2020*
Cash paid for amounts included in the measurement of lease liabilities:
Financing cash outflows from finance leases	$	203	$	202
Operating cash outflows from finance leases		28		37
Operating cash outflows from operating leases		985		1,385

	~~Six Months Ended July 31, 2020~~
~~ROU Assets obtained in exchange for new lease obligations:~~
~~Finance leases liabilities~~	$	-
~~Operating leases liabilities~~		53

	*Six Months Ended July 31, 2021*		*Six Months Ended July 31, 2020*
ROU Assets obtained in exchange for new lease obligations:
Finance leases liabilities	$	201	$	0
Operating leases liabilities		45		53

Weighted-average lease terms and discount rates are as follows:

	*July 31, ~~2020~~2021*
Weighted-average remaining lease terms (in years):
Finance leases		~~2.6~~2.0
Operating leases		~~8.3~~13.4

Weighted-average discount rates:
Finance leases		~~7.7~~7.8	%
Operating leases		~~7.9~~7.4	%	%

Maturities of lease liabilities as of July 31, ~~2020~~2021, are as ~~follows:~~follows (in thousands):

Year:	Operating Leases			Finance Leases			*Operating Leases*			*Finance Leases*
For the six months ended January 31, 2021	$	949		$	239
For the year ended January 31, 2022		2,340			325
For the six months ended January 31, 2022							$	1,210		$	202
For the year ended January 31, 2023		2,229			264			2,295			393
For the year ended January 31, 2024		2,061			142			2,281			180
For the year ended January 31, 2025		1,330			-			1,520			0
For the year ended January 31, 2026		1,144			-			1,326			0
For the year ended January 31, 2027								1,333			0

Thereafter		6,214			-			12,322			0
Total lease payments		16,267			970			22,287			775
Less: amount representing interest		(4,366	)		(93	)		(9,030	)		(58	)
Total lease liabilities at July 31, 2020	$	11,901		$	877
Total lease liabilities at July 31, 2021							$	13,257		$	717

Rent expense on operating leases, which is recorded on straight-line basis, was ~~$0.8 million and~~ $0.7 million for the three months ended July 31, ~~2020~~2021 and ~~2019~~2020, ~~and $1.5 million and $1.4 million for the six months ended July 31, 2020 and 2019,~~ respectively.

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Note 13 - Recent accounting pronouncements

In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") ~~2020-04,~~2020-04, Reference Rate Reform (Topic ~~848)~~848), which provides guidance designed to provide relief from the accounting analysis and impacts that may otherwise be required for modifications to agreements necessitated by the scheduled discontinuation of LIBOR on December 31, 2021. It also provides optional expedients to enable companies to continue to apply hedge accounting to certain hedging relationships impacted by reference rate reform. The ASU provides the option to account for and present a modification that meets the scope of the standard as an event that does not require contract remeasurement at the modification date or reassessment of a previous accounting determination required under the relevant topic or subtopic. This ASU is effective for all entities; however, application of the guidance is optional, is only available in certain situations and is only available for companies to apply from March 12, 2020 until December 31, 2022. The Company's Senior Credit Facility which matures on September 20, 2021 bears interest using an alternate base rate or LIBOR plus an applicable margin. Based on the maturity of the Senior Credit Facility prior to the discontinuation of LIBOR, the Company does not expect a material impact from the adoption of this standard on the financial statements of the Company.

In ~~December 2019,~~ June 2016, the FASB issued ASU ~~2019-12,~~ ~~Simplifying the Accounting for Income Taxes~~ (Topic 740), which eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating taxes during the quarters and the recognition of deferred tax liabilities for outside basis differences. This guidance also simplifies aspects of the accounting for franchise taxes, enacts changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating this standard and the impact to the financial statements of the Company.

~~In August 2018, the FASB issued ASU 2018-14,~~ ~~Compensation~~ No.2016- ~~Retirement Benefits - Defined Benefit Plans - General~~ (Subtopic 715-20), which removes disclosures that are no longer considered cost beneficial, clarifies specific requirements of existing disclosures and adds disclosure requirements identified as relevant. This ASU is effective for fiscal years ending after December 15, 2020, with early adoption permitted. The Company will adopt this standard in its Annual Report on Form 10-K footnote disclosures for the year ended January 31, 2021 and does not expect a material impact on the financial statements of the Company.

~~In June 2016, the FASB issued ASU No. 2016-13,~~ 13,Financial Instruments-Credit Losses (Topic ~~326)~~326): Measurement of Credit Losses on Financial Instruments. The new guidance affects loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. A recently adopted amendment has delayed the effective date until fiscal years beginning after December 15, 2022. The Company is currently evaluating this standard and the impact to the financial statements of the Company.

The Company evaluated other recent accounting pronouncements and does not expect them to have a material impact on its consolidated financial statements or related disclosures.

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The statements contained under the caption MD&A and other information contained elsewhere in this quarterly report, which can be identified by the use of forward-looking terminology such as "may," "will," "expect," "continue," "remains," "intend," "aim," "should," "prospects," "could," "future," "potential," "believes," "plans," "likely" and "probable" or the negative thereof or other variations thereon or comparable terminology, constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbors created thereby. These statements should be considered as subject to the many risks and uncertainties that exist in the Company's operations and business environment. Such risks and uncertainties could cause actual results to differ materially from those projected as a result of many factors, including, but not limited to, those under the heading Item 1A. Risk Factors included in the Company's latest Annual Report on Form 10-K.

This MD&A should be read in conjunction with the Company’s consolidated financial statements, including the notes thereto, contained elsewhere in this report. Percentages set forth below in the MD&A have been rounded to the nearest percentage point, and may not exactly correspond to the comparative data presented.

~~In January~~The Company's results of operations, financial condition, liquidity and cash flow in 2020 ~~an outbreak of novel coronavirus (also known as "COVID-19") started in Wuhan, China. The virus was recognized as a pandemic~~and the three months ended April 30, 2021 were materially adversely affected by the ~~World Health Organization~~COVID-19 pandemic and the depressed market prices for oil and gas, and may continue to be materially adversely affected, the extent to which remains unclear at this time. See Item 1A. Risk Factors included in the Company's latest Annual Report on ~~March 11, 2020. In response to the rapid spread of the virus, national and local governments have instituted varying levels of actions to contain the virus's spread.~~Form 10-K for additional information.

As of the date of filing this Form 10-Q, all of the Company’s plants are ~~operating and, to date, the Compay's~~operating. The Company's global supply chains have ~~not~~ been ~~materially~~adversely affected by the ~~global pandemic.~~COVID-19 pandemic and the effects of the winter weather events in the Gulf Coast region. The Company is taking steps to ensure continuity of supply. Due to the unprecedented actions taken to stem the spread of the virus and the uncertainty of the duration and impact of additional actions that may be required, the resulting future disruptions to the Company’s operations are uncertain.

In response to the ~~extraordinary steps taken to combat the spread of COVID-19~~factors noted above that negatively impacted our business in 2020 and ~~the impact of decreased oil prices,~~early 2021, the Company has updated its forecasts more frequently ~~during this period~~ to determine the continuing financial impact of these events on the Company’s results of ~~operations. The resulting actions from these reforecasts included reducing~~operations, financial condition and liquidity. As a result of the anticipated conditions, the Company reduced headcount, planned capital expenditures and non-essential operating expenses. With the actions taken, the Company believes it will remain in compliance with its debt covenants under its Senior Credit Facility; however, foreign cash can be repatriated to maintain debt covenant compliance if necessary.

On May 1, 2020, the Company entered into a loan agreement under the ~~Small Business Administration's ("SBA") Paycheck Protection Program ("PPP")~~PPP and received proceeds of approximately $3.2 million. Interest on the loan accrued at a fixed interest rate of 1.0%. Under Section 1106 of the CARES Act, borrowers are eligible for forgiveness of principal and accrued interest on the loans to the extent that the proceeds are used to cover eligible payroll costs, mortgage interest costs, rent and utility costs, otherwise described as qualified expenses. During the three months ended July 31, 2020, the Company used all of the PPP loan proceeds to pay for qualified expenses, 100% of which were used for payroll related expenses. The Company ~~believes~~submitted its application and supporting documentation for forgiveness to its bank, which submitted the ~~PPP loan proceeds will be forgiven under~~application and supporting documents to the terms of the CARES Act program, although no assurance to that effect can be provided. Under the current provisions of the CARES Act, any recipient of a PPP loan may be subject to an audit to confirm it qualifies for the loan and that the proceeds were used for qualified expenses as prescribed by the program rules.Small Business Administration ("SBA").

Based on the facts and circumstances of the Company's PPP loan and according to the applicable accounting guidance described herein, the Company has elected to account for the PPP loan proceeds as a grant that has reasonable assurance of being forgiven. As such, the Company recognized the proceeds in earnings during the ~~three months~~year ended ~~July~~January 31, ~~2020.~~2021. The amounts ~~are~~were recognized in other income in the consolidated statements of operations. On June 24, 2021, the Company was notified by its lender that its PPP loan had been forgiven by the SBA.

Beginning in April 2020, the Company's subsidiary, Perma-Pipe Canada, Ltd. ("PPCA"), applied for relief in the form of grants from the Canadian government under the Canadian Emergency Wage Subsidy ("CEWS") program. Based on the program rules, the grants are applied for each month and are granted based on the amount of eligible employee expenses incurred over the previous month. Beginning in October 2020, PPCA also applied for grants under the Canadian Emergency Rent Subsidy ("CERS") program. PPCA was approved for and received approximately $0.6 million and $0.1 million in grants under the ~~program~~CEWS and CERS programs, respectively, during the six months ended July 31, ~~2020. The CEWS program is scheduled~~2021. Both programs are expected to continue through ~~November 2020.~~September 2021. PPCA plans to apply for additional grants under the program, however there is no guarantee that PPCA will be granted any additional funds under the program. The proceeds from the CEWS ~~proceeds~~and CERS programs are recognized in other income in the consolidated statements of operations.

The Company’s results of operations, financial condition, liquidity and cash flow in 2020 have been adversely affected by the COVID-19 pandemic and the current depressed market prices for oil and gas and will likely continue to be materially adversely affected, the extent to which remains unclear at this time. See Item 1A. Risk Factors included in the Company's latest Annual Report on Form 10-K for additional information.

The Company is engaged in the manufacture and sale of products in one reportable segment. Since the Company focuses on large discrete projects, operating results ~~could be~~are significantly impacted ~~in the future~~ as a result of large variations in the level of project activity in reporting periods.

Three months ended July 31, ~~2020~~2021 ("current quarter") vs. Three months ended July 31, ~~2019~~2020 ("prior year quarter")

Net sales were $~~20.4~~$39.8 million in the current quarter, ~~a decrease~~an increase of ~~$16.3~~$19.4 million, or ~~44%~~95%, from $~~36.7~~$20.4 million in the prior year quarter. The decrease in the Company's our Canadian and offshore Gulf of Mexico businesses resulted from the impact of lower oil prices combined with project delays in the Company's U.S. and Middle East district heating and cooling businesses arising asincrease was a result of increased sales volumes in both North America and the Middle East due to recovery from the effects of the COVID-19 pandemic. In addition, the Company's U.A.E. business benefitted from the introduction of a new product line.

Gross profit ~~decreased~~increased to $~~2.4~~$10.7 million, or ~~12%~~27% of net sales, in the current quarter from $~~9.7~~$2.4 million, or ~~26%~~12% of net sales, in the prior year quarter. This ~~decrease~~increase was ~~primarily~~ driven by ~~lower~~higher sales ~~volumes.~~volumes and project mix.

General and administrative expenses ~~decreased to $4.5~~increased $1.1 million, ~~in the current quarter~~or 25%, from ~~$4.8 million in~~ the prior year quarter. This ~~decrease~~increase was ~~primarily~~ driven by ~~cost cutting measures enacted as a result of~~personnel related expense increases corresponding to the ~~COVID-19 pandemic.~~business activity increases during the period.

Selling expenses decreased to $~~1.3~~$1.1 million in the current quarter, compared to $~~1.4~~$1.3 million in the prior year quarter due primarily to ~~lower personnel costs.~~organizational changes in the roles of certain corporate employees.

Net interest expense increased to $0.3 million in the current quarter from $0.1 million in the prior year quarter. This increase was primarily related to the sale leaseback transaction for our operating facility in Tennessee entered into in April 2021.

Other income, net decreased to $~~0.1~~an income of $0.5 million in the current quarter, compared to ~~$0.2~~income of $3.7 million in the prior year ~~quarter~~.quarter. This decrease was ~~driven by lower interest rates on borrowings during the period.~~

~~Other~~a result of income ~~increased to $3.7 million in the current quarter, compared to $0.2 million~~recorded in the prior year quarter ~~an increase of $3.5 million. This increase was primarily~~for funds received under the ~~result of recognition of the Company's reasonable expectation of forgiveness of its~~ PPP ~~loan proceeds during the period~~program of $3.2 million.

Income from operations before income taxes ~~decreased~~increased by $~~3.3~~$4.1 million to ~~$0.2~~$4.3 million in the current quarter from ~~$3.5~~$0.2 million in the prior year quarter. The ~~decrease resulted from lower revenues~~increase was a result of increased sales volumes in both North America and the Middle East due to ~~declines in oil prices and certain of~~recovery from the ~~Company's Middle East and U.S. district heating and cooling operations due to project delays as a result~~effects of the COVID-19 pandemic. ~~The negative impact of these lower revenues was offset by increased income~~In addition, the Company's U.A.E. business benefitted from the ~~Company's~~introduction of a new ~~operations in Egypt and by reduced overhead as a consequence of cost reduction initiatives.~~product line.

The Company's worldwide effective tax rates ("ETR") were ~~(56.8%)~~20.1% and ~~(7.6%~~(56.8%) in the current quarter and the prior year quarter, respectively. The change in the ETR from the prior year quarter to the current year quarter ~~was~~is largely due to changes in the mix of income and loss in various ~~jurisdictions, as well as the impact of the lower current quarter pre-tax income as compared to the prior year quarter.~~jurisdictions.

The Company expects that future distributions from foreign subsidiaries will not be subject to incremental U.S. federal tax as they will either be remittances of previously taxed earnings and profits or eligible for a full ~~dividends received~~dividends-received deduction. Current and future earnings in the Company's subsidiaries in Canada and Egypt are not permanently reinvested, and earnings in its Indian subsidiary are partially permanently reinvested. The earnings from these subsidiaries will be subject to tax in their local jurisdiction, and the impact of Indian, Canadian and Egyptian withholding taxes will be recorded. As such, the Company has accrued a liability of ~~$0.4~~$0.5 million as of July 31, ~~2020~~2021 related to these taxes.

For further information, see Note 5 - Income taxes, in the Notes to Consolidated Financial Statements.

The resulting net income of ~~$0.3~~$3.4 million in the current quarter was ~~a decline~~an improvement of ~~$3.4~~$3.1 million over the ~~net income of $3.7~~$0.3 million in the prior year quarter. The ~~decrease resulted from lower revenues~~increase was a result of increased sales volumes in both North America and the Middle East due to ~~declines in oil prices and certain of~~recovery from the ~~Company's Middle East and U.S. district heating and cooling operations due to project delays as a result~~effects of the COVID-19 pandemic. ~~The negative impact of these lower revenues was offset by increased income~~In addition, the Company's U.A.E. business benefitted from the ~~Company's~~introduction of a new ~~operations in Egypt and by reduced overhead as a consequence of cost reduction initiatives.~~

Net sales were ~~$43.1~~$64.2 million in the current year-to-date, ~~a decrease~~an increase of ~~$17.8~~$21.1 million, or ~~29%~~49%%, from ~~$60.9~~$43.1 million in the prior year year-to-date. The decrease resulted from lower revenues in North America due to declines in oil prices and certain of the Company's Middle East and U.S. district heating and cooling operations due to project delays asincrease was a result of increased sales volumes in both North America and the Middle East due to recovery from the effects of the COVID-19 pandemic. In addition, the Company's U.A.E. business benefitted from the introduction of a new product line.

Gross profit ~~decreased~~increased to $15.2 million, or 24% of net sales, in the current year-to-date from $5.8 million, or 14% of net sales, in the ~~current year-to-date from $14.4 million, or 24% of net sales, in the~~ prior year year-to-date. This ~~decrease~~increase was ~~primarily~~ driven by ~~lower~~higher sales ~~volumes.~~volumes and project mix.

General and administrative expenses ~~decreased to $8.8~~were $10.0 million in the current year-to-date, an increase of $1.2 million, or 14%, from ~~$9.3~~$8.8 million in the prior year year-to-date. This ~~decrease~~increase was ~~primarily~~ driven by ~~cost cutting measures enacted as a result of~~personnel related expense increases corresponding to the ~~COVID-19 pandemic.~~business activity increases during the period.

Selling expenses ~~increased~~decreased to ~~$3.0~~$2.1 million in the current year-to-date, compared to ~~$2.7~~$3.0 million in the prior year year-to-date ~~an increase of $0.3 million, or 11%. This increase was primarily~~ due to ~~payroll expenses for additional sales~~organizational changes in the roles of certain corporate employees ~~added in 2019.~~as well as the continued effects of cost reduction strategies implemented during the COVID-19 pandemic.

Net interest expense remained relatively consistent, increasing slightly from $0.3 million in the prior year year-to-date to $0.4 million in the current year-to-date. This increase is primarily related to the sale leaseback transaction for our operating facility in Tennessee entered into in April 2021.

Other income, net decreased to ~~$0.3~~$0.9 million in the current year-to-date, compared to ~~$0.4~~$3.7 million in the prior year year-to-date. This decrease was ~~driven by lower interest rates on borrowings during the period.~~

~~Other~~a result of income ~~increased to $3.7 million in the current year-to-date, compared to $0.3 million~~recorded in the prior year ~~year-to-date, an increase of $3.4 million. This increase was primarily the result of recognition of the Company's reasonable expectation of forgiveness of~~for funds received under the PPP ~~loan proceeds during the period~~program of $3.2 ~~million.~~million, offset by funds received under the CEWS and CERS programs in Canada.

Income/(loss) from operations before income taxes ~~decreased~~increased by ~~$4.8~~$6.2 million to ~~a loss~~income of ~~$2.6~~$3.6 million in the current year-to-date from ~~income~~a loss of ~~$2.2 million~~($2.6 million) in the prior year year-to-date. The ~~decrease resulted from lower revenues~~increase was a result of increased sales volumes in both North America and the Middle East due to ~~declines in oil prices and certain of~~recovery from the ~~Company's Middle East and U.S. district heating and cooling operations due to project delays as a result~~effects of the COVID-19 pandemic. ~~The negative impact of these lower revenues was offset by increased income~~In addition, the Company's U.A.E. business benefitted from the ~~Company's~~introduction of a new ~~operations in Egypt and by reduced overhead as a consequence of cost reduction initiatives.~~product line.

The Company's worldwide ~~ETRs~~effective tax rates ("ETR") were ~~12.3%~~28.5% and ~~2.1%~~12.3% in the current year-to-date and the prior year year-to-date, respectively. The change in the ETR from the prior year ~~year-to-date~~ to the current year ~~year-to-date~~ was largely due to changes in the mix of income and loss in various jurisdictions.

The Company expects that future distributions from foreign subsidiaries will not be subject to incremental U.S. federal tax as they will either be remittances of previously taxed earnings and profits or eligible for a full dividends received deduction. Current and future earnings in the Company's subsidiaries in Canada and Egypt are not permanently reinvested, and earnings in its Indian subsidiary are partially permanently reinvested. The earnings from these subsidiaries will be subject to tax in their local jurisdiction, and the impact of the Indian, Canadian and Egyptian withholding taxes will be recorded. As such, the Company has accrued a liability of $0.4 million as of July 31, 2020 related to these taxes.

~~For further information, see Note 5 - Income taxes, in the Notes to Consolidated Financial Statements.~~

The resulting net ~~loss~~income of ~~$2.3~~$2.6 million in the current year-to-date was ~~a decline~~an improvement of ~~$4.5~~approximately $4.9 million over the net ~~income~~loss of ~~$2.2 million~~($2.3 million) in the prior year year-to-date. The ~~decrease resulted from lower revenues~~increase was a result of increased sales volumes in both North America and the Middle East due to ~~declines in oil prices and certain of~~recovery from the ~~Company's Middle East and U.S. district heating and cooling operations due to project delays as a result~~effects of the COVID-19 pandemic. ~~The negative impact of these lower revenues was offset by increased income~~In addition, the Company's U.A.E. business benefitted from the ~~Company's~~introduction of a new ~~operations in Egypt and by reduced overhead as a consequence of cost reduction initiatives.~~product line.

Cash and cash equivalents as of July 31, ~~2020~~2021 were $~~9.1~~$5.5 million compared to $~~13.4~~$7.2 million on January 31, ~~2020~~.2021. On July 31, ~~2020, $0.2~~2021, $1.5 million was held in the U.S., and $~~8.9~~$4.0 million was held at the Company's foreign subsidiaries. The Company's working capital was $~~31.1~~$38.9 million on July 31, ~~2020~~2021 compared to $~~31.4~~$25.6 million on January 31, ~~2020~~.2021. Of the working capital components, accounts receivable increased by $18.5 million and cash and cash equivalents decreased ~~$4.3~~by $1.7 million as the result of the movements discussed below. As of July 31, 2021, the Company had $10.3 million of borrowing capacity under its Senior Credit Facility in North America and $10.1 million of borrowing capacity under its foreign revolving credit agreements. The Company had $3 thousand borrowed under its Senior Credit Facility $2.5 million borrowed under its foreign revolving credit agreements at July 31, 2021.

Net cash ~~provided by~~used in operating activities in the ~~current quarter~~six months ended July 31, 2021 was ~~$2.6~~$5.2 million, as compared to net cash ~~used in~~provided by operating activities of ~~$0.9~~$2.6 million in the prior year ~~quarter.~~period. This ~~increase~~decrease in cash from operations was due primarily ~~due~~ to ~~the Company collecting more accounts receivable and purchasing less inventory for projects~~increases in net working capital requirements in the current ~~quarter~~period compared to the prior year ~~quarter.~~period due to increased activity as a result of post-COVID-19 economic recovery. The largest component of this increase was an increase in accounts receivable resulting in cash used of $19.3 million, partially offset by increases in net income and accounts payable of $2.6 million and $6.4 million, respectively. All of these changes were the result of the increase in project activity during the period.

Net cash used in investing activities in the ~~current quarter~~six months ended July 31, 2021 and in the prior year ~~quarter~~period was ~~$0.8~~$1.1 million and ~~$1.0~~$0.8 million, respectively. This increase was due primarily to ~~a decrease in investments in fixed assets needed for~~our Canadian subsidiary entering into two capital equipment leases during the ~~operation of the business, including the deferral of certain capital expenditures until the global markets recover from the current downturn.~~quarter.

Net cash provided by financing activities in the six months ended July 31, 2021 was $4.5 million, as compared to net cash used in financing activities ~~in the current quarter and prior year quarter was~~of $6.3 million ~~and $1.6 million, respectively. The primary reason for this change was that during~~in the prior year ~~quarter~~period. The main source of cash from financing activities during the period was net proceeds of $8.6 million as a result of the sale and leaseback of the Company's land and buildings in Lebanon, Tennessee during the period. This increase was also impacted by increased net repayments ~~exceeded its borrowings~~of approximately $3.6 million under ~~its revolving credit facility by approximately $1.3 million, whereas in~~ the ~~current quarter,~~Senior Credit Facility, as compared to the prior year period, where net repayments ~~exceeded borrowings by~~were approximately $5.8 million. Debt totaled $~~10.5~~$8.6 million and ~~$16.9~~$13.2 million as of July 31, ~~2020~~2021 and January 31, ~~2020~~,2021, respectively. For additional information, see Note 9 - Debt, in the Notes to Consolidated Financial Statements.

Revolving line - North America. On September 20, 2018, the Company and certain of its U.S. and Canadian subsidiaries (collectively, together with the Company, the “North American Loan Parties”) entered into a Revolving Credit and Security Agreement (the “Credit Agreement”) with PNC Bank, National Association ("PNC"), as administrative agent and lender, providing for a three-year ~~$18~~$18.0 million Senior Secured Revolving Credit Facility, subject to a borrowing base including various reserves (the “Senior Credit Facility”).

The Company has used proceeds from the Senior Credit Facility ~~to pay outstanding amounts under a prior credit facility, a cash collateralized letter of credit, and~~ for on-going working capital needs, and expects to continue using this facility to fund future capital expenditures, working capital needs and other corporate purposes. Borrowings under the Senior Credit Facility bear interest at a rate equal to an alternate base rate or ~~LIBOR,~~London Interbank Offered Rate ("LIBOR"), plus, in each case, an applicable margin. The applicable margin is based on average quarterly undrawn availability with respect to the Senior Credit Facility. Interest on alternate base rate borrowings are generally payable monthly in arrears and interest on LIBOR borrowings are generally payable in arrears on the last day of each interest period. Additionally, the Company is required to pay a 0.375% per annum facility fee on the unused portion of the Senior Credit Facility. The facility fee is payable quarterly in arrears.

Subject to certain exceptions, borrowings under the Senior Credit Facility are secured by substantially all of the assets of the Company and certain of the assets of its North American subsidiaries. The North American Loan Parties’ obligations under the Senior Credit Facility are guaranteed by Perma-Pipe Canada, Inc. The Senior Credit Facility will mature on September 20, 2021. The Company has engaged a consultant to assist with the search for, communication with and selection of a new lender or a replacement facility with PNC. The Company is in ongoing discussions with PNC to extend our current credit agreement for a multi-year term, which we expect to finalize prior to our current credit agreement's expiration on September 20, 2021.

The Senior Credit Facility also contains financial covenants requiring (i) the North America Loan Parties to achieve a ratio of ~~their~~its EBITDA (with certain additional adjustments) to the sum of scheduled cash principal payments on indebtedness for borrowed money and interest payments on the advances under the Senior Credit Facility (excluding from the calculation items related to the financial performance of the Company’s foreign subsidiaries not party to the Credit Agreement) ("fixed charge coverage ratio") to be not less than 1.10 to 1.00 at each quarter end on a trailing four-quarter basis; and ~~(iii)~~(ii) the Company and its subsidiaries (including the Company’s foreign subsidiaries not party to the Credit Agreement) to achieve a fixed charge coverage ratio of their EBITDA (with certain additional adjustments) to the sum of scheduled cash principal payments on indebtedness for borrowed money and interest payments on the advances under the Senior Credit Facility of not less than 1.10 to 1.00 at each quarter end on a trailing four-quarter basis.

As of October 31, 2020, the Company and its subsidiaries failed to achieve the necessary fixed charge coverage ratio of 1.10 to 1.00 for the trailing four-quarters ended October 31, 2020 under its Credit Agreement for both the North American Loan Parties and the Company and its subsidiaries. On December 18, 2020, the Company entered into the First Amendment and Waiver to the Revolving Credit and Security Agreement (“Amendment and Waiver”) with PNC, which (i) reflected PNC’s waiver of the Company’s failure to maintain a fixed charge coverage ratio of 1.10 to 1.00 as of October 31, 2020 on a trailing four quarter basis as required under the Company’s Credit Agreement and (ii) further amended certain future fixed charge coverage ratio covenants requirements under the Credit Agreement as described below. Additionally, the Company was also required to have received, and applied to reduce the outstanding balance under the Credit Agreement, $1.0 million from one of its foreign subsidiaries, Perma-Pipe Middle East FZC, in the UAE. The transfer and repayment occurred on December 17, 2020 and did not cause the Company to incur any additional fees or taxes, nor did it force the Company to change any of its assertions with regards to permanent reinvestment in any of its foreign subsidiaries. The Company will incur additional fees over the remainder of the Amendment and Waiver of approximately $0.1 million. The Amendment and Waiver also eliminates the Company’s ability to make LIBOR borrowings and reduces the overall availability by $2.0 million until maturity.

The amended fixed charge coverage ratio requirements for the Company and its subsidiaries under the Amendment and Waiver are 1.25 to 1.00 for the nine-month period ending July 31, 2021. The amended fixed charge coverage ratio requirements for the North American Loan Parties under the Amendment and Waiver are 1.10 to 1.00 for the nine-month period ending July 31, 2021. In order to cure any future breach of the fixed charge coverage ratio covenant by the North American Loan Parties, the Company may repatriate cash from any of its foreign subsidiaries that are otherwise not a party to the Credit Agreement in an amount which, when added to the amount of the Company’s Consolidated EBITDA, would result in pro forma compliance with the covenant. The Company was in compliance with these ~~requirements~~covenants as of July 31, ~~2020~~.2021.

As of July 31, ~~2020,~~2021, the Company had $3 thousand in borrowings and had $10.3 million available under the Senior Credit Facility, before application of the $2.0 million availability block noted above in connection with the Amendment and Waiver. As of January 31, 2021, the Company had borrowed an aggregate of ~~$2.5~~$2.8 million ~~at a rate of 6.25% and 4.17% resulting in a weighted average rate of 4.56%~~ and had ~~$5.2~~$1.7 million available under the Senior Credit Facility.

Revolving lines - foreign. The Company also has credit arrangements used by its Middle Eastern subsidiaries in the U.A.E. and Egypt as discussed further below.

The Company has a revolving line for 8.0 million Dirhams (approximately $2.2 million at July 31, ~~2020)~~2021) from a bank in the U.A.E. The facility has an interest rate of approximately ~~3.8%~~3.58% and ~~expires~~was originally set to expire in November ~~2020.~~2020, however, the expiration was extended due to the COVID-19 pandemic and inability to finalize renewal documentation prior to that time. The Company has submitted final documentation to complete the renewal process, and is awaiting official notification from the bank of the renewal completion. This process is expected to be completed in September 2021.

The Company has a second revolving line for 19.5 million Dirhams (approximately $5.3 million at July 31, ~~2020)~~2021) from a bank in the U.A.E. The facility has an interest rate of approximately ~~4.3%~~4.5% and ~~was originally~~is set to expire in January 2022.

The Company has a third revolving line for 3.0 million Dirhams (approximately $0.8 million at July ~~2020, however,~~31, 2021) from a bank in the ~~expiration~~U.A.E. The facility has ~~been extended~~an interest rate of approximately 4.5% and is set to ~~September 2020 due to the global pandemic and inability to finalize renewal documentation prior to that time.~~expire in January 2022.

In ~~November 2019,~~June 2021, the Company's Egyptian subsidiary entered into a credit arrangement with a bank in Egypt for a revolving line of ~~200.0~~100.0 million Egyptian Pounds (approximately ~~$12.5~~$6.2 million at July 31, ~~2020)~~2021). This credit arrangement is in the form of project financing at rates competitive in Egypt. The line was secured by certain assets (such as accounts receivable) of the Company's Egyptian subsidiary. Among other covenants, the credit arrangement established a maximum leverage ratio allowable and restricted the Company's Egyptian subsidiary's ability to undertake any additional debt. The facility has an interest rate of approximately 11.0% and is set to expire in August 2022.

In January 2021, the Company entered into a second credit arrangement for project financing with a bank in Egypt for 46.0 million Egyptian Pounds (approximately $2.9 million at July 31, 2021). This credit arrangement is in the form of project financing at rates competitive in Egypt. The line is secured by ~~certain assets (such as accounts receivable). Among other covenants,~~ the ~~credit arrangement establishes~~contract for a ~~maximum leverage ratio allowable and restricts~~project being financed by the ~~ability to undertake any additional debt.~~Company's Egyptian subsidiary. The facility has an interest rate of approximately ~~12.8%~~8.0% and ~~was originally set~~is expected to expire in ~~June 2020, however,~~September 2021 in connection with the ~~expiration has been extended to September 2020 due to~~completion of the ~~global pandemic and inability to finalize renewal documentation prior to that time.~~project.

~~Table of Contents~~

The ~~Company’s~~Company's credit arrangements used by its Middle Eastern subsidiaries renew on an annual basis. The Company guarantees the subsidiaries' debt including all foreign debt.

The Company was in compliance with the covenants under the credit arrangements in the U.A.E. and Egypt as of July 31, ~~2020.~~2021. On July 31, ~~2020,~~2021, interest rates were based on the Emirates Inter Bank Offered Rate ~~("EIBOR")~~ plus 3.0% to 3.5% per annum ~~with~~for the U.A.E. credit arrangements, two of which have a minimum interest rate of 4.5% per annum, ~~for the U.A.E. credit arrangements~~ and based on the ~~Central Bank of Egypt corridor~~stated interest rate ~~plus 1.5% per annum~~in the agreement for the Egypt credit arrangement. Based on these base rates, as of July 31, ~~2020,~~2021, the Company's interest rates ranged from ~~3.8%~~3.57% to ~~12.8%~~8.0%, with a weighted average rate of ~~3.76%~~5.89%, and the Company ~~could borrow $20.0~~had facility limits totaling $17.6 million under these credit arrangements. AsA s of July 31, ~~2020, $4.3~~2021 , $5.1 million of availability was used to support letters of credit to guarantee amounts committed for inventory purchases and for performance guarantees. Additionally, as of July 31, ~~2020,~~2021 , the Company had borrowed ~~$1.0~~$2.5 million, and had an additional ~~$14.7~~$10.1 million of borrowing remaining available under the foreign revolving credit arrangements. The foreign revolving lines balances as of July 31, ~~2020~~2021 and January 31, ~~2020,~~2021, were included as current maturities of long-term debt in the Company's consolidated balance sheets.

On May 1, 2020, the Company entered into a loan agreement under the ~~SBA's~~ PPP and received proceeds of approximately $3.2 million. Interest on the loan accrued at a fixed interest rate of 1.0%~~, and the loan had a maturity date of April 28, 2022.~~. Under Section 1106 of the CARES Act, borrowers are eligible for forgiveness of principal and accrued interest on the loans to the extent that the proceeds are used to cover eligible payroll costs, mortgage interest costs, rent and utility costs, otherwise described as qualified expenses. During the three months ended July 31, 2020, the Company used all of the PPP loan proceeds to pay for qualified expenses, 100% of which were used for payroll related expenses. The Company ~~believes~~submitted its application and supporting documentation for forgiveness to its bank, which submitted the ~~PPP loan proceeds will be forgiven under~~application and supporting documents to the terms of the CARES Act program, although no assurance to such effect may be provided. Under the current provisions of the CARES Act, any recipients of a PPP loan may be subject to an audit to confirm they qualify for the loan and that the proceeds were used for qualified expenses as prescribed by the program rules.Small Business Administration ("SBA").

Based on the facts and circumstances of the Company's PPP loan and according to the applicable accounting guidance described herein, the Company has elected to account for the PPP loan proceeds as a grant that has reasonable assurance of being forgiven. As such, the Company recognized the proceeds in earnings during the ~~three~~year ended January 31, 2021. The amounts were recognized in other income in the consolidated statements of operations. On June 24, 2021, the Company was notified by its lender that its PPP loan had been forgiven by the SBA.

Beginning in April 2020, the Company's subsidiary, PPCA, applied for relief in the form of grants from the Canadian government under the CEWS program. Based on the program rules, the grants are applied for each month and are granted based on the amount of eligible employee expenses incurred over the previous month. Beginning in October 2020, PPCA also applied for grants under the CERS program. PPCA was approved for and received approximately $0.6 million and $0.1 million in grants under the CEWS and CERS programs, respectively, during the six months ended July 31, ~~2020.~~2021. Both programs are expected to continue through September 2021. The ~~amounts~~proceeds from CEWS and CERS are recognized in other income in the consolidated statements of operations.

In 2013, the Company started a project in the Middle East as a sub-contractor, with billings in the aggregate amount of approximately $41.9 million. The Company completed all of its deliverables in 2015 ~~and~~under the related contract, but the system has not yet been commissioned by the customer. Nevertheless, the Company has since then collected approximately ~~$37.8~~$38.2 million as of July 31, ~~2020~~,2021, with a remaining balance due in the amount of ~~$4.1~~$3.7 million. Included in this balance is an amount of ~~$3.6~~$3.4 million, which pertains to retention clauses within the agreements of the Company's customer (contractor), and which become payable by the customer when this project is fully tested and commissioned. In the absence of a firm date for the final commissioning of the project, and due to the long-term nature of this receivable, ~~$1.6~~$2.1 million of this retention amount was reclassified to a long-term receivable account.

The Company has been engaged in ongoing active efforts to collect the outstanding ~~amount, but due~~amount. During the first quarter of 2021, the Company received approximately $0.1 million from the customer and additional receipts are expected throughout the rest of 2021. The Company continues to engage with the ~~current global pandemic~~customer to ensure full payment of open balances, and ~~associated government shutdowns, has not made any collections~~ during ~~the~~ ~~six months ended July 31, 2020. During fiscal 2019, the Company~~August 2021 received an updated acknowledgment of the outstanding balances and assurances of payment from the customer. During the first quarter of 2020, the Company has certified invoices of $0.5 million in the process of collection. In August 2020, the Company received approximately $0.2 million from the customer and additional receipts are expected in September 2020 and throughout the remainder of the year. As a result, the Company did not reserve any allowance against this amount as of July 31, ~~2020~~.2021. However, if the Company’s efforts to collect on this account are not successful, the Company may recognize an allowance for all, or substantially all, of any such then uncollected amounts.

Critical accounting policies are described in Item 7. MD&A and in the Notes to the Consolidated Financial Statements for the year ended January 31, ~~2020~~2021 contained in the Company's latest Annual Report on Form 10-K. Any new accounting policies or updates to existing accounting policies as a result of new accounting pronouncements have been discussed in the Notes to Consolidated Financial Statements in this Quarterly Report on Form 10-Q. The application of critical accounting policies may require management to make assumptions, judgments and estimates about the amounts reflected in the Consolidated Financial Statements. Management uses historical experience and all available information to make these estimates and judgments, and different amounts could be reported using different assumptions and estimates.

The Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of July 31, ~~2020~~.2021. Based upon the foregoing, ~~and the material weakness remediation activities implemented by the Company as described below,~~ the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective and operating to provide reasonable assurance that information required to be disclosed by the Company in the reports the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and to provide reasonable assurance that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Management has previously reported on a material weakness in the Company's internal control over financial reporting that resulted from an accounting error identified by the Company’s auditors during the audit of the Company’s financial statements for the fiscal year ended January 31, 2020 related to the Company’s revenue recognition under percentage of completion accounting. Specifically, the Company had improperly recognized revenue for an open project based on imputed sales amounts greater than the total contracted amount. This accounting error was attributable to the Company’s deviation from its standard contract accounting policies and failure to recognize the error during monthly revenue reviews and led management to conclude that a material weakness existed with respect to the Company’s internal control over financial reporting.

As described below, the Company has adopted and implemented policies and procedures to ensure that personnel will not deviate from the Company's standard accounting policies and perform monthly reviews that will result in appropriate revenue recognition.

~~Notwithstanding the material weakness described above, the~~The Company's management, including the Chief Executive Officer and Chief Financial Officer, ~~based on the remediation activities implemented by the Company as described below,~~ has concluded that the financial statements included in this Quarterly Report on Form 10-Q present fairly, in all material respects, the Company's financial position, results of operations, and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States.

Changes in Internal Control over Financial Reporting. There were no changes in the Company's internal control over financial reporting during the Company's most recent quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.

The Company's auditors identified an accounting error during the audit of the Company's financial statements for the fiscal year ended January 31, 2020 related to the Company's revenue recognition under percentage of completion accounting. Specifically, the Company had improperly recognized revenue for an open project based on imputed sales amounts greater than the total contracted amount. The accounting error was attributable to the Company’s deviation from its standard contract accounting policies and failure to recognize the error during monthly revenue reviews and led management to conclude that a material weakness existed with respect to the Company's internal control over financial reporting. As a result of the material weakness identified, the Company has updated its internal control over financial reporting as discussed in its remediation plan below.

~~Remediation Plan for the Material Weakness in Internal Control over Financial Reporting.~~ ~~To address the material weakness regarding the improper recognition of revenue for open projects, the Company has substantially completed the following:~~

The Company anticipates the actions described above and resulting improvements in controls will strengthen the Company's processes, procedures and controls related to revenue recognition under percentage of completion accounting and will address the related material weakness described above. However, the material weakness cannot be considered fully remediated until the remediation processes have been in operation for an acceptable period of time and successfully tested.

Pursuant to the requirements 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.

	Three Months Ended July 31,				Six Months Ended July 31,					*Three Months Ended July 31,*					*Six Months Ended July 31,*
	2020		2019		2020			2019		*2021*			*2020*		*2021*			*2020*
Net income/(loss)	$	267	$	3,720	$	(2,254	)	$	2,218	$	3,416		$	267	$	2,573		$	(2,254	)

Other comprehensive income/(loss)
Foreign currency translation adjustments, net of tax		153		358		(214	)		41		(150	)		153		(110	)		(214	)
Other comprehensive income/(loss)		153		358		(214	)		41		(150	)		153		(110	)		(214	)

Comprehensive income/(loss)	$	420	$	4,078	$	(2,468	)	$	2,259	$	3,266		$	420	$	2,463		$	(2,468	)

	July 31, 2020			January 31, 2020			*July 31, 2021*			*January 31, 2021*
		(Unaudited)						(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	9,106		$	13,371		$	5,509		$	7,174
Restricted cash		1,150			1,287			1,217			1,201
Trade accounts receivable, less allowance for doubtful accounts of $300 at July 31, 2020 and $407 at January 31, 2020		23,884			29,402
Trade accounts receivable, less allowance for doubtful accounts of $497 at July 31, 2021 and $474 at January 31, 2021								43,699			25,226
Inventories, net		12,137			14,498			14,603			12,157
Prepaid expenses and other current assets		7,033			3,531			9,125			4,110
Costs and estimated earnings in excess of billings on uncompleted contracts		1,750			2,166			1,713			4,007
Total current assets		55,060			64,255			75,866			53,875
Property, plant and equipment, net of accumulated depreciation		27,306			28,629			25,626			26,897
Other assets
Operating lease right-of-use asset		10,889			11,475			11,848			13,384
Deferred tax assets		566			293			879			823
Goodwill		2,222			2,254			2,388			2,332
Other assets		3,955			5,319			5,078			5,380
Total other assets		17,632			19,341			20,193			21,919
Total assets	$	99,998		$	112,225		$	121,685		$	102,691
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Trade accounts payable	$	7,943		$	9,577		$	16,735		$	10,365
Accrued compensation and payroll taxes		1,496			1,190			1,875			1,448
Commissions and management incentives payable		1,107			1,759			1,116			218
Revolving line - North America		2,470			8,577			3			2,826
Current maturities of long-term debt		1,715			1,458			3,177			3,941
Customers' deposits		1,844			2,202			2,774			2,088
Outside commission liability		1,712			1,755			2,357			1,431
Operating lease liability short-term		1,338			1,040			1,367			1,402
Other accrued liabilities		2,836			3,444			4,279			2,616
Billings in excess of costs and estimated earnings on uncompleted contracts		767			1,173			1,781			762
Income taxes payable		750			664			1,470			1,155
Total current liabilities		23,978			32,839			36,934			28,252
Long-term liabilities
Long-term debt, less current maturities		6,293			6,717			5,444			6,268
Long-term finance obligation								9,371			0
Deferred compensation liabilities		4,415			4,199			4,167			4,120
Deferred tax liabilities		672			1,052			1,057			914
Operating lease liability long-term		10,563			11,214			11,890			13,174
Other long-term liabilities		628			575			753			650
Total long-term liabilities		22,571			23,757		$	32,682		$	25,126
Stockholders' equity
Common stock, $.01 par value, authorized 50,000 shares; 8,165 issued and outstanding at July 31, 2020 and 8,048 issued and outstanding at January 31, 2020		82			80
Common stock, $.01 par value, authorized 50,000 shares; 8,144 issued and outstanding at July 31, 2021 and 8,165 issued and outstanding at January 31, 2021								81			82
Additional paid-in capital		60,310			60,024			61,169			60,875
Accumulated deficit		(2,969	)		(715	)		(5,784	)		(8,357	)
Accumulated other comprehensive loss		(3,974	)		(3,760	)		(3,397	)		(3,287	)
Total stockholders' equity		53,449			55,629			52,069			49,313
Total liabilities and stockholders' equity	$	99,998		$	112,225		$	121,685		$	102,691

	Common Stock		Additional Paid-in Capital		Accumulated Deficit			Accumulated Other Comprehensive Loss			Total Stockholders' Equity			*Common Stock*			*Additional Paid-in Capital*			*Accumulated Deficit*			*Accumulated Other Comprehensive Loss*			*Total Stockholders' Equity*
Revised total stockholders' equity at January 31, 2019	$	79	$	58,793	$	(4,291	)	$	(2,880	)	$	51,701
Total stockholders' equity at January 31, 2021														$	82		$	60,875		$	(8,357	)	$	(3,287	)	$	49,313

Net loss		-		-		(1,502	)		-			(1,502	)		0			0			(843	)		0			(843	)
Common stock issued under stock plans, net of shares used for tax withholding		-		79		-			-			79
Stock-based compensation expense		-		154		-			-			154			0			272			0			0			272
Foreign currency translation adjustment		-		-		-			(317	)		(317	)		0			0			0			40			40
Total stockholders' equity at April 30, 2019	$	79	$	59,026	$	(5,793	)	$	(3,197	)	$	50,115
Total stockholders' equity at April 30, 2021														$	82		$	61,147		$	(9,200	)	$	(3,247	)	$	48,782

Net income		-		-		3,720			-			3,720			0			0			3,416			0			3,416
Common stock issued under stock plans, net of shares used for tax withholding		1		43		-			-			44			(1	)		(254	)		0			0			(255	)
Stock-based compensation expense		-		406		-			-			406			0			276			0			0			276
Foreign currency translation adjustment		-		-		-			358			358			0			0			0			(150	)		(150	)
Total stockholders' equity at July 31, 2019	$	80	$	59,475	$	(2,073	)	$	(2,839	)	$	54,643
Total stockholders' equity at July 31, 2021														$	81		$	61,169		$	(5,784	)	$	(3,397	)	$	52,069

	Common Stock		Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total Stockholders' Equity			*Common Stock*		*Additional Paid-in Capital*			*Accumulated Deficit*			*Accumulated Other Comprehensive Loss*			*Total Stockholders' Equity*
Total stockholders' equity at January 31, 2020	$	80	$	60,024		$	(715	)	$	(3,760	)	$	55,629		$	80	$	60,024		$	(715	)	$	(3,760	)	$	55,629

Net loss		-		-			(2,521	)		-			(2,521	)		0		0			(2,521	)		0			(2,521	)
Stock-based compensation expense		-		219			-			-			219			0		219			0			0			219
Foreign currency translation adjustment		-		-			-			(367	)		(367	)		0		0			0			(367	)		(367	)
Total stockholders' equity at April 30, 2020	$	80	$	60,243		$	(3,236	)	$	(4,127	)	$	52,960		$	80	$	60,243		$	(3,236	)	$	(4,127	)	$	52,960

Net income		-		-			267			-			267			0		0			267			0			267
Common stock issued under stock plans, net of shares used for tax withholding		2		(193	)		-			-			(191	)		2		(193	)		0			0			(191	)
Stock-based compensation expense		-		260			-			-			260			0		260			0			0			260
Foreign currency translation adjustment		-		-			-			153			153			0		0			0			153			153
Total stockholders' equity at July 31, 2020	$	82	$	60,310		$	(2,969	)	$	(3,974	)	$	53,449		$	82	$	60,310		$	(2,969	)	$	(3,974	)	$	53,449

Shares	2020		2019		*2021*			*2020*
Balances at beginning of year		8,048,006		7,854,322		8,164,989			8,048,006
Shares issued		116,983		193,684
Shares issued, net of shares used for tax withholding						(20,585	)		116,983
Balances at period end		8,164,989		8,048,006		8,144,404			8,164,989

	Contract Assets
Balance January 31, 2019	$	1,653
Costs and gross profit recognized during the period for uncompleted contracts from the prior period		(1,038	)
Costs and deferred gross profit incurred on uncompleted contracts not billed at the end of the current period		1,368
Closing Balance at April 30, 2019	$	1,983
Costs and gross profit recognized during the period for uncompleted contracts from the prior period		(1,509	)
Costs and deferred gross profit incurred on uncompleted contracts not billed at the end of the current period		3,000
Closing Balance at July 31, 2019	$	3,474

Balance January 31, 2020	$	2,166
Costs and gross profit recognized during the period for uncompleted contracts from the prior period		(2,896	)
Costs and deferred gross profit incurred on uncompleted contracts not billed at the end of the current period		3,630
Closing Balance at April 30, 2020	$	2,900
Costs and gross profit recognized during the period for uncompleted contracts from the prior period		(1,743	)
Costs and deferred gross profit incurred on uncompleted contracts not billed at the end of the current period		593
Closing Balance at July 31, 2020	$	1,750

		January 31, 2020				Foreign exchange change effect				July 31, 2020
Goodwill		$	2,254			$	(32	)		$	2,222

Option activity	No. of Shares Underlying Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at January 31, 2020		132		$	8.98		3.2	$	160
Exercised		-			-		-		-
Expired or forfeited		(13	)		-		-		-
Outstanding at July 31, 2020		119			9.20		2.9		4

Exercisable at July 31, 2020		119		$	9.20		2.9	$	4

Unvested option activity	No. of Shares Underlying Options			Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Outstanding at January 31, 2020		3		$	7.33	$	4
Vested		(3	)		-		-
Expired or forfeited		-			-		-
Outstanding at July 31, 2020		-		$	-	$	-

	Three Months Ended July 31,				Six Months Ended July 31,
(In thousands, except per share data)	*2021*		*2020*		*2021*		*2020*
Basic weighted average common shares outstanding		8,151		8,126		8,158		8,087
Dilutive effect of equity compensation plans		170		152		132		0
Weighted average common shares outstanding assuming full dilution		8,321		8,278		8,290		8,087

Stock options and restricted stock not included in the computation of diluted earnings per share of common stock because the option exercise prices or grant date prices exceeded the average market prices of the common shares		166		248		203		197
Stock options and restricted stock with exercise prices or grant date prices below the average market prices		170		152		132		203

Net income/(loss)	$	3,416	$	267	$	2,573	$	(2,254	)

Earnings/(loss) per share
Basic		0.42		0.03		0.32		(0.28	)
Diluted		0.41		0.03		0.31		(0.28	)

	Six Months Ended July 31, 2020		Six Months Ended July 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Financing cash flows from finance leases	$	202	$	103
Operating cash flows from finance leases	$	37		17
Operating cash flows from operating leases	$	1,385		1,127


	July 31, 2020		July 31, 2019
(In thousands)						*July 31, 2021*		*July 31, 2020*
Cash and cash equivalents	$	9,106	$	8,052	$	5,509	$	9,106
Restricted cash		1,150		1,167		1,217		1,150
Cash, cash equivalents and restricted cash shown in the statement of cash flows	$	10,256	$	9,219	$	6,726	$	10,256

($ in thousands)	Three Months Ended July 31,																		Six Months Ended July 31,																	Three Months Ended July 31,														Six Months Ended July 31,
	2020						2019						Change favorable/(unfavorable)						2020						2019					Change favorable/(unfavorable)						2021					2020						Change favorable/(unfavorable)			2021					2020						Change favorable/(unfavorable)
	Amount			Percent of Net Sales			Amount			Percent of Net Sales			Amount			Percent			Amount			Percent of Net Sales			Amount		Percent of Net Sales			Amount			Percent			Amount		Percent of Net Sales			Amount			Percent of Net Sales			Amount			Amount		Percent of Net Sales			Amount			Percent of Net Sales			Amount
Net sales	$	20,364					$	36,667					$	(16,303	)		(44	%)	$	43,106					$	60,943				$	(17,837	)		(29	%)	$	39,804				$	20,364					$	19,440		$	64,227				$	43,106					$	21,121

Gross profit		2,364			12	%		9,653			26	%		(7,289	)		(76	%)		5,831			14	%		14,375		24	%		(8,544	)		(59	%)		10,743		27	%		2,364			12	%		8,379			15,248		24	%		5,831			14	%		9,417

General and administrative expenses		4,488			22	%		4,814			13	%		326			7	%		8,792			20	%		9,271		15	%		479			5	%		5,602		14	%		4,488			22	%		(1,114	)		10,008		16	%		8,792			20	%		(1,216	)

Selling expense		1,331			7	%		1,416			4	%		85			6	%		2,978			7	%		2,676		4	%		(302	)		(11	%)		1,053		3	%		1,331			7	%		278			2,094		3	%		2,978			7	%		884

Interest expense, net		118						209						91			44	%		304						419					115			27	%		268					118						(150	)		446					304						(142	)

Other income		3,739						241						3,498			1451	%		3,674						256					3,418			1335	%
Other income, net																																					457					3,739						(3,282	)		899					3,674						(2,775	)

Income/(loss) from operations before income taxes		166						3,455						(3,289	)		(95	%)		(2,569	)					2,265					(4,834	)		(213	%)		4,277					166						4,111			3,599					(2,569	)					6,168

Income tax (benefit)/expense		(101	)					(265	)					(164	)		(62	%)		(315	)					47					362			770	%
Income tax expense/(benefit)																																					861					(101	)					(962	)		1,026					(315	)					(1,341	)

Net income/(loss)		267						3,720						(3,453	)		(93	%)		(2,254	)					2,218					(4,472	)		(202	%)		3,416					267						3,149			2,573					(2,254	)					4,827

•	Reinforced the importance of adherence to Company policies regarding entering into and subsequently modifying contracts with customers, and confirmed in monthly meetings with managers that no contracts have been entered into that deviate from Company’s accounting policies;
•	~~Created additional reports to identify potential system errors and exceptions related to project revenues and costs where higher risk may exist for inappropriate revenue recognition;~~
•	~~Reviewed listing of material request invoices each month to identify if any significant items are included and reviewed with additional scrutiny for appropriate revenue recognition;~~
•	Ensured adherence to guidelines for preparation of the Company's monthly revenue and contribution margin presentation to include all components of a project in one line to provide full visibility of total job performance; and
•	Implemented a monthly meeting between accounting personnel to discuss and analyze the asset and liability work-in-process accounts to identify any specific projects that require further investigation.

10.1	Executive Employment Agreement, dated July 26, 2021, by and between the Company and Grant Dewbre
31.1	Rule 13a - 14(a)/15d - 14(a) Certifications (1) Chief Executive Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Rule 13a - 14(a)/15d - 14(a) Certifications (2) Chief Financial Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	Section 1350 Certifications (Chief Executive Officer and Chief Financial Officer certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)
101.INS	XBRL Instance
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation
101.DEF	XBRL Taxonomy Extension Definition
101.LAB	XBRL Taxonomy Extension Labels
101.PRE	XBRL Taxonomy Extension Presentation

		Perma-Pipe International Holdings, Inc.


Date:	September ~~9, 2020~~8, 2021	/s/ David J. Mansfield
		David J. Mansfield
		President and Chief Executive Officer
		(Principal Executive Officer)

Date:	September ~~9, 2020~~8, 2021	/s/ D. Bryan Norwood
		D. Bryan Norwood
		~~D. Bryan Norwood~~Vice President and Chief Financial Officer
		~~Vice President and Chief Financial Officer~~
		(Principal Financial and Accounting Officer)