10-Q

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, 2020.

Commission File No. 0-18370

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 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(§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, 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, there were 8,164,989 shares of the registrant's common stock outstanding.

Perma-Pipe International Holdings, Inc.

FORM 10-Q

For the fiscal quarter ended July 31, 2020

TABLE OF CONTENTS

Item		Page
Part I	Financial Information
1.	Financial Statements
	Consolidated Statements of Operations (Unaudited) for the Three and Six Months Ended July 31, 2020 and 2019	2
	Consolidated Statements of Comprehensive Income/(Loss) (Unaudited) for the Three and Six Months Ended July 31, 2020 and 2019	3
	Consolidated Balance Sheets as of July 31, 2020 (Unaudited) and January 31, 2020	4
	Consolidated Statements of Stockholders' Equity (Unaudited) for the Three and Six Months Ended July 31, 2020 and 2019	5
	Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended July 31, 2020 and 2019	6
	Notes to Consolidated Financial Statements (Unaudited)	7
2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	19
4.	Controls and Procedures	26
Part II	Other Information
6.	Exhibits	27
Signatures		28

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,
	2020			2019			2020			2019
Net sales	$	20,364		$	36,667		$	43,106		$	60,943
Cost of sales		18,000			27,014			37,275			46,568
Gross profit		2,364			9,653			5,831			14,375
Operating expenses
General and administrative expenses		4,488			4,814			8,792			9,271
Selling expenses		1,331			1,416			2,978			2,676
Total operating expenses		5,819			6,230			11,770			11,947
Income/(loss) from operations		(3,455	)		3,423			(5,939	)		2,428
Interest expense, net		118			209			304			419
Other income		3,739			241			3,674			256
Income/(loss) from operations before income taxes		166			3,455			(2,569	)		2,265
Income tax (benefit)/expense		(101	)		(265	)		(315	)		47
Net income/(loss)	$	267		$	3,720		$	(2,254	)	$	2,218
Weighted average common shares outstanding
Basic		8,126			7,887			8,087			7,937
Diluted		8,278			8,202			8,087			8,122
Income/(loss) per share
Basic		0.03			0.47			(0.28	)		0.28
Diluted		0.03			0.45			(0.28	)		0.27

See accompanying notes to consolidated financial statements.

Note: Earnings per share calculations could be impacted by rounding.

2

PERMA-PIPE INTERNATIONAL HOLDINGS, INC. 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS) (Unaudited)

(In thousands)

	Three Months Ended July 31,				Six Months Ended July 31,
	2020		2019		2020			2019
Net income/(loss)	$	267	$	3,720	$	(2,254	)	$	2,218
Other comprehensive income/(loss)
Foreign currency translation adjustments, net of tax		153		358		(214	)		41
Other comprehensive income/(loss)		153		358		(214	)		41
Comprehensive income/(loss)	$	420	$	4,078	$	(2,468	)	$	2,259

See accompanying notes to consolidated financial statements.

3

PERMA-PIPE INTERNATIONAL HOLDINGS, INC. 

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

	July 31, 2020			January 31, 2020
		(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	9,106		$	13,371
Restricted cash		1,150			1,287
Trade accounts receivable, less allowance for doubtful accounts of $300 at July 31, 2020 and $407 at January 31, 2020		23,884			29,402
Inventories, net		12,137			14,498
Prepaid expenses and other current assets		7,033			3,531
Costs and estimated earnings in excess of billings on uncompleted contracts		1,750			2,166
Total current assets		55,060			64,255
Property, plant and equipment, net of accumulated depreciation		27,306			28,629
Other assets
Operating lease right-of-use asset		10,889			11,475
Deferred tax assets		566			293
Goodwill		2,222			2,254
Other assets		3,955			5,319
Total other assets		17,632			19,341
Total assets	$	99,998		$	112,225
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Trade accounts payable	$	7,943		$	9,577
Accrued compensation and payroll taxes		1,496			1,190
Commissions and management incentives payable		1,107			1,759
Revolving line - North America		2,470			8,577
Current maturities of long-term debt		1,715			1,458
Customers' deposits		1,844			2,202
Outside commission liability		1,712			1,755
Operating lease liability short-term		1,338			1,040
Other accrued liabilities		2,836			3,444
Billings in excess of costs and estimated earnings on uncompleted contracts		767			1,173
Income taxes payable		750			664
Total current liabilities		23,978			32,839
Long-term liabilities
Long-term debt, less current maturities		6,293			6,717
Deferred compensation liabilities		4,415			4,199
Deferred tax liabilities		672			1,052
Operating lease liability long-term		10,563			11,214
Other long-term liabilities		628			575
Total long-term liabilities		22,571			23,757
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
Additional paid-in capital		60,310			60,024
Accumulated deficit		(2,969	)		(715	)
Accumulated other comprehensive loss		(3,974	)		(3,760	)
Total stockholders' equity		53,449			55,629
Total liabilities and stockholders' equity	$	99,998		$	112,225

See accompanying notes to consolidated financial statements.

4

PERMA-PIPE INTERNATIONAL HOLDINGS, INC. 

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)

(In thousands, except share data)

	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
Net loss		-		-		(1,502	)		-			(1,502	)
Common stock issued under stock plans, net of shares used for tax withholding		-		79		-			-			79
Stock-based compensation expense		-		154		-			-			154
Foreign currency translation adjustment		-		-		-			(317	)		(317	)
Total stockholders' equity at April 30, 2019	$	79	$	59,026	$	(5,793	)	$	(3,197	)	$	50,115
Net income		-		-		3,720			-			3,720
Common stock issued under stock plans, net of shares used for tax withholding		1		43		-			-			44
Stock-based compensation expense		-		406		-			-			406
Foreign currency translation adjustment		-		-		-			358			358
Total stockholders' equity at July 31, 2019	$	80	$	59,475	$	(2,073	)	$	(2,839	)	$	54,643

	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
Net loss		-		-			(2,521	)		-			(2,521	)
Stock-based compensation expense		-		219			-			-			219
Foreign currency translation adjustment		-		-			-			(367	)		(367	)
Total stockholders' equity at April 30, 2020	$	80	$	60,243		$	(3,236	)	$	(4,127	)	$	52,960
Net income		-		-			267			-			267
Common stock issued under stock plans, net of shares used for tax withholding		2		(193	)		-			-			(191	)
Stock-based compensation expense		-		260			-			-			260
Foreign currency translation adjustment		-		-			-			153			153
Total stockholders' equity at July 31, 2020	$	82	$	60,310		$	(2,969	)	$	(3,974	)	$	53,449

Shares	2020		2019
Balances at beginning of year		8,048,006		7,854,322
Shares issued		116,983		193,684
Balances at period end		8,164,989		8,048,006

See accompanying notes to consolidated financial statements.

5

PERMA-PIPE INTERNATIONAL HOLDINGS, INC. 

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In thousands)	Six Months Ended July 31,
	2020			2019
Operating activities
Net income/(loss)	$	(2,254	)	$	2,218
Adjustments to reconcile net income/(loss) to net cash flows provided by/(used in) in operating activities
Depreciation and amortization		2,241			2,302
Deferred tax expense/(benefit)		(630	)		54
Equity-based compensation expense		479			560
Loss on disposal of fixed assets		10			85
Provision on uncollectible accounts		(105	)		(80	)
Changes in operating assets and liabilities
Accounts receivable		3,782			980
Inventories		2,315			(4,238	)
Contract assets and contract liabilities		10			(2,250	)
Accounts payable		(1,733	)		641
Accrued compensation and payroll taxes		(475	)		(627	)
Customers' deposits		(352	)		(112	)
Income taxes receivable and payable		(66	)		(1,421	)
Prepaid expenses and other current assets		(3,774	)		(8	)
Other assets and liabilities		3,170			953
Net cash provided by/(used in) operating activities		2,618			(943	)
Investing activities
Capital expenditures		(761	)		(981	)
Net cash used in investing activities		(761	)		(981	)
Financing activities
Proceeds from revolving lines		23,533			40,630
Payments of debt on revolving lines of credit		(29,341	)		(41,912	)
Payments of other debt		(175	)		(179	)
Increase/(decrease) in drafts payable		100			(131	)
Payments on finance lease obligations		(202	)		(103	)
Stock options exercised and restricted shares retired for tax		(193	)		123
Net cash used in financing activities		(6,278	)		(1,572	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		19			(22	)
Net decrease in cash, cash equivalents and restricted cash		(4,402	)		(3,518	)
Cash, cash equivalents and restricted cash - beginning of period		14,658			12,737
Cash, cash equivalents and restricted cash - end of period	$	10,256		$	9,219
Supplemental cash flow information
Interest paid	$	321		$	408
Income taxes paid		170			1,393

See accompanying notes to consolidated financial statements.

6

PERMA-PIPE INTERNATIONAL HOLDINGS, INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

July 31, 2020

(Tabular amounts presented in thousands, except per share amounts)

Note 1 - Basis of presentation

The interim consolidated financial statements of Perma-Pipe International Holdings, Inc., and subsidiaries (collectively, "PPIH", "Company", or "Registrant") are unaudited, but include all adjustments that the Company's management considers necessary to present fairly the financial position and results of operations for the periods presented. These adjustments consist of normal recurring adjustments. Information and footnote disclosures have been omitted pursuant to Securities and Exchange Commission ("SEC") rules and regulations. The consolidated balance sheet as of January 31, 2020 is derived from the audited consolidated balance sheet as of that date. The results of operations for any interim period are not necessarily indicative of future or annual results. Interim financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's latest Annual Report on Form 10-K. The Company's fiscal year ends on January 31. Years and balances described as 2020 and 2019 are for the three and six months ended July 31, 2020 and 2019, and for the fiscal years ended January 31, 2021 and 2020, respectively.

Note 2 - Business segment reporting

The Company is engaged in the manufacture and sale of products in one segment: Piping Systems. The Company engineers, designs, manufactures and sells specialty piping systems, and leak detection systems. Specialty piping systems include: (i) insulated and jacketed district heating and cooling piping systems for efficient energy distribution from central energy plants to multiple locations, (ii) primary and secondary containment piping systems for transporting chemicals, hazardous fluids and petroleum products, and (iii) the coating and/or insulation of oil and gas gathering and transmission pipelines. The Company's leak detection systems are sold with its piping systems or on a stand-alone basis, to monitor areas where fluid intrusion may contaminate the environment, endanger personal safety, cause a fire hazard, impair essential services or damage equipment or property.

Note 3 - Accounts receivable

The majority of the Company's accounts receivable are due from geographically dispersed contractors and manufacturing companies. Credit is extended based on an evaluation of a customer's financial condition, including the availability of credit insurance. In the U.S., collateral is not generally required. In the United Arab Emirates and Saudi Arabia, letters of credit are usually obtained for significant orders. Accounts receivable are due within various time periods specified in the terms applicable to the specific customer and are stated at amounts due from customers net of an allowance for claims and doubtful accounts. The allowance for doubtful accounts is based on specifically identified amounts in customers' accounts, where future collectability is deemed uncertain. Management may exercise its judgment in adjusting the provision as a consequence of known items, such as current economic factors and credit trends. Past due trade accounts receivable balances are written off when the Company's collection efforts have been unsuccessful in collecting the amount due and the amount is deemed uncollectible. The write-off is recorded against the allowance for doubtful accounts. 

One of the Company’s accounts receivable in the total amount of $4.1 million as of July 31, 2020 and January 31, 2020 has been outstanding for several years. Included in this balance is a retention receivable amount of $3.6 million, of which, due to the long-term nature of the receivable, $1.6 million and $2.1 million were included in the balance of other long-term assets as of July 31, 2020 and January 31, 2020, respectively. The Company completed all of its deliverables in 2015 under the related contract, and has been engaged in ongoing active efforts to collect this outstanding amount. During the first quarter of 2020, the Company 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. The Company continues to engage with the customer to ensure full payment of open balances, and during fiscal 2019 received an updated acknowledgment of the outstanding balances and assurances of payment from the customer. As a result, the Company did not reserve any allowance against this receivable as of July 31, 2020. 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. 

For the three months ended July 31, 2020 and 2019, no individual customer accounted for 10% of the Company’s consolidated net sales. For the six months ended July 31, 2020 and 2019, no individual customer accounted for more than 10% of the Company's consolidated net sales.

At July 31, 2020 and January 31, 2020, one customer accounted for 14.4% and 13.3% of the Company's accounts receivable, respectively. 

7

Note 4 - Revenue recognition 

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) Systems - which include all bundled products in which the Company 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) 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 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) 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) 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).

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

	Three Months Ended July 31,										Six Months Ended July 31,
	2020					2019					2020					2019
	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	%
Specialty Piping Systems and Coating
Revenue recognized under input method		9,784		48	%		15,451		42	%		18,346		43	%		24,238		40	%
Revenue recognized under output method		8,877		44	%		15,356		42	%		18,592		43	%		25,948		42	%
Total	$	20,364		100	%	$	36,667		100	%	$	43,106		100	%	$	60,943		100	%

The input method, as noted in ASC 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. 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 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, 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.

8

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 will be billed and collected within one year.

The following tables set forth the changes in the Company's contract assets and liabilities for the periods indicated. In addition to these amounts, the Company has recorded $3.3 million of unbilled receivables from one of its subsidiaries in the Middle East in other assets on its consolidated balance sheet as of July 31, 2020.

	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

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.

9

Note 5 - Income taxes 

The determination of the consolidated provision for income taxes, deferred tax assets and liabilities and related valuation allowances requires management to make judgments and estimates. As a company with subsidiaries in foreign jurisdictions, the process of calculating income taxes involves estimating current tax obligations and exposures in each jurisdiction as well as making judgments regarding the future recoverability of deferred tax assets. Income earned in the United Arab Emirates is not subject to local country income tax. Additionally, the relative proportion of taxable income earned domestically versus internationally can fluctuate significantly from period to period. Changes in the estimated level of annual pre-tax income, tax laws and the results of tax audits can affect the overall effective income tax rate, which impacts the level of income tax expense and net income. Judgments and estimates related to the Company's projections and assumptions are inherently uncertain; therefore, actual results could differ materially from projections. 

The Company's effective tax rate ("ETR") from operations for the second quarter and year-to-date in fiscal 2020 was (56.8%) and 12.3% compared to (7.6%) and 2.1% during the respective prior year periods. The change in the ETR from the prior year quarter to the current year quarter was largely due to changes in the mix of income and loss in various jurisdictions.

The amount of unrecognized tax benefits, including interest and penalties at July 31, 2020, recorded in other long-term liabilities was $0.1 million, all of which would impact the Company’s ETR if recognized. 

On March 7, 2020, President Trump signed into law the Coronavirus Aid, Relief and Economic Security Act (H.R. 748) (the "CARES Act"). Among the changes to the U.S. federal income tax rules, the CARES Act restored net operating loss carryback rules that were eliminated by the U.S. Tax Cuts and Jobs Act ("Tax Act"), restored 100% bonus depreciation for qualified improvement property, modified the limit on the deduction for net interest expense and accelerated the timeframe for refunds of alternative minimum tax credits. With consideration to these changes to federal income tax rules, there is no net impact to the Company's deferred taxes due to the full valuation allowance. The Company will continue to evaluate the effects of the CARES Act as additional legislative guidance becomes available.

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, 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 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 no impairment of the Company's long-lived assets for the three and six months ended July 31, 2020 and 2019. 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 and January 31, 2020 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

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, 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 exceeded its carrying value. The qualitative assessment identified triggering events that indicated potential impairment of the Company's goodwill. 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 no impairment for the three and six months ended July 31, 2020 and 2019.

10

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, but under which no new awards may be granted. At July 31, 2020 the Company had reserved a total of 534,670 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 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,
	2020		2019		2020		2019
Stock-based compensation expense	$	1	$	3	$	3	$	8
Restricted stock-based compensation expense		259		403		476		552
Total stock-based compensation expense	$	260	$	406	$	479	$	560

Stock Options

The Company did not grant any stock options during the three or six months ended July 31, 2020. 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

No stock options were exercised during the six months ended July 31, 2020. 

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		-		$	-	$	-

11

As of July 31, 2020, there were no remaining unvested stock options outstanding, and therefore no unrecognized compensation expense related to unvested stock options.

Restricted stock

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

Restricted stock activity	Restricted Shares			Weighted Average Grant Price Per Share		Aggregate Intrinsic Value
Outstanding at January 31, 2020		321		$	8.89	$	2,857
Granted		156			5.88
Vested and issued		(63	)		8.96
Forfeited or retired for taxes		(36	)		8.72
Outstanding at July 31, 2020		378		$	7.63	$	2,884

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

Note 8 - Income/(loss) per share

	Three Months Ended July 31,				Six Months Ended July 31,
	2020		2019		2020		2019
Basic weighted average common shares outstanding		8,126		7,887		8,087		7,937
Dilutive effect of equity compensation plans		152		315		-		185
Weighted average common shares outstanding assuming full dilution		8,278		8,202		8,087		8,122
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		248		73		197		203
Stock options and restricted stock with exercise prices or grant date prices below the average market prices		152		315		203		185

 

12

Note 9 - Debt

Debt totaled $10.5 million and $16.9 million at July 31, 2020 and January 31, 2020, 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 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 the PPP loan proceeds will be forgiven under the terms of the CARES Act program.

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 ended July 31, 2020.  

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 ended July 31, 2020. The amounts are recognized in other income in the consolidated statements of operations. 

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, as administrative agent and lender, providing for a three-year $18 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. 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) to be not less than 1.10 to 1.00  at each quarter end on a trailing four-quarter basis; and (iii) the Company and its subsidiaries (including the Company’s foreign subsidiaries not party to the Credit Agreement) 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 of not less than 1.10 to 1.00 at each quarter end on a trailing four-quarter basis. The Company was in compliance with these covenants as of July 31, 2020. 

As of July 31, 2020, the Company had borrowed an aggregate of $2.5 million at rates of 6.25% and 4.17% resulting in a weighted average rate of 4.56% and had $5.2 million available under the Senior Credit Facility. 

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Revolving lines - foreign. The Company also has credit arrangements used by its Middle Eastern subsidiaries in the United Arab Emirates (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) from a bank in the U.A.E. The facility has an interest rate of approximately 3.8% and expires in November 2020.

The Company has a second revolving line for 19.5 million Dirhams (approximately $5.3 million at July 31, 2020) from a bank in the U.A.E. The facility has an interest rate of approximately 4.3% and was originally set to expire in July 2020, however, the expiration has been extended to September 2020 due to the global pandemic and inability to finalize renewal documentation prior to that time.

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, the Company's Egyptian subsidiary entered into a credit arrangement with a bank in Egypt for a revolving line of 200.0 million Egyptian Pounds (approximately $12.5 million at July 31, 2020). 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 a maximum leverage ratio allowable and restricts the ability to undertake any additional debt. The facility has an interest rate of approximately 12.8% and was originally set to expire in June 2020, however, the expiration has been extended to September 2020 due to the global pandemic and inability to finalize renewal documentation prior to that time.

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 ofJuly 31, 2020. On July 31, 2020, interest rates were based on the Emirates Inter Bank Offered Rate ("EIBOR") plus 3.0% to 3.5% per annum, with 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 rate plus 1.5% per annum for the Egypt credit arrangement. Based on these base rates, as of July 31, 2020, the Company's interest rates ranged from 3.8% to 12.8%, with a weighted average rate of 3.76%, and the Company could borrow $20.0 million under these credit arrangements. As of July 31, 2020, $4.3 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, the Company had borrowed $1.0 million, and had an additional $14.7 million of borrowing remaining available under the foreign revolving credit arrangements. The foreign revolving lines balances as of July 31, 2020 and January 31, 2020, 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. 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 of amounts borrowed. The loan bears interest at 4.5% with monthly payments of $13 thousand for both principal and interest and matures July 1, 2027. On June 19, 2022, and on the same day of each year thereafter, the interest rate shall adjust 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%.

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Note 10 - Leases

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 leases mature between April 2021 to 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 14 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 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, the Company had total operating lease liabilities of $11.9 million and total operating ROU assets of $10.9 million, which are reflected in the consolidated balance sheet. At July 31, 2020, the Company also had total finance lease liabilities of $0.9 million included in current maturities of long-term debt and long-term debt less current maturities, and total finance ROU assets of $1.0 million which were included in property plant and equipment, net of accumulated depreciation in the consolidated balance sheet.

15

Supplemental balance sheet information related to leases is as follows: 

Operating and Finance leases:	July 31, 2020			January 31, 2020
Finance leases assets:
Property and Equipment - gross	$	1,659		$	1,696
Accumulated depreciation and amortization		(640	)		(551	)
Property and Equipment - net	$	1,019		$	1,145
Finance lease liabilities:
Finance lease liability short-term	$	375		$	417
Finance lease liability long-term		502			677
Total finance lease liabilities	$	877		$	1,094
Operating lease assets:
Operating lease ROU assets	$	10,889		$	11,475
Operating lease liabilities:
Operating lease liability short-term	$	1,338		$	1,040
Operating lease liability long-term		10,563			11,214
Total operating lease liabilities	$	11,901		$	12,254

Total lease costs consist of the following: 

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
Finance Lease Costs
Amortization of ROU assets	Cost of sales	$	53		$	51		$	101		$	102
Interest on lease liabilities	Interest expense		18			8			37			17
Operating lease costs	Cost of sales, SG&A expenses		610			581			1,222			1,132
Short-term lease costs (1)	Cost of sales, SG&A expenses		213			82			236			266
Sub-lease income	SG&A expenses		(20	)		(20	)		(40	)		(40	)
Total Lease costs		$	874		$	702		$	1,556		$	1,477

(1) Includes variable lease costs, which are immaterial

16

Supplemental cash flow information related to leases is as follows:

	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, 2020
ROU Assets obtained in exchange for new lease obligations:
Finance leases liabilities	$	-
Operating leases liabilities		53

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

	July 31, 2020
Weighted-average remaining lease terms (in years):
Finance leases		2.6
Operating leases		8.3
Weighted-average discount rates:
Finance leases		7.7	%
Operating leases		7.9	%

Maturities of lease liabilities as of July 31, 2020, are as follows:

Year:	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 year ended January 31, 2023		2,229			264
For the year ended January 31, 2024		2,061			142
For the year ended January 31, 2025		1,330			-
For the year ended January 31, 2026		1,144			-
Thereafter		6,214			-
Total lease payments		16,267			970
Less: amount representing interest		(4,366	)		(93	)
Total lease liabilities at July 31, 2020	$	11,901		$	877

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 and 2019, and $1.5 million and $1.4 million for the six months ended July 31, 2020 and 2019, respectively. 

17

Note 11 - Restricted cash

Restricted cash held by foreign subsidiaries was $1.2 million as of July 31, 2020 and 2019, respectively, and is related to fixed deposits that also serve as security deposits and guarantees. 

	July 31, 2020		July 31, 2019
Cash and cash equivalents	$	9,106	$	8,052
Restricted cash		1,150		1,167
Cash, cash equivalents and restricted cash shown in the statement of cash flows	$	10,256	$	9,219

Note 12 - Fair value

The carrying values of cash and cash equivalents, accounts receivable and accounts payable are reasonable estimates of their fair value due to their short-term nature. The carrying amount of the Company's short-term debt, revolving line of credit and long-term debt approximate fair value because the majority of the amounts outstanding accrue interest at variable market rates.

Note 13 - Recent accounting pronouncements

In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform (Topic 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, 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 - 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, Financial Instruments-Credit Losses (Topic 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.

18

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A")

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.

COVID-19 and Depressed Oil and Gas Market Impact

In January 2020, an outbreak of novel coronavirus (also known as "COVID-19") started in Wuhan, China. The virus was recognized as a pandemic by the World Health Organization 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.

As of the date of filing this Form 10-Q, all of the Company’s plants are operating and, to date, the Compay's global supply chains have not been materially affected by the global pandemic. 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 and the impact of decreased oil prices, 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 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") 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 the PPP loan proceeds will be forgiven under 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.

Based on the facts and circumstances of the Company's loan and according to the applicable accounting guidance described herein, the Company has elected to account for the PPP proceeds as a grant that has reasonable assurance of being forgiven. As such, the Company recognized the proceeds in earnings during the three months ended July 31, 2020. The amounts are recognized in other income in the consolidated statements of operations. 

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. PPCA was approved for and received approximately $0.6 million in grants under the program during the six months ended July 31, 2020. The CEWS program is scheduled to continue through November 2020. 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 CEWS proceeds 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.

19

Table of Contents

RESULTS OF OPERATIONS

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 significantly impacted in the future as a result of large variations in the level of project activity in reporting periods.

($ in thousands)	Three Months Ended July 31,																		Six Months Ended July 31,
	2020						2019						Change favorable/(unfavorable)						2020						2019					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
Net sales	$	20,364					$	36,667					$	(16,303	)		(44	%)	$	43,106					$	60,943				$	(17,837	)		(29	%)
Gross profit		2,364			12	%		9,653			26	%		(7,289	)		(76	%)		5,831			14	%		14,375		24	%		(8,544	)		(59	%)
General and administrative expenses		4,488			22	%		4,814			13	%		326			7	%		8,792			20	%		9,271		15	%		479			5	%
Selling expense		1,331			7	%		1,416			4	%		85			6	%		2,978			7	%		2,676		4	%		(302	)		(11	%)
Interest expense, net		118						209						91			44	%		304						419					115			27	%
Other income		3,739						241						3,498			1451	%		3,674						256					3,418			1335	%
Income/(loss) from operations before income taxes		166						3,455						(3,289	)		(95	%)		(2,569	)					2,265					(4,834	)		(213	%)
Income tax (benefit)/expense		(101	)					(265	)					(164	)		(62	%)		(315	)					47					362			770	%
Net income/(loss)		267						3,720						(3,453	)		(93	%)		(2,254	)					2,218					(4,472	)		(202	%)

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

Net sales:

Net sales were $20.4 million in the current quarter, a decrease of $16.3 million, or 44%, from $36.7 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 as a result of the COVID-19 pandemic.

20

Gross profit:

Gross profit decreased to $2.4 million, or 12% of net sales, in the current quarter from $9.7 million, or 26% of net sales, in the prior year quarter. This decrease was primarily driven by lower sales volumes.

General and administrative expenses:

General and administrative expenses decreased to $4.5 million in the current quarter from $4.8 million in the prior year quarter. This decrease was primarily driven by cost cutting measures enacted as a result of the COVID-19 pandemic. 

Selling expenses:

Selling expenses decreased to $1.3 million in the current quarter, compared to $1.4 million in the prior year quarter due primarily to lower personnel costs.

Interest expense, net:

Net interest expense decreased to $0.1 million in the current quarter, compared to $0.2 million in the prior year quarter. This decrease was driven by lower interest rates on borrowings during the period.  

Other income:

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

Income/(loss) from operations before income taxes:

Income from operations before income taxes decreased by $3.3 million to $0.2 million in the current quarter from $3.5 million in the prior year quarter. 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 as a result of the COVID-19 pandemic. The negative impact of these lower revenues was offset by increased income from the Company's new operations in Egypt and by reduced overhead as a consequence of cost reduction initiatives.

Income tax (benefit)/expense:

The Company's worldwide effective tax rates ("ETR") were (56.8%) and (7.6%) 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 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.

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 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.

21

Net income:

The resulting net income of $0.3 million in the current quarter was a decline of $3.4 million over the net income of $3.7 million in the prior year quarter. 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 as a result of the COVID-19 pandemic. The negative impact of these lower revenues was offset by increased income from the Company's new operations in Egypt and by reduced overhead as a consequence of cost reduction initiatives.

Six months ended July 31, 2020 ("year-to-date") vs. Six months ended July 31, 2019 ("prior year year-to-date")

Net sales:

Net sales were $43.1 million in the current year-to-date, a decrease of $17.8 million, or 29%, from $60.9 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 as a result of the COVID-19 pandemic.

Gross profit:

Gross profit decreased to $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 was primarily driven by lower sales volumes.

General and administrative expenses:

General and administrative expenses decreased to $8.8 million in the current year-to-date from $9.3 million in the prior year year-to-date. This decrease was primarily driven by cost cutting measures enacted as a result of the COVID-19 pandemic.  

Selling expenses:

Selling expenses increased to $3.0 million in the current year-to-date, compared to $2.7 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 employees added in 2019.

Interest expense, net:

Net interest expense decreased to $0.3 million in the current year-to-date, compared to $0.4 million in the prior year year-to-date. This decrease was driven by lower interest rates on borrowings during the period. 

Other income:

Other income increased to $3.7 million in the current year-to-date, compared to $0.3 million 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 the PPP loan proceeds during the period of $3.2 million.

Income/(loss) from operations before income taxes:

Income/(loss) from operations before income taxes decreased by $4.8 million to a loss of $2.6 million in the current year-to-date from income of $2.2 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 as a result of the COVID-19 pandemic. The negative impact of these lower revenues was offset by increased income from the Company's new operations in Egypt and by reduced overhead as a consequence of cost reduction initiatives.

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Income tax (benefit)/expense:

The Company's worldwide ETRs were 12.3% and 2.1% 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.

Net income/(loss):

The resulting net loss of $2.3 million in the current year-to-date was a decline of $4.5 million over the net income of $2.2 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 as a result of the COVID-19 pandemic. The negative impact of these lower revenues was offset by increased income from the Company's new operations in Egypt and by reduced overhead as a consequence of cost reduction initiatives.

Liquidity and capital resources

Cash and cash equivalents as of July 31, 2020 were $9.1 million compared to $13.4 million on January 31, 2020. On July 31, 2020, $0.2 million was held in the U.S., and $8.9 million was held at the Company's foreign subsidiaries. The Company's working capital was $31.1 million on July 31, 2020 compared to $31.4 million on January 31, 2020. Of the working capital components, cash decreased $4.3 million as the result of the movements discussed below.

Net cash provided by operating activities in the current quarter was $2.6 million, as compared to net cash used in operating activities of $0.9 million in the prior year quarter. This increase was primarily due to the Company collecting more accounts receivable and purchasing less inventory for projects in the current quarter compared to the prior year quarter.

Net cash used in investing activities in the current quarter and prior year quarter was $0.8 million and $1.0 million, respectively. This was due to a decrease in investments in fixed assets needed for the operation of the business, including the deferral of certain capital expenditures until the global markets recover from the current downturn.

Net cash used in financing activities in the current quarter and prior year quarter was $6.3 million and $1.6 million, respectively. The primary reason for this change was that during the prior year quarter the Company's repayments exceeded its borrowings under its revolving credit facility by approximately $1.3 million, whereas in the current quarter, repayments exceeded borrowings by approximately $5.8 million. Debt totaled $10.5 million and $16.9 million as of July 31, 2020 and January 31, 2020, respectively. For additional information, see Note 9 - Debt, in the Notes to Consolidated Financial Statements.

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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, as administrative agent and lender, providing for a three-year $18 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, 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 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. 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 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 (excluding from the calculation items related to the financial performance of the Company’s foreign subsidiaries not party to the Credit Agreement) to be not less than 1.10 to 1.00 at each quarter end on a trailing four-quarter basis; and (iii) the Company and its subsidiaries (including the Company’s foreign subsidiaries not party to the Credit Agreement) to achieve a 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. The Company was in compliance with these requirements as of July 31, 2020.

As of July 31, 2020, the Company had borrowed an aggregate of $2.5 million at a rate of 6.25% and 4.17% resulting in a weighted average rate of 4.56% and had $5.2 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) from a bank in the U.A.E. The facility has an interest rate of approximately 3.8% and expires in November 2020.

The Company has a second revolving line for 19.5 million Dirhams (approximately $5.3 million at July 31, 2020) from a bank in the U.A.E. The facility has an interest rate of approximately 4.3% and was originally set to expire in July 2020, however, the expiration has been extended to September 2020 due to the global pandemic and inability to finalize renewal documentation prior to that time.

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, the Company's Egyptian subsidiary entered into a credit arrangement with a bank in Egypt for a revolving line of 200.0 million Egyptian Pounds (approximately $12.5 million at July 31, 2020). 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 a maximum leverage ratio allowable and restricts the ability to undertake any additional debt. The facility has an interest rate of approximately 12.8% and was originally set to expire in June 2020, however, the expiration has been extended to September 2020 due to the global pandemic and inability to finalize renewal documentation prior to that time.

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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. On July 31, 2020, interest rates were based on the Emirates Inter Bank Offered Rate ("EIBOR") plus 3.0% to 3.5% per annum, with 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 rate plus 1.5% per annum for the Egypt credit arrangement. Based on these base rates, as of July 31, 2020, the Company's interest rates ranged from 3.8% to 12.8%, with a weighted average rate of 3.76%, and the Company could borrow $20.0 million under these credit arrangements. As of July 31, 2020, $4.3 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, the Company had borrowed $1.0 million, and had an additional $14.7 million of borrowing remaining available under the foreign revolving credit arrangements. The foreign revolving lines balances as of July 31, 2020 and January 31, 2020, were included as current maturities of long-term debt in the Company's consolidated balance sheets. 

Additional Liquidity from the PPP

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 the PPP loan proceeds will be forgiven under 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.

Based on the facts and circumstances of the Company's loan and according to the applicable accounting guidance described herein, the Company has elected to account for the PPP proceeds as a grant that has reasonable assurance of being forgiven. As such, the Company recognized the proceeds in earnings during the three months ended July 31, 2020. The amounts are recognized in other income in the consolidated statements of operations. 

Accounts receivable: 

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 has since then collected approximately $37.8 million as of July 31, 2020, with a remaining balance due in the amount of $4.1 million. Included in this balance is an amount of $3.6 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 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 to the current global pandemic and associated government shutdowns, has not made any collections during the six months ended July 31, 2020. During fiscal 2019, the Company 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. 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 AND ESTIMATES

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 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.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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. 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 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. 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:

• 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.

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.

26

PART II OTHER INFORMATION

Item 6. Exhibits

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

27

SIGNATURES

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.

		Perma-Pipe International Holdings, Inc.
Date:	September 9, 2020	/s/ David J. Mansfield
		David J. Mansfield
		President and Chief Executive Officer
		(Principal Executive Officer)
Date:	September 9, 2020	/s/ D. Bryan Norwood
		D. Bryan Norwood
		Vice President and Chief Financial Officer
		(Principal Financial and Accounting Officer)

28

EX-31.1

Exhibit 31.1

I, David J. Mansfield, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Perma-Pipe International Holdings, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with the respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 9, 2020

/s/ David J. Mansfield

David J. Mansfield

President and Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

I, D. Bryan Norwood, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Perma-Pipe International Holdings, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with the respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 9, 2020

/s/ D. Bryan Norwood

D. Bryan Norwood 

Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)

EX-32

Exhibit 32

Certification of Principal Executive Officers

Pursuant to 18 U.S.C. 1350

(Section 906 of the Sarbanes-Oxley Act of 2002)

The undersigned in their capacities as Chief Executive Officer and Chief Financial Officer of Perma-Pipe International Holdings, Inc.. (the “Registrant’), certify that, to the best of their knowledge, based upon a review of the Quarterly Report on Form 10-Q for the period ended July 31, 2020 of the Registrant, (the “Report”):

(1) The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

/s/ David J. Mansfield

David J. Mansfield

President and Chief Executive Officer

(Principal Executive Officer)

/s/ D. Bryan Norwood

D. Bryan Norwood

Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)

September 9, 2020

A signed original of this written statement required by Section 906 has been provided by Perma-Pipe International Holdings, Inc. and will be retained by Perma-Pipe International Holdings, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

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Document And Entity Information - shares	6 Months Ended
	Jul. 31, 2020	Sep. 04, 2020
Document Information [Line Items]
Entity Registrant Name	Perma-Pipe International Holdings, Inc.
Entity Central Index Key	0000914122
Trading Symbol	ppih
Current Fiscal Year End Date	--01-31
Entity Filer Category	Non-accelerated Filer
Entity Current Reporting Status	Yes
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Interactive Data Current	Yes
Entity Common Stock, Shares Outstanding (in shares)		8,164,989
Entity Shell Company	false
Document Type	10-Q
Document Period End Date	Jul. 31, 2020
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q2
Amendment Flag	false
Title of 12(b) Security	Common Stock, $.01 par value per share

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Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2020	Jul. 31, 2019	Jul. 31, 2020	Jul. 31, 2019
Net sales	$ 20,364	$ 36,667	$ 43,106	$ 60,943
Cost of sales	18,000	27,014	37,275	46,568
Gross profit	2,364	9,653	5,831	14,375
Operating expenses
General and administrative expenses	4,488	4,814	8,792	9,271
Selling expenses	1,331	1,416	2,978	2,676
Total operating expenses	5,819	6,230	11,770	11,947
Income/(loss) from operations	(3,455)	3,423	(5,939)	2,428
Interest expense, net	118	209	304	419
Other income	3,739	241	3,674	256
Income/(loss) from operations before income taxes	166	3,455	(2,569)	2,265
Income tax (benefit)/expense	(101)	(265)	(315)	47
Net income/(loss)	$ 267	$ 3,720	$ (2,254)	$ 2,218
Weighted average common shares outstanding
Basic (in shares)	8,126	7,887	8,087	7,937
Diluted (in shares)	8,278	8,202	8,087	8,122
Income/(loss) per share
Basic (in dollars per share)	$ 0.03	$ 0.47	$ (0.28)	$ 0.28
Diluted (in dollars per share)	$ 0.03	$ 0.45	$ (0.28)	$ 0.27

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Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2020	Jul. 31, 2019	Jul. 31, 2020	Jul. 31, 2019
Net income/(loss)	$ 267	$ 3,720	$ (2,254)	$ 2,218
Other comprehensive income/(loss)
Foreign currency translation adjustments, net of tax	153	358	(214)	41
Other comprehensive income/(loss)	153	358	(214)	41
Comprehensive income/(loss)	$ 420	$ 4,078	$ (2,468)	$ 2,259

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Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	Jul. 31, 2020	Jan. 31, 2020
Current assets
Cash and cash equivalents	$ 9,106	$ 13,371
Restricted cash	1,150	1,287
Trade accounts receivable, less allowance for doubtful accounts of $300 at July 31, 2020 and $407 at January 31, 2020	23,884	29,402
Inventories, net	12,137	14,498
Prepaid expenses and other current assets	7,033	3,531
Costs and estimated earnings in excess of billings on uncompleted contracts	1,750	2,166
Total current assets	55,060	64,255
Property, plant and equipment, net of accumulated depreciation	27,306	28,629
Other assets
Operating lease right-of-use asset	10,889	11,475
Deferred tax assets	566	293
Goodwill	2,222	2,254
Other assets	3,955	5,319
Total other assets	17,632	19,341
Total assets	99,998	112,225
Current liabilities
Trade accounts payable	7,943	9,577
Accrued compensation and payroll taxes	1,496	1,190
Commissions and management incentives payable	1,107	1,759
Revolving line - North America	2,470	8,577
Current maturities of long-term debt	1,715	1,458
Customers' deposits	1,844	2,202
Outside commission liability	1,712	1,755
Operating lease liability short-term	1,338	1,040
Other accrued liabilities	2,836	3,444
Billings in excess of costs and estimated earnings on uncompleted contracts	767	1,173
Income taxes payable	750	664
Total current liabilities	23,978	32,839
Long-term liabilities
Long-term debt, less current maturities	6,293	6,717
Deferred compensation liabilities	4,415	4,199
Deferred tax liabilities	672	1,052
Operating lease liability long-term	10,563	11,214
Other long-term liabilities	628	575
Total long-term liabilities	22,571	23,757
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
Additional paid-in capital	60,310	60,024
Accumulated deficit	(2,969)	(715)
Accumulated other comprehensive loss	(3,974)	(3,760)
Total stockholders' equity	53,449	55,629
Total liabilities and stockholders' equity	$ 99,998	$ 112,225

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Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($) shares in Thousands	Jul. 31, 2020	Jan. 31, 2020
Accounts Receivable, Allowance for Credit Loss, Current	$ 300	$ 407
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, authorized (in shares)	50,000	50,000
Common stock, issued (in shares)	8,165	8,048
Common stock, outstanding (in shares)	8,165	8,048

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Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	Total
Stockholders' equity at Jan. 31, 2019	$ 79	$ 58,793	$ (4,291)	$ (2,880)	$ 51,701
Net income (loss)			(1,502)		(1,502)
Common stock issued under stock plans, net of shares used for tax withholding		79			79
Stock-based compensation expense		154			154
Foreign currency translation adjustment				(317)	(317)
Stockholder's equity at Apr. 30, 2019	$ 79	59,026	(5,793)	(3,197)	50,115
Balances at beginning of year (in shares) at Jan. 31, 2019	7,854,322
Stockholders' equity at Jan. 31, 2019	$ 79	58,793	(4,291)	(2,880)	51,701
Net income (loss)					2,218
Stockholder's equity at Jul. 31, 2019	$ 80	59,475	(2,073)	(2,839)	54,643
Balances at beginning of year (in shares) at Jan. 31, 2019	7,854,322
Shares issued (in shares)	193,684
Balances at period end (in shares) at Jul. 31, 2019	8,048,006
Stockholders' equity at Apr. 30, 2019	$ 79	59,026	(5,793)	(3,197)	50,115
Net income (loss)			3,720		3,720
Common stock issued under stock plans, net of shares used for tax withholding	1	43			44
Stock-based compensation expense		406			406
Foreign currency translation adjustment				358	358
Stockholder's equity at Jul. 31, 2019	$ 80	59,475	(2,073)	(2,839)	54,643
Balances at period end (in shares) at Jul. 31, 2019	8,048,006
Stockholders' equity at Jan. 31, 2020	$ 80	60,024	(715)	(3,760)	55,629
Net income (loss)			(2,521)		(2,521)
Stock-based compensation expense		219			219
Foreign currency translation adjustment				(367)	(367)
Stockholder's equity at Apr. 30, 2020	$ 80	60,243	(3,236)	(4,127)	52,960
Balances at beginning of year (in shares) at Jan. 31, 2020	8,048,006
Stockholders' equity at Jan. 31, 2020	$ 80	60,024	(715)	(3,760)	55,629
Net income (loss)					(2,254)
Stockholder's equity at Jul. 31, 2020	$ 82	60,310	(2,969)	(3,974)	53,449
Balances at beginning of year (in shares) at Jan. 31, 2020	8,048,006
Shares issued (in shares)	116,983
Balances at period end (in shares) at Jul. 31, 2020	8,164,989
Stockholders' equity at Apr. 30, 2020	$ 80	60,243	(3,236)	(4,127)	52,960
Net income (loss)			267		267
Common stock issued under stock plans, net of shares used for tax withholding	2	(193)			(191)
Stock-based compensation expense		260			260
Foreign currency translation adjustment				153	153
Stockholder's equity at Jul. 31, 2020	$ 82	$ 60,310	$ (2,969)	$ (3,974)	$ 53,449
Balances at period end (in shares) at Jul. 31, 2020	8,164,989

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Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jul. 31, 2020	Jul. 31, 2019
Operating activities
Net income/(loss)	$ (2,254)	$ 2,218
Adjustments to reconcile net income/(loss) to net cash flows provided by/(used in) in operating activities
Depreciation and amortization	2,241	2,302
Deferred tax expense/(benefit)	(630)	54
Equity-based compensation expense	479	560
Loss on disposal of fixed assets	10	85
Provision on uncollectible accounts	(105)	(80)
Changes in operating assets and liabilities
Accounts receivable	3,782	980
Inventories	2,315	(4,238)
Contract assets and contract liabilities	10	(2,250)
Accounts payable	(1,733)	641
Accrued compensation and payroll taxes	(475)	(627)
Customers' deposits	(352)	(112)
Income taxes receivable and payable	(66)	(1,421)
Prepaid expenses and other current assets	(3,774)	(8)
Other assets and liabilities	3,170	953
Net cash provided by/(used in) operating activities	2,618	(943)
Investing activities
Capital expenditures	(761)	(981)
Net cash used in investing activities	(761)	(981)
Financing activities
Proceeds from revolving lines	23,533	40,630
Payments of debt on revolving lines of credit	(29,341)	(41,912)
Payments of other debt	(175)	(179)
Increase/(decrease) in drafts payable	100	(131)
Payments on finance lease obligations	(202)	(103)
Stock options exercised and restricted shares retired for tax	(193)	123
Net cash used in financing activities	(6,278)	(1,572)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	19	(22)
Net decrease in cash, cash equivalents and restricted cash	(4,402)	(3,518)
Cash, cash equivalents and restricted cash - beginning of period	14,658	12,737
Cash, cash equivalents and restricted cash - end of period	10,256	9,219
Supplemental cash flow information
Interest paid	321	408
Income taxes paid	$ 170	$ 1,393

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Note 1 - Basis of Presentation

6 Months Ended

Jul. 31, 2020

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

Note

1

- Basis of presentation

The interim consolidated financial statements of Perma-Pipe International Holdings, Inc., and subsidiaries (collectively, "PPIH", "Company", or "Registrant") are unaudited, but include all adjustments that the Company's management considers necessary to present fairly the financial position and results of operations for the periods presented. These adjustments consist of normal recurring adjustments. Information and footnote disclosures have been omitted pursuant to Securities and Exchange Commission ("SEC") rules and regulations. The consolidated balance sheet as of 

January 31, 2020

is derived from the audited consolidated balance sheet as of that date. The results of operations for any interim period are

not

necessarily indicative of future or annual results. Interim financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's latest Annual Report on Form

10

-K. The Company's fiscal year ends on

January 31.

Years and balances described as 

2020

and 

2019

are for the

three

and

six

months ended

July 31, 2020

and

2019

, and for the fiscal years ended

January 31, 2021

and

2020

, respectively.

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Note 2 - Business Segment Reporting

6 Months Ended

Jul. 31, 2020

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

Note

2

- Business segment reporting

The Company is engaged in the manufacture and sale of products in

one

segment: Piping Systems. The Company engineers, designs, manufactures and sells specialty piping systems, and leak detection systems. Specialty piping systems include: (i) insulated and jacketed district heating and cooling piping systems for efficient energy distribution from central energy plants to multiple locations, (ii) primary and secondary containment piping systems for transporting chemicals, hazardous fluids and petroleum products, and (iii) the coating and/or insulation of oil and gas gathering and transmission pipelines. The Company's leak detection systems are sold with its piping systems or on a stand-alone basis, to monitor areas where fluid intrusion

may

contaminate the environment, endanger personal safety, cause a fire hazard, impair essential services or damage equipment or property.

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Note 3 - Accounts Receivable

6 Months Ended

Jul. 31, 2020

Notes to Financial Statements

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

Note

3

- Accounts receivable

The majority of the Company's accounts receivable are due from geographically dispersed contractors and manufacturing companies. Credit is extended based on an evaluation of a customer's financial condition, including the availability of credit insurance. In the U.S., collateral is

not

generally required. In the United Arab Emirates and Saudi Arabia, letters of credit are usually obtained for significant orders. Accounts receivable are due within various time periods specified in the terms applicable to the specific customer and are stated at amounts due from customers net of an allowance for claims and doubtful accounts. The allowance for doubtful accounts is based on specifically identified amounts in customers' accounts, where future collectability is deemed uncertain. Management

may

exercise its judgment in adjusting the provision as a consequence of known items, such as current economic factors and credit trends. Past due trade accounts receivable balances are written off when the Company's collection efforts have been unsuccessful in collecting the amount due and the amount is deemed uncollectible. The write-off is recorded against the allowance for doubtful accounts. 

One of the Company's accounts receivable in the total amount of $

4.1

million as of

July 31, 2020

and

January 31, 2020

has been outstanding for several years. Included in this balance is a retention receivable amount of $

3.6

million, of which, due to the long-term nature of the receivable,

$1.6

million and $

2.1

 million were included in the balance of other long-term assets

as of

July 31, 2020

and

January 31, 2020

, respectively. The Company completed all of its deliverables in

2015

under the related contract, and has been engaged in ongoing active efforts to collect this outstanding amount. During the

first

quarter of

2020,

the Company 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. The Company continues to engage with the customer to ensure full payment of open balances, and during fiscal

2019

received an updated acknowledgment of the outstanding balances and assurances of payment from the customer. As a result, the Company did

not

reserve any allowance against this receivable as of

July 31, 2020.

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. 

For the

three

months ended 

July 31, 2020

 and

2019,

 

no

individual customer accounted for 

10%

of the Company's consolidated net sales. For the

six

months ended

July 31, 2020

and

2019,

no

individual customer accounted for more than

10%

of the Company's consolidated net sales.

At 

July 31, 2020

and

January 31, 2020

, 

one

customer accounted for

14.4%

 and 

13.3%

of the Company's accounts receivable, respectively. 

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Note 4 - Revenue Recognition

6 Months Ended

Jul. 31, 2020

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

Note

4

- Revenue recognition 

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 ) Systems - which include all bundled products in which the Company 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 ) 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

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 ) 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 ) 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

).

A breakdown of the Company's revenues by revenue class for the 

three

and

six

months ended

July 31, 2020

and

2019

are as follows:

	Three Months Ended July 31,										Six Months Ended July 31,
	2020					2019					2020					2019
	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	%
Specialty Piping Systems and Coating
Revenue recognized under input method		9,784		48	%		15,451		42	%		18,346		43	%		24,238		40	%
Revenue recognized under output method		8,877		44	%		15,356		42	%		18,592		43	%		25,948		42	%
Total	$	20,364		100	%	$	36,667		100	%	$	43,106		100	%	$	60,943		100	%

The input method, as noted in ASC

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. 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 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,

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.

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

will be billed and collected within

one

year.

The following tables set forth the changes in the Company's contract assets and liabilities for the periods indicated. In addition to these amounts, the Company has recorded

$3.3

million of unbilled receivables from

one

of its subsidiaries in the Middle East in other assets on its consolidated balance sheet as of

July 31, 2020.

	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

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 5 - Income Taxes

6 Months Ended

Jul. 31, 2020

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note

5

- Income taxes 

The determination of the consolidated provision for income taxes, deferred tax assets and liabilities and related valuation allowances requires management to make judgments and estimates. As a company with subsidiaries in foreign jurisdictions, the process of calculating income taxes involves estimating current tax obligations and exposures in each jurisdiction as well as making judgments regarding the future recoverability of deferred tax assets. Income earned in the United Arab Emirates is

not

subject to local country income tax. Additionally, the relative proportion of taxable income earned domestically versus internationally can fluctuate significantly from period to period. Changes in the estimated level of annual pre-tax income, tax laws and the results of tax audits can affect the overall effective income tax rate, which impacts the level of income tax expense and net income. Judgments and estimates related to the Company's projections and assumptions are inherently uncertain; therefore, actual results could differ materially from projections. 

The Company's effective tax rate ("ETR") from operations for the 

second

quarter and year-to-date in fiscal 

2020

was (

56.8%

) and

12.3%

compared to (

7.6%

) and

2.1%

during the respective prior year periods. The change in the ETR from the prior year quarter to the current year quarter was largely due to changes in the mix of income and loss in various jurisdictions.

The amount of unrecognized tax benefits, including interest and penalties at

July 31, 2020,

recorded in other long-term liabilities was

$0.1

 million, all of which would impact the Company's ETR if recognized. 

On

March 7, 2020,

President Trump signed into law the Coronavirus Aid, Relief and Economic Security Act(H.R.

748

) (the "CARES Act"). Among the changes to the U.S. federal income tax rules, the CARES Act restored net operating loss carryback rules that were eliminated by the U.S. Tax Cuts and Jobs Act ("Tax Act"), restored

100%

bonus depreciation for qualified improvement property, modified the limit on the deduction for net interest expense and accelerated the timeframe for refunds of alternative minimum tax credits. With consideration to these changes to federal income tax rules, there is

no

net impact to the Company's deferred taxes due to the full valuation allowance. The Company will continue to evaluate the effects of the CARES Act as additional legislative guidance becomes available.

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Note 6 - Impairment of Long-lived Assets

6 Months Ended

Jul. 31, 2020

Notes to Financial Statements

Asset Impairment Charges [Text Block]

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,

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 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 

no

impairment of the Company's long-lived assets for the

three

and

six

months ended

July 31, 2020

and

2019

. 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

and

January 31, 2020

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

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,

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 exceeded its carrying value. The qualitative assessment identified triggering events that indicated potential impairment of the Company's goodwill. 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

no

impairment for the 

three

and

six

months ended

July 31, 2020

and

2019

.

XML

Note 7 - Stock-based Compensation

6 Months Ended

Jul. 31, 2020

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

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, but under which

no

new awards

may

be granted. At

July 31, 2020

the Company had reserved a total of

534,670

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 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,
	2020		2019		2020		2019
Stock-based compensation expense	$	1	$	3	$	3	$	8
Restricted stock-based compensation expense		259		403		476		552
Total stock-based compensation expense	$	260	$	406	$	479	$	560

Stock Options

The Company did

not

grant any stock options during the

three

or

six

months ended

July 31, 2020

. 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

No

stock options were exercised during the 

six

months ended

July 31, 2020

. 

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		-		$	-	$	-

As of

July 31, 2020

, there were

no

remaining unvested stock options outstanding, and therefore

no

unrecognized compensation expense related to unvested stock options.

Restricted stock

The following table summarizes the Company's restricted stock activity for the 

six

months ended

July 31, 2020

:

Restricted stock activity	Restricted Shares			Weighted Average Grant Price Per Share		Aggregate Intrinsic Value
Outstanding at January 31, 2020		321		$	8.89	$	2,857
Granted		156			5.88
Vested and issued		(63	)		8.96
Forfeited or retired for taxes		(36	)		8.72
Outstanding at July 31, 2020		378		$	7.63	$	2,884

As of

July 31, 2020

, there was

$1.9

million of unrecognized compensation expense related to unvested restricted stock granted under the

2017

Plan. That cost is expected to be recognized over a weighted average period of

2.1

 years.

XML

Note 8 - Income (Loss) Per Share

6 Months Ended

Jul. 31, 2020

Notes to Financial Statements

Earnings Per Share [Text Block]

Note

8

- Income/(loss) per share

	Three Months Ended July 31,				Six Months Ended July 31,
	2020		2019		2020		2019
Basic weighted average common shares outstanding		8,126		7,887		8,087		7,937
Dilutive effect of equity compensation plans		152		315		-		185
Weighted average common shares outstanding assuming full dilution		8,278		8,202		8,087		8,122
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		248		73		197		203
Stock options and restricted stock with exercise prices or grant date prices below the average market prices		152		315		203		185

 

XML

Note 9 - Debt

6 Months Ended

Jul. 31, 2020

Notes to Financial Statements

Debt Disclosure [Text Block]

Note

9

- Debt

Debt totaled $

10.5

million and

$16.9

million at

July 31, 2020

 and

January 31, 2020

, 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 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 the PPP loan proceeds will be forgiven under the terms of the CARES Act program.

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 ended

July 31, 2020.  

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 ended

July 31, 2020.

The amounts are recognized in other income in the consolidated statements of operations. 

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, as administrative agent and lender, providing for a

three

-year

$18

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.

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) to be

not

less than

1.10

to

1.00

  at each quarter end on a trailing

four

-quarter basis; and (iii) the Company and its subsidiaries (including the Company's foreign subsidiaries

not

party to the Credit Agreement) 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 of

not

less than

1.10

to

1.00

at each quarter end on a trailing

four

-quarter basis. The Company was in compliance with these covenants as of

July 31, 2020

. 

As of

July 31, 2020,

the Company had borrowed an aggregate of

$2.5

 million at rates of

6.25%

and 

4.17%

resulting in a weighted average rate of

4.56%

and had

$5.2

 million available under the Senior Credit Facility. 

Revolving lines - foreign

.

The Company also has credit arrangements used by its Middle Eastern subsidiaries in the United Arab Emirates (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)

from a bank in the U.A.E. The facility has an interest rate of approximately

3.8%

and expires in

November 2020.

The Company has a

second

revolving line for

19.5

 million Dirhams (approximately

$5.3

 million at

July 31, 2020)

from a bank in the U.A.E. The facility has an interest rate of approximately

4.3%

and was originally set to expire in 

July 2020,

however, the expiration has been extended to

September 2020

due to the global pandemic and inability to finalize renewal documentation prior to that time.

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,

the Company's Egyptian subsidiary entered into a credit arrangement with a bank in Egypt for a revolving line of

200.0

million Egyptian Pounds (approximately

$12.5

million at

July 31, 2020).

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 a maximum leverage ratio allowable and restricts the ability to undertake any additional debt. The facility has an interest rate of approximately

12.8%

and was originally set to expire in 

June 2020,

however, the expiration has been extended to

September 2020

due to the global pandemic and inability to finalize renewal documentation prior to that time.

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

. On

July 31, 2020

, interest rates were based on the Emirates Inter Bank Offered Rate ("EIBOR") plus

3.0%

to

3.5%

per annum, with 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 rate plus

1.5%

per annum for the Egypt credit arrangement. Based on these base rates, as of

July 31, 2020

, the Company's interest rates ranged from

3.8%

to

12.8%,

with a weighted average rate of

3.76%,

and the Company could borrow

$20.0

 million under these credit arrangements. As of

July 31, 2020

, 

$4.3

 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

, the Company had borrowed

$1.0

 million, and had an additional

$14.7

 million of borrowing remaining available under the foreign revolving credit arrangements. The foreign revolving lines balances

as of

July 31, 2020

and

January 31, 2020

, 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. 

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 of amounts borrowed. The loan bears interest at

4.5%

with monthly payments of

$13

thousand for both principal and interest and matures

July 

1,

2027.

On

June 

19,

2022,

and on the same day of each year thereafter, the interest rate shall adjust 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%.

XML

Note 10 - Leases

6 Months Ended

Jul. 31, 2020

Notes to Financial Statements

Lessee, Operating and Finance Leases [Text Block]

Note

10

- Leases

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 leases mature between

April 

2021

to

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

14

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 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

, the Company had total operating lease liabilities of

$11.9

 million and total operating ROU assets of

$10.9

 million, which are reflected in the consolidated balance sheet. At

July 31, 2020

, the Company also had total finance lease liabilities of $

0.9

million included in current maturities of long-term debt and long-term debt less current maturities, and total finance ROU assets of $

1.0

million which were included in property plant and equipment, net of accumulated depreciation in the consolidated balance sheet.

Supplemental balance sheet information related to leases is as follows: 

Operating and Finance leases:	July 31, 2020			January 31, 2020
Finance leases assets:
Property and Equipment - gross	$	1,659		$	1,696
Accumulated depreciation and amortization		(640	)		(551	)
Property and Equipment - net	$	1,019		$	1,145
Finance lease liabilities:
Finance lease liability short-term	$	375		$	417
Finance lease liability long-term		502			677
Total finance lease liabilities	$	877		$	1,094
Operating lease assets:
Operating lease ROU assets	$	10,889		$	11,475
Operating lease liabilities:
Operating lease liability short-term	$	1,338		$	1,040
Operating lease liability long-term		10,563			11,214
Total operating lease liabilities	$	11,901		$	12,254

Total lease costs consist of the following: 

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
Finance Lease Costs
Amortization of ROU assets	Cost of sales	$	53		$	51		$	101		$	102
Interest on lease liabilities	Interest expense		18			8			37			17
Operating lease costs	Cost of sales, SG&A expenses		610			581			1,222			1,132
Short-term lease costs (1)	Cost of sales, SG&A expenses		213			82			236			266
Sub-lease income	SG&A expenses		(20	)		(20	)		(40	)		(40	)
Total Lease costs		$	874		$	702		$	1,556		$	1,477

(

1

) Includes variable lease costs, which are immaterial

Supplemental cash flow information related to leases is as follows:

	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, 2020
ROU Assets obtained in exchange for new lease obligations:
Finance leases liabilities	$	-
Operating leases liabilities		53

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

	July 31, 2020
Weighted-average remaining lease terms (in years):
Finance leases		2.6
Operating leases		8.3
Weighted-average discount rates:
Finance leases		7.7	%
Operating leases		7.9	%

Maturities of lease liabilities as of

July 31, 2020

, are as follows:

Year:	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 year ended January 31, 2023		2,229			264
For the year ended January 31, 2024		2,061			142
For the year ended January 31, 2025		1,330			-
For the year ended January 31, 2026		1,144			-
Thereafter		6,214			-
Total lease payments		16,267			970
Less: amount representing interest		(4,366	)		(93	)
Total lease liabilities at July 31, 2020	$	11,901		$	877

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

 and

2019

, and

$1.5

million and

$1.4

million for the

six

months ended

July 31, 2020

and

2019,

respectively. 

XML

Note 11 - Restricted Cash

6 Months Ended

Jul. 31, 2020

Notes to Financial Statements

Cash and Cash Equivalents Disclosure [Text Block]

Note

11

 - Restricted cash

Restricted cash held by foreign subsidiaries was

$1.2

 million as of

July 31, 2020

and

2019,

respectively, and is related to fixed deposits that also serve as security deposits and guarantees. 

	July 31, 2020		July 31, 2019
Cash and cash equivalents	$	9,106	$	8,052
Restricted cash		1,150		1,167
Cash, cash equivalents and restricted cash shown in the statement of cash flows	$	10,256	$	9,219

XML

Note 12 - Fair Value

6 Months Ended

Jul. 31, 2020

Notes to Financial Statements

Fair Value Disclosures [Text Block]

Note

12

 - Fair value

The carrying values of cash and cash equivalents, accounts receivable and accounts payable are reasonable estimates of their fair value due to their short-term nature. The carrying amount of the Company's short-term debt, revolving line of credit and long-term debt approximate fair value because the majority of the amounts outstanding accrue interest at variable market rates.

XML

Note 13 - Recent Accounting Pronouncements

6 Months Ended

Jul. 31, 2020

Notes to Financial Statements

Description of New Accounting Pronouncements Not yet Adopted [Text Block]

Note

13

 - Recent accounting pronouncements

In

March 2020,

the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU")

2020

-

04,

 

Reference Rate Reform

(Topic

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,

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 - 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,

Financial Instruments-Credit Losses

(Topic

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.

XML

Note 4 - Revenue Recognition (Tables)

6 Months Ended

Jul. 31, 2020

Notes Tables

Disaggregation of Revenue [Table Text Block]

	Three Months Ended July 31,										Six Months Ended July 31,
	2020					2019					2020					2019
	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	%
Specialty Piping Systems and Coating
Revenue recognized under input method		9,784		48	%		15,451		42	%		18,346		43	%		24,238		40	%
Revenue recognized under output method		8,877		44	%		15,356		42	%		18,592		43	%		25,948		42	%
Total	$	20,364		100	%	$	36,667		100	%	$	43,106		100	%	$	60,943		100	%

Contract with Customer, Contract Asset, Contract Liability, and Receivable [Table Text Block]

	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

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Note 6 - Impairment of Long-lived Assets (Tables)

6 Months Ended

Jul. 31, 2020

Notes Tables

Schedule of Goodwill [Table Text Block]

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

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Note 7 - Stock-based Compensation (Tables)

6 Months Ended

Jul. 31, 2020

Notes Tables

Share-based Payment Arrangement, Expensed and Capitalized, Amount [Table Text Block]

	Three Months Ended July 31,				Six Months Ended July 31,
	2020		2019		2020		2019
Stock-based compensation expense	$	1	$	3	$	3	$	8
Restricted stock-based compensation expense		259		403		476		552
Total stock-based compensation expense	$	260	$	406	$	479	$	560

Share-based Payment Arrangement, Option, Activity [Table Text Block]

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

Schedule of Nonvested Share Activity [Table Text Block]

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		-		$	-	$	-

Share-based Payment Arrangement, Restricted Stock and Restricted Stock Unit, Activity [Table Text Block]

Restricted stock activity	Restricted Shares			Weighted Average Grant Price Per Share		Aggregate Intrinsic Value
Outstanding at January 31, 2020		321		$	8.89	$	2,857
Granted		156			5.88
Vested and issued		(63	)		8.96
Forfeited or retired for taxes		(36	)		8.72
Outstanding at July 31, 2020		378		$	7.63	$	2,884

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Note 8 - Income (Loss) Per Share (Tables)

6 Months Ended

Jul. 31, 2020

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three Months Ended July 31,				Six Months Ended July 31,
	2020		2019		2020		2019
Basic weighted average common shares outstanding		8,126		7,887		8,087		7,937
Dilutive effect of equity compensation plans		152		315		-		185
Weighted average common shares outstanding assuming full dilution		8,278		8,202		8,087		8,122
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		248		73		197		203
Stock options and restricted stock with exercise prices or grant date prices below the average market prices		152		315		203		185

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Note 10 - Leases (Tables)

6 Months Ended

Jul. 31, 2020

Notes Tables

Supplemental Balance Sheet Information Related to Leases [Table Text Block]

Operating and Finance leases:	July 31, 2020			January 31, 2020
Finance leases assets:
Property and Equipment - gross	$	1,659		$	1,696
Accumulated depreciation and amortization		(640	)		(551	)
Property and Equipment - net	$	1,019		$	1,145
Finance lease liabilities:
Finance lease liability short-term	$	375		$	417
Finance lease liability long-term		502			677
Total finance lease liabilities	$	877		$	1,094
Operating lease assets:
Operating lease ROU assets	$	10,889		$	11,475
Operating lease liabilities:
Operating lease liability short-term	$	1,338		$	1,040
Operating lease liability long-term		10,563			11,214
Total operating lease liabilities	$	11,901		$	12,254

Lease, Cost [Table Text Block]

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
Finance Lease Costs
Amortization of ROU assets	Cost of sales	$	53		$	51		$	101		$	102
Interest on lease liabilities	Interest expense		18			8			37			17
Operating lease costs	Cost of sales, SG&A expenses		610			581			1,222			1,132
Short-term lease costs (1)	Cost of sales, SG&A expenses		213			82			236			266
Sub-lease income	SG&A expenses		(20	)		(20	)		(40	)		(40	)
Total Lease costs		$	874		$	702		$	1,556		$	1,477

Supplemental Cash Flow Information Related Leases [Table Text Block]

	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, 2020
ROU Assets obtained in exchange for new lease obligations:
Finance leases liabilities	$	-
Operating leases liabilities		53

Weighted-average Lease Terms and Discount Rates [Table Text Block]

	July 31, 2020
Weighted-average remaining lease terms (in years):
Finance leases		2.6
Operating leases		8.3
Weighted-average discount rates:
Finance leases		7.7	%
Operating leases		7.9	%

Finance and Operating Lease, Liability, Maturity [Table Text Block]

Year:	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 year ended January 31, 2023		2,229			264
For the year ended January 31, 2024		2,061			142
For the year ended January 31, 2025		1,330			-
For the year ended January 31, 2026		1,144			-
Thereafter		6,214			-
Total lease payments		16,267			970
Less: amount representing interest		(4,366	)		(93	)
Total lease liabilities at July 31, 2020	$	11,901		$	877

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Note 11 - Restricted Cash (Tables)

6 Months Ended

Jul. 31, 2020

Notes Tables

Restrictions on Cash and Cash Equivalents [Table Text Block]

	July 31, 2020		July 31, 2019
Cash and cash equivalents	$	9,106	$	8,052
Restricted cash		1,150		1,167
Cash, cash equivalents and restricted cash shown in the statement of cash flows	$	10,256	$	9,219

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Note 2 - Business Segment Reporting (Details Textual)	6 Months Ended
	Jul. 31, 2020
Number of Reportable Segments	1

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Note 3 - Accounts Receivable (Details Textual) $ in Thousands	1 Months Ended	3 Months Ended			6 Months Ended		12 Months Ended
	Aug. 31, 2020 USD ($)	Jul. 31, 2020 USD ($)	Apr. 30, 2020 USD ($)	Jul. 31, 2019	Jul. 31, 2020 USD ($)	Jul. 31, 2019	Jan. 31, 2020 USD ($)
Accounts Receivable, Outstanding for Several Years		$ 4,100			$ 4,100		$ 4,100
Retention Receivable		3,600			3,600		$ 3,600
Accounts Receivable, Certified Invoices in Process of Collection			$ 500
Allowance for Doubtful Accounts Receivable Outstanding for Several Years		$ 0			$ 0
Revenue Benchmark [Member] | Customer Concentration Risk [Member]
Number of Major Customers		0		0	0	0
Accounts Receivable [Member] | Customer Concentration Risk [Member]
Number of Major Customers					1		1
Accounts Receivable [Member] | Customer Concentration Risk [Member] | One Customer [Member]
Concentration Risk, Percentage					14.40%		13.30%
Subsequent Event [Member]
Proceeds from Collection of Accounts Receivable Outstanding for Several Years	$ 200
Other Noncurrent Assets [Member]
Retention Receivable		$ 1,600			$ 1,600		$ 2,100

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Note 4 - Revenue Recognition (Details Textual) $ in Millions	6 Months Ended
	Jul. 31, 2020 USD ($)
Costs Incurred for Uncompleted Contracts, Anticipated Collection Period (Year)	1 year
Middle East [Member]
Unbilled Receivables, Current	$ 3.3

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Note 4 - Revenue Recognition - Revenues by Revenue Class (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2020	Jul. 31, 2019	Jul. 31, 2020	Jul. 31, 2019
Net sales	$ 20,364	$ 36,667	$ 43,106	$ 60,943
Sales by product, percent	100.00%	100.00%	100.00%	100.00%
Product [Member] | Transferred at Point in Time [Member]
Net sales	$ 1,703	$ 5,860	$ 6,168	$ 10,757
Sales by product, percent	8.00%	16.00%	14.00%	18.00%
Specialty Piping Systems And Coating [Member] | Transferred at Point in Time Using Input Method [Member]
Net sales	$ 9,784	$ 15,451	$ 18,346	$ 24,238
Sales by product, percent	48.00%	42.00%	43.00%	40.00%
Specialty Piping Systems And Coating [Member] | Transferred at Point in Time Using Output Method [Member]
Net sales	$ 8,877	$ 15,356	$ 18,592	$ 25,948
Sales by product, percent	44.00%	42.00%	43.00%	42.00%

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Note 4 - Revenue Recognition - Contract With Customer, Asset and Liability (Details) - USD ($) $ in Thousands	3 Months Ended
	Jul. 31, 2020	Apr. 30, 2020	Jul. 31, 2019	Apr. 30, 2019
Balance, assets	$ 2,900	$ 2,166	$ 1,983	$ 1,653
Costs and gross profit recognized during the period for uncompleted contracts from the prior period	(1,743)	(2,896)	(1,509)	(1,038)
Costs and deferred gross profit incurred on uncompleted contracts not billed at the end of the current period	593	3,630	3,000	1,368
Balance, assets	1,750	2,900	3,474	1,983
Balance, liabilities	1,061	1,173	1,846	1,569
Revenue recognized during the period for uncompleted contracts from the prior period	631	(17)	(1,250)	(444)
New contracts entered into that are uncompleted at the end of the current period	(925)	(95)	545	721
Balance, liabilities	$ 767	$ 1,061	$ 1,141	$ 1,846

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Note 5 - Income Taxes (Details Textual) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jul. 31, 2020	Jul. 31, 2019	Jul. 31, 2020	Jul. 31, 2019
Effective Income Tax Rate Reconciliation, Percent, Total	(56.80%)	(7.60%)	12.30%	2.10%
Other Noncurrent Liabilities [Member]
Unrecognized Tax Benefits, Ending Balance	$ 0.1		$ 0.1

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Note 6 - Impairment of Long-lived Assets (Details Textual) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2020	Jul. 31, 2019	Jul. 31, 2020	Jul. 31, 2019
Impairment of Long-Lived Assets Held-for-use	$ 0	$ 0	$ 0	$ 0
Goodwill, Impairment Loss	$ 0	$ 0	$ 0	$ 0

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Note 6 - Impairment of Long-lived Assets - Goodwill (Details) $ in Thousands	6 Months Ended
	Jul. 31, 2020 USD ($)
Goodwill	$ 2,254
Goodwill, foreign exchange change effect	(32)
Goodwill	$ 2,222

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Note 7 - Stock-based Compensation (Details Textual) $ in Thousands	3 Months Ended	6 Months Ended
	Jul. 31, 2020 USD ($) shares	Jul. 31, 2020 USD ($) shares
Common Stock, Capital Shares Reserved for Future Issuance (in shares)	534,670	534,670
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross (in shares)	0	0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Number of Shares, Ending Balance (in shares)	0	0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period (in shares)		0
Share-based Payment Arrangement, Option [Member]
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount, Total | $	$ 0	$ 0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period (in shares)
Restricted Stock [Member]
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount, Total | $	$ 1,900	$ 1,900
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition (Year)		2 years 36 days

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Note 7 - Stock-based Compensation - Stock-based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2020	Jul. 31, 2019	Jul. 31, 2020	Jul. 31, 2019
Stock-based compensation expense	$ 260	$ 406	$ 479	$ 560
Share-based Payment Arrangement, Option [Member]
Stock-based compensation expense	1	3	3	8
Restricted Stock [Member]
Stock-based compensation expense	$ 259	$ 403	$ 476	$ 552

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Note 7 - Stock-based Compensation - Stock Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands	6 Months Ended	12 Months Ended
	Jul. 31, 2020	Jan. 31, 2020
Exercised (in shares)	0
Share-based Payment Arrangement, Option [Member]
Outstanding at beginning of period (in shares)	132,000
Outstanding at beginning of period, weighted average exercise price (in dollars per share)	$ 8.98
Outstanding weighted average remaining contractual term (Year)	2 years 328 days	3 years 73 days
Outstanding at beginning of period, aggregate intrinsic value	$ 160
Exercised (in shares)
Exercised, weighted average exercise price (in dollars per share)
Exercised, aggregate intrinsic value
Expired or forfeited (in shares)	(13,000)
Expired or forfeited, weighted average exercise price (in dollars per share)
Outstanding at end of period (in shares)	119,000	132,000
Outstanding at end of period, weighted average exercise price (in dollars per share)	$ 9.20	$ 8.98
Outstanding at end of period, aggregate intrinsic value	$ 4	$ 160
Exercisable at end of period (in shares)	119,000
Exercisable at end of period, weighted average exercise price (in dollars per share)	$ 9.20
Exercisable at end of period, weighted average remaining contractual term (Year)	2 years 328 days
Exercisable at end of period, aggregate intrinsic value	$ 4

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Note 7 - Stock-based Compensation - Unvested Option Activity (Details) - Unvested Option [Member] $ / shares in Units, shares in Thousands, $ in Thousands	6 Months Ended
	Jul. 31, 2020 USD ($) $ / shares shares
Outstanding at beginning of period (in shares)	3
Outstanding at beginning of period, weighted average exercise price (in dollars per share) | $ / shares	$ 7.33
Outstanding at beginning of period, aggregate intrinsic value | $	$ 4
Vested, number (in shares)	(3)
Expired or forfeited (in shares)
Expired or forfeited, weighted average exercise price (in dollars per share) | $ / shares
Outstanding at end of period (in shares)
Outstanding at end of period, weighted average exercise price (in dollars per share) | $ / shares
Outstanding at end of period, aggregate intrinsic value | $

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Note 7 - Stock-based Compensation - Restricted Stock Activity (Details) - Restricted Stock [Member] $ / shares in Units, shares in Thousands, $ in Thousands	6 Months Ended
	Jul. 31, 2020 USD ($) $ / shares shares
Outstanding (unvested) at beginning of period (in shares) | shares	321
Outstanding (unvested) at beginning of period, weighted average grant price per share (in dollars per share) | $ / shares	$ 8.89
Outstanding (unvested) at beginning of period, aggregate intrinsic value | $	$ 2,857
Granted (in shares) | shares	156
Granted, weighted average grant price per share (in dollars per share) | $ / shares	$ 5.88
Vested and issued (in shares) | shares	(63)
Vested and issued, weighted average grant price per share (in dollars per share) | $ / shares	$ 8.96
Forfeited or retired for taxes (in shares) | shares	(36)
Forfeited or retired for taxes, weighted average grant price per share (in dollars per share) | $ / shares	$ 8.72
Outstanding (unvested) at endof period (in shares) | shares	378
Outstanding (unvested) at end of period, weighted average grant price per share (in dollars per share) | $ / shares	$ 7.63
Outstanding (unvested) at end of period, aggregate intrinsic value | $	$ 2,884

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Note 8 - Income (Loss) Per Share - Summary of Earnings Per Share (Details) - shares shares in Thousands	3 Months Ended		6 Months Ended
	Jul. 31, 2020	Jul. 31, 2019	Jul. 31, 2020	Jul. 31, 2019
Basic weighted average common shares outstanding (in shares)	8,126	7,887	8,087	7,937
Dilutive effect of equity compensation plans (in shares)	152	315		185
Weighted average common shares outstanding assuming full dilution (in shares)	8,278	8,202	8,087	8,122
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 (in shares)	248	73	197	203
Stock options and restricted stock with exercise prices or grant date prices below the average market prices (in shares)	152	315	203	185

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Note 9 - Debt (Details Textual) $ in Thousands, د.إ in Millions, $ in Millions, ج.م. in Billions						3 Months Ended	6 Months Ended
	May 01, 2020 USD ($)	Sep. 20, 2018 USD ($)	Jul. 28, 2016 USD ($)	Jul. 28, 2016 CAD ($)	Jun. 19, 2012 USD ($)	Jul. 31, 2020 USD ($)	Jul. 31, 2020 USD ($)	Jul. 31, 2020 AED (د.إ)	Jan. 31, 2020 USD ($)	Nov. 30, 2019 EGP (ج.م.)
Debt and Lease Obligation, Total						$ 10,500	$ 10,500		$ 16,900
Line of Credit, Current						2,470	2,470		$ 8,577
Revolving Lines, North America [Member]
Debt Instrument, Term (Year)		3 years
Line of Credit Facility, Maximum Borrowing Capacity		$ 18,000
Line of Credit Facility, Unused Capacity, Commitment Fee Percentage		0.375%
Line of Credit Facility, Capital Expenditures Restrictions		$ 3,000
Line of Credit Facility, Covenant Terms, EBITDA Ratio, Term One		1.1
Line of Credit Facility, Covenant Terms, EBITDA Ratio, Term Two		1.1
Line of Credit, Current						2,500	2,500
Line of Credit Facility, Current Borrowing Capacity						$ 5,200	$ 5,200
Revolving Lines, North America [Member] | Weighted Average [Member]
Line of Credit Facility, Interest Rate at Period End						4.56%	4.56%	4.56%
Foreign Revolving Lines [Member]
Line of Credit Facility, Maximum Borrowing Capacity						$ 20,000	$ 20,000
Letters of Credit Outstanding, Amount						4,300	4,300
Proceeds from Issuance of Debt							1,000
Line of Credit Facility, Remaining Borrowing Capacity						$ 14,700	$ 14,700
Foreign Revolving Lines [Member] | CBE Corridor Rate [Member]
Debt Instrument, Basis Spread on Variable Rate							1.50%
Foreign Revolving Lines [Member] | Weighted Average [Member]
Line of Credit Facility, Interest Rate at Period End						3.76%	3.76%	3.76%
Foreign Revolving Lines [Member] | Minimum [Member]
Line of Credit Facility, Interest Rate at Period End						3.80%	3.80%	3.80%
Debt Instrument, Interest Rate, Stated Percentage						4.50%	4.50%	4.50%
Foreign Revolving Lines [Member] | Minimum [Member] | EIBOR [Member]
Debt Instrument, Basis Spread on Variable Rate							3.00%
Foreign Revolving Lines [Member] | Maximum [Member]
Line of Credit Facility, Interest Rate at Period End						12.80%	12.80%	12.80%
Foreign Revolving Lines [Member] | Maximum [Member] | EIBOR [Member]
Debt Instrument, Basis Spread on Variable Rate							3.50%
Paycheck Protection Program CARES Act [Member]
Proceeds from Issuance of Long-term Debt, Total	$ 3,200
Percent of Proceeds from Issuance of Debt Used for Payroll Related Expenses						100.00%
Interest Rate 1 [Member] | Revolving Lines, North America [Member]
Line of Credit Facility, Interest Rate at Period End						6.25%	6.25%	6.25%
Interest Rate 2 [Member] | Revolving Lines, North America [Member]
Line of Credit Facility, Interest Rate at Period End						4.17%	4.17%	4.17%
Revolving Credit Lines Used by Middle Eastern Subsidiaries, 1 [Member] | Foreign Revolving Lines [Member]
Line of Credit Facility, Maximum Borrowing Capacity						$ 2,200	$ 2,200	د.إ 8.0
Line of Credit Facility, Interest Rate at Period End						3.80%	3.80%	3.80%
Revolving Credit Lines Used by Middle Eastern Subsidiaries, 2 [Member] | Foreign Revolving Lines [Member]
Line of Credit Facility, Maximum Borrowing Capacity						$ 5,300	$ 5,300	د.إ 19.5
Line of Credit Facility, Interest Rate at Period End						4.30%	4.30%	4.30%
Revolving Credit Lines Used by Middle Eastern Subsidiaries, 3 [Member] | Foreign Revolving Lines [Member]
Line of Credit Facility, Maximum Borrowing Capacity						$ 12,500	$ 12,500			ج.م. 0.2
Line of Credit Facility, Interest Rate at Period End						12.80%	12.80%	12.80%
Canadian Mortgage Note [Member]
Proceeds from Issuance of Debt			$ 6,100	$ 8
Debt Instrument, Maturity Date			Dec. 23, 2042	Dec. 23, 2042
Debt Instrument, Interest Rate, Effective Percentage						4.55%	4.55%	4.55%
Mortgage Note Secured by Tennessee Manufacturing Facility [Member]
Debt Instrument, Interest Rate, Stated Percentage					4.50%
Debt Instrument, Maturity Date					Jul. 01, 2027
Debt Instrument, Issuance Date					Jun. 19, 2012
Proceeds from Issuance of Secured Debt					$ 1,800
Debt Instrument, Periodic Payment, Total					$ 13
Debt Instrument, Adjustable Interest Rate Period, Commencement Date					Jun. 19, 2022
Debt Instrument, Interest Rate, Maximum Annual Increase					2.00%
Debt Instrument, Adjustable Interest Rate, Ceiling					18.00%
Debt Instrument, Adjustable Interest Rate, Floor					4.50%

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Note 10 - Leases (Details Textual) $ in Thousands, ₨ in Millions, $ in Millions		3 Months Ended		6 Months Ended		12 Months Ended
	Aug. 05, 2016 USD ($)	Jul. 31, 2020 USD ($)	Jul. 31, 2019 USD ($)	Jul. 31, 2020 USD ($)	Jul. 31, 2019 USD ($)	Jan. 31, 2020 USD ($)	Jan. 31, 2018 USD ($)	Jan. 31, 2020 CAD ($)	Jan. 31, 2018 CAD ($)	Aug. 05, 2016 INR (₨)
Finance Lease, Right-of-Use Asset, after Accumulated Amortization, Total		$ 1,000		$ 1,000
Operating Lease, Liability, Total		11,901		11,901		$ 12,254
Operating Lease, Right-of-Use Asset		10,889		10,889		11,475
Finance Lease, Liability, Total		877		877		1,094
Operating Lease, Expense		$ 800	$ 700	$ 1,500	$ 1,400
Maximum [Member]
Lessee, Operating Lease, Term of Contract (Year)		14 years		14 years
Minimum [Member]
Lessee, Operating Lease, Term of Contract (Year)		1 year		1 year
Finance Vehicle Equipment, One [Member]
Finance Lease, Right-of-Use Asset, after Accumulated Amortization, Total						$ 800	$ 800	$ 1.1	$ 1.1
Interest Rate for Finance Lease						8.00%
Finance Vehicle Equipment, One [Member] | Maximum [Member]
Interest Rate for Finance Lease							7.80%
Finance Lease, Principal Payments and Interest Payment on Liability						$ 100	$ 100
Finance Vehicle Equipment, One [Member] | Minimum [Member]
Interest Rate for Finance Lease							4.00%
Finance Vehicle Equipment, Two [Member]
Finance Lease, Right-of-Use Asset, after Accumulated Amortization, Total	$ 8									₨ 0.6
Interest Rate for Finance Lease	15.60%
Finance Vehicle Equipment, Two [Member] | Maximum [Member]
Finance Lease, Principal Payments and Interest Payment on Liability	$ 1

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Note 10 - Leases - Supplemental Balance Sheet Information Related to Leases (Details) - USD ($) $ in Thousands	Jul. 31, 2020	Jan. 31, 2020
Property and Equipment - net	$ 27,306	$ 28,629
Finance lease liability short-term	375	417
Finance lease liability long-term	502	677
Total finance lease liabilities	877	1,094
Operating Lease, Right-of-Use Asset	10,889	11,475
Operating lease liability short-term	1,338	1,040
Operating lease liability long-term	10,563	11,214
Total operating lease liabilities	11,901	12,254
Finance Leases Assets [Member]
Property and Equipment - gross	1,659	1,696
Accumulated depreciation and amortization	(640)	(551)
Property and Equipment - net	$ 1,019	$ 1,145

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Note 10 - Leases - Lease Costs (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jul. 31, 2020	Jul. 31, 2019	Jul. 31, 2020	Jul. 31, 2019
Amortization of ROU assets		$ 53	$ 51	$ 101	$ 102
Interest on lease liabilities		18	8	37	17
Operating lease costs		610	581	1,222	1,132
Short-term lease costs (1)	[1]	213	82	236	266
Sub-lease income		(20)	(20)	(40)	(40)
Total Lease costs		$ 874	$ 702	$ 1,556	$ 1,477

[1] Includes variable lease costs, which are immaterial

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Note 10 - Leases - Supplemental Cash Flow Information Related to Leases (Details) - USD ($) $ in Thousands	6 Months Ended
	Jul. 31, 2020	Jul. 31, 2019
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
Finance leases liabilities
Operating leases liabilities	$ 53

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Note 10 - Leases - Weighted-average Lease Terms and Discount Rates (Details)	Jul. 31, 2020
Finance leases (Year)	2 years 219 days
Operating leases (Year)	8 years 109 days
Finance leases	7.70%
Operating leases	7.90%

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Note 10 - Leases - Maturities of Lease Liabilities (Details) - USD ($) $ in Thousands	Jul. 31, 2020	Jan. 31, 2020
For the six months ended January 31, 2021, operating leases	$ 949
For the six months ended January 31, 2021, finance leases	239
For the year ended January 31, 2022, operating leases	2,340
For the year ended January 31, 2022, finance leases	325
For the year ended January 31, 2023, operating leases	2,229
For the year ended January 31, 2023, finance leases	264
For the year ended January 31, 2024, operating leases	2,061
For the year ended January 31, 2024, finance leases	142
For the year ended January 31, 2025, operating leases	1,330
For the year ended January 31, 2025, finance leases
For the year ended January 31, 2026, operating leases	1,144
For the year ended January 31, 2026, finance leases
Thereafter, operating leases	6,214
Thereafter, finance leases
Total lease payments, operating leases	16,267
Total lease payments, finance leases	970
Less: amount representing interest, operating leases	(4,366)
Less: amount representing interest, finance leases	(93)
Total lease liabilities, operating leases	11,901	$ 12,254
Total lease liabilities, finance leases	$ 877	$ 1,094

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Note 11 - Restricted Cash (Details Textual) - USD ($) $ in Thousands	Jul. 31, 2020	Jan. 31, 2020	Jul. 31, 2019
Restricted Cash, Current	$ 1,150	$ 1,287	$ 1,167
Non-US [Member]
Restricted Cash, Current	$ 1,200		$ 1,200

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Note 11 - Restricted Cash - Summary of Cash, Cash Equivalents and Restricted Cash (Details) - USD ($) $ in Thousands	Jul. 31, 2020	Jan. 31, 2020	Jul. 31, 2019
Cash and cash equivalents	$ 9,106	$ 13,371	$ 8,052
Restricted cash	1,150	$ 1,287	1,167
Cash, cash equivalents and restricted cash shown in the statement of cash flows	$ 10,256		$ 9,219