Perma-Pipe International Holdings, Inc. 10-Q

Item 1. Financial Statements   PERMA-PIPE INTERNATIONAL HOLDINGS, INC.  CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share data)       Three Months Ended October 31,     Nine Months Ended October 31,       2021     2020     2021     2020   Net sales   $ 35,199     $ 20,294     $ 99,426     $ 63,399   Cost of sales     27,570       17,356       76,549       54,630   Gross profit     7,629       2,938       22,877       8,769                                     Operating expenses                                 General and administrative expenses     4,635       4,528       14,643       13,320   Selling expenses     1,303       1,174       3,397       4,153   Total operating expenses     5,938       5,702       18,040       17,473                                     Income/(loss) from operations     1,691       ( 2,764 )     4,837       ( 8,704 )                                   Interest expense, net     270       107       717       411   Other income, net     98       ( 2 )     997       3,672   Income/(loss) from operations before income taxes     1,519       ( 2,873 )     5,117       ( 5,443 )                                   Income tax expense/(benefit)     1,024       ( 23 )     2,049       ( 339 )                                   Net income/(loss)   $ 495     $ ( 2,850 )   $ 3,068     $ ( 5,104 )                                   Weighted average common shares outstanding                                 Basic     8,126       8,165       8,148       8,113   Diluted     8,393       8,165       8,408       8,113                                     Earnings/(loss) per share                                 Basic     0.06       ( 0.35 )     0.38       ( 0.63 ) Diluted     0.06       ( 0.35 )     0.36       ( 0.63 )   See accompanying notes to consolidated financial statements. Note: Earnings per share calculations could be impacted by rounding.   2 Table of Contents Table of Contents     PERMA-PIPE INTERNATIONAL HOLDINGS, INC.  CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS) (Unaudited) (In thousands)       Three Months Ended October 31,     Nine Months Ended October 31,       2021     2020     2021     2020   Net income/(loss)   $ 495     $ ( 2,850 )   $ 3,068     $ ( 5,104 )                                   Other comprehensive income/(loss)                                 Foreign currency translation adjustments, net of tax     22       110       ( 88 )     ( 104 ) Other comprehensive income/(loss)     22       110       ( 88 )     ( 104 )                                   Comprehensive income/(loss)   $ 517     $ ( 2,740 )   $ 2,980     $ ( 5,208 )   See accompanying notes to consolidated financial statements.   3 Table of Contents Table of Contents     PERMA-PIPE INTERNATIONAL HOLDINGS, INC.  CONSOLIDATED BALANCE SHEETS (In thousands, except per share data)       October 31, 2021     January 31, 2021         (Unaudited)           ASSETS                 Current assets                 Cash and cash equivalents   $ 10,018     $ 7,174   Restricted cash     1,746       1,201   Trade accounts receivable, less allowance for doubtful accounts of $478 at October 31, 2021 and $474 at January 31, 2021     37,741       25,226   Inventories, net     15,431       12,157   Prepaid expenses and other current assets     4,996       3,863   Unbilled accounts receivable     3,415       247   Costs and estimated earnings in excess of billings on uncompleted contracts     2,322       4,007   Total current assets     75,669       53,875   Property, plant and equipment, net of accumulated depreciation     25,599       26,897   Other assets                 Operating lease right-of-use asset     11,515       13,384   Deferred tax assets     858       823   Goodwill     2,406       2,332   Other assets     6,449       5,380   Total other assets     21,228       21,919   Total assets   $ 122,496     $ 102,691   LIABILITIES AND STOCKHOLDERS' EQUITY                 Current liabilities                 Trade accounts payable   $ 16,216     $ 10,365   Accrued compensation and payroll taxes     1,862       1,448   Commissions and management incentives payable     1,500       218   Revolving line - North America     -       2,826   Current maturities of long-term debt     4,822       3,941   Customers' deposits     3,493       2,088   Outside commission liability     1,647       1,431   Operating lease liability short-term     1,427       1,402   Other accrued liabilities     3,793       2,616   Billings in excess of costs and estimated earnings on uncompleted contracts     871       762   Income taxes payable     1,802       1,155   Total current liabilities     37,433       28,252   Long-term liabilities                 Long-term debt, less current maturities     5,342       6,268   Long-term finance obligation     9,349       -   Deferred compensation liabilities     4,224       4,120   Deferred tax liabilities     1,328       914   Operating lease liability long-term     11,586       13,174   Other long-term liabilities     852       650   Total long-term liabilities   $ 32,681     $ 25,126   Stockholders' equity                 Common stock, $.01 par value, authorized 50,000 shares; 8,089 issued and outstanding at October 31, 2021 and 8,165 issued and outstanding at January 31, 2021     81       82   Additional paid-in capital     61,461       60,875   Treasury Stock, 58 shares at October 31, 2021 and no shares at January 31, 2021     ( 496 )     -   Accumulated deficit     ( 5,289 )     ( 8,357 ) Accumulated other comprehensive loss     ( 3,375 )     ( 3,287 ) Total stockholders' equity     52,382       49,313   Total liabilities and stockholders' equity   $ 122,496     $ 102,691       See accompanying notes to consolidated financial statements.   4 Table of Contents Table of Contents   PERMA-PIPE INTERNATIONAL HOLDINGS, INC.  CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) (In thousands, except share data)       Common Stock     Additional Paid-in Capital     Accumulated Deficit     Treasury Stock     Accumulated Other Comprehensive Loss     Total Stockholders' Equity   Total stockholders' equity at January 31, 2021   $ 82     $ 60,875     $ ( 8,357 )   $ -     $ ( 3,287 )   $ 49,313                                                     Net loss     -       -       ( 843 )     -       -       ( 843 ) Stock-based compensation expense     -       272       -       -       -       272   Foreign currency translation adjustment     -       -       -       -       40       40   Total stockholders' equity at April 30, 2021   $ 82     $ 61,147     $ ( 9,200 )   $ -     $ ( 3,247 )   $ 48,782                                                     Net income     -       -       3,416       -       -       3,416   Common stock issued under stock plans, net of shares used for tax withholding     ( 1 )     ( 254 )     -       -       -       ( 255 ) Stock-based compensation expense     -       276       -       -       -       276   Foreign currency translation adjustment     -       -       -       -       ( 150 )     ( 150 ) Total stockholders' equity at July 31, 2021   $ 81     $ 61,169     $ ( 5,784 )   $ -     $ ( 3,397 )   $ 52,069                                                     Net income     -       -       495       -       -       495   Common stock issued under stock plans, net of shares used for tax withholding     -       22       -       -       -       22   Repurchase of common stock     -       -       -       ( 496 )     -       ( 496 ) Stock-based compensation expense     -       270       -       -       -       270   Foreign currency translation adjustment     -       -       -       -       22       22   Total stockholders' equity at October 31, 2021   $ 81     $ 61,461     $ ( 5,289 )   $ ( 496 )   $ ( 3,375 )   $ 52,382         Common Stock     Additional Paid-in Capital     Accumulated Deficit     Treasury Stock     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                                                     Net loss     -       -       ( 2,850 )     -       -       ( 2,850 ) Common stock issued under stock plans, net of shares used for tax withholding     -       -       -       -       -       -   Stock-based compensation expense     -       285       -       -       -       285   Foreign currency translation adjustment     -       -       -       -       110       110   Total stockholders' equity at October 31, 2020   $ 82     $ 60,595     $ ( 5,819 )   $ -     $ ( 3,864 )   $ 50,994       Shares   2021     2020   Balances at beginning of year     8,164,989       8,048,006   Treasury stock purchased     ( 58,528 )     -   Shares issued, net of shares used for tax withholding     ( 17,235 )     116,983   Balances at period end     8,089,226       8,164,989     See accompanying notes to consolidated financial statements.   5 Table of Contents Table of Contents     PERMA-PIPE INTERNATIONAL HOLDINGS, INC.  CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)   (In thousands)   Nine Months Ended October 31,       2021     2020   Operating activities                 Net income/(loss)   $ 3,068     $ ( 5,104 ) Adjustments to reconcile net income/(loss) to net cash flows (used in)/provided by operating activities                 Depreciation and amortization     3,259       3,616   Deferred tax expense/(benefit)     361       ( 763 ) Stock-based compensation expense     818       764   Provision on uncollectible accounts     11       6   Loss/(gain) on disposal of fixed assets     122       ( 2 ) Changes in operating assets and liabilities                 Accounts receivable     ( 11,189 )     1,226   Inventories, net     ( 3,241 )     2,383   Costs and estimated earnings in excess of billings on uncompleted contracts     1,794       302   Accounts payable     5,859       ( 1,606 ) Accrued compensation and payroll taxes     1,800       ( 1,087 ) Customers' deposits     1,413       ( 107 ) Income taxes receivable and payable     729       102   Prepaid expenses and other current assets     ( 1,011 )     ( 117 ) Unbilled accounts receivable     ( 3,167 )     ( 1,401 ) Other assets and liabilities     ( 658 )     3,757   Net cash (used in)/provided by operating activities     ( 32 )     1,969   Investing activities                 Capital expenditures     ( 1,951 )     ( 1,633 ) Proceeds from sales of property and equipment     44       2   Net cash used in investing activities     ( 1,907 )     ( 1,631 ) Financing activities                 Proceeds from revolving lines     13,289       36,563   Payments of debt on revolving lines     ( 11,436 )     ( 42,988 ) Proceeds from term loan     -       19   Payments of debt on mortgage     ( 4,823 )     -   Proceeds from finance obligation, net of issuance costs     9,538       -   Payments of principal on finance obligation     ( 107 )     -   Payments of other debt     ( 174 )     ( 269 ) Decrease in drafts payable     ( 8 )     ( 49 ) Payments on finance lease obligations, net     ( 291 )     ( 310 ) Repurchase of common stock     ( 496 )     -   Stock options exercised and taxes paid related to restricted shares vested     ( 233 )     ( 192 ) Net cash provided by/(used in) financing activities     5,259       ( 7,226 ) Effect of exchange rate changes on cash, cash equivalents and restricted cash     69       ( 23 ) Net increase/(decrease) in cash, cash equivalents and restricted cash     3,389       ( 6,911 ) Cash, cash equivalents and restricted cash - beginning of period     8,375       14,658   Cash, cash equivalents and restricted cash - end of period   $ 11,764     $ 7,747   Supplemental cash flow information                 Interest paid   $ 672     $ 421   Income taxes paid     725       83     See accompanying notes to consolidated financial statements.   6 Table of Contents Table of Contents   PERMA-PIPE INTERNATIONAL HOLDINGS, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) October 31, 2021 (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, 2021 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  2021 and  2020 are for the three and nine months ended October 31, 2021 and 2020 , and for the fiscal years ended January 31, 2022 and 2021 , respectively.   Significant New Accounting Policies   Refer to the Company's Annual Report on Form 10 -K for the year ended January 31, 2021 as filed with the SEC on April 15, 2021 for discussion of the Company's significant accounting policies. During the three months ended October 31, 2021, the following accounting policy was adopted.    Treasury Stock   In accordance with Accounting Standards Codification ("ASC") Topic 505, "Equity", the Company has accounted for the share repurchases under the cost method, as the Company has not elected to retire the repurchased shares at this time. This results in recognizing the shares as treasury stock, a reduction of stockholders' equity on the Company's consolidated balance sheets as of October  31, 2021 and on the Company's consolidated statements of stockholders' equity for the three and nine month period ended October 31, 2021. The amounts recognized as treasury stock in the consolidated balance sheets and consolidated statements of stockholders' equity include costs associated with the acquisition of the shares.   Reclassifications     Certain reclassifications have been made to prior period financial statements to conform to current period presentation. Unbilled accounts receivable was segregated from prepaid expenses and other current assets and reclassified into its own line on the consolidated balance sheets and consolidated statements of cash flows.    Subsequent Events   The Company has evaluated subsequent events through December 8, 2021, the date the financial statements were issued. No  material subsequent events occurred during this time that would require recongition or disclosure in thse financial statements.    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 (the "U.A.E.") 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 $ 3.6 million as of October 31, 2021 and January 31, 2021 , respectively, has been outstanding for several years. Included in this balance is a retention receivable that is payable upon the commissioning of the system in the amount of $ 3.4 million, of which, due to the long-term nature of the receivable, $ 2.4  million was included in the balance of other long-term assets as of October 31, 2021 and January 31, 2021 , respectively. The Company completed all of its deliverables in 2015 under the related contract, but the system has not yet been commissioned by the customer. Nevertheless, the Company has been engaged in ongoing active efforts to collect this outstanding amount. During  2021, the Company received approximately $ 0.1 million from the customer and additional receipts are expected throughout the rest of 2021. The Company continues to engage with the customer to ensure full payment of open balances, and during August 2021 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 October 31, 2021 . However, if the Company’s efforts to collect on this account are not successful, the Company may recognize an allowance for all, or substantially all, of any such then uncollected amounts.    7 Table of Contents   For the three months ended  October 31, 2021  and 2020,   no individual customer accounted for greater than  10% of the Company’s consolidated net sales. For the nine  months ended October  31, 2021  and 2020, no individual customer accounted for greater than 10% of the Company's consolidated net sales.   As of  October 31, 2021  and January 31, 2021,  one customer accounted for 11 % and  no one customer accounted for greater than 10% of the Company's accounts receivable, respectively.    Note 4 - Revenue recognition    The Company accounts for its revenues under ASC Topic 606, "Revenue from Contracts with Customers".   Revenue from contracts with customers:   The Company defines a contract as an agreement that has approval and commitment from both parties, defined rights and identifiable payment terms, which ensures the contract has commercial substance and that collectability is reasonably assured.   The Company’s standard revenue transactions are classified into two main categories:     1 ) Systems and Coating - which include all bundled products in which Perma-Pipe designs, engineers, and manufactures pre-insulated specialty piping systems, insulates subsea flowline pipe, subsea oil production equipment, and land-lines. Additionally, this systems classification also includes coating applied to pipes and structures.      2 ) Products - which include cables, leak detection products, heat trace products, material/goods not bundled with piping or flowline systems, and field services not bundled into a project contract.   In accordance with 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 nine months ended October 31, 2021 and 2020  are as follows (in thousands):       Three Months Ended October 31,     Nine Months Ended October 31,       2021     2020     2021     2020       Sales     % to Total     Sales     % to Total     Sales     % to Total     Sales     % to Total   Products     3,340       10 %   $ 2,435       12 %     10,475       11 %   $ 8,603       14 %                                                                   Specialty Piping Systems and Coating                                                                 Revenue recognized under input method     9,166       26 %     8,252       41 %     33,118       33 %     26,597       42 % Revenue recognized under output method     22,693       64 %     9,607       47 %     55,833       56 %     28,199       44 % Total   $ 35,199       100 %   $ 20,294       100 %   $ 99,426       100 %   $ 63,399       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 over time. Generally, these contracts are considered a single performance obligation satisfied over time and due to the custom nature of the goods and services, the input method is the most faithful depiction of the Company’s performance as it measures the value of the goods and services transferred to the customer. Costs include all material, labor and direct costs incurred to satisfy the performance obligations of the contract. Revenue recognition begins when project 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 Table of Contents Table of Contents   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  October 31, 2021 will be billed and collected within one year.   During the year ended  January 31, 2021, one of the Company's customers in Qatar made a call on a performance bond held to secure one of the Company's contracts. The Company believes the customer's claims of non-performance under the contract are invalid and that the customer's actions were themselves a breach of the contract. The Company has engaged local counsel to seek reimbursement as well as additional compensation for lost profits suffered as a result of cancellation of certain work orders under the contract. The Company has recorded the expense related to the encashment of approximately $ 0.6 million in other income in the consolidated statement of operations for the year ended January 31, 2021. No receivable has been recorded related to the potential reimbursement in the consolidated financial statements as of October  31, 2021.   The following table shows the reconciliation of the cost in excess of billings:    (In thousands)   October 31, 2021     January 31, 2021   Costs incurred on uncompleted contracts   $ 19,077     $ 17,543   Estimated earnings     11,359       9,651   Earned revenue     30,436       27,194   Less billings to date     28,985       23,949   Costs in excess of billings, net   $ 1,451     $ 3,245   Balance sheet classification                 Contract assets: Costs and estimated earnings in excess of billings on uncompleted contracts   $ 2,322     $ 4,007   Contract liabilities: Billings in excess of costs and estimated earnings on uncompleted contracts     ( 871 )     ( 762 ) Costs in excess of billings, net   $ 1,451     $ 3,245     Substantially all of the $ 1.2 million contract liabilities balance as of January 31, 2020 was recognized in revenues during 2020 and substantially all of the $ 0.8 million contract liabilities balance as of January 31, 2021 is expected to be recognized in revenues during 2021.   Unbilled accounts receivable:   The Company has recorded $3 .4  million and $ 0.2 million of unbilled accounts receivable on the consolidated balance sheets as of October 31, 2021  and January 31, 2021, respectively, from revenues generated by its subsidiaries in the Middle East, North Africa and India ("MENA"). The Company has fulfilled all performance obligations and has recorded revenue under the respective contracts. The deliverables under these contracts have been accepted by the customer and await customer to pick up or arrange shipping for the product before billing can be made. All of the amounts included in unbilled accounts receivable as of October 31, 2021 are expected to be billed before January 31, 2022.   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 Table of Contents Table of Contents     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 U.A.E. 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 in the  third quarter in fiscal  2021 was 67.6 % compared to 0.8 % during the prior year quarter. The Company's worldwide ETR's were 40.0 % and 6.2 % in the current year-to-date and the prior year year-to-date, respectively. The change in the ETR from the prior year to the current year is largely due to changes in the mix of income and loss in various jurisdictions and the absence of recognizing tax benefits on losses in the United States due to a full valuation allowance applied against its deferred tax assets.   The amount of unrecognized tax benefits, including interest and penalties at October 31, 2021 , recorded in other long-term liabilities was $ 0.1  million, all of which would impact the Company’s ETR if recognized.   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 October 31, 2021 , the Company performed a qualitative analysis assessment to determine if it was more likely than not that the fair values of the Company's long-lived assets exceeded their carrying values. The Company assessed three asset groups as part of this analysis: United States, Canada and Middle East. The qualitative assessment indicated that it was more likely than not that the fair values of the Company's long-lived assets exceeded their carrying values for all three  asset groups. Therefore, it was determined that there was  no impairment of the Company's long-lived assets for the three and nine months ended October 31, 2021 and 2020 . The Company will continue testing for potential impairment at least annually or as otherwise required by applicable accounting standards.   Goodwill. The purchase price of an acquired company is allocated between intangible assets and the net tangible assets of the acquired business with the residual of the purchase price recorded as goodwill. All identifiable goodwill as of October 31, 2021 and January 31, 2021 was attributable to the purchase of Perma-Pipe Canada, Ltd., which occurred in 2016.   (In thousands)     January 31, 2021       Foreign exchange change effect       October 31, 2021   Goodwill   $ 2,332     $ 74     $ 2,406     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 October 31, 2021 , the Company elected to perform a qualitative analysis assessment to determine if it was more likely than not that the fair value of the Company's Canadian reporting unit exceeded its carrying value, including goodwill. The qualitative assessment did not  identify any triggering events that would indicate potential impairment of the Company's Canadian reporting unit. Therefore, it was determined that the fair value of the reporting unit exceeded its carrying value, resulting in no impairment for the  three and nine months ended October 31, 2021 and 2020 . The Company will continue testing for potential impairment at least annually or as otherwise required by applicable accounting standards.   10 Table of Contents Table of Contents     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.    The Company has prior incentive plans under which previously granted awards remain outstanding, including the 2017 Plan, but under which no new awards may be granted. At October 31, 2021 the Company had reserved a total of 424,194 shares for grants and issuances under these incentive stock plans, which includes a reserve for issuances pursuant to unvested or unexercised prior awards.   While the 2017 Plan provided for the grant of deferred shares, non-qualified stock options, incentive stock options, restricted shares, restricted stock units, and performance-based restricted stock units intended to qualify under section 422 of the Internal Revenue Code, the Company issued only restricted shares and restricted stock units under the 2017 Plan. The 2017 Plan authorized awards to officers, employees, consultants and independent directors.   The Company's 2021 Omnibus Stock Incentive Plan dated May 26, 2021  was approved by the Company's stockholders in May 2021 ( "2021 Plan"). The 2021 Plan will expire in May 2024. The 2021 Plan authorizes awards to officers, employees, consultants and independent directors. Grants were made to the Company's employees, officers and independent directors under the 2021 Plan, as described below.   Stock-based compensation expense   The Company has granted stock-based compensation awards to eligible employees, officers or independent directors. The following were the Company's stock-based compensation expenses for the periods presented:       Three Months Ended October 31,     Nine Months Ended October 31,   (In thousands)   2021     2020     2021     2020   Stock-based compensation expense   $ -     $ -     $ -     $ 3   Restricted stock-based compensation expense     270       285       818       761   Total stock-based compensation expense   $ 270     $ 285     $ 818     $ 764     Stock Options   The Company did not grant any stock options during the three or nine months ended October 31, 2021 . The following tables summarizes the Company's stock option activity:   (Shares in thousands)   Options     Weighted Average Exercise Price     Weighted Average Remaining Contractual Term     Aggregate Intrinsic Value   Outstanding at January 31, 2021     107     $ 9.24       2.5     $ 5.00   Exercised     ( 3 )     6.91       -       4.55   Expired or forfeited     ( 20 )     7.94       -       -   Outstanding at October 31, 2021     84       9.63       2.0       66                                     Options exercisable at October 31, 2021     84     $ 9.63       2.0     $ 66     Three thousand stock options were exercised during the  nine months ended October 31, 2021 .    There was no vesting, expiration or forfeiture of previously unvested stock options during the nine  months ended October 31, 2021. As of October  31, 2021, there were no remaining unvested stock options outstanding, and therefore no unrecognized compensation expense related to unvested stock options.   11 Table of Contents Table of Contents   Restricted stock   The following table summarizes the Company's restricted stock activity for the  nine months ended October 31, 2021 :   (Shares in thousands)   Restricted Shares     Weighted Average Price     Aggregate Intrinsic Value   Outstanding at January 31, 2021     372     $ 7.62     $ 2,843   Granted     120       7.14           Vested and issued     ( 113 )     7.51           Forfeited or retired for taxes     ( 40 )     7.36           Outstanding at October 31, 2021     339     $ 7.50     $ 2,550     As of October 31, 2021 , there was $ 1.3  million of unrecognized compensation expense related to unvested restricted stock granted under the plans. That cost is expected to be recognized over a weighted average period of 1.8  years.     Note 8 - Earnings/(loss) per share       Three Months Ended October 31,     Nine Months Ended October 31,   (In thousands, except per share data)   2021     2020     2021     2020   Basic weighted average common shares outstanding     8,126       8,165       8,148       8,113   Dilutive effect of equity compensation plans     267       -       260       -   Weighted average common shares outstanding assuming full dilution     8,393       8,165       8,408       8,113                                     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     60       227       66       223   Stock options and restricted stock with exercise prices or grant date prices below the average market prices     267       165       260       169                                     Net income/(loss)   $ 495     $ ( 2,850 )   $ 3,068     $ ( 5,104 )                                   Earnings/(loss) per share                                 Basic     0.06       ( 0.35 )     0.38       ( 0.63 ) Diluted     0.06       ( 0.35 )     0.36       ( 0.63 )     Note 9 - Debt   Debt totaled $ 10.2 million and $ 13.2 million at October 31, 2021  and January 31, 2021 , respectively.   Paycheck Protection Program Loan. On May 1, 2020, the Company entered into a loan agreement under the Small Business Administration's Paycheck Protection Program ("PPP") and received proceeds of approximately $ 3.2 million. Interest on the loan accrued at a fixed interest rate of 1.0%, and the loan had a maturity date of April 28, 2022. Under Section 1106 of the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"), borrowers are eligible for forgiveness of principal and accrued interest on the loans to the extent that the proceeds are used to cover eligible payroll costs, mortgage interest costs, rent and utility costs, otherwise described as qualified expenses. During the  three months ended  July 31, 2020, the Company used all of the PPP loan proceeds to pay for qualified expenses, 100 % of which were used for payroll related expenses.  The Company submitted its application and supporting documentation for forgiveness to its bank, which submitted the application and supporting documents to the Small Business Administration ("SBA"). On June 24, 2021, the Company was notified by its lender that its PPP loan had been forgiven by the SBA.    Guidance from the American Institute of Certified Public Accountants' ("AICPA") Technical Question and Answer Section 3200.18 states that if a company expects to meet the PPP’s eligibility criteria and concludes that the PPP loan represents, in substance, a grant that is expected to be forgiven, it may analogize to International Accounting Standards ("IAS") 20 - Accounting for Government Grants and Disclosure of Government Assistance to account for the PPP loan. The Company 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 year ended January 31, 2021.   The IAS 20  guidance allows for recognition in earnings either separately under a general heading such as other income, or as a reduction of the related expenses. The Company has elected the former option, to make a more clear distinction in its financial statements between its operating income and the amount of net income resulting from the PPP loan and subsequent forgiveness. As such, we have recognized the proceeds in earnings during the year ended January 31,  2021. The amounts were recognized in other income in the consolidated statements of operations.    12 Table of Contents   Revolving lines - North America .  On September 20, 2018, the Company and certain of its U.S. and Canadian subsidiaries (collectively, together with the Company, the “North American Loan Parties”) entered into a Revolving Credit and Security Agreement (the “Credit Agreement”) with PNC Bank, National Association ("PNC"), as administrative agent and lender, providing for a three -year $ 18.0 million Senior Secured Revolving Credit Facility, subject to a borrowing base including various reserves (the “Senior Credit Facility”).   The Company used proceeds from the Senior Credit Facility for on-going working capital needs and to fund capital expenditures, working capital needs and other corporate purposes. Borrowings under the Senior Credit Facility bore 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 was based on average quarterly undrawn availability with respect to the Senior Credit Facility. Additionally, the Company was required to pay a 0.375 % per annum facility fee on the unused portion of the Senior Credit Facility.    As of October 31, 2020, the Company and its subsidiaries failed to achieve the necessary fixed charge coverage ratio ("FCCR") of 1.10 to 1.00 for the trailing four -quarters ended October 31, 2020 under its Credit Agreement for both the North American Loan Parties and the Company and its subsidiaries. On December 18, 2020, the Company entered into the First Amendment and Waiver to the Revolving Credit and Security Agreement (“Amendment and Waiver”) with PNC, which (i) reflected PNC’s waiver of the Company’s failure to maintain a FCCR of 1.10 to 1.00 as of October 31, 2020 on a trailing four quarter basis as required under the Company’s Credit Agreement and (ii) further amended certain future fixed charge coverage ratio covenants requirements under the Credit Agreement.  Additionally, the Company was also required to have received, and applied to reduce the outstanding balance under the Credit Agreement, $ 1.0 million from one of its foreign subsidiaries, Perma-Pipe Middle East FZC, in the U.A.E. The transfer and repayment occurred on December 17, 2020 and did not cause the Company to incur any additional fees or taxes, nor did it force the Company to change any of its assertions with regards to permanent reinvestment in any of its foreign subsidiaries. The Company incurred additional fees over the remainder of the Amendment and Waiver of approximately $ 0.1 million. The Amendment and Waiver also eliminated the Company’s ability to make LIBOR borrowings and reduced the overall availability by $ 2.0 million until maturity.    On September 17, 2021,  the North American Loan Parties executed an extension of the Credit Agreement with PNC, providing for a new five -year $ 18.0 million senior secured revolving credit facility, subject to a borrowing base including various reserves (the “Renewed Senior Credit Facility”). The Company's obligations under the Renewed Senior Credit Facility are currently guaranteed by Perma-Pipe Canada, Inc. Each of the North American Loan Parties other than Perma-Pipe Canada, Inc. is a borrower under the Renewed Senior Credit Facility (collectively, the “Borrowers”).   The Borrowers will use borrowings under the Renewed Senior Credit Facility (i) to fund future capital expenditures; (ii) to fund on-going working capital needs; and (iii) for other corporate purposes, including potentially additional share repurchases. Borrowings under the Renewed Senior Credit Facility bears interest at a rate equal to an alternate base rate, the London Inter-Bank Offered Rate (“LIBOR”) or a LIBOR successor rate index, plus, in each case, an applicable margin. The applicable margin will be based on an FCCR range. Interest on alternate base rate borrowings will be the alternate base rate as defined in the Renewed Senior Credit Facility plus an applicable margin ranging from 1.00 % to 1.50 %, based on the FCCR in the most recently reported period. Interest on LIBOR or LIBOR successor rate borrowings will be the LIBOR rate as defined in the Renewed Senior Credit Facility plus an applicable margin ranging from 2.00 % to 2.50 %, based on the FCCR in the most recently reported period. Additionally, the Borrowers will pay a 0.25 % per annum facility fee on the unused portion of the Renewed Senior Credit Facility.    Subject to certain exceptions, borrowings under the Renewed Senior Credit Facility will be secured by substantially all of the North American Loan Parties’ assets. The Renewed Senior Credit Facility will mature on September 20, 2026. Subject to certain qualifications and exceptions, the Renewed 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 may not make capital expenditures in excess of $ 5.0 million annually, plus a limited carryover of unused amounts.    The Renewed Senior Credit Facility also contains financial covenants requiring the North American Loan Parties to achieve a ratio of its EBITDA to the sum of scheduled cash principal payments on indebtedness for borrowed money and interest payments on the advances under the Renewed Senior Credit Facility to be not less than 1.10 to 1.00 if for any five consecutive days the undrawn availability is less than $ 3.0 million or any day in which the undrawn availability is less than $ 2.0 million. If the covenant is triggered it will be tested for the nine -month period ending October 31, 2021 and the twelve -month period ending January 31, 2022 and thereafter on a trailing twelve -month basis. As of the most recent reporting date, the calculated ratio was substantially greater than 1.10  to 1.00.  In order to cure any future breach of the fixed charge coverage ratio covenant by the North American Loan Parties, the Company may repatriate cash from any of its foreign subsidiaries that are otherwise not a party to the Credit Agreement in an amount which, when added to the amount of the Company’s Consolidated EBITDA, would result in pro forma compliance with the covenant. The Company was in compliance with these covenants as of October 31, 2021.   The Renewed Senior Credit Facility contains customary events of default. If an event of default occurs and is continuing, then PNC may terminate all commitments to extend further credit and declare all amounts outstanding under the Renewed Senior Credit Facility due and payable immediately. In addition, if any of the North American Loan Parties or certain of their subsidiaries become the subject of voluntary or involuntary proceedings under any bankruptcy, insolvency or similar law, then any outstanding obligations under the Renewed Senior Credit Facility will automatically become immediately due and payable. Loans outstanding under the Renewed Senior Credit Facility will bear interest at a rate of 2.00 % per annum in excess of the otherwise applicable rate (i) while a bankruptcy event of default exists or (ii) upon the lender's request, during the continuance of any other event of default.   13 Table of Contents Table of Contents   As of October 31, 2021,  the Company had no borrowings and had $ 5.9  million available under the Renewed Senior Credit Facility, before application of a $ 3.0 million availability block that can be reduced by the Company's financial performance. As of January 31, 2021, the Company had borrowed an aggregate of $ 2.8 million and had $ 1.7 million available under the Senior Credit Facility.   Finance obligation - buildings and land. On April 14, 2021, the Company entered into a purchase and sale agreement (the "Purchase and Sale Agreement"). Pursuant to the terms of the Purchase and Sale Agreement, the Company sold its land and buildings in Lebanon, Tennessee (the "Property") for a purchase price of $ 10.4 million. The transaction generated net cash proceeds of $ 9.1  million, following the release of the escrowed amount in June 2021  discussed below. The Company used a portion of the proceeds to repay its borrowings under the Senior Credit Facility. The Company expects to use its liquidity for strategic investments and general corporate needs. Concurrent with the sale of the Property, the Company entered into a  fifteen -year lease agreement (the “Lease Agreement”), whereby the Company will lease back the Property at an annual rental rate of approximately $ 0.8 million, subject to annual rent increases of  2.0 %. Under the Lease Agreement, the Company has  four consecutive options to extend the term of the lease by  five years for each such option.   In accordance with ASC Topic 842, "Leases", this transaction was recorded as a failed sale and leaseback as the present value of lease payments exceeded substantially all of the fair value of the underlying asset. The Company utilized an incremental borrowing rate of 8.0 % to determine the finance obligation to record for the amounts received and will continue to depreciate the assets. The current portion of the finance obligation of $ 0.1  million is recognized in current maturities of long-term debt and the long-term portion of $ 9.3  million is recognized in long-term finance obligation on the Company's consolidated balance sheets as of October  31, 2021.  The net carrying amount of the financial liability and remaining assets will be zero at the end of the lease term. Concurrently with the sale, the Company paid off the approximately $ 0.9 million mortgage note on the Property to its lender. At closing, $ 0.4 million was placed in a short-term escrow account to cover certain post-closing contingencies that may arise. The contingencies were resolved in May 2021 and the Company received the escrowed funds in June 2021.   Revolving lines - foreign . The Company also has credit arrangements used by its Middle Eastern subsidiaries in the U.A.E. and Egypt as discussed further below.   The Company has a revolving line for 8.0  million U.A.E. Dirhams (approximately $ 2.2  million at October 31, 2021 ) from a bank in the U.A.E. The facility has an interest rate of approximately 3.46 % and was originally set to expire in  November 2020, however, the expiration was extended due to the COVID- 19 pandemic and inability to finalize renewal documentation prior to that time. The Company has submitted final documentation to complete the renewal process, and is awaiting official notification from the bank of the renewal completion. This process is expected to be completed in December 2021.   The Company has a second revolving line for 19.5  million U.A.E. Dirhams (approximately $ 5.3  million at October 31, 2021 ) from a bank in the U.A.E. The facility has an interest rate of approximately 4.5 % and is set to expire in  January 2022.   The Company has a third  revolving line for 3.0  million U.A.E. Dirhams (approximately $ 0.8  million at October 31, 2021 ) from a bank in the U.A.E. The facility has an interest rate of approximately 4.5 % and is set to expire in  January 2022.   These credit arrangements are in the form of overdraft facilities and project financing at rates competitive in the countries in which the Company operates. The lines are secured by certain equipment, certain assets (such as accounts receivable and inventory), and a guarantee by the Company. Some credit arrangement covenants require a minimum tangible net worth to be maintained, including maintaining certain levels of intercompany subordinated debt. In addition, some of the revolving credit facilities restrict payment of dividends or undertaking of additional debt.   In June 2021, the Company's Egyptian subsidiary entered into a credit arrangement with a bank in Egypt for a revolving line of 100.0 million Egyptian Pounds (approximately $ 6.4  million at October 31, 2021 ). This credit arrangement is in the form of project financing at rates competitive in Egypt. The line was secured by certain assets (such as accounts receivable) of the Company's Egyptian subsidiary. Among other covenants, the credit arrangement established a maximum leverage ratio allowable and restricted the Company's Egyptian subsidiary's ability to undertake any additional debt. The facility has an interest rate of approximately 10.8 % and is set to expire in August  2022.   14 Table of Contents   In January 2021, the Company entered into a credit arrangement for project financing with a bank in Egypt for 46.2 million Egyptian Pounds (approximately $ 2.9 million at October 31, 2021). This credit arrangement is in the form of project financing at rates competitive in Egypt. The line is secured by the contract for a project being financed by the Company's Egyptian subsidiary. The facility has an interest rate of approximately 8.0 % and is expected to expire in December 2021 in connection with the completion of the project.   The Company’s credit arrangements used by its Middle Eastern subsidiaries renew on an annual basis. The Company guarantees the subsidiaries' debt including all foreign debt.   The Company was in compliance with the covenants under the credit arrangements in the U.A.E. and Egypt as of October 31, 2021 . On October 31, 2021 , interest rates were based on the Emirates Inter Bank Offered Rate plus 3.0 % to 3.5 % per annum for the U.A.E. credit arrangements, two  of which have a minimum interest rate of 4.5 % per annum, and based on the stated interest rate in the agreement for the Egypt credit arrangement. Based on these base rates, as of October 31, 2021 , the Company's interest rates ranged from 3.46 % to 10.8 %, with a weighted average rate of 6.51 %, and the Company had facility limits totaling $ 17.6  million under these credit arrangements. As of October 31, 2021 , $ 2.9  million of availability was used to support letters of credit to guarantee amounts committed for inventory purchases and for performance guarantees. Additionally, as of October 31, 2021 , the Company had borrowed $ 4.1  million, and had an additional $ 9.4  million of borrowing remaining available under the foreign revolving credit arrangements. The foreign revolving lines balances as of October 31, 2021 and January 31, 2021 , were included as current maturities of long-term debt in the Company's consolidated balance sheets.    Mortgages. On July  28, 2016, the Company borrowed CAD 8.0 million (approximately $ 6.1 million at the prevailing exchange rate on the transaction date) from a bank in Canada under a mortgage note secured by the Company's manufacturing facility located in Alberta, Canada that matures on December  23, 2042. The interest rate is variable, and was  4.55 % at October 31, 2021 . Principal payments began in January 2018.   On June  19, 2012, the Company borrowed $ 1.8 million under a mortgage note secured by its manufacturing facility in Lebanon, Tennessee. The proceeds were used for repayment of amounts borrowed. O n April 14, 2021, the Company entered into the Purchase and Sale Agreement, discussed further above. Concurrently with the sale, the Company paid off the approximately $ 0.9 million remaining on the mortgage note on the Property to its lender.   Note 10 - Leases   Operating Leases. In August 2020, the Company entered into a new lease in Abu Dhabi for land upon which the Company intends to build a facility. The annual payments are initially expected to be approximately 1.2 million U.A.E. Dirhams (approximately $ 0.3 million at October 31, 2020), inclusive of rent and common charges, with escalation clauses in the agreement. Rent payments are deferred until August 2022.  The lease expires in August 2050.   Finance Leases. In 2019,  the Company obtained two finance leases for a total of CAD 1.1 million (approximately $ 0.8 million at the prevailing exchange rates on the transaction dates) to finance vehicle equipment. The interest rates for these finance leases were 8.0 % per annum with monthly principal and interest payments of less than $ 0.1 million. These leases mature in August 2023.  In 2017, the Company obtained three finance leases for a total of CAD 1.1 million (approximately $ 0.8 million at the prevailing exchange rates on the transaction dates) to finance vehicle equipment. The interest rates for these finance leases range from 4.0 % to 7.8 % per annum with monthly principal and interest payments of less than $ 0.1 million. Two of these leases matured in April  2021 and new leases have been entered into in May 2021 to replace the matured leases. The remaining lease matures in September  2022.   The Company has several significant operating lease agreements, with lease terms of one to  30 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 right-of-use ("ROU") assets as the Company is not reasonably certain to exercise the options.  Variable expenses generally represent the Company’s share of the landlord’s operating expenses.  The Company does not have any arrangements where it acts as a lessor, other than one sub-lease arrangement.    At October 31, 2021 , the Company had total operating lease liabilities of $ 13.0  million and total operating ROU assets of $ 11.5  million, which are reflected in the consolidated balance sheets. At October 31, 2021 , the Company also had total finance lease liabilities of $ 0.6 million included in current maturities of long-term debt and long-term debt less current maturities, and total finance ROU assets of $ 0.8 million which were included in property plant and equipment, net of accumulated depreciation in the consolidated balance sheets.   15 Table of Contents Table of Contents   Supplemental balance sheet information related to leases is as follows (in thousands):    Operating and Finance leases:   October 31, 2021     January 31, 2021   Finance leases assets:                 Property and Equipment - gross   $ 1,254     $ 879   Accumulated depreciation and amortization     ( 438 )     ( 96 ) Property and Equipment - net   $ 816     $ 783                     Finance lease liabilities:                 Finance lease liability short-term   $ 368     $ 300   Finance lease liability long-term     266       401   Total finance lease liabilities   $ 634     $ 701                     Operating lease assets:                 Operating lease ROU assets   $ 11,515     $ 13,384                     Operating lease liabilities:                 Operating lease liability short-term   $ 1,427     $ 1,402   Operating lease liability long-term     11,586       13,174   Total operating lease liabilities   $ 13,013     $ 14,576     Total lease costs consist of the following (in thousands):    Lease costs Consolidated Statements of Operations Classification   Three Months Ended October 31, 2021     Three Months Ended October 31, 2020     Nine Months Ended October 31, 2021     Nine Months Ended October 31, 2020   Finance Lease Costs                                   Amortization of ROU assets Cost of sales   $ 65     $ 50     $ 184     $ 151   Interest on lease liabilities Interest expense     13       17       42       54   Operating lease costs Cost of sales, SG&A expenses     620       682       1,890       1,904   Short-term lease costs (1) Cost of sales, SG&A expenses     255       53       454       289   Sub-lease income SG&A expenses     ( 20 )     ( 21 )     ( 61 )     ( 61 ) Total Lease costs   $ 933     $ 781     $ 2,509     $ 2,337     ( 1 ) Includes variable lease costs, which are immaterial   16 Table of Contents Table of Contents   Supplemental cash flow information related to leases is as follows (in thousands):       Nine Months Ended October 31, 2021     Nine Months Ended October 31, 2020   Cash paid for amounts included in the measurement of lease liabilities:                 Financing cash outflows from finance leases   $ 203     $ 291   Operating cash outflows from finance leases     28       42   Operating cash outflows from operating leases     985       1,470         Nine Months Ended October 31, 2021     Nine Months Ended October 31, 2020   ROU Assets obtained in exchange for new lease obligations:                 Finance leases liabilities   $ 201     $ -   Operating leases liabilities     89       3,255     Weighted-average lease terms and discount rates are as follows:        October 31, 2021   Weighted-average remaining lease terms (in years):         Finance leases     1.7   Operating leases     13.5             Weighted-average discount rates:         Finance leases     8.9 % Operating leases     7.4 %   Maturities of lease liabilities as of October 31, 2021 , are as follows (in thousands):   Year:   Operating Leases     Finance Leases   For the three months ended January 31, 2022   $ 737     $ 102   For the year ended January 31, 2023     2,313       396   For the year ended January 31, 2024     2,299       182   For the year ended January 31, 2025     1,528       -   For the year ended January 31, 2026     1,326       -   For the year ended January 31, 2027     1,333       -                     Thereafter     12,322       -   Total lease payments     21,858       680   Less: amount representing interest     ( 8,845 )     ( 46 ) Total lease liabilities at October 31, 2021   $ 13,013     $ 634     Rent expense on operating leases, which is recorded on straight-line basis, was $ 0.9  million for the three months ended  October 31, 2021  and 2020 , respectively.    17 Table of Contents Table of Contents     Note 11  - Restricted cash   Restricted cash held by foreign subsidiaries was $ 1.7  million as of October 31, 2021 and 2020 , respectively, and is related to fixed deposits that also serve as security deposits and guarantees.    (In thousands)     October 31, 2021       October 31, 2020   Cash and cash equivalents   $ 10,018     $ 6,593   Restricted cash     1,746       1,154   Cash, cash equivalents and restricted cash shown in the statement of cash flows   $ 11,764     $ 7,747       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 Renewed Senior Credit Facility, which matures on September 20, 2026,  bears interest at a rate equal to an alternate base rate, the London Inter-Bank Offered Rate (“LIBOR”) or a LIBOR successor rate index, plus, in each case, an applicable margin. Based on the inclusion of the LIBOR successor rate index in the Renewed Senior Credit Facility, the Company does not expect a material impact from the adoption of this standard 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.     Note 14 - Treasury stock   On  October 4, 2021, the Company's Board of Directors approved a share repurchase program, which authorizes the Company to use up to $ 3.0  million for the purchase of its outstanding shares of common stock. Share repurchases are permitted to be executed through open market or privately negotiated transactions over the course of 12  months, depending upon current market conditions and other factors.    The following table sets forth information with respect to repurchases by the Company of its shares of common stock during the third quarter of 2021:   Period   Total number of shares purchased     Average price paid per share     Total number of shares purchased as part of publicly announced plans or programs     Approximate dollar value of shares that may yet be purchased under the plans or programs   August 1, 2021 - August 31, 2021     -     $ -       -     $ -   September 1, 2021 - September 30, 2021     -       -       -       -   October 1, 2021 - October 31, 2021     58,528       8.45       58,528       2,505,216     18 Table of Contents Table of Contents