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Item 1. Financial Statements

2024-09-11 compared with 2024-06-13 · 181 added, 175 removed, 531 unchanged (40% of the section changed)

3 unchanged sentences

(In thousands, except per share data)

Three Months Ended April 30,

$ 34,321 $ 29,657

Three Months Ended July 31,

Six Months Ended July 31,

Cost of sales

23,804 22,883

Operating expenses

5 unchanged sentences

Other (expense) income

Income (loss) before income taxes

2,560 ( 365 )

Income before income taxes

Income tax expense

Net income (loss)

1,790 ( 1,123 )

Net income attributable to non-controlling interest

Net income (loss) attributable to common stock

$ 1,443 $ ( 1,123 )

Weighted average common shares outstanding

Earnings per share attributable to common stock

$ 0.18 $ ( 0.14 )

Earnings (loss) per share attributable to common stock

See accompanying notes to consolidated financial statements.

2 unchanged sentences

(In thousands)

Three Months Ended April 30,

Net income (loss)

$ 1,790 $ ( 1,123 )

Three Months Ended July 31,

Six Months Ended July 31,

Other comprehensive income (loss)

Foreign currency translation adjustments, net of tax

( 1,415 ) ( 437 )

Comprehensive income (loss)

$ 375 $ ( 1,560 )

Comprehensive income attributable to non-controlling interests

Total comprehensive income (loss) attributable to common stock

$ 28 $ ( 1,560 )

See accompanying notes to consolidated financial statements.

2 unchanged sentences

(In thousands, except per share data)

April 30, 2024

July 31, 2024

January 31, 2024

3 unchanged sentences

Restricted cash

Trade accounts receivable, less allowance for credit losses of $ 644 at April 30, 2024 and $ 699 at January 31, 2024

Trade accounts receivable, less allowance for credit losses of $ 713 at July 31, 2024 and $ 699 at January 31, 2024

39,927 46,646

44 unchanged sentences

Common stock, $ .01 par value, authorized 50,000 shares;

8,018 issued and outstanding at April 30, 2024 and 8,017 at January 31, 2024

7,978 issued and outstanding at July 31, 2024 and 8,017 at January 31, 2024

Additional paid-in capital

59,808 60,063

Treasury stock, 112 shares at April 30, 2024 and January 31, 2024

Treasury stock, 112 shares at July 31, 2024 and January 31, 2024

( 968 ) ( 968 )

17 unchanged sentences

Total stockholders' equity at January 31, 2024

$ 80 $ 60,063 $ 12,088 $ ( 968 ) $ ( 5,551 ) $ 65,712

- - 1,443 - - 1,443

Stock-based compensation expense

- 228 - - - 228

Amount attributable to non-controlling interest

- ( 421 ) - - - ( 421 )

Foreign currency translation adjustment

- - - - ( 1,415 ) ( 1,415 )

Total stockholders' equity at April 30, 2024

$ 80 $ 59,870 $ 13,531 $ ( 968 ) $ ( 6,966 ) $ 65,547

Common stock issued under stock plans, net of shares used for tax withholding

Stock-based compensation expense

Amount attributable to non-controlling interest

Foreign currency translation adjustment

Total stockholders' equity at July 31, 2024

Additional Paid-in Capital

4 unchanged sentences

Total stockholders' equity at January 31, 2023

$ 80 $ 62,562 $ 1,617 $ ( 26 ) $ ( 6,449 ) $ 57,784

- - ( 1,123 ) - - ( 1,123 )

Stock-based compensation expense

- 229 - - - 229

Foreign currency translation adjustment

- - - - ( 437 ) ( 437 )

Total stockholders' equity at April 30, 2023

$ 80 $ 62,791 $ 494 $ ( 26 ) $ ( 6,886 ) $ 56,453

Common stock issued under stock plans, net of shares used for tax withholding

Repurchase of common stock

Stock-based compensation expense

Foreign currency translation adjustment

Total stockholders' equity at July 31, 2023

Balances at beginning of year

8,016,781 8,007,002

Treasury stock retired

Shares issued, net of shares used for tax withholding

1 unchanged sentence

Balances at period end

8,017,981 8,016,781

See accompanying notes to consolidated financial statements.

2 unchanged sentences

(In thousands)

Three Months Ended April 30,

Six Months Ended July 31,

Operating activities

Net income (loss)

$ 1,790 $ ( 1,123 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities

Adjustments to reconcile net income to net cash provided by operating activities

Depreciation and amortization

Deferred tax (benefit) expense

Deferred tax expense

Stock-based compensation expense

3 unchanged sentences

Accounts receivable

( 359 ) 1,813

Costs and estimated earnings in excess of billings on uncompleted contracts

Accounts payable

( 268 ) ( 227 )

Accrued compensation and payroll taxes

Customers' deposits

1,143 ( 371 )

Income taxes payable

( 694 ) ( 318 )

Income tax receivable

Prepaid expenses and other current assets

( 2,552 ) ( 570 )

Unbilled accounts receivable

Other assets and liabilities

( 2,826 ) ( 1,275 )

Net cash provided by operating activities

1 unchanged sentence

Capital expenditures

( 2,012 ) ( 3,227 )

Proceeds from insurance recovery for property and equipment

Net cash used in investing activities

( 2,012 ) ( 3,222 )

Financing activities

Proceeds from revolving credit lines

18,268 28,333

Payments of debt on revolving credit lines

( 16,405 ) ( 25,527 )

Payments of principal on finance obligation

( 42 ) ( 27 )

Payments of other debt

( 58 ) ( 61 )

Increase (decrease) in drafts payable

Payments on finance lease obligations

Repurchase of common stock

Stock options exercised and taxes paid related to restricted shares vested

1 unchanged sentence

Effect of exchange rate changes on cash, cash equivalents and restricted cash

( 71 ) ( 56 )

Net increase in cash, cash equivalents and restricted cash

1 unchanged sentence

Cash, cash equivalents and restricted cash - end of period

$ 9,064 $ 9,785

Supplemental cash flow information

1 unchanged sentence

Cash income taxes paid

Fixed assets acquired under finance leases - non-cash

Fixed assets acquired from non affiliates - non-cash

See accompanying notes to consolidated financial statements.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

April 30, 2024

July 31, 2024

(In thousands, except per share data, or unless otherwise specified)

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.

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 fairly state the financial position and results of operations for the periods presented.

These adjustments consist of normal recurring adjustments.

7 unchanged sentences

Refer to the Company's Annual Report on Form 10 -K for the year ended January 31, 2024 as filed with the SEC on April 26, 2024 for discussion of the Company's significant accounting policies.

Subsequent Events

The Company has evaluated subsequent events through June 13, 2024 , the date the financial statements were issued.

Any material subsequent events that occurred during this time have been properly recognized and/or disclosed in these consolidated financial statements.

During the six months ended July 31, 2024 , the Company did not adopt or make changes to any new or existing accounting policies.

Note 2 - Business segment reporting

10 unchanged sentences

In the United Arab Emirates ("U.A.E."), Saudi Arabia, Egypt and India 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 as amounts due from customers net of an allowance for claims and doubtful accounts.

Standard payment terms are generally net 30 to 60 days.

The allowance for doubtful accounts is based on specifically identified amounts in customers' accounts, where future collectability is deemed uncertain.

The allowance for credit losses 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.

The write off is recorded against the allowance for credit losses.

In 2015, the Company completed a project in the Middle East with billings in the aggregate amount of approximately $ 41.9 million.

The system has not yet been commissioned by the customer.

Nevertheless, the Company has settled approximately $ 40.1 million as of April 30, 2024 , with a remaining balance due in the amount of $ 1.8 million, all of which pertains to retention clauses within the agreements with the Company's customer, and which become payable by the customer when this project is fully tested and commissioned.

Nevertheless, the Company has received approximately $ 40.1 million as of July 31, 2024 , with a remaining balance due in the amount of $ 1.8 million, all of which pertains to retention clauses within the agreements with the Company's customer, and which become payable by the customer when this project is fully tested and commissioned.

Of this amount, $ 1.3 million is classified in other long-term assets on the Company's consolidated balance sheets.

The Company has been actively involved in ongoing efforts to collect this outstanding balance.

The Company continues to engage with the customer to ensure full payment of the open balances, and during the three months ended April 30, 2024, and at various times throughout 2023, the Company received partial payments to settle $ 0.3 million and $ 0.6 million, respectively, of the customer's outstanding balances.

The Company continues to engage with the customer to ensure full payment of the open balances, and during the six months ended July 31, 2024 , and at various times throughout 2023, the Company received partial payments to settle $ 0.3 million and $ 0.6 million, respectively, of the customer's outstanding balances.

Further, the Company has been engaged by the customer to perform additional work in 2024 under customary trade terms that supports the continued cooperation between the Company and the customer.

As a result, the Company did not reserve any allowance against the remaining outstanding balances as of April 30, 2024 .

As a result, the Company did not reserve any allowance against the remaining outstanding balances as of July 31, 2024 .

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 April 30, 2024 and 2023 , respectively, no one customer accounted for greater than 10% of the Company's consolidated net sales.

As of April 30, 2024 and January 31, 2024 , one customer accounted for 11 % of the Company's accounts receivable, and one customer accounted for 12 % of the Company's accounts receivable, respectively.

For the three months ended July 31, 2024 , no individual customer accounted for greater than 10% of the Company's consolidated net sales, and during the same period in 2023, one customer accounted for greater than 10% of the Company's consolidated net sales.

For the six months ended July 31, 2024 and 2023 , no individual customer accounted for greater than 10% of the Company's consolidated net sales.

As of July 31, 2024 and January 31, 2024 , no individual customer accounted for more than 10% of the Company's accounts receivable, and one customer accounted for more than 10% of the Company's accounts receivable, respectively.

Note 4 - Revenue recognition

9 unchanged sentences

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 months ended April 30, 2024 are as follows:

Three Months Ended April 30,

A breakdown of the Company's revenues by revenue class for the three and six months ended July 31, 2024 and 2023 are as follows:

Three Months Ended July 31,

Six Months Ended July 31,

$ 2,795 7 % $ 2,146 7 % $ 6,048 8 % $ 4,988 7 %

28 unchanged sentences

In addition, contract assets include receivables or amounts that are billable beyond the passage of time.

For additional information, see Note 3 in the Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10 -K for the year ended January 31, 2024 as filed with the SEC on April 26, 2024, and Unbilled accounts receivable , as further described below.

The following table shows the reconciliation of costs in excess of billings and billings in excess of costs:

April 30, 2024

July 31, 2024

January 31, 2024

18 unchanged sentences

$ 2,381 $ 2,602

The Company anticipates that substantially all costs incurred on uncompleted contracts as of April 30, 2024 will be billed and collected within one year .

The Company anticipates that substantially all costs incurred on uncompleted contracts as of July 31, 2024 will be billed and collected within one year .

Unbilled accounts receivable

The Company has recorded $ 15.7 million and $ 16.6 million of unbilled accounts receivable on the consolidated balance sheet s as of April 30, 2024 and January 31, 2024 , from revenues generated by certain of its subsidiaries.

The Company has recorded $ 17.9 million and $ 16.6 million of unbilled accounts receivable on the consolidated balance sheet s as of July 31, 2024 and January 31, 2024 , from revenues generated by certain of its subsidiaries.

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 billings will be made once the customer takes possession of or arranges shipping for the products.

The Company anticipates that substantially all of the amounts included in unbilled accounts receivable as of April 30, 2024 will be billed within one year.

The Company anticipates that substantially all of the amounts included in unbilled accounts receivable as of July 31, 2024 will be billed within one year.

Practical expedients

2 unchanged sentences

As a result of the Company's contracts having a duration of less than one year, a practical expedient was applied 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.

Note 5 - Inventories

Inventories are stated at the lower of cost or net realizable value.

Cost is determined using the first -in, first -out method for all inventories.

Inventories consisted of the following:

July 31, 2024

January 31, 2024

Raw materials

$ 14,777 $ 13,787

Work in process

Finished goods

16,626 16,420

Less allowance

$ 15,823 $ 15,541

The Company conducts periodic reviews of its inventory and records allowances for slow moving and obsolete items to reflect their net realizable value, which is primarily attributable to finished goods.

Note 6 - Income taxes

5 unchanged sentences

therefore, actual results could differ materially from projections.

The Company's worldwide effective tax rates ("ETR") for the three months ended April 30, 2024 and 2023 were 30 % and ( 208 %) , respectively.

The change in the ETR is due to the inability to recognize tax benefits on losses in the United States due to a partial valuation allowance in the prior period and changes in the mix of income and loss in various jurisdictions.

The Company's worldwide effective tax rates ("ETR") for the three months ended July 31, 2024 and 2023 were 23 % and 45 % , respectively.

The Company's ETR was 25 % and 97 % for the six months ended July 31, 2024 and 2023 , respectively.

The change in the ETR is due to the ability to recognize tax benefits on losses in the United States in the current year whereas the prior year had a full valuation allowance and 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.

federal tax as they will be excludible from U.S.

taxable income 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.

The earnings from these subsidiaries are subject to tax in their local jurisdiction, and withholding taxes in these jurisdictions are considered.

As such, the Company has accrued a liability of $ 0.7 million as of April 30, 2024 related to these taxes.

As such, the Company has accrued a liability of $ 0.7 million as of July 31, 2024 related to these taxes.

Note 7 - 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 April 30, 2024 , the Company performed an assessment to determine whether there were any triggering events that may have occurred which could indicate that the carrying value of the Company's long-lived assets are not recoverable, and an impairment may exist.

Based on this assessment, the Company did not identify any triggering events that would indicate that the carrying amounts may not be recoverable with respect to long-lived assets at April 30, 2024 .

At July 31, 2024 , the Company performed an assessment to determine whether there were any triggering events that may have occurred which could indicate that the carrying value of the Company's long-lived assets are not recoverable, and an impairment may exist.

Based on this assessment, the Company did not identify any triggering events that would indicate that the carrying amounts may not be recoverable with respect to long-lived assets at July 31, 2024 .

The Company will continue testing for potential impairment at least annually or as otherwise required by applicable accounting standards.

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 April 30, 2024 and January 31, 2024 is attributable to the purchase of the remaining 50 % interest in Perma-Pipe Canada, Ltd., which occurred in 2016.

All identifiable goodwill as of July 31, 2024 and January 31, 2024 is attributable to the purchase of the remaining 50 % interest in Perma-Pipe Canada, Ltd., which occurred in 2016.

The following table provides a reconciliation of changes in the carrying amount of goodwill:

1 unchanged sentence

Foreign exchange change effect

April 30, 2024

July 31, 2024

$ 2,222 $ ( 66 ) $ 2,156

1 unchanged sentence

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.

During the period ended April 30, 2024 , the Company performed a periodic assessment to determine whether there were any triggering events that may have occurred which could indicate that more likely than not that the fair value of the reporting unit did not exceed its carrying value, resulting in an impairment.

Based on this assessment, the Company did not identify any triggering events that would indicate that the fair value is less than the carrying value of the reporting unit at April 30, 2024 and 2023 .

During the period ended July 31, 2024 , the Company performed a periodic assessment to determine whether there were any triggering events that may have occurred which could indicate that more likely than not that the fair value of the reporting unit did not exceed its carrying value, resulting in an impairment.

Based on this assessment, the Company did not identify any triggering events that would indicate that the fair value is less than the carrying value of the reporting unit at July 31, 2024 .

Accordingly, the Company did not proceed with performing an impairment test as a result of this periodic assessment.

1 unchanged sentence

Note 8 - 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 April 30, 2024 the Company had reserved a total of 245,150 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 Company has prior incentive plans under which previously granted awards remain outstanding, but under which no new awards may be granted, including the Company's 2021 Omnibus Stock Incentive Plan, which expired in May 2024.

At July 31, 2024 , the Company had reserved a total 196,026 shares for grants and issuances under these incentive plans, including issuances pursuant to unvested or unexercised prior awards.

The Company's prior incentive plans 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 prior incentive plans authorized awards to officers, employees, consultants, and independent directors.

The Company's 2024 Omnibus Stock Incentive Plan, dated May 28, 2024, was approved by the Company's stockholders in July 2024 ( "2024 Plan").

The 2024 Plan will expire in July 2027.

The 2024 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.

Grants were made in connection with the 2024 Plan and the prior incentive plans to employees, officers, and independent directors, as further described below.

Stock-based compensation expense

1 unchanged sentence

The Company recognized the following stock-based compensation expense for the periods presented:

Three Months Ended April 30,

Three Months Ended July 31,

Six Months Ended July 31,

Restricted stock-based compensation expense

$ 177 $ 227 $ 396 $ 456

Stock options

The Company did not grant any stock options during the three months ended April 30, 2024 .

The Company did not grant any stock options during the three or six months ended July 31, 2024 .

The following table summarizes the Company's stock option activity:

6 unchanged sentences

Expired or forfeited

Outstanding and exercisable at April 30, 2024

( 17 ) 12.41 - -

There was no vesting, expiration or forfeiture of previously unvested stock options during the three months ended April 30, 2024 .

Outstanding and exercisable at July 31, 2024

4 $ 6.89 1.4 $ 10

There was no vesting, expiration or forfeiture of previously unvested stock options during the six months ended July 31, 2024 .

In addition , 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 three months ended April 30, 2024 :

The following table summarizes the Company's restricted stock activity for the six months ended July 31, 2024 :

Restricted Shares

5 unchanged sentences

Forfeited or retired for taxes

Outstanding at April 30, 2024

Outstanding at July 31, 2024

230 $ 9.05 $ 2,083

As of April 30, 2024 , there was $ 0.8 million of unrecognized compensation expense related to unvested restricted stock granted under the plans.

As of July 31, 2024 , there was $ 1.5 million of unrecognized compensation expense related to unvested restricted stock granted under the plans.

These costs are expected to be recognized over a weighted average period of 2.1 years .

Note 9 - Earnings per share

Three Months Ended April 30,

Basic weighted average common shares outstanding at April 30, 2024

Three Months Ended July 31,

Six Months Ended July 31,

Basic weighted average common shares outstanding at July 31, 2024

7,954 8,029 7,930 8,017

Dilutive effect of equity compensation plans

Weighted average common shares outstanding assuming full dilution

8,125 8,139 7,987 8,017

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

Stock options and restricted stock with exercise prices or grant date prices below the average market prices

171 110 57 170

Net income (loss) attributable to common stock

$ 3,289 $ 1,022 $ 4,732 $ ( 100 )

Earnings per share attributable to common stock

Earnings (loss) per share attributable to common stock

$ 0.41 $ 0.13 $ 0.60 $ ( 0.01 )

1 unchanged sentence

Note 10 - Debt

Debt totaled $ 27.3 million and $ 25.7 million at April 30, 2024 and January 31, 2024 , respectively.

Debt totaled $ 27.9 million and $ 25.7 million at July 31, 2024 and January 31, 2024 , respectively.

Revolving lines - North America .

20 unchanged sentences

In order to cure any future breach of these covenants 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 Renewed Senior Credit Facility in an amount which, when added to the amount of the Company’s Consolidated EBITDA, would result in compliance on a pro forma basis.

The Company was in compliance with respect to these covenants as of April 30, 2024 .

The Company was in compliance with respect to these covenants as of July 31, 2024 .

The Renewed Senior Credit Facility contains customary events of default.

2 unchanged sentences

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.

As of April 30, 2024 , the Company had borrowed an aggregate of $ 5.3 million at a rate of 10.0 % and had $ 5.0 million available under the Renewed Senior Credit Facility.

As of July 31, 2024 , the Company had borrowed an aggregate of $ 6.7 million at a rate of 10.0 % and had $ 4.7 million available under the Renewed Senior Credit Facility.

As of January 31, 2024 , the Company had borrowed an aggregate of $ 5.5 million and had $ 4.0 million available under the Renewed Senior Credit Facility.

9 unchanged sentences

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 $ 0.2 million is recognized in current maturities of long-term debt and the long-term portion of $ 9.0 million is recognized in long-term finance obligation on the Company's consolidated balance sheets as of April 30, 2024 .

The current portion of the finance obligation of $ 0.2 million is recognized in current maturities of long-term debt and the long-term portion of $ 8.9 million is recognized in long-term finance obligation on the Company's consolidated balance sheets as of July 31, 2024 .

The net carrying amount of the financial liability and remaining assets will be zero at the end of the lease term.

4 unchanged sentences

The Company has a revolving line for 8.0 million U.A.E.

Dirhams (approximately $ 2.2 million at April 30, 2024 ) from a bank in the U.A.E.

As of April 30, 2024 the facility has an interest rate of approximately 8.8 %, and is set to expire in July 2024, with intentions to be subsequently renewed and extended thereafter.

The Company had borrowed an aggregate of $ 0.2 million as of April 30, 2024 and January 31, 2024 , respectively, and is presented as a component of current maturities of long-term debt in the Company's consolidated balance sheets.

The Company had unused borrowing availability of approximately $ 1.9 million as of April 30, 2024 and January 31, 2024 , respectively.

Dirhams (approximately $ 2.2 million at July 31, 2024 ) from a bank in the U.A.E.

As of July 31, 2024 the facility has an interest rate of approximately 8.6 %, and expired in July 2024, however, the Company has started the process to renew and extend this credit arrangement and the credit facility has continued without interruption and penalty.

The Company had borrowed an aggregate of $ 1.2 million as of July 31, 2024 and $ 0.2 million as of January 31, 2024 , respectively, and is presented as a component of current maturities of long-term debt in the Company's consolidated balance sheets.

As of July 31, 2024 and January 31, 2024 , the Company had unused borrowing availability of approximately $ 1.0 million and $ 1.9 million, respectively.

The Company has a revolving line for 20.5 million U.A.E.

Dirhams (approximately $ 5.6 million at April 30, 2024 ) from a bank in the U.A.E.

As of April 30, 2024 the facility has an interest rate of approximately 8.7 %, and is set to expire in August 2024, with intentions to be subsequently renewed and extended thereafter.

The Company had borrowed an aggregate of $ 0.1 million as of April 30, 2024 and January 31, 2024 , respectively, and is presented as a component of current maturities of long-term debt in the Company's consolidated balance sheets.

As of April 30, 2024 and January 31, 2024 , the Company had unused borrowing availability of approximately $ 1.6 million and $ 1.0 million, respectively.

Dirhams (approximately $ 5.6 million at July 31, 2024 ) from a bank in the U.A.E.

As of July 31, 2024 the facility has an interest rate of approximately 8.7 %.

The facility expired in August 2024, however, the Company has started the process to renew and extend this credit arrangement and the credit facility has continued without interruption or penalty.

The Company had borrowed an aggregate o f $ 1.0 million as of July 31, 2024 and $ 0.1 million as of January 31, 2024 , respectively, and is presented as a component of current maturities of long-term debt in the Company's consolidated balance sheets.

As of July 31, 2024 and January 31, 2024 , the Company had unused borrowing availability of approximately $ 1.2 million and $ 1.0 million, respectively.

June 2021, and as renewed or amended subsequently thereafter, 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

April 30, 2024 ).

July 31, 2024 ).

This credit arrangement is in the form of project financing at rates competitive in Egypt.

1 unchanged sentence

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.

April 30, 2024 the facility has an interest rate of approximately

and expired in June 2022.

This credit arrangement was subsequently renewed in August 2023 with substantially the same terms and conditions, except for the facility interest rate which increased to 20.8 %, and expires in August 2024.

This credit arrangement was subsequently renewed in November 2023 with substantially the same terms and conditions and expires in November 2024.

As of April 30, 2024 , the Company had substantially nothing outstanding with respect to this credit arrangement, and approximately $ 1.4 million outstanding at January 31, 2024 , which is presented as a component of current maturities of long-term debt in the Company's consolidated balance sheets.

July 31, 2024 , the facility has an interest rate of approximately

and expires in November 2024.

As of July 31, 2024 , the Company had substantially nothing outstanding with respect to this credit arrangement, and approximately $ 1.4 million outstanding at January 31, 2024 , which is presented as a component of current maturities of long-term debt in the Company's consolidated balance sheets.

Further, as of

April 30, 2024 and

January 31, 2024 , the Company had unused borrowing capacity of

$ 2.1 million and

$ 3.2 million, respectively.

July 31, 2024 and

January 31, 2024 , the Company had unused borrowing capacity

of $ 2.1 million and $ 3.2 m illion, respectively.

December 2021, the Company entered into a credit arrangement for project financing with a bank in Egypt for

2 unchanged sentences

2.1 million Egyptian Pounds (approximatel

April 30, 2024 ).

y $ 0.1 mi llion at

July 31, 2024 ).

This credit arrangement is in the form of project financing at rates competitive in Egypt.

6 unchanged sentences

$ 0.1 million outstanding

as of April 30, 2024 and January 31, 2024 , respectively, and is presented as a component of current maturities of long-term debt in the Company's consolidated balance sheets.

In March 2022, the Company's Saudi Arabian subsidiary entered into a credit arrangement with a bank in Saudi Arabia for a revolving line of 37.0 million Saudi Riyals (approximately $ 9.9 million at April 30, 2024 ).

as of July 31, 2024 and January 31, 2024 , respectively, and is presented as a component of current maturities of long-term debt in the Company's consolidated balance sheets.

This credit arrangement is in the form of project financing at rates competitive in Saudi Arabia.

1 unchanged sentence

The facility was renewed in May 2024 with substantially the same terms and conditions and expires in May 2025.

As of April 30, 2024 , the facility has an interest rate of approximately 9.5 %.

The Company had borrowed an aggregate of $ 4.1 million and $ 3.2 million as of April 30, 2024 and January 31, 2024 , respectively, and is presented as a component of current maturities of long-term debt in the Company's consolidated balance sheets.

The unused borrowing availability attributable to this credit arrangement at April 30, 2024 and January 31, 2024 , was $ 5.4 million and $ 6.1 million, respectively.

As of July 31, 2024 , the facility has an interest rate of approximately 9.7 %.

The Company had borrowed an aggregate o f $ 2.6 million and $ 3.2 million as of July 31, 2024 and January 31, 2024 , respectively, and is presented as a component of current maturities of long-term debt in the Company's consolidated balance sheets.

The unused borrowing availability attributable to this credit arrangement at July 31, 2024 and January 31, 2024 , was $ 6.3 million and $ 6.1 million, respectively.

These credit arrangements are in the form of overdraft facilities and project financing at rates competitive in the countries in which the Company operates.

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The Company guarantees only a portion of the subsidiaries' debt, including foreign debt.

The amount of foreign subsidiary debt guaranteed by the Company was approxim ately $ 0.3 million and $ 0.1 million at April 30, 2024 and January 31, 2024 , respectively.

The Company was in compliance with the covenants under the credit arrangements in the U.A.E., Egypt and Saudi Arabia as of April 30, 2024 , with the exception of those arrangements that have expired or are set to expire and have not yet been renewed.

The amount of foreign subsidiary debt guaranteed by the Company was approxim ately $ 1.1 million and $ 0.1 million at July 31, 2024 and January 31, 2024 , respectively.

The Company was in compliance with the covenants under the credit arrangements in the U.A.E., Egypt and Saudi Arabia as of July 31, 2024 , with the exception of those arrangements that have expired or are set to expire and have not yet been renewed.

Although certain of the arrangements have expired and the borrowings could be required to be repaid immediately by the banks, the Company is in regular communication with the respective banks throughout the renewal process and all of the arrangements have continued without interruption or penalty.

On April 30, 2024 , interest rates were based on (i) the Emirates Inter Bank Offered Rate plus 3.0 % to 3.5 % per annum for the U.A.E.

On July 31, 2024 , interest rates were based on (i) 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;

1 unchanged sentence

and (iii) the Saudi Inter-Bank Offered Rate plus 3.5 % for the Saudi Arabia credit arrangement.

Based on these base rates, as of April 30, 2024 , the Company's interest rates ranged from 8.7 % to 20.8 %, with a weighted average rate of 11.5 %, and the Company had facility limits totaling $ 24.7 million under these credit arrangements.

As of April 30, 2024 , $ 6.7 million o f availability was used to support letters of credit to guarantee amounts committed for inventory purchases and for performance guarantees.

Additionally, as of April 30, 2024 , the Company had borrow ed $ 8.4 million and had an additional $ 13.0 million of borrowing remaining available under the foreign revolving credit arrangements.

The foreign revolving lines balances were included as a component of current maturities of long-term debt in the Company's consolidated balance sheets as of April 30, 2024 and January 31, 2024 .

Based on these base rates, as of July 31, 2024 , the Company's interest rates ranged from 8.6 % to 20.8 %, with a weighted average rate of 11.5 %, and the Company had facility limits totaling $ 24.7 million under these credit arrangements.

As of July 31, 2024 , $ 7.1 million o f availability was used to support letters of credit to guarantee amounts committed for inventory purchases and for performance guarantees.

Additionally, as of July 31, 2024 , the Company had borrow ed $ 7.8 million and had an additional $ 12.6 million of borrowing remaining available under the foreign revolving credit arrangements.

The foreign revolving lines balances were included as a component of current maturities of long-term debt in the Company's consolidated balance sheets as of July 31, 2024 and January 31, 2024 .

In June 2023, the Company assumed a promissory note of approximately $ 2.8 million in connection with the formation of the joint venture with Gulf Insulation Group (see Note 16 ).

In accordance with the promissory note, all principal is due and payable on the maturity date of April 9, 2026, with the option to prepay, in whole or in part, at any time prior to the maturity date, without premium or penalty.

I n accordance with the promissory note, all principal is due and payable on the maturity date of April 9, 2026, with the option to prepay, in whole or in part, at any time prior to the maturity date, without premium or penalty.

On July 28, 2016, the Company entered into a mortgage agreement secured by the Company's manufacturing facility located in Alberta, Canada that matures on December 23, 2042.

As of April 30, 2024 , the remaining balance on the mortgage in Canada is approximately CAD 6.00 million (approximately $ 4.4 million at April 30, 2024 ).

The interest rate is variable, and was 9.1 % at April 30, 2024 .

The principal balance is included as a component of long-term debt, less current maturities in the Company's consolidated balance sheets and is presented net of issuance costs of $ 0.1 million as of April 30, 2024 and January 31, 2024 , respectively.

As of July 31, 2024 , the remaining balance on the mortgage in Canada is approximately CAD 5.9 million (approximately $ 4.3 million at July 31, 2024 ).

The interest rate is variable, and was 8.8 % at July 31, 2024 .

Note 11 - Leases

16 unchanged sentences

The initial annual payments were approximately 1.2 million U.A.E.

Dirhams (approximatel y $ 0.3 million at April 30, 2024), inclusive of rent, escalation clauses, and other common charges contained in the agreement.

Rent payments previously deferred until August 2022 have commenced, and the lease expires in August 2050.

Dirhams (approximatel y $ 0.3 million at July 31, 2024 ), inclusive of rent, escalation clauses, and other common charges contained in the agreement.

The lease expires in August 2050.

In March and December 2022, the Company served Notices of Termination to its lessor for the Company's lease of land and buildings in Fujairah in the U.A.E.

2 unchanged sentences

The first Notice of Termination required that the Company pay an additional amount equal to three months' rent after that termination to enable the lessor to prepare the assets for lease by another party.

As a result of the termination, the Company has recognized adjustments to the amounts recorded in the consolidated financial statements as of April 30, 2024 .

The termination resulted in decreases of $ 0.4 million, $ 6.0 million and $ 5.5 million to operating lease liability short-term, operating lease liability long-term and operating lease right-of-use asset, respectively, in the consolidated balance sheets as of April 30, 2024 .

The termination also resulted in a decrease in rent expense of $ 1.1 million in the consolidated statement of operations for the year ended January 31, 2023.

There were no other adjustments in connection with these terminations for the year ended January 31, 2024, or during the three months ended April 30, 2024 .

At April 30, 2024 , the Company had total operating lease liabilities of $ 6.9 million and operating ROU assets of $ 6.2 million , which are reflected in the consolidated balance sheets.

At April 30, 2024 , the Company also had total finance lease liabilities of $ 0.1 million included in current maturities of long-term debt , and total finance ROU assets of $ 0.4 million which were included in property plant and equipment, net of accumulated depreciation in the consolidated balance sheets.

As a result of the termination, the Company has recognized adjustments to the amounts recorded in the consolidated financial statements as of July 31, 2024 .

There were no other adjustments in connection with these terminations for the year ended January 31, 2024, or during the three and six months ended July 31, 2024 .

At July 31, 2024 , the Company had total operating lease liabilities of $ 7.7 million and operating ROU assets of $ 6.9 million , which are reflected in the consolidated balance sheets.

Finance Leases.

The Company has several significant operating lease agreements, with lease terms of one to thirty years, which consist of real estate, vehicles and office equipment leases.

The Company has several lease agreements, with lease terms of one to thirty 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.

2 unchanged sentences

The Company does not have any arrangements where it acts as a lessor.

At April 30, 2024 , the Company also had finance lease liabilities of $ 0.1 million included in current maturities of long-term debt and long-term debt less current maturities , and financial ROU assets of $ 0.4 million which were included in property plant and equipment, net of accumulated depreciation in the consolidated balance sheets.

At July 31, 2024 , the Company also had finance lease liabilities of $ 0.1 million included in current maturities of long-term debt and long-term debt less current maturities, and financial ROU assets of $ 0.3 million which were included in property plant and equipment, net of accumulated depreciation in the consolidated balance sheets.

Supplemental balance sheet information related to leases is as follows:

Operating and Finance leases

April 30, 2024

July 31, 2024

January 31, 2024

17 unchanged sentences

Total lease costs consist of the following:

Three Months Ended April 30,

Three Months Ended July 31,

Six Months Ended July 31,

Consolidated Statements of Operations Classification

2 unchanged sentences

Cost of sales

$ 37 $ 33 $ 75 $ 87

Interest on lease liabilities

2 unchanged sentences

Cost of sales, SG&A expenses

438 426 893 882

Short-term lease costs (1)

Cost of sales, SG&A expenses

93 59 236 245

Sub-lease income

SG&A expenses

- ( 20 ) - ( 40 )

Total Lease costs

$ 570 $ 501 $ 1,207 $ 1,179

( 1 ) Includes variable lease costs, which are not material.

Supplemental cash flow information related to leases is as follows:

Three Months Ended April 30,

Six Months Ended July 31,

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

4 unchanged sentences

Operating leases liabilities

$ 1,041 $ 3,484

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

April 30, 2024

July 31, 2024

Weighted-average remaining lease terms (in years):

4 unchanged sentences

Operating leases

Maturities of lease liabilities as of April 30, 2024 , is as follows:

Operating Leases

Finance Leases

For the nine months ending January 31, 2024

Maturities of lease liabilities as of July 31, 2024 , are as follows:

Operating Leases Finance Leases

For the six months ending January 31, 2025

For the year ended January 31, 2026

6 unchanged sentences

amount representing interest

( 8,377 ) ( 10 )

Total lease liabilities at April 30, 2024

$ 6,877 $ 103

Rent expense on operating leases, which is recorded on straight-line basis, was $ 0.6 million for the three months ended April 30, 2024 and 2023 , respectively.

Total lease liabilities at July 31, 2024

Rent expense on operating leases, which is recorded on straight-line basis, was $ 0.6 million for the three months ended July 31, 2024 and 2023 , respectively.

Note 12 - Restricted cash

Restricted cash held by foreign subsidiaries is related to fixed deposits that also serve as security deposits and guarantees:

April 30, 2024

July 31, 2024

January 31, 2024

8 unchanged sentences

Note 14 - Recent accounting pronouncements

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

In November 2023, the FASB issued ASU No.

2023 - 07, Segment Reporting ( Topic 280 ):

Improvements to Reportable Segment Disclosures .

The standard update requires additional disclosures, including further details about segment expenses regarding a public entity's reportable segments on an annual and interim basis.

The additional segment disclosures are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

The Company is still evaluating the impact of these updated disclosure requirements on its statement of financial position or results of operations.

In December 2023, the FASB issued ASU No.

2023 - 09, Income Taxes ( Topic 740 ):

Improvements to Income Tax Disclosures .

Pursuant to this standard update, companies are required to provide additional information which is primarily attributable to the rate reconciliation and income taxes paid.

The new income tax disclosures are effective for fiscal years beginning after December 15, 2024.

The Company is still evaluating this standard update but does not expect it to have a material impact on its statement of financial position or results of operations.

Note 15 - Treasury stock

3 unchanged sentences

During the twelve months ended January 31, 2024 , the Company used the remaining $ 1.0 million authorized to repurchase its outstanding shares of common stock.

Accordingly, t here was no repurchase activity with respect to the Company's shares of common stock during the three months ended April 30, 2024 .

Accordingly, t here was no repurchase activity with respect to the Company's shares of common stock during the three and six months ended July 31, 2024 .

Note 16 - Noncontrolling interest

4 unchanged sentences

The primary business activities of the JV include the manufacture and sale of the pre-insulated piping systems and pipe coating services.

The other party to this business arrangement acquired a 40% non-controlling interest by contributing assets to the JV of approximately $ 6.8 million in fair value, mainly consisting of an idle building and equipment.

GIG acquired its 40 % non-controlling interest by contributing assets to the JV of approximately $ 6.8 million in fair value, mainly consisting of an idle building and equipment.

The fair value of the net assets contributed was determined through the use of a third -party appraiser using the indirect cost method.

Pursuant to the applicable guidance in ASC 805, Business Combinations and Noncontrolling Interests , the Company determined that the transaction did not meet the necessary conditions to be considered a business as the set of assets acquired did not contain an organized workforce and therefore was recorded as an asset acquisition.

The assets transferred by the Company to the JV were recorded at historical cost, and no gain was recognized as a result of this exchange since the Company has a controlling interest in the JV.

The assets transferred by the Company to the JV were recorded at historical cost, and no gain was recognized as a result of this exchange due to the Company having a controlling interest in the JV.

The Company’s measurement of the acquired assets is comprised of the fair value of the contributed net assets given up by the Company and the fair value of the non-controlling interest excluding the contributed assets.

7 unchanged sentences

Pursuant to the applicable guidance contained in ASC 810, Consolidations , the balance sheets and operating activities of this investment are included in the Company's consolidated financial statements.

T he carrying amount of the assets and liabilities of the JV that are consolidated by the Company totaled $ 26.3 million and $ 17.7 million, respectively, as of April 30, 2024 .

T he carrying amount of the assets and liabilities of the JV that are consolidated by the Company totaled $ 26.4 million and $ 15.5 million, respectively, as of July 31, 2024 .

The Company adjusts net income in the consolidated statements of operations to exclude the proportionate share of results that is attributable to the non-controlling interest.

1 unchanged sentence

This mezzanine presentation is the result of the non-controlling interest being subject to a put option that is not solely within the Company's control and in connection with the equity shares of the business arrangement that is redeemable at any time after five years following the date of formation.

The redemption amount per the JV Agreement is at fair value of the non-controlling interest which represents the fair value of ordinary shares of the JV that is owned by GIG.

Further, neither the call option or put option contained in the JV Agreement met the definition of a derivative as a result of not containing a net settlement provision and the shares not being readily convertible to cash, thereby being considered embedded with respect to non-controlling interest and not a freestanding instrument.

The redemption amount per the JV Agreement is at fair value of the non-controlling interest which represents the fair value of ordinary shares of the JV that are owned by GIG.

Further, neither the call option nor put option contained in the JV Agreement met the definition of a derivative as a result of not containing a net settlement provision and the shares not being readily convertible to cash, thereby being considered embedded with respect to non-controlling interest and not a freestanding instrument.

As a result of the non-controlling interest being subject to redemption rights that are not entirely within the Company's control, it was concluded that the necessary conditions were met to be accounted for in accordance with ASC 480, Distinguishing Liabilities from Equity .

5 unchanged sentences

Additionally, adjustments made to reflect the change in the value of the redeemable non-controlling interest are offset against permanent equity within the Company's consolidated balance sheets.

Net income attributable to GIG was $ 0.3 million and $ 0.0 million for the three months ended April 30, 2024 and 2023 , respectively.

Net income attributable to GIG was $ 1.0 million and $ 0.1 million for the three months ended July 31, 2024 and 2023 , respectively.

Net income attributable to GIG was $ 1.3 million and $ 0.1 million for the six months ended July 31, 2024 and 2023 , respectively.

The proportionate share of net income was accounted for as a reduction in deriving net income attributable to common stock in the Company's consolidated statements of operations.

4 unchanged sentences

The 60% equity ownership of the JV by the Company allows it to receive its proportionate share of losses and residual returns.

The non-controlling interest as measured at fair value was $ 7.0 million and $ 6.3 million, and was recorded within temporary equity at April 30, 2024 and January 31, 2024 , respectively.

The non-controlling interest as measured at fair value was $ 8.1 million and $ 6.3 million, and was recorded within temporary equity at July 31, 2024 and January 31, 2024 , respectively.

The change in non-controlling interest consists of $ 1.3 million in current year net income attributable to non-controlling interest, and approximately $ 0.5 million as an adjustment in the carrying value of the redeemable non-controlling interest pertaining to the business arrangement.

In addition, there were no dividends or any other form of distributions from non-controlling interest for the period ended April 30, 2024 and January 31, 2024 , respectively.

In addition, there were no dividends or any other form of distributions from non-controlling interest for the period ended July 31, 2024 and January 31, 2024 , respectively.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements