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Item 4. Controls and Procedures

2024-12-23 compared with 2024-09-11 · 22 added, 41 removed, 20 unchanged (76% of the section changed)

1 unchanged sentence

Evaluation of Disclosure Controls and Procedures

The Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of July 31, 2024.

This evaluation included consideration of the controls, processes and procedures that are designed to ensure that information required to be disclosed by the Company in the reports the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and to provide reasonable assurance that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

1 unchanged sentence

Material Weaknesses in Internal Control Over Financial Reporting

As previously reported, we have material weaknesses in the Company's internal control over information technology general controls ("ITGC"), financial reporting relating to the review and approval of manual journal entries, timely review of the financial close process, and timely review of certain financial policies and procedures and respective HR policies.

The Company also did not maintain effective controls at certain operating locations in the Middle East and North Africa ("MENA"), specifically the Company did not maintain sufficient documentation to support an evaluation that controls over business processes were operating effectively.

These deficiencies led management to conclude that a material weakness existed with respect to the Company's internal control over financial reporting.

The material weakness did not result in any material misstatements to the Company’s consolidated financial statements.

As a result of these material weaknesses, there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.

There are material weaknesses in the Company's internal control over financial reporting, as follows.

We did not design and maintain effective controls in response to the risks of material misstatement.

Specifically, changes to existing controls or the implementation of new controls have not been sufficient to respond to changes to the risks of material misstatement in financial reporting.

This contributed to the following material weaknesses:

We did not design and maintain effective controls over information technology general controls ("ITGC"), specifically related to the policies and procedures over the timely review of security management and monitoring, user access and security administration, password control, administrative access, program change management, data security and back up, review of third-party SOC1 reports, and related management's review of the completeness and accuracy of certain system-generated reports.

These material weaknesses did not result in a misstatement to the Company's annual or interim financial statements.

Additionally, we did not design and maintain effective controls over certain controls over financial reporting relating to the review and approval of manual journal entries, review of the financial close process, including the statement of cash flows, and review of certain financial policies and procedures and respective HR policies.

We also did not design and maintain effective controls at operating locations in the Middle East and North Africa ("MENA"), including not maintaining sufficient documentation to support an evaluation that controls over business processes were designed and operating effectively.

These material weaknesses resulted in adjustments to property, plant, and equipment, net of accumulated depreciation, trade accounts payable, trade accounts receivable, and the statement of cash flows.

These adjustments resulted in a revision of the unaudited consolidated financial statements as of and for the period ended April 30, 2024, a restatement as of and for the period ended July 31, 2024 and material adjustments as of and for the period ended October 31, 2024.

Additionally, there is a reasonable possibility that each of these material weaknesses could result in material misstatements of substantially all accounts and disclosures in the Company's annual or interim financial statements that would not be prevented or detected on a timely basis.

Remediation Plan for the Material Weaknesses in Internal Control over Financial Reporting

1 unchanged sentence

Our ongoing remediation plans include the following:

(i) addressing the identified issues with control owners, including Company leadership and IT personnel;

(ii) engaging outside consultants with expertise relating to ITGCs to document processes, assist in addressing the design and operating business process controls, monitoring and testing reviews focusing on systems supporting our financial reporting process (iii) developing and maintaining documentation underlying ITGCs for knowledge transfer and function changes, including access control and change management;

and (iv) outsourcing certain functions to third-party providers, specifically relating to servers and firewalls, and managed detection and response.

Our remediation plans related to entity level controls and business process controls over MENA locations include:

(i) designing and implementing controls to identify and evaluate changes in our business and the impact on our internal control over financial reporting;

(ii) addressing the identified issues with control owners, including Company leadership and IT personnel;

(iii) engaging outside consultants with expertise relating to ITGCs to document processes, assist in addressing the design and operating ITGCs controls, monitoring and testing reviews focusing on systems supporting our financial reporting process (iv) developing and maintaining controls and documentation evidencing those controls underlying ITGCs for knowledge transfer and function changes, including access and program control and change management, data security and back up, reviewing third party SOC1 reports, and reviewing the completeness and accuracy of certain system-generated reports;;

and (v) outsourcing certain functions to third-party providers, specifically relating to servers and firewalls, and managed detection and response.

Our remediation plans related to entity level controls, financial reporting controls, and business process controls include:

(i) enhancing the design of controls for the review of and posting of a complete set of journal entries;

(ii) evaluating and updating documented formal accounting policies, financial reporting, HR, and financial processes;

and overall internal control procedures;

and (iii) updating the design of controls for the preparation and review of the statement of cash flows.

Our remediation plans related to our MENA locations include:

(i) addressing issues with control owners, including company leadership;

6 unchanged sentences

The remediation processes and procedures will also need to be in operation for a period of time and management conclude through testing, that these controls are operating effectively.

Accordingly, the material weaknesses are not remediated as of July 31, 2024.

Change in Internal Control over Financial Reporting .

1 unchanged sentence

PART II OTHER INFORMATION

Certificate of Incorporation of Perma-Pipe International Holdings, Inc.

[Incorporated by reference to Exhibit 3.3 to Registration Statement No.

Certificate of Amendment to Certificate of Incorporation of Perma-Pipe International Holdings, Inc.

[Incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on March 20, 2017]

Fifth Amended and Restated By-Laws of Perma-Pipe International Holdings, Inc.

[Incorporated by reference to Exhibit 3.2 to the Company's Current Report on Form 8-K filed on May 6, 2019]

Perma-Pipe International Holdings, Inc.

2024 Omnibus Stock Incentive Plan [Incorporated by reference to Appendix A to the Company's Definitive Proxy Statement on Schedule 14A filed on June 21, 2024]*

Rule 13a - 14(a)/15d - 14(a) Certifications

(1) Chief Executive Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Rule 13a - 14(a)/15d - 14(a) Certifications

(2) Chief Financial Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Section 1350 Certifications (Chief Executive Officer and Chief Financial Officer certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)

Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)

Inline XBRL Taxonomy Extension Schema

Inline XBRL Taxonomy Extension Calculation

Inline XBRL Taxonomy Extension Definition

Inline XBRL Taxonomy Extension Labels

Inline XBRL Taxonomy Extension Presentation

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*Management contracts and compensatory plans or agreements

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Perma-Pipe International Holdings, Inc.

September 11, 2024

President and Chief Executive Officer

(Principal Executive Officer)

September 11, 2024

/s/ Matthew E.

Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)

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 4. Controls and Procedures