Perma-Pipe International Holdings Inc

(1) Financial Statements - Consolidated Financial Statements of the Company

Refer to Part II, Item 8 of this report.

(2) Financial Statement Schedules

Schedule II - Valuation and Qualifying Accounts

(3) Report of Registered Public Accounting Firm (PricewaterhouseCoopers LLP, Houston, Texas, Auditor Firm ID 238)

(4) Report of Registered Public Accounting Firm (Grant Thornton LLP, Houston, Texas, Auditor Firm ID 248)

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Perma-Pipe International Holdings, Inc.

Opinion on the financial statements

We have audited the accompanying consolidated balance sheet of Perma-Pipe International Holdings, Inc. and its subsidiaries (the "Company") as of January 31, 2025, and the related consolidated statements of operations, of comprehensive income, of stockholders’ equity and of cash flows for the year then ended, including the related notes and schedule of valuation and qualifying accounts for the year then ended appearing under Item 15, (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of January 31, 2025, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

Basis for opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

Critical audit matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Specialty Piping Systems and Coating Revenue Recognition under the Input Method

As described in Notes 2 and 4 to the consolidated financial statements, approximately $46 million of the Company’s revenue for year ended January 31, 2025 relates to specialty piping systems and coating revenue recognized over time under the input method. Under this approach, income is recognized in each reporting period based on the status of the uncompleted contracts and the current estimates of costs to complete. The amount of revenue recognized is determined by the relationship of costs incurred to the total estimated costs of the contract. Generally, these contracts are considered a single performance obligation satisfied over time and due to the custom nature of the goods and services, the "over time" method is the most accurate depiction of the Company’s performance as it measures the value of the goods and services transferred to the customer. Costs include material, labor, and direct costs incurred to satisfy the performance obligations of the contract. Revenue recognition begins when project costs are incurred.

The principal considerations for our determination that performing procedures relating to specialty piping systems and coating revenue recognition under the input method is a critical audit matter are (i) the significant judgment by management when developing the estimated total costs to complete the contracts and (ii) a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating management’s significant assumptions related to the total costs to complete.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among others, for certain open contracts (i) testing management’s process for developing the estimated total costs to complete and (ii) evaluating the reasonableness of the significant assumptions used by management related to the estimated total costs to complete. Evaluating the reasonableness of the significant assumptions related to the estimated total costs to complete involved considering (i) the terms of the contracts and other documents that support those estimates ; (ii) using actual costs to date to assess the reasonableness of the estimate of the remaining costs to complete the contract; and (iii) performing a retrospective review of certain open contracts as of January 31, 2024 to evaluate actual costs incurred to estimated costs.

/s/ PricewaterhouseCoopers LLP

Houston, Texas

May 1, 2025

We have served as the Company’s auditor since 2024.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

Perma-Pipe International Holdings, Inc.

Opinion on the financial statements

We have audited the accompanying consolidated balance sheet of Perma-Pipe International Holdings, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of January 31, 2024, the related consolidated statement

of operations, comprehensive income, stockholders’ equity, and cash flows for the period ended January 31, 2024, and the related notes and financial statement schedule included in Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of January 31, 2024, and the results of its operations and its cash flow for the period ended January 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

Basis for opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor from 2004 to 2024.

Houston, Texas

April 26, 2024 (except for Note 13, as to which the date is May 1, 2025)

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

See accompanying Notes to Consolidated Financial Statements.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In thousands, except share data)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED JANUARY 31, 2025 AND 2024

(Tabular amounts in thousands, except per share data, or unless otherwise specified)

Note1 - Business information

Perma-Pipe International Holdings, Inc. ("PPIH", the "Company", "we", "our" or the "Registrant") was incorporated in Delaware on* October**12,* 1993. The Company is engaged in the manufacture and sale of products inone distinct segment: Piping Systems.

Fiscal year.The Company's fiscal year ends on January 31.Years, results and balances described as2024 and2023 are for the fiscal years ended January 31, 2025and2024, respectively.

***Nature of business.*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 ("DHC") 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 maycontaminate the environment, endanger personal safety, cause a fire hazard, impair essential services or damage equipment or property.

**Geographic information.Net sales attributed to a geographic area are based on the destination of the product shipment. Sales to foreign customers were 66.6% in2024 compared to 65.6% in2023. Long-lived assets are based on the physical location of the assets and consist of property, plant and equipment.

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Note2 - Significant accounting policies

*********Use of estimates.***The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue recognition.During2024 and2023 and in accordance with Accounting Standards Codification ("ASC")606, Revenue from Contracts with Customers, the Company recognizes revenue for certain contracts when a customer obtains control of promised goods or services. Other contracts recognize revenues using periodic recognition of income. For these contracts, the Company uses the "over time" accounting method. Under this approach, income is recognized in each reporting period based on the status of the uncompleted contracts and the current estimates of costs to complete. The amount of revenue recognized is determined by the relationship of costs incurred to the total estimated costs of the contract. Provisions are made for estimated losses on uncompleted contracts in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability, including those arising from contract penalty provisions and final contract settlements, mayresult in revisions to costs and income. Such revisions are recognized in the period in which they are determined. Claims for additional compensation due to the Company are recognized in contract revenues when realization is probable, the amount can be reliably estimated, and the amount isnot subject to reversal. See Note4 - Revenue recognition, in the Notes to Consolidated Financial Statements, for further information relating to input and output accounting methods.

*********Shipping and handling.***Shipping and handling costs are included in cost of sales, and the amounts invoiced to customers relating to shipping and handling are included in net sales.

**Operating cycle.The length of contracts varies but are typically less thanone year. The Company includes in current assets and liabilities amounts realizable and payable in the normal course of contract completion unless completion of such contracts extends significantly beyondone year.

*********Consolidation.***The consolidated financial statements include the accounts of the Company and its subsidiaries. This includes all wholly owned subsidiaries as well as certain joint ventures in which the Company has a controlling financial interest. All intercompany balances and transactions have been eliminated.

********Translation of foreign currency.Assets and liabilities of consolidated foreign subsidiaries are translated into U.S. dollars at exchange rates in effect at year-end. Revenues and expenses are translated at average exchange rates prevailing during the year. The resulting translation adjustments are included in stockholders' equity as part of accumulated other comprehensive loss. Gains or losses on foreign currency transactions and the related tax effects are reflected in net income. The aggregate foreign exchange transaction loss recognized in the income statement was $0.3 million and $0.1 million in2024 and2023, respectively. Additionally, translation adjustments attributable to intercompany transactions, such as loans and receivables, are included in stockholders' equity as part ofaccumulated other comprehensive loss.

*********Contingencies.*The Company is subject to various legal proceedings and claims that arise in the ordinary course of business, including those involving environmental, tax, product liability and general liability claims. The Company accrues for such liabilities when it is probable that future costs will be incurred, and the amount can be reasonably estimated. Such accruals are based on developments to date, the Company's estimates of the outcomes of these matters, and its experience in contesting, litigating and settling other similar matters. The Company doesnot currently anticipate the amount of any ultimate liability with respect to these matters will materially affect the Company's financial position, liquidity, or future operations.

**Cash and cash equivalents.All highly liquid investments with a maturity ofthree months or less when purchased are considered to be cash equivalents. Cash and cash equivalents was $15.7 million and $5.8 million as of January 31, 2025 and2024, respectively. On January 31, 2025, $0.3 million was held in the United States and $15.4 million was held by foreign subsidiaries. On January 31, 2024, less than $0.1 million was held in the United States and $5.7 million was held by foreign subsidiaries.

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Restricted cash.There wasno restricted cash held in the United States on January 31, 2025 or2024. Restricted cash held by foreign subsidiaries was $1.4 million and $1.4 million as of January 31, 2025 and2024, respectively. Restricted cash held by foreign subsidiaries related to fixed deposits that also serve as security deposits and guarantees.

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. In the United States, collateral isnot generally required. 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 net30 to60 days. The Company maintains an allowance for credit losses for accounts receivable. The assessment of the allowance for credit losses involves certain judgments and estimates. Management estimates the allowance balance using relevant available information from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts. The Company* mayalso establish an allowance for credit losses for specific receivables when it is probable that a specific receivable willnot* be collected and the loss can be reasonably estimated. 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 credit losses.

For the years ended* January 31, 2025* and2024, respectively, no one customer accounted for greater than10% of the Company's consolidated net sales.

As of* January 31, 2025* and2024, respectively, no one customer accounted for greater than10% of accounts receivable.

*********Concentration of credit risk.*The Company maintains its U.S. cash in bank deposit accounts at financial institutions that are insured by the Federal Deposit Insurance Corporation ("FDIC"). Cash balances are below FDIC limits. The Company hasnot experienced any losses in such accounts. The Company's foreign cash is held in accounts at multiple institutions in the various countries in which the Company operates, limiting the concentration of risk internationally. The Company has a broad customer base doing business in all regions of the United States as well as other areas in the world.

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***Accumulated other comprehensive loss.***Accumulated other comprehensive loss represents the change in equity from non-owner transactions and consists of foreign currency translation.

***Inventories.*Inventories are stated at the lower of cost or net realizable value. Cost is determined using thefirst-in,first-out method for all inventories.

**Long-lived assets.Property, plant and equipment are stated at cost. Interest is capitalized in connection with the construction of facilities and amortized over the estimated useful life of the asset. Long-lived assets are reviewed for possible impairment whenever events indicate that the carrying amount of such assets maynot be recoverable. If such a review indicates impairment, the carrying amount of such assets is reduced to an estimated fair value.

Depreciation is computed using the straight-line method over the estimated useful lives of assets, as presented in the following table. Leasehold improvements are depreciated over the remaining life of the lease or its useful life, whichever is shorter. Amortization of finance lease assets is included in depreciation. Depreciation expense was approximately $3.6 million and $3.8 million in the years ended* January 31, 2025* and2024, respectively.

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 January 31, 2025, the Company performed an assessment to determine whether there were any triggering events that mayhave occurred which could indicate that the carrying value of the Company's long-lived assets arenot recoverable. Based on this assessment, the Company didnot identify any triggering events that would indicate that the carrying amounts maynot be recoverable with respect to long-lived assets. Accordingly, there wasno impairment charge for the year ended* January 31, 2025*.

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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* January 31, 2025* and2024, is attributable to the purchase of the remaining50% interest in Perma-Pipe Canada, Ltd., which occurred in2016.

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

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. At January 31, 2025*, the Company performed a qualitative assessment to determine whether there were any triggering events that* mayhave occurred which could indicate that more likely thannot* that the fair value of the reporting unit didnot exceed its carrying amount. Based on this assessment, the Company didnot identify any triggering events that would indicate that the fair value is less than the carrying value of the reporting unit for the year ended* January 31, 2025*. Accordingly, performing a quantitative goodwill impairment test wasnot required.

Other intangible assets with definite lives.The Company owns several patents including those covering features of its piping and electronic leak detection systems. Patents are capitalized and amortized on a straight-line basis over a periodnot to exceed the legal lives of the patents. The Company expenses costs incurred to renew or extend the term of intangible assets. Gross patents were $2.7 million as of January 31, 2025 and2024. Accumulated amortization was approximately $2.6 million as of January 31, 2025 and2024. Amortization over the nextfive fiscal years will be less than $0.1 million and an insignificant amount thereafter. Amortization expense is expected to be recognized over the weighted-average period of 9.1 years.

**Research and development.Research and development expenses consist of materials, salaries and related expenses of engineering personnel and outside services for product development projects. Research and development costs are expensed as incurred. Research and development expense was approximately $0.1 million and $0.5 million in the years ended January 31, 2025 and2024, respectively.

**Income taxes.Deferred income taxes have been provided for temporary differences arising from differences in the basis of assets and liabilities for tax and financial reporting purposes. Deferred income taxes on temporary differences have been recorded at the current tax rate. The Company assesses its deferred tax assets and liabilities for realizability at each reporting period. A valuation allowance is recorded to reduce deferred tax assets when it is more likely thannot that a tax benefit willnot be realized.

The Company recognizes a tax position in its consolidated financial statements only after determining that the relevant tax authority would more likely thannot sustain the position following an audit. For tax positions meeting the more likely thannot threshold, the amount recognized in the financial statements is the largest benefit that has a greater than50% likelihood of being realized upon ultimate settlement with the relevant tax authority. For further information, see Note7 - Income taxes.

One of the base broadening provisions of the U.S. Tax Cuts and Jobs Act of2017 ("Tax Act") is the Global Intangible Low-Taxed Income provisions ("GILTI"). In accordance with guidance issued by the Financial Accounting Standards Board ("FASB") staff, the Company has adopted an accounting policy to treat any GILTI inclusions as a period cost if and when incurred. Thus, for the years ended* January 31, 2025* and2024, deferred taxes were computed without consideration of the possible future impact of the GILTI provisions, and any current year impact was recorded as a part of the current portion of income tax expense.

****Fair value of financial instruments. The Company classifies cash and cash equivalents, accounts receivable, and accounts payable based on carrying values that approximate their fair value due to the short-term nature of these instruments. 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 rates.

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Net income per common share.Earnings per share ("EPS") is computed by dividing net income by the weighted average number of common shares outstanding (basic). The Company reported net income in2024 and2023. The Company adjusted for dilutive shares in2024 and2023, assuming conversion, exercise, or contingent issuance of securities that would have an anti-dilutive effect on earnings per share. The dilutive shares are in the following table:

***Equity-based compensation. The Company issues or has issued various types of stock-based awards to employees and directors: restricted stock, deferred stock and stock options. Non-cash compensation expense associated with restricted stock is based on the fair value of the common stock at the grant date, and amortized using the straight line method over avesting period range ofone tofour years. Compensation expense associated with deferred stock which has been awarded to the Board of Directors (non-employee) is based upon the fair value of the common stock at the date of grant, and since the grant vests immediately it is expensed on the date of the grant. Stock ***compensation expense for stock options is recognized ratably over the requisite service period of the award. The Black-Scholes option-pricing model is utilized to estimate the fair value of option awards.

****Treasury Stock. In accordance with ASC505, Equity, the Company accounts for share repurchases pursuant to the repurchase program under the cost method. This results in recognizing the shares as treasury stock, a reduction of stockholders' equity on the Company's consolidated balance sheets and on the Company's consolidated statements of stockholders' equity. These amounts include costs associated with the acquisition of the shares. See Note11 - Treasury stock for further detail.

****Segments. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker ("CODM") in making decisions regarding resource allocation and assessing performance. The Company’s Chief Executive Officer is the CODM, and he uses the Company's consolidated financial information in determining how to allocate resources and assess performance. The Company has determined that it operates asone segment.

Recent accounting pronouncements. In* November 2023,the FASB issued ASUNo.* 2023-07, Segment Reporting (Topic280**):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 adopted this standard update in fiscal2024.* The standard adoption resulted in additional disclosures but didnot have a material impact on the consolidated financial statements. See Note13 - Segment reporting, in the Notes to Consolidated Financial Statements for related disclosures.

In* December 2023,the FASB issued ASUNo.* 2023-09, Income Taxes (Topic740**):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 standard update is to be applied prospectively, with retrospective application permitted. The new income tax disclosures are effective for fiscal years beginning after* December 15, 2024,with early adoption permitted. The Company is still evaluating this standard update but doesnot* expect it to have a material impact on its consolidated financial statements.

In* November 2024,the FASB issued ASUNo.* 2024-03, Income Statement - Disaggregation of Income Statement Expenses (Subtopic220*-40). The standard update requires additional disclosures related to the disaggregation of income statement expenses. The disaggregation of income statement expense disclosures set forth in this standard update is effective for annual periods beginning after December 15, 2026and interim periods within fiscal years beginning after December 15, 2027,with early adoption permitted. The Company is still evaluating the impact this standard update but doesnot* expect it to have a material impact on its consolidated financial statements.

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Note3 - Retention

A retention receivable is a portion of an outstanding receivable balance amount withheld by a customer until a contract is fully completed as specified in the contract. As of* January 31, 2025* and2024, the Company had short-term retention receivables of $3.3 million and $2.4 million, respectively, which were included as a component of trade accounts receivable. Additionally, the Company had long-term retention receivables of $2.6 million and $1.7 million as of* January 31, 2025* and2024, respectively. The long-term retention receivable balances were included as a component of other long-term assets in the Company's consolidated balance sheets. See Note2 - Accounts receivable for further information regarding the future realization of these long-term balances.

In2015, the Company completed a project in the Middle East with billings in the aggregate amount of approximately $41.9 million. The system hasnot yet been commissioned by the customer. Nevertheless, the Company has settled approximately $40.1 million as of* January 31, 2025*, 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 retention amount, $1.2 million is classified as a long-term asset.

The Company has been actively engaged in ongoing collection efforts with the customer to ensure full payment of open balances, and at various times throughout2025 and2024, the Company received a partial payment to settle $0.4 million and $0.6 million of the customer's outstanding balances, respectively, including an additional $0.6 million that was received subsequent to the end of the year. Additionally, the Company has been engaged by the customer to perform additional work in2025 under customary trade credit terms that support the continued cooperation between the Company and the customer. As a result, the Company didnot reserve any allowance against this outstanding receivable as of* January 31, 2025*. However, if the Company's efforts to collect on this account arenot successful, the Company* may*recognize an allowance for all, or substantial all, of any such uncollected amounts.

For further information regarding accounts receivable, see Note2 - Significant accounting policies, in the Notes to Consolidated Financial Statements.

Note4 - Revenue recognition

The Company accounts for its revenues under ASC606, 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 intotwo main categories:

In accordance with ASC606-10-25-27 through29, the Company recognizes specialty piping and coating systems revenue over time as the manufacturing process progresses becauseone of the following conditions exist:

Products revenue is recognized when goods are shipped or services are performed (ASC606-10-25-30).

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A breakdown of the Company's revenues by revenue class for the years ended* January 31, 2025* and2024 are as follows:

The input method is used by certain 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 "over time" method is the most accurate depiction of the Company’s performance as it measures the value of the goods and services transferred to the customer. Costs include all material, labor, and direct costs incurred to satisfy the performance obligations of the contract. Revenue recognition begins when projects costs are incurred.

The output method 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 donot 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 are made for estimated losses on uncompleted contracts in the contract liabilities account in the period in which such losses are determined.

The transaction price associated with the Company's contracts with customers are generally determined based on the fixed amount of consideration as specified in a contract that is generallynot subject to change. Additionally, from time to time the transaction price* mayalso include variable consideration in certain instances where it is deemed probable that a significant reversal of cumulative revenue recognized willnot* occur. The aggregate of these amounts represents the total transaction price, which excludes amounts that are attributable to sales and value added taxes, or amounts collected on behalf ofthird parties. The total transaction price is then allocated to the performance obligations that is eventually recognized as revenue based on the project type and the method that is used to measure the transfer of promised goods and services to customers. Additionally, transaction prices relating to cost-plus contracts are determined by applying the applicable profit margin to costs incurred on contracts, whereas transaction prices relating to fixed price contracts are determined on a lump-sum basis. Further, standard payment terms are generally net30 to60 days, which is customer specific.

Contract assets and liabilities

Contract assets represent revenue recognized in excess of amounts billed 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 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 impact the period end balances in these accounts. In addition, contract assets include receivables or amounts that are billable beyond the passage of time. For additional information, see Note3 - Retention, in the Notes to Consolidated Financial Statements, andUnbilled accounts receivable, as further described below.

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The Company anticipates that substantially all costs incurred on uncompleted contracts as of* January 31, 2025* will be billed and collected withinone year.

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

Substantially all of the $0.5 million and $1.3 million contract liabilities balances at* January 31, 2024* and2023, respectively, were recognized in revenues during2024 and2023, respectively.

Unbilled accounts receivable

The Company has recorded $18.9 million and $16.6 million of unbilled accounts receivable on the consolidated balance sheets as of* January 31, 2025* and2024, respectively, 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* January 31, 2025* will be billed withinone year.

Practical expedients

Costs to obtain a contract arenot considered to be incremental or material, and project duration generally doesnot span more thanone year. Accordingly, the Company applies a practical expedient for these types of costs and as such, are expensed in the period incurred.

As a result of the Company's contracts having a duration of less thanone 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.

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Note5 - Debt

The following table summarizes the Company's scheduled maturities in each of the nextfive fiscal years:

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 athree-year $18 million Senior Secured Revolving Credit Facility, subject to a borrowing base including various reserves (the “Senior Credit Facility”).

On* September 17, 2021,*the North American Loan Parties executed an extension of the Credit Agreement with PNC, providing for a newfive-year $18 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 have used and will continue to use borrowings under the Renewed Senior Credit Facility (i) to fund future capital expenditures; (ii) to fund ongoing working capital needs; and (iii) for other corporate purposes, including potentially additional stock repurchases. Borrowings under the Renewed Senior Credit Facility bear interest at a rate equal to an alternate base rate, SOFR rate index, plus, in each case, an applicable margin. The applicable margin is based on a fixed charge coverage ratio ("FCCR") range. Interest on alternate base rate borrowings is 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 SOFR rate borrowings is the SOFR 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, as well as an additional SOFR adjustment ranging from 0.10% to 0.25%, based on the term of the interest period. Additionally, the Borrowers 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 are secured by substantially all of the North American Loan Parties’ assets. The Renewed Senior Credit Facility matures 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 maynot* make capital expenditures in excess of $5.0 million annually, plus a limited carryover of unused amounts. Further, the North American Loan Parties* maynot* make repurchases of the Company's common stock in excess of $3.0 million.

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The Renewed Senior Credit Facility also contains financial covenants requiring the North American Loan Parties to achieve a ratio of its EBITDA (as defined in the Renewed Senior Credit Facility) 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 benot less than 1.10 to1.00 for anyfive consecutive days in which the undrawn availability is less than $3.0 million or any day in which the undrawn availability is less than $2.0 million. As of* January 31, 2025*, the calculated ratio was greater than 1.10 to1.00. In order to cure any future breach of these covenants by the North American Loan Parties, the Company* mayrepatriate cash from any of its foreign subsidiaries that are otherwisenot* 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* January 31, 2025*.

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.

As of* January 31, 2025*, the Company had borrowed an aggregate of $6.8 million at a rate of 9.0% and had $3.7 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.

Finance obligation - buildings and land. On* April 14, 2021,the Company entered into a purchase and sale agreement (the "Purchase and Sale Agreement") to sell its land and building in Lebanon, Tennessee (the "Property"). Pursuant to the terms of the Purchase and Sale Agreement, the Company sold the Property for $10.4 million. The transaction generated net cash proceeds of $9.1 million. Concurrently with the sale of the Property, the Company paid off the approximately $0.9 million remaining on the mortgage note on the Property to its lender. The Company used the remaining proceeds to repay its borrowings under the Senior Credit Facility, for strategic investments, and for general corporate needs. Concurrent with the sale of the Property, the Company entered into afifteen-year lease agreement (the “Lease Agreement”), whereby the Company is leasing 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 hasfour consecutive options to extend the term of the lease byfive years for each such option. As of January 31, 2025* and2024, the Company had a net book value relating to this asset of $1.8 million and $1.9 million, respectively.

In accordance with ASC842, 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 $0.2 million is recognized in current maturities of long-term debt and the long-term portion of $8.8 million is recognized in long-term finance obligation on the Company's consolidated balance sheets as of* January 31, 2025*. The net carrying amount of the financial liability and remaining assets will bezero at the end of the lease term.

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

United Arab Emirates

The Company has a revolving line for 8.0 million U.A.E. Dirhams (approximately $2.2 million at* January 31, 2025*) from a bank in the U.A.E. As of* January 31, 2025*, the facility has an interest rate of approximately 7.9% and expires in* July* 2025. The Company had borrowed an aggregate of $0.4 million and $0.2 million as of* January 31, 2025* 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* January 31, 2025* and* January 31, 2024*, the Company had unused borrowing availability of approximately $1.6 million and $1.9 million, respectively.

The Company has a revolving line for 65.2 million U.A.E. Dirhams (approximately $17.7 million at* January 31, 2025*) from a bank in the U.A.E. As of* January 31, 2025*, the facility has an interest rate of approximately 7.9% and expires in* August**2025.* The Company had borrowed an aggregate of $0.1 million as of* January 31, 2025* 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* January 31, 2025* and* January 31, 2024*, the Company had unused borrowing availability of approximately $9.0 million and $1.0 million, respectively.

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Egypt

In* 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 $2.0 million at January 31, 2025*). This credit arrangement is in the form of project financing at rates competitive in Egypt. The line is secured by certain assets (such as accounts receivable) 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. As of* January 31, 2025*, the facility has an interest rate of approximately 20.8%. Additionally, this credit arrangement was renewed in* November 2024with substantially the same terms and conditions and expires in November* 2025. As of* January 31, 2025*, the Company had an immaterial amount outstanding with respect to this credit arrangement, and approximately $1.4 million outstanding at* January 31, 2024*, respectively, and is presented as a component of current maturities of long-term debt in the Company's consolidated balance sheets. Further, as of * January 31, 2025* and * January 31, 2024* , the Company had unused borrowing capacity of $2.0 million and $3.2 million, respectively.

In* December 2021,the Company entered into a credit arrangement for project financing with a bank of Egypt for 28.2 million Egyptian Pounds. As this project has progressed and the Company received collections, the facility has decreased to a current amount of 2.1 million Egyptian Pounds (approximately $0.1 million at January 31, 2025*). 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 20.8% and, as of* November 2022,isno longer available for borrowings by the Company. The facility will expire in connection with final customer balance collections and the completion of the project. As of January 31, 2025*, the Company had an insignificant amount outstanding, and approximately $0.1 million outstanding at* January 31, 2024*, respectively, and is presented as a component of current maturities of long-term debt in the Company's consolidated balance sheets.

Saudi Arabia

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 Riyal (approximately $ 9.9 million at * January 31, 2025 ). This credit arrangement is in the form of project financing at rates competitive in Saudi Arabia. The line is secured by certain assets (such as accounts receivable) of the Company's Saudi Arabian subsidiary. The facility was renewed in* May 2024with substantially the same terms and conditions and expires in May 2025.As of * January 31, 2025 , the facility has an interest rate of approximately 9.0%. The Company had borrowed an aggregate of $1.5 million and $3.2 million as of* January 31, 2025* 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* January 31, 2025* and* January 31, 2024*, was $3.0 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. 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. The Company guarantees only a portion of the subsidiaries' debt, including foreign debt. The amount of foreign subsidiary debt guaranteed by the Company was approximately $10 million at* January 31, 2025* and* January 31, 2024*.

The Company was in compliance with the covenants under the credit arrangements in the U.A.E., Egypt and Saudi Arabia as of* January 31, 2025* . 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; (ii) either the Central Bank of Egypt corporate loan rate plus 1.5% to 3.5% per annum or the stated interest rate in the agreements for the Egypt credit arrangements; and (iii) the Saudi Inter Bank Offered Rate plus 3.5% for the Saudi Arabia credit arrangement. Based on these rates, as of* January 31, 2025*, the Company's interest rates ranged from 7.9% to 20.8%, with a weighted average rate of 11.6%, and the Company had facility limits totaling $34.6 million under these credit arrangements. As of* January 31, 2025*, $16.9 million of availability was used to support letters of credit to guarantee amounts committed for inventory purchases and for performance guarantees. Additionally, the Company had borrowed approximately $2.1 million and had an additional $15.6 million of remaining borrowing capacity available under the foreign revolving credit arrangements. The foreign revolving line balances were included as current maturities of long-term debt in the Company's consolidated balance sheets as of* January 31, 2025* 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 GIG. 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.

Mortgages.On July28, 2016, the Company entered into a mortgage agreement secured by the Company's manufacturing facility located in Alberta, Canada that matures on December23, 2042. As of* January 31, 2025*, the remaining balance on the mortgage in Canada is approximately 5.7 million Canadian Dollars ("CAD") (approximately $4.0 million at* January 31, 2025*). The interest rate is variable, and was 7.1% at* January 31, 2025*. 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* January 31, 2025* and* January 31, 2024*.

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Note6 - Leases

The Company accounts for its leases under ASC842, Leases. Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases, and are recorded on the consolidated balance sheets. Operating leases are included in operating lease right-of-use (“ROU”) assets, operating lease liabilities short-term, and operating lease liabilities long-term in the Company's consolidated balance sheets. Finance leases are included in property, plant and equipment, current maturities of long-term debt, and long-term debt less current maturities in the Company's consolidated balance sheets.

ROU assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the ROU asset is amortized over the lease term. For operating leases, interest on the lease liability and the amortization of the ROU asset result in straight-line rent expense over the lease term. For finance leases, interest on the lease liability and the amortization of the ROU asset results in front-loaded expense over the lease term. Variable lease expenses are recorded when incurred. ROU assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term.

As most of the Company's leases donot provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The incremental borrowing rate is the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term and amount equal to the lease payments in a similar economic environment.

In calculating the ROU asset and lease liability, the Company elects to combine lease and non-lease components. Additionally, the Company excludes short-term leases having an initial term of12 months or less in accordance with the new guidance as an accounting policy election, and recognizes rent expense on a straight-line basis over the lease term.

Operating Leases.In August 2020,the Company entered into a new lease in Abu Dhabi for land upon which the Company has built a production facility. The annual payments are approximately 1.2 million U.A.E. Dirhams (approximately $0.3 million at January 31, 2025), inclusive of rent and common charges, with escalation clauses in the agreement. Rent payments were deferred until August 2022and have now commenced. The lease expires in August 2050.

In* Marchand December 2022,the Company served Notices of Termination to its lessor for the Company's lease of the land and buildings in Fujairah in the U.A.E. The Company served the Notices of Termination in connection with the Company's intended relocation to a different facility in Abu Dhabi. The Company vacated portions of the leased space in December 2022and the remaining space was vacated in December**2024.* Thefirst Notice of Termination required that the Company pay an additional amount equal tothree 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* January 31, 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* January 31, 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, 2024*. There wereno other adjustments in connection with these terminations for the year ended* January 31, 2025*.

At* January 31, 2025*, the Company had total operating lease liabilities of $8.8 million and operating ROU assets of $8.2 million, which are reflected in the consolidated balance sheets.

Finance Leases.The Company has several lease agreements, with lease terms ofone tofifteen years, which consist of real estate, vehicles and office equipment leases. These leases donot 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 havenot been included in the calculation of the lease liabilities and ROU assets as the Company isnot reasonably certain to exercise the options. Variable expenses generally represent the Company’s share of the landlord’s operating expenses. The Company doesnot have any arrangements where it acts as a lessor, other thanone sub-lease arrangement.

At* January 31, 2025*, the Company also had finance lease liabilities of $0.1 million included incurrent maturities of long-term debt andlong-term debt less current maturities, and finance ROU assets of $0.3 million which were included inproperty plant and equipment, net of accumulated depreciation in the consolidated balance sheets.

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Supplemental balance sheet information related to leases is as follows:

Total lease costs consist of the following:

(1) Includes variable lease costs, which arenot material

Supplemental cash flow information related to leases is as follows:

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

Maturities of lease liabilities as of* January 31, 2025*, are as follows:

Rent expense on operating leases, which is recorded on a straight-line basis, was $2.5 million and $2.4 million for the years ended* January 31, 2025* and2024, respectively.

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Note7 - Income taxes

(1) The domestic loss from continuing operations before income taxes includes corporate overhead costs.

As a result of theone-time transition tax from the U.S. Tax Cuts and Jobs Act of2017 (“Tax Act”), the Company estimates that distributions from foreign subsidiaries willno longer be subject to incremental U.S. federal income tax as they will either be remittances of previously taxed earnings and profits or eligible for a full dividends received deduction to offset any U.S. federal income tax liability on the undistributed earnings. However, upon repatriation, various state taxes and foreign withholding taxes* maybe levied on such amounts. Determination of the amount of unrecognized state and local tax liability isnot* practicable due to the complexities associated with its hypothetical calculation. Current and future earnings in the Company's subsidiaries in Canada and Egypt arenot permanently reinvested. Earnings from these subsidiaries are subject to tax in their local jurisdiction, and withholding taxes in these jurisdictions are considered. The Company's liability was $0.8 million as of* January 31, 2025* and2024, related to these taxes.

U.S. income and foreign withholding taxes havenot been recognized on the excess of the amount for financial reporting over the tax basis of investments in foreign subsidiaries that is indefinitely reinvested outside the United States. The Company intends to permanently reinvest the undistributed earnings of its Middle Eastern and Indian subsidiaries. The Middle Eastern and Indian subsidiaries have unremitted earnings of $50.6 million and $13.3 million, respectively, as of* January 31, 2025*. Unremitted earnings of $25.9 million in the United Arab Emirates wouldnot be subject to withholding tax in the event of a distribution, and $24.7 million of unremitted earnings in Saudi Arabia would be subject to withholding tax of $1.2 million. The Company hasnot recorded a deferred tax liability related to any financial reporting basis over tax basis in connection with the Company's investment in these foreign subsidiaries as it isnot practical to estimate.

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The difference between the provision for income taxes and the amount computed by applying the U.S. Federal statutory rate of21% was as follows:

The Company's worldwide effective tax rates ("ETR") were 29.1% and (33.6%) in the year ended* January 31, 2025* and2024, respectively. The change in the ETR was largely due to changes in the mix of income and loss in various tax jurisdictions, and the release of the partial domestic valuation allowance in the prior year.

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As of* January 31, 2025* and2024, the Company had deferred tax assets of $4.9 million and $6.2 million, respectively, related to gross U.S. Federal net operating loss ("NOL") carryforwards of $23.8 million and $30.1 million, respectively. Of this amount, $16.4 million will begin to expire between tax years2036 and2037, with the remaindernot subject to expiration. As of* January 31, 2025* and2024, the Company had deferred tax assets of $1.5 million related to gross state NOLs of $21.9 million and $21.0 million, respectively, that expire between2025 and2044. The Company has released the valuation allowance recorded against U.S. Federal NOLs during the year ended* January 31, 2024*, and continues to maintain a valuation allowance against its state NOLs. As of* January 31, 2025* and2024, the Company had deferred tax assets of $0.3 million related to gross foreign NOLs of $1.3 million for its subsidiary in Saudi Arabia, which can be carried forward indefinitely and doesnot have a valuation allowance recorded against it. The ultimate realization of the tax benefit is dependent upon the future generation of taxable income in the respective tax jurisdictions.

The Company periodically reviews the adequacy of its valuation allowance in all of the tax jurisdictions in which it operates, evaluates future sources of taxable income and tax planning strategies and* may*make further adjustments based on management's outlook for continued profits in each jurisdiction.

Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit the use of the existing deferred tax assets. A significant piece of objective negative evidence previously evaluated was the domestic cumulative loss incurred over athree-year period. The Company achievedthree years of cumulative income in the U.S. federal tax jurisdiction as of the period ended* January 31, 2024*. As such, management determined that the domestic deferred tax assets are more likely thannot to be realized and have released the valuation allowance accordingly during the period ended* January 31, 2024*. The Company continues to maintain a valuation allowance against certain domestic deferred tax assets including its foreign tax credit carryovers, R&D credit carryovers, and state deferred tax assets. Management has released $0.2 million of valuation allowance related to R&D credit carryovers in the period ending* January 31, 2025* based upon expectations of future taxable income. The amount of the domestic deferred tax assets considered realizable, however, could be increased if there are changes to the objective positive and negative evidence considered.

The Company has a deferred tax asset of $2.6 million for U.S. foreign tax credits after considering the impact of the repatriated foreign earnings and theone-time transition tax. The foreign tax credit deferred tax asset is fully offset with a valuation allowance. The excess foreign tax credits are subject to aten-year carryforward and will begin to expire on* January 31, 2026*.

The following table summarizes uncertain tax position ("UTP") activity, excluding the related accrual for interest and penalties:

Included in the total UTP liability were estimated accrued interest and penalties of $0.4 million as of each of* January 31, 2025* and2024. These non-current income tax liabilities are recorded in other long-term liabilities in the consolidated balance sheets and recognized as an expense during the period. The Company's policy is to include interest and penalties in income tax expense. On* January 31, 2025*, the Company didnot anticipate any significant adjustments to its unrecognized tax benefits within the nexttwelve months. Included in the balance on* January 31, 2025* were amounts offset by deferred taxes (i.e. temporary differences) or amounts that could be offset by refunds in other taxing jurisdictions (i.e., corollary adjustments). Upon reversal, $1.2 million of the amount accrued on* January 31, 2025* would impact the future ETR.

The Company is subject to income taxes in the U.S. federal jurisdiction, and various states and foreign jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. Tax years related to* January 31, 2022,2023, and2024 are open for federal and state tax purposes. In addition, federal and state tax years related to January 31,2005 through January 31,*2010, are subject to adjustment on audit, up to the amount of research tax credit generated in those years. Any NOL carryover can still be adjusted by the Internal Revenue Service in future year audits.

The Company's management periodically estimates the probable tax obligations of the Company using historical experience in tax jurisdictions and informed judgments. There are inherent uncertainties related to the interpretation of tax regulations in the jurisdictions in which the Company transacts business. The judgments and estimates made at a point in time* maychange based on the outcome of tax audits, as well as changes to or further interpretations of regulations. If such changes take place, there is a risk that the tax rate may*increase or decrease in any period. Tax accruals for tax liabilities related to potential changes in judgments and estimates for federal, foreign and state tax issues are included in other long-term liabilities on the consolidated balance sheets.

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Note8 - Retirement plans

401(k) plan

The domestic employees of the Company participate in the PPIH401(k) Employee Savings Plan, which is applicable to all employees except employees covered by collective bargaining agreement benefits. The plan allows employee pretax payroll contributions from 1% to 16% of total compensation. The Company matches 100% of each participant's payroll deferral contributions up to 1% of their compensation, plus 50% of each participant's payroll deferral contributions on the next 5% of compensation.

Contributions to the401(k) plan were $0.4 million in the years ended* January 31, 2025and2024*, respectively.

Multi-employer plans

The Company contributes to a multi-employer plan for certain collective bargaining U.S. employees. The risks of participating in this multi-employer plan are different from a single employer plan in the following aspects:

The Company has assessed and determined that the multi-employer plans to which it contributes arenot significant to the Company's consolidated financial statements. The Company doesnot expect to incur a withdrawal liability or expect to significantly increase its contribution over the remainder of the contract period. The Company made contributions to the bargaining unit supported multi-employer pension plans (in thousands):

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Note9 - Stock-based compensation

The Company has prior incentive plans under which previously granted awards remain outstanding, but under whichno new awards* maybe granted, including the Company's2021* Omnibus Stock Incentive Plan, which expired in* May 2024.At January 31, 2025*, the Company had reserved a total of 122,814 shares for grants and issuances under these incentive plans, including issuances pursuant to unvested or unexercised prior awards.

The Company's2024 Omnibus Stock Incentive Plan dated* May 28, 2024was approved by the Company's stockholders in July2024* ("2024 Plan"). The2024 Plan will expire in* July2027.* The2024 Plan authorizes awards to officers, employees, consultants and independent directors. The2024 Plan provides 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 section422 of the Internal Revenue Code.

Grants were made in connection with the2024 Plan and the prior incentive plans to employees, officers, and independent directors, as further described below:

Stock compensation expense

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

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Stock options

The Company didnot grant any stock options during the years ended* January 31, 2025* or2024. The following table summarizes the Company's stock option activity:

There wasno vesting, expiration or forfeiture of previously unvested stock options during the year ended* January 31, 2025*. In addition, there wereno remaining unvested stock options outstanding, and thereforeno unrecognized compensation expense related to unvested stock options during the year ended* January 31, 2025*.

Deferred stock

As part of their compensation, in previous years the Company granted deferred stock units to each non-employee director, equal to the result of dividing the award amount by the fair market value of the common stock on the date of grant. The stock vests on the date of grant; however, it is distributed to the directors only upon their separation from service. During the year ended* January 31, 2025*, no deferred stock units were distributed. There were approximately 62,926 deferred stock units outstanding included in the restricted stock activity shown below as of* January 31, 2025* and2024.

Restricted stock

The Company has granted restricted stock to executive officers, independent directors, and employees. The restricted stock vests ratably overone tofour years. The Company calculates restricted stock compensation expense based on the grant date fair value and recognizes expense on a straight-line basis over the vesting period. The following table summarizes the Company's restricted stock activity:

The fair value of vested restricted stock was $0.9 million and $1.1 million in the year ended* January 31, 2025* and2024 respectively. Additionally, there was $1.0 million of unrecognized compensation cost related to unvested restricted stock granted under the plans as of* January 31, 2025* and2024. These costs are expected to be recognized over the weighted-average period of 1.7 years and 1.8 years, respectively. Further, the Company had approximately 0.2 million of non-vested restricted stock granted under the plan as of* January 31, 2025*. The remaining amount of non-vested restricted stock is expected to vest over the weighted-average period of 1.7 years.

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Note10 - Interest expense

Note11 - Treasury stock

The repurchase program approved on* October 4, 2021,authorized the Company to use up to $3.0 million for the purchase of its outstanding shares of common stock. Stock repurchases were permitted to be executed through open market or privately negotiated transactions, depending upon current market conditions and other factors. On December 7, 2022,the Board of Directors authorized the use of $1.0 million remaining under the share repurchase program previously approved on October 4, 2021that expired on October 3, 2022.During the 12 months ended* * January 31, 2024,the Company used the remaining $1.0 million of the $3.0 million authorized to repurchase its outstanding shares of common stock. Accordingly, there wasno repurchase activity with respect to the Company's shares of common stock during thetwelve* months ended* January 31, 2025.*

The following table sets forth information with respect to repurchases by the Company of its shares of common stock during2023:

On* August 29, 2024,the Company retired all remaining treasury stock previously acquired under the stock repurchase program. The retirement was recorded as a reduction to common stock based on the par value of the shares, and the excess over par value was recorded as a decrease in retained earnings in accordance with ASC505*-30, Equity - Treasury Stock.

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Note12 - Joint venture and non-controlling interest

On* June 1, 2023,the Company closed on its formation of the joint venture (the "JV Agreement" or "JV") with Gulf Insulation Group ("GIG") a leading provider of pre-insulated piping systems and pipe fabrication, in which the Company acquired a 60% financial controlling interest and contributed assets consisting of a building and equipment. The JV is a limited liability company named Perma Pipe Gulf Arabia Industry and is a closed joint stock company established under laws of the Kingdom of Saudi Arabia. The JV's capital is comprised of ordinary shares with60%* owned by the Company and the remaining 40% owned by GIG. The Company expects this collaborative business arrangement to result in expanding its market presence in Saudi Arabia, Kuwait, and Bahrain. 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 a40% non-controlling interest in the JV by contributing assets (i.e. acquired by 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 athird-party appraiser using the indirect cost method.

Pursuant to the applicable guidance in ASC805, Business Combinations and Noncontrolling Interests, the Company determined that the transaction didnot meet the necessary conditions to be considered a business as the set of assets acquired didnot 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, andno gain was recognized as a result of this exchange since the Company has 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. The non-controlling interest attributable to the other party was recorded as of the investment date and was measured as part of the carrying amount of the ownership interest in the net assets given up by the Company plus the fair value of the non-controlling interest, excluding the contributed assets.No gain or loss was recognized as a result of this exchange. In connection with the joint venture, the Company also assumed a promissory note issued as part of the formation of the JV in the principal amount of $2.8 million payable to GIG. The principal amount is presented within the Long-term debt, less current maturities caption in the Company's consolidated balance sheets. The Company also has a promissory note due from the JV that was issued as part of the formation of the JV in the amount of approximately $4.2 million, which is eliminated in consolidation.

The Company has a60% controlling financial interest in the joint venture which isnot considered a wholly owned subsidiary. Accordingly, there remains a minority portion of the equity interest that is owned by athird party, GIG. Pursuant to the applicable guidance contained in ASC810, Consolidations, the balance sheets and operating activities of this investment are included in the Company's consolidated financial statements. As of* January 31, 2025*, the carrying amount of the assets and liabilities of the JV that are consolidated by the Company totaled $39.1 million and $22.1 million, respectively.

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. Additionally, the Company presents the proportionate share that is attributable to redeemable non-controlling interest as temporary equity within the consolidated balance sheets. This mezzanine presentation is the result of the non-controlling interest being subject to a put option that isnot solely within the Company's control and in connection with the equity shares of the business arrangement that is redeemable any time afterfive years following the date of incorporation. The redemption amount per the JV Agreement is at fair value of the non-controlling interest which is the fair value of ordinary shares of the JV 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 ofnot containing a net settlement provision and the sharesnot being readily convertible to cash, thereby being considered embedded with respect to non-controlling interest andnot a freestanding instrument.

As a result of the non-controlling interest being subject to redemption rights that arenot entirely within the Company's control, it was concluded that the necessary conditions were met to be accounted for in accordance with ASC480, Distinguishing Liabilities from Equity. Pursuant to this accounting standard, the Company determined that the only criteria for the security to become redeemable is the passage of time and, therefore, is considered probable of redemption. The Company made a policy election to measure changes in the non-controlling interest immediately as they occur and adjust the carrying amount of non-controlling interest equal to its redemption amount as the non-controlling interest hasno stated fixed price or fixed date. As such, at each subsequent balance sheet date following the formation of this business arrangement, the Company must determine whether further adjustment is required to increase the carrying value of the redeemable non-controlling interest. If the Company determines that the fair value of the redeemable non-controlling interest exceeds its carrying value, an adjustment is made to reflect this change. However, if the value is determined to be less than its carrying value, such adjustment is limited to its original carrying value at the formation of the business arrangement. 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 $4.1 million and $2.7 million for thetwelve months ended* January 31, 2025* and2024, 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.

The Company is the ultimate parent of the JV through its60% financial control and as part of the JV Agreement has majority control of the operational activities of the JV andno joint control exists. The JV Agreement hasno veto or kickout rights and board voting is proportional to the ownership interest. Certain activities do include atwo-third majority affirmative vote of shareholders of the JV and include acquiring another company, establishing new subsidiaries, entering another partnership or joint venture, any merger or material change to the business of the JV. These are considered protective rights. The60% equity ownership of the JV by the Company allows it to receive its proportionate share of losses and residual returns.

The non-controlling interest is measured at fair value and was $11.0 million and $6.3 million recorded within temporary equity at* January 31, 2025* and2024, respectively. The change in non-controlling interest consists of approximately $4.1 million in current year net income attributable to non-controlling interest, and approximately $0.6 million as an adjustment in the carrying value of the redeemable non-controlling interest pertaining to the business arrangement. In addition, there wereno dividends or any other form of distributions from non-controlling interest for the year ended* January 31, 2025* and2024, respectively.

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Note13 - Segment reporting

The Company operates underone segment: Piping Systems. The results are presented on an consolidated basis to the Chief Executive Officer who serves as the chief operating decision maker ("CODM"). The accounting policies of the Company's segment are the same as those described in the summary of significant accounting policies. For further information, see Note2 - Significant accounting policies, in the Notes to Consolidated Financial Statements.

The CODM regularly reviews consolidated revenues, significant expenses, and consolidated net income attributable to common stock to make operating decisions and assess performance. The CODM uses this information in making company-wide decisions when determining how to allocate resources.

Significant expenses represent amounts that are regularly provided to the CODM and included in consolidated net income attributable to common stock. Additionally, the CODM regularly reviews asset information by our reporting segment in a manner that is consistent with the presentation on the Company's accompanying consolidated balance sheets.

The following table summarizes the Company's revenues, net income attributable to common stock, and significant expenses:

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Schedule II

Perma-Pipe International Holdings, Inc. and Subsidiaries

VALUATION AND QUALIFYING ACCOUNTS

For the Years Ended January 31, 2025 and2024**

**(1)**Uncollectible accounts written off.

**(2)Impact on allowance due to foreign currency translation for the year ended January 31, 2025.

**(3)The release of valuation allowances related to deferred tax assets for the year ended January 31, 2024.

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EXHIBIT INDEX

*Management contracts and compensatory plans or agreements