The statements contained under the caption MD&A and other information contained
elsewhere in this quarterly report, which can be identified by the use of
forward-looking terminology such as "may," "will," "expect," "continue,"
"remains," "intend," "aim," "should," "prospects," "could," "future,"
"potential," "believes," "plans," "likely" and "probable" or the negative
thereof or other variations thereon or comparable terminology, constitute
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, and are subject to the safe harbors created thereby. These
statements should be considered as subject to the many risks and uncertainties
that exist in the Company's operations and business environment. Such risks and
uncertainties could cause actual results to differ materially from those
projected as a result of many factors, including, but not limited to, those
under the heading Item 1A. Risk Factors included in the Company's latest Annual
Report on Form 10-K.



This MD&A should be read in conjunction with the Company's consolidated
financial statements, including the notes thereto, contained elsewhere in this
report. Percentages set forth below in the MD&A have been rounded to the nearest
percentage point, and may not exactly correspond to the comparative data
presented.



COVID-19 Receding Impacts



The Company's results of operations, financial condition, liquidity and cash
flow in early 2021 were materially adversely affected by the COVID-19
pandemic. During 2021, the Company experienced improved results as the adverse
impact of the COVID-19 pandemic diminished and delayed projects were turned to
production. The Company is not currently experiencing any significant negative
impacts as a result of the COVID-19 pandemic.



Ukraine War



The war in Ukraine and resulting Russian oil and gas boycotts have added to
the surge in oil prices which has impacted some of the Company's material and
freight costs. However, the Company has not experienced any direct impact from
the disruption in region. The Company does not source materials from this
region, nor does it serve the market in any material nature.



Oil and Gas Market



Increases in oil prices helped to improve demand for the Company's products as
reflected in the Company's results during the three months ended April 30, 2022
as compared to the same period in 2021. In particular, the Company's activity
level in Canada has increased significantly due to the rise in energy prices.

Supply Chain Constraints and Inflationary Impacts

Due to the current inflationary environment, raw material supply shortages and
transportation delays, the Company routinely experiences delays and increased
prices for raw materials used in the Company's production processes. To mitigate
these impacts, the Company has implemented several strategies,
including purchasing from alternative suppliers and planning for material
purchases further in advance to ensure the Company has materials when needed.
The Company has also updated its pricing to customers to offset the impacts of
the raw material price increases. These impacts are expected to continue
throughout 2022.



Liquidity Position



On April 14, 2021, the Company entered into a purchase and sale agreement to
sell its land and buildings in Lebanon, Tennessee (the "Property"), and
subsequently enter into a fifteen-year lease agreement to lease back the
Property. The transaction generated net cash proceeds of $9.1 million, following
the release of the escrowed amount of $0.4 million in June 2021. The transaction
provided significant liquidity for the Company, which used the proceeds to repay
its borrowings under the Senior Credit Facility, for strategic investments, and
for general corporate needs. The Company will lease back the Property at an
annual rental rate of approximately $0.8 million, subject to annual rent
increases of 2.0%.



The Company enhanced its liquidity position on September 17, 2021 when it
executed an extension of the Credit Agreement with PNC, providing for a
new five-year $18 million senior secured revolving credit facility, subject to a
borrowing base including various reserves (the "Renewed Senior Credit
Facility"). See further discussion of the Company's liquidity position as of
April 30, 2022 in "Liquidity and capital resources" below.


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RESULTS OF OPERATIONS



The Company is engaged in the manufacture and sale of products in one reportable
segment. Since the Company focuses on large discrete projects, operating results
can be significantly impacted as a result of large variations in the level of
project activity in reporting periods.



($ in thousands)                                                            

Three Months Ended April 30,

                                                                                                                       Change
                                                          2022                           2021                 favorable/(unfavorable)
                                                             Percent of                     Percent of
                                                Amount        Net Sales        Amount        Net Sales                 Amount
Net sales                                      $ 31,222                       $ 24,423                       $                    6,799

Gross profit                                      7,049                23 %      4,505                18 %                        2,544

General and administrative expenses               5,650                18 %      4,404                18 %                       (1,246 )

Selling expense                                   1,239                 4 %      1,042                 4 %                         (197 )

Interest expense, net                               368                            178                                             (190 )

Other income, net                                    49                            441                                             (392 )

Loss from operations before income taxes           (159 )                         (678 )                                            519

Income tax expense                                  726                            165                                             (561 )

Net loss                                           (885 )                         (843 )                                            (42 )

Three months ended April 30, 2022 (“current quarter”) vs. Three months
ended April 30, 2021 (“prior year quarter”)

Net sales:



Net sales were $31.2 million in the current quarter, an increase of
$6.8 million, or 28%, from $24.4 million in the prior year quarter. The increase
was a result of increased sales volumes, partly due to recovery from the effects
of the COVID-19 pandemic.



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Gross profit:

Gross profit increased to $7.0 million, or 23% of net sales, in the current
quarter from $4.5 million, or 18% of net sales, in the prior year quarter. This
increase was driven by higher sales volumes and project and product mix.

General and administrative expenses:

General and administrative expenses increased $1.2 million, or 28%, from
$4.4 million in the prior year quarter to $5.7 million in the current quarter.
Approximately $0.9 million of this increase was the result of increased
incentive compensation. This amount was based on 2021 actual payouts as compared
to estimated amounts previously accrued in addition to accruals made for
2022 forecasted results as compared to the prior year quarter, where no
incentive compensation was recorded. The remainder of the increase was due
to additions to headcount in support of the Company's business growth.



Selling expenses:

Selling expenses were relatively consistent, increasing slightly to $1.2 million
in the current quarter, compared to $1.0 million in the prior year quarter.

Interest expense, net:



Net interest expense increased to $0.4 million in the current quarter from
$0.2 million in the prior year quarter. This increase was related primarily to
the sale leaseback transaction for our operating facility in Tennessee entered
into in April 2021.



Other income, net:



Other income, net decreased to an income of less than $0.1 million in the
current quarter, compared to approximately $0.4 million in the prior year
quarter. In the prior year quarter, the Company received grants from the
Canadian government under the Canadian Emergency Wage Subsidy ("CEWS") and
Canadian Emergency Rent Subsidy ("CERS") programs. The Company was approved for
and received approximately $0.3 million and $0.1 million in grants under the
CEWS and CERS programs, respectively, during the prior year quarter. Grants to
the Company under both programs ended in the second quarter of 2021.

Loss from operations before income taxes:

Loss from operations before income taxes decreased by $0.5 million to a loss of
$(0.2) million in the current quarter from a loss of $(0.7) million in the prior
year quarter. The improvement was a result of increased sales volumes and
margins as described above.



Income tax expense:



The Company's worldwide effective tax rates ("ETR") were (455.9%) and (24.3%) in
the current quarter and the prior year quarter, respectively. The change in the
ETR from the prior year quarter to the current year quarter is largely due to
changes in the mix of income and loss in various jurisdictions.



The Company expects that future distributions from foreign subsidiaries will not
be subject to incremental U.S. federal tax as they will either be remittances of
previously taxed earnings and profits or eligible for a full dividends-received
deduction. Current and future earnings in the Company's subsidiaries in Canada
and Egypt are not permanently reinvested. The earnings from these subsidiaries
are subject to tax in their local jurisdiction, and withholding taxes in these
jurisdictions are considered. As such, the Company has accrued a liability of
$0.4 million as of April 30, 2022 related to these taxes.

For further information, see Note 5 – Income taxes, in the Notes to Consolidated
Financial Statements.

Net loss:

The resulting net loss of $(0.9) million in the current quarter was relatively
consistent with the net loss of $(0.8) million in the prior year quarter.

Liquidity and capital resources

Cash and cash equivalents as of April 30, 2022 were $6.4 million compared to
$8.2 million on January 31, 2022. On April 30, 2022, $0.6 million was held in
the United States, and $5.8 million was held at the Company's foreign
subsidiaries. The Company's working capital was $38.7 million on April 30, 2022
compared to $40.0 million on January 31, 2022. Of the working capital
components, accounts receivable decreased by $5.6 million and cash and cash
equivalents decreased by $1.8 million as the result of the movements discussed
below. As of April 30, 2022, the Company had $4.9 million of borrowing
capacity under its Senior Credit Facility in North America and $6.5 million of
borrowing capacity under its foreign revolving credit agreements. The Company
had $5.2 million borrowed under its Senior Credit Facility and $6.1 million
borrowed under its foreign revolving credit agreements at April 30, 2022.



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Net cash used in operating activities in the three months ended April 30,
2022 and in the prior year period was $7.1 million and $2.4 million,
respectively. This decrease of $4.7 million was due primarily to an increases in
costs and estimated earnings in excess of billings on uncompleted contracts and
a decrease in accounts receivable, partially offset by an increase in accounts
payable and changes in other assets and liabilities in the current period
compared to the prior year period.

Net cash used in investing activities in the three months ended April 30, 2022
and in the prior year period was $0.3 million and $0.4 million, respectively.

Net cash provided by financing activities in the three months ended April 30,
2022 and in the prior year period was $5.1 million and $3.9 million,
respectively. The main source of cash from financing activities during the
period was net proceeds from borrowings of approximately $5.3 million under the
Senior Credit Facility, as compared to the prior year period, where net
repayments were approximately $4.1 million. The increase in cash provided by
financing activities was offset by net proceeds of $9.1 million as a result of
the sale and leaseback of the Company's land and buildings in Lebanon, Tennessee
during the prior year period. Debt totaled $26.3 million and $21.9 million as of
April 30, 2022 and January 31, 2022, respectively. For additional information,
see Note 9 - Debt, in the Notes to Consolidated Financial Statements.



Treasury stock. There were no purchases of shares of the Company's common stock
made by or on behalf of the Company during the three months ended April 30,
2022. On October 4, 2021, the Company's Board of Directors approved a share
repurchase program, which authorizes the Company to use up to $3.0 million for
the purchase of its outstanding shares of common stock. Stock repurchases are
permitted to be executed through open market or privately negotiated
transactions over the course of 12 months, depending upon current market
conditions and other factors. As of April 30, 2022, the Company has used $2.0
million of the $3.0 million authorized to repurchase its outstanding shares of
common stock.



Revolving lines - North America . On September 20, 2018, the Company and certain
of its U.S. and Canadian subsidiaries (collectively, together with the Company,
the "North American Loan Parties") entered into a Revolving Credit and Security
Agreement (the "Credit Agreement") with PNC Bank, National Association ("PNC"),
as administrative agent and lender, providing for a three-year $18 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 new five-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 will 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 bears
interest at a rate equal to an alternate base rate, LIBOR or a LIBOR successor
rate index, plus, in each case, an applicable margin. The applicable margin will
be based on an FCCR range. Interest on alternate base rate borrowings will be
the alternate base rate as defined in the Renewed Senior Credit Facility plus an
applicable margin ranging from 1.00% to 1.50%, based on the FCCR in the most
recently reported period. Interest on LIBOR or LIBOR successor rate borrowings
will be the LIBOR rate as defined in the Renewed Senior Credit Facility plus an
applicable margin ranging from 2.00% to 2.50%, based on the FCCR in the most
recently reported period. Additionally, the Borrowers will pay a 0.25% per annum
facility fee on the unused portion of the Renewed Senior Credit Facility.



Subject to certain exceptions, borrowings under the Renewed Senior Credit
Facility will be secured by substantially all of the North American Loan
Parties' assets. The Renewed Senior Credit Facility will mature on September 20,
2026. Subject to certain qualifications and exceptions, the Renewed Senior
Credit Facility contains covenants that, among other things, restrict the North
American Loan Parties' ability to create liens, merge or consolidate, consummate
acquisitions, make investments, dispose of assets, incur debt, and pay dividends
and other distributions. In addition, the North American Loan Parties may not
make capital expenditures in excess of $5.0 million annually, plus a limited
carryover of unused amounts. Further, the North American Loan Parties may not
make repurchases of the Company's common stock in excess of $3.0 million.

The Renewed Senior Credit Facility also contains financial covenants
requiring the North American Loan Parties to achieve a ratio of its EBITDA to
the sum of scheduled cash principal payments on indebtedness for borrowed money
and interest payments on the advances under the Renewed Senior Credit
Facility to be not less than 1.10 to 1.00 if for any five consecutive days the
undrawn availability is less than $3.0 million or any day in which the undrawn
availability is less than $2.0 million. As of April 30, 2022, the calculated
ratio was greater than 1.10 to 1.00. In order to cure any future breach of the
FCCR covenant by the North American Loan Parties, the Company may repatriate
cash from any of its foreign subsidiaries that are otherwise not a party to the
Renewed Senior Credit Facility in an amount which, when added to the amount of
the Company's Consolidated EBITDA, would result in pro forma compliance with the
covenant. The Company was in compliance with these covenants as of April 30,
2022.

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.

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As of April 30, 2022, the Company had borrowed an aggregate of $5.2 million at a
rate of 4.5% and had $4.9 million available under the Renewed Senior Credit
Facility. As of January 31, 2022, the Company had borrowed an aggregate of
$0.6 million and had $8.5 million available under the Renewed Senior Credit
Facility, before application of a $2.5 million availability block that has
subsequently been removed completely based on the Company’s financial
performance.

Revolving lines – foreign. The Company also has credit arrangements used by its
Middle Eastern subsidiaries in the U.A.E. and Egypt as discussed further below.

The Company has a revolving line for 8.0 million U.A.E. Dirhams (approximately
$2.2 million at April 30, 2022) from a bank in the U.A.E. The facility has an
interest rate of approximately 4.54% and was originally set to
expire in November 2020, however, the expiration was extended due to
the COVID-19 pandemic.



The Company has submitted final documentation to complete the renewal process,
and is awaiting official notification from the bank of the renewal completion.
This process is expected to be completed in June 2022.

The Company has a second revolving line for 17.5 million U.A.E. Dirhams
(approximately $4.8 million at April 30, 2022) from a bank in the U.A.E.
The facility has an interest rate of approximately 4.50% and is set to
expire in January 2023.

The Company has a third credit agreement for project financing with a bank in
the U.A.E. for 3.0 million U.A.E. Dirhams (approximately $0.8 million at April
30, 2022). This credit arrangement is in the form of project financing at rates
competitive in the U.A.E. The line is secured by the contract for a project
being financed by the Company's U.A.E. subsidiary. The facility has an interest
rate of approximately 4.50% and is expected to expire in June 2023 in connection
with the completion of the project.



These credit arrangements are in the form of overdraft facilities and project
financing at rates competitive in the countries in which the Company operates.
The lines are secured by certain equipment, certain assets (such as accounts
receivable and inventory), and a guarantee by the Company. Some credit
arrangement covenants require a minimum tangible net worth to be maintained,
including maintaining certain levels of intercompany subordinated debt. In
addition, some of the revolving credit facilities restrict payment of dividends
or undertaking of additional debt.



In June 2021, the Company's Egyptian subsidiary entered into a credit
arrangement with a bank in Egypt for a revolving line of 100.0 million Egyptian
Pounds (approximately $5.4 million at April 30, 2022). This credit arrangement
is in the form of project financing at rates competitive in Egypt. The line was
secured by certain assets (such as accounts receivable) of the Company's
Egyptian subsidiary. Among other covenants, the credit arrangement established a
maximum leverage ratio allowable and restricted the Company's Egyptian
subsidiary's ability to undertake any additional debt. The facility has an
interest rate of approximately 8.00% and is set to expire in August 2022.



In December 2021, the Company entered into a credit arrangement for project
financing with a bank in Egypt for 28.2 million Egyptian Pounds (approximately
$1.5 million at April 30, 2022). This credit arrangement is in the form of
project financing at rates competitive in Egypt. The line is secured by the
contract for a project being financed by the Company's Egyptian subsidiary. The
facility has an interest rate of approximately 8.00% and is expected to expire
in June 2022 in connection with the completion of the project.



The Company's credit arrangements used by its Middle Eastern subsidiaries renew
on an annual basis. The Company guarantees only a portion of the subsidiaries'
debt, including foreign debt. As of April 30, 2022, the amount of foreign
subsidiary debt guaranteed by the Company was approximately $0.1 million.



The Company was in compliance with the covenants under the credit arrangements
in the U.A.E. and Egypt as of April 30, 2022. On April 30, 2022, interest rates
were based on the Emirates Inter Bank Offered Rate plus 3.0% to 3.5% per annum
for the U.A.E. credit arrangements, two of which have a minimum interest rate of
4.5% per annum, and based on the stated interest rate in the agreement for the
Egypt credit arrangement. Based on these base rates, as of April 30, 2022, the
Company's interest rates ranged from 4.50% to 8.0%, with a weighted average rate
of 7.63%, and the Company had facility limits totaling $14.9 million under these
credit arrangements. As of April 30, 2022, $2.3 million of availability was used
to support letters of credit to guarantee amounts committed for inventory
purchases and for performance guarantees. Additionally, as of April 30, 2022,
the Company had borrowed $6.1 million, and had an additional $6.5 million of
borrowing remaining available under the foreign revolving credit arrangements.
The foreign revolving lines balances as of April 30, 2022 and January 31, 2022,
were included as current maturities of long-term debt in the Company's
consolidated balance sheets.



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Finance obligation - buildings and land. On April 14, 2021, the Company entered
into a purchase and sale agreement (the "Purchase and Sale Agreement"). Pursuant
to the terms of the Purchase and Sale Agreement, the Company sold its land and
buildings in Lebanon, Tennessee (the "Property") for a purchase price of
$10.4 million. The transaction generated net cash proceeds of $9.1 million,
following the release of the escrowed amount in June 2021 discussed below.
The Company used the 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 a fifteen-year lease
agreement (the "Lease Agreement"), whereby the Company will lease back the
Property at an annual rental rate of approximately $0.8 million, subject to
annual rent increases of 2.0%. Under the Lease Agreement, the Company
has four consecutive options to extend the term of the lease by five years for
each such option. 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. At closing, $0.4 million was placed in a short-term
escrow account to cover certain post-closing contingencies that may arise. The
contingencies were resolved in May 2021 and the Company received the escrowed
funds in June 2021.



In accordance with ASC Topic 842, "Leases", this transaction was recorded as a
failed sale and leaseback as the present value of lease payments
exceeded substantially all of the fair value of the underlying asset. The
Company utilized an incremental borrowing rate of 8.0% to determine the finance
obligation to record for the amounts received and will continue to depreciate
the assets. The current portion of the finance obligation of $0.1 million is
recognized in current maturities of long-term debt and the long-term portion of
$9.3 million is recognized in long-term finance obligation on the Company's
consolidated balance sheets as of January 31, 2022. The net carrying amount of
the financial liability and remaining assets will be zero at the end of the
lease term.

Prior additional liquidity from the CEWS and CERS Programs

Beginning in April 2020, the Company's subsidiary, Perma-Pipe Canada, Ltd.
("PPCA"), applied for relief in the form of grants from the Canadian government
under the CEWS program. Based on the program rules, the grants are applied for
each month and are granted based on the amount of eligible employee expenses
incurred over the previous month. Beginning in October 2020, PPCA also applied
for grants under the CERS program. PPCA was approved for and received
approximately $0.6 million and $0.1 million in grants under the CEWS and CERS
programs, respectively, during the year ended January 31, 2022. Grants to the
Company under both programs ended in the second quarter of 2021. The proceeds
from CEWS and CERS are recognized in other income, net in the consolidated
statements of operations.

Accounts receivable:

In 2013, the Company started a project in the Middle East as a sub-contractor,
with billings in the aggregate amount of approximately $41.9 million. The
Company completed all of its deliverables in 2015 under the related contract,
but the system has not yet been commissioned by the customer. Nevertheless, the
Company has collected approximately $38.3 million as of April 30, 2022, with a
remaining balance due in the amount of $3.6 million. Included in this balance is
an amount of $3.4 million, which pertains to retention clauses within the
agreements of the Company's customer, and which become payable by the customer
when this project is fully tested and commissioned. In the absence of a firm
date for the final commissioning of the project, and due to the long-term nature
of this receivable, $1.4 million of this retention amount was reclassified to a
long-term receivable account.



The Company has been engaged in ongoing active efforts to collect the
outstanding amount. The Company continues to engage with the customer to ensure
full payment of open balances, and during April 2022 received an updated
acknowledgment of the outstanding balances and assurances of payment from the
customer. Further, the Company has been engaged by the customer to perform
additional work in 2022 under customary trade terms that supports the continued
cooperation between the Company and the customer. As a result, the Company did
not reserve any allowance against this amount as of April 30, 2022. However, if
the Company's efforts to collect on this account are not successful, the Company
may recognize an allowance for all, or substantially all, of any such then
uncollected amounts.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Critical accounting policies are described in Item 7. MD&A and in the Notes to
the Consolidated Financial Statements for the year ended January 31, 2022
contained in the Company's latest Annual Report on Form 10-K. Any new accounting
policies or updates to existing accounting policies as a result of new
accounting pronouncements have been discussed in the Notes to Consolidated
Financial Statements in this Quarterly Report on Form 10-Q. The application of
critical accounting policies may require management to make assumptions,
judgments and estimates about the amounts reflected in the Consolidated
Financial Statements. Management uses historical experience and all available
information to make these estimates and judgments, and different amounts could
be reported using different assumptions and estimates.



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