What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-07-11 compared with 2024-04-11 · 186 added, 232 removed, 538 unchanged (44% of the section changed)

1 unchanged sentence

NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS AS OF FEBRUARY 29, 2024 (UNAUDITED)

CONSOLIDATED BALANCE SHEETS AS OF MAY 31, 2024 (UNAUDITED)

AND AUGUST 31, 2023 (AUDITED)

February 29, 2024

August 31, 2023

2 unchanged sentences

Trade, excluding joint ventures, less allowance for doubtful accounts

of $ 533,000 as of February 29, 2024 and August 31, 2023

of $ 533,000 as of May 31, 2024 and August 31, 2023

Trade, joint ventures

Fees for services provided to joint ventures

Dividend receivable from joint venture

Dividend receivable from joint ventures

Prepaid expenses

26 unchanged sentences

authorized 15,000,000 shares as of

February 29, 2024 and August 31, 2023;

May 31, 2024 and August 31, 2023;

issued and outstanding 9,441,124 and

4 unchanged sentences

Stockholders’ equity

Non-controlling interests

Non-controlling interest

Total liabilities and equity

2 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

FOR THE THREE AND SIX MONTHS ENDED FEBRUARY 29, 2024 AND FEBRUARY 28, 2023

FOR THE THREE AND NINE MONTHS ENDED MAY 31, 2024 AND 2023

Three Months Ended

Six Months Ended

February 29, 2024

February 28, 2023

February 29, 2024

February 28, 2023

Nine Months Ended

Cost of goods sold

21 unchanged sentences

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

FOR THE THREE AND SIX MONTHS ENDED FEBRUARY 29, 2024 AND FEBRUARY 28, 2023

FOR THE THREE AND NINE MONTHS ENDED MAY 31, 2024 AND 2023

Three Months Ended

Six Months Ended

February 29, 2024

February 28, 2023

February 29, 2024

February 28, 2023

OTHER COMPREHENSIVE (LOSS) INCOME – FOREIGN CURRENCY TRANSLATION ADJUSTMENT

Nine Months Ended

OTHER COMPREHENSIVE INCOME (LOSS) – FOREIGN CURRENCY TRANSLATION ADJUSTMENT

COMPREHENSIVE INCOME

4 unchanged sentences

CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)

FOR THE THREE AND SIX MONTHS ENDED FEBRUARY 29, 2024 AND FEBRUARY 28, 2023

STOCKHOLDERS’ EQUITY – THREE MONTHS ENDED FEBRUARY 29, 2024 AND FEBRUARY 28, 2023

FOR THE THREE AND NINE MONTHS ENDED MAY 31, 2024 AND 2023

STOCKHOLDERS’ EQUITY – THREE MONTHS ENDED MAY 31, 2024 AND 2023

Comprehensive

Income (Loss)

BALANCE AT NOVEMBER 30, 2022

BALANCE AT FEBRUARY 28, 2023

Stock issued for employee stock purchase plan

Stock option expense

1 unchanged sentence

Dividend received by non-controlling interest

Other comprehensive income

Other comprehensive income (loss)

BALANCE AT MAY 31, 2023

BALANCE AT FEBRUARY 29, 2024

BALANCE AT NOVEMBER 30, 2023

Stock issued for employee stock purchase plan

Stock options exercised

Stock option expense

Dividends paid to stockholders

Dividend received by non-controlling interest

Other comprehensive loss

BALANCE AT FEBRUARY 29, 2024

STOCKHOLDERS’ EQUITY – SIX MONTHS ENDED FEBRUARY 29, 2024 AND FEBRUARY 28, 2023

Other comprehensive income (loss)

BALANCE AT MAY 31, 2024

STOCKHOLDERS’ EQUITY – NINE MONTHS ENDED MAY 31, 2024 AND 2023

Comprehensive

1 unchanged sentence

BALANCE AT AUGUST 31, 2022

Stock options exercised

Stock issued for employee stock purchase plan

Stock options exercised

Stock option expense

2 unchanged sentences

Other comprehensive income

BALANCE AT FEBRUARY 28, 2023

BALANCE AT MAY 31, 2023

BALANCE AT AUGUST 31, 2023

Stock issued for employee stock purchase plan

Stock options exercised

Stock option expense

1 unchanged sentence

Dividend received by non-controlling interest

Other comprehensive loss

BALANCE AT FEBRUARY 29, 2024

Other comprehensive income

BALANCE AT MAY 31, 2024

See notes to consolidated financial statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE SIX MONTHS ENDED FEBRUARY 29, 2024 AND FEBRUARY 28, 2023

Six Months Ended

FOR THE NINE MONTHS ENDED MAY 31, 2024 AND 2023

Nine Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

3 unchanged sentences

Amortization expense

Loss on disposable of assets

Loss on disposal of assets

Equity in income from joint ventures

18 unchanged sentences

CASH FLOWS FROM FINANCING ACTIVITIES:

Net (payments) proceeds from line of credit

Dividend received by non-controlling interest

Net payments from line of credit

Proceeds from term loan

Dividends paid on NTIC common stock

2 unchanged sentences

Proceeds from employee stock purchase plan

Net cash used in financing activities

Net cash (used in) provided by financing activities

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

NET INCREASE IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

4 unchanged sentences

INTERIM FINANCIAL INFORMATION

In the opinion of management, the accompanying unaudited consolidated financial statements contain all necessary adjustments, which are of a normal recurring nature, and present fairly the consolidated financial position of Northern Technologies International Corporation and its subsidiaries (the Company) as of February 29, 2024 and August 31, 2023 and the results of the Company’s operations for the three and six months ended February 29, 2024 and February 28, 2023, the changes in stockholders’ equity for the three and six months ended February 29, 2024 and February 28, 2023, and the Company’s cash flows for the six months ended February 29, 2024 and February 28, 2023, in conformity with accounting principles generally accepted in the United States of America (U.S.

In the opinion of management, the accompanying unaudited consolidated financial statements contain all necessary adjustments, which are of a normal recurring nature, and present fairly the consolidated financial position of Northern Technologies International Corporation and its subsidiaries (the Company) as of May 31, 2024 and August 31, 2023, the results of the Company’s operations for the three and nine months ended May 31, 2024 and 2023, the changes in stockholders’ equity for the three and nine months ended May 31, 2024 and 2023, and the Company’s cash flows for the nine months ended May 31, 2024 and 2023, in conformity with accounting principles generally accepted in the United States of America (U.S.

These consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the Company’s annual report on Form 10-K for the fiscal year ended August 31, 2023.

These consolidated financial statements also should be read in conjunction with the “ Management ’ s Discussion and Analysis of Financial Condition and Results of Operations ” section appearing in this report.

Operating results for the three and six months ended February 29, 2024 are not necessarily indicative of the results that may be expected for the full fiscal year ending August 31, 2024.

Operating results for the three and nine months ended May 31, 2024 are not necessarily indicative of the results that may be expected for the full fiscal year ending August 31, 2024.

The Company evaluates events occurring after the date of the consolidated financial statements, through the date the consolidated financial statements were available to be issued, requiring recording or disclosure in the consolidated financial statements.

13 unchanged sentences

Inventories consisted of the following:

February 29, 2024

August 31, 2023

3 unchanged sentences

Property and equipment, net consisted of the following:

February 29, 2024

August 31, 2023

2 unchanged sentences

Less accumulated depreciation

Depreciation expense was $ 290,393 and $ 597,403 for the three and six months ended February 29, 2024, respectively, compared to $ 225,962 and $ 488,838 for the three and six months ended February 28, 2023, respectively.

Depreciation expense was $ 287,018 and $ 884,421 for the three and nine months ended May 31, 2024, respectively, compared to $ 277,253 and $ 766,091 for the three and nine months ended May 31, 2023, respectively.

INTANGIBLE ASSETS, NET

Intangible assets, net consisted of the following:

As of February 29, 2024

Gross Carrying Amount

Accumulated Amortization

Net Carrying Amount

As of May 31, 2024

Gross Carrying

Patents and trademarks

2 unchanged sentences

As of August 31, 2023

Gross Carrying Amount

Accumulated Amortization

Net Carrying Amount

Gross Carrying

Patents and trademarks

1 unchanged sentence

Total intangible assets, net

Amortization expense related to intangible assets was $ 147,571 and $ 295,226 for the three and six months ended February 29, 2024, respectively, compared to $ 147,062 and $ 294,873 for the three and six months ended February 28, 2023, respectively.

As of February 29, 2024, future amortization expense related to intangible assets for each of the next five fiscal years and thereafter is estimated as follows:

Amortization expense related to intangible assets was $ 147,749 and $ 442,975 for the three and nine months ended May 31, 2024, respectively, compared $ 146,730 and $ 441,603 for the three and nine months ended May 31, 2023, respectively.

As of May 31, 2024, future amortization expense related to intangible assets for each of the next five fiscal years and thereafter is estimated as follows:

Remainder of fiscal 2024

5 unchanged sentences

Financial information from the audited and unaudited financial statements of the Company’s joint venture in Germany, Excor Korrosionsschutz – Technologien und Produkte GmbH (EXCOR), and all the Company’s other joint ventures are summarized as follows:

As of February 29, 2024

As of May 31, 2024

Current assets

Current liabilities

Noncurrent liabilities

Non-current liabilities

Joint ventures’ equity

1 unchanged sentence

NTIC’s share of joint ventures’ undistributed earnings

Three Months Ended February 29, 2024

Three Months Ended May 31, 2024

NTIC’s share of equity in income from joint ventures

NTIC’s dividends received from joint ventures

Six Months Ended February 29, 2024

Nine Months Ended May 31, 2024

NTIC’s share of equity in income from joint ventures

3 unchanged sentences

Current liabilities

Noncurrent liabilities

Non-current liabilities

Joint ventures’ equity

1 unchanged sentence

NTIC’s share of joint ventures’ undistributed earnings

Three Months Ended February 28, 2023

Three Months Ended May 31, 2023

NTIC’s share of equity in income from joint ventures

NTIC’s dividends received from joint ventures

Six Months Ended February 28, 2023

Nine Months Ended May 31, 2023

NTIC’s share of equity in income from joint ventures

3 unchanged sentences

(JPM), which provides the Company with a senior secured revolving line of credit (the Credit Facility) of up to $ 10.0 million, which includes a $ 5.0 million sublimit for standby letters of credit.

Borrowings of $ 1,192,645 and $ 3,600,000 were outstanding under the Credit Facility as of February 29, 2024 and August 31, 2023, respectively.

Borrowings of $ 1,988,380 and $ 3,600,000 were outstanding under the Credit Facility as of May 31, 2024 and August 31, 2023, respectively.

Unless terminated earlier, the principal amount under the Credit Facility, together with all accrued unpaid interest and other amounts owing thereunder, if any, will be payable in full on the maturity date.

6 unchanged sentences

There is no applicable margin with respect to borrowings using a CB Floating Rate.

To secure the Credit Agreement, the Company assigned JPM a continuing security interest in all of its right, title and interested in collateral made up for the assets of the Company.

To secure the Credit Agreement, the Company assigned JPM a continuing security interest in all of its right, title and interest in collateral made up for the assets of the Company.

The Credit Agreement contains customary affirmative and negative covenants, including, among other matters, limitations on the Company’s ability to incur additional debt, grant liens, engage in certain business operations and transactions, make certain investments, modify its organizational documents or form any new subsidiaries, subject to certain exceptions.

2 unchanged sentences

The term “Fixed Charge Coverage Ratio” means the ratio, computed for the Company on a consolidated basis, of net income plus income tax expense, plus amortization expense, plus depreciation expense, plus interest expense, and plus dividends received from joint ventures, minus unfinanced capital expenditures and equity in income from joint ventures, all computed for the twelve month period then ending, to scheduled principal payments made, plus scheduled finance lease payments made, plus interest expense paid, plus income tax expense paid, and plus cash distributions and dividends paid, all computed for the same twelve month period then ending.

The Company was in compliance with all covenants as of February 29, 2024.

The Company was in compliance with all covenants as of May 31, 2024.

The Credit Agreement also contains customary events of default, including, without limitation, payment defaults, material inaccuracy of representations and warranties, covenant defaults, bankruptcy and insolvency proceedings, cross-defaults to certain other agreements, breach of any financial covenant and change of control.

5 unchanged sentences

Both term loans are secured by an office building owned by NTIC China and the loan agreements contain certain financial and other covenants.

The Company was in compliance with the covenants as of February 29, 2024.

The current outstanding balance for both term loans was USD $ 2,782,686 as of February 29, 2024 and USD $ 2,757,176 as of August 31, 2023.

The Company was in compliance with the covenants as of May 31, 2024.

The current outstanding balance for both term loans was USD $ 2,762,049 as of May 31, 2024 and USD $ 2,757,176 as of August 31, 2023.

STOCKHOLDERS ’ EQUITY

During the six months ended February 29, 2024, the Company’s Board of Directors declared cash dividends on the following dates in the following amounts to the following holders of the Company’s common stock:

During the nine months ended May 31, 2024, the Company’s Board of Directors declared cash dividends on the following dates in the following amounts to the following holders of the Company’s common stock:

Declaration Date

5 unchanged sentences

February 14, 2024

During the six months ended February 28, 2023, the Company’s Board of Directors declared cash dividends on the following dates in the following amounts to the following holders of the Company’s common stock:

April 17, 2024

During the nine months ended May 31, 2023, the Company’s Board of Directors declared cash dividends on the following dates in the following amounts to the following holders of the Company’s common stock:

Declaration Date

5 unchanged sentences

February 15, 2023

During the six months ended February 29, 2024 and February 28, 2023, the Company repurchased no shares of its common stock.

April 21, 2023

During the nine months ended May 31, 2024 and 2023, the Company repurchased no shares of its common stock.

The Company issued 3,496 and 3,620 shares of common stock on September 1, 2023 and 2022, respectively, under the Northern Technologies International Corporation Employee Stock Purchase Plan (ESPP).

The Company issued 3,284 and 3,566 shares of common stock on March 1, 2024 and 2023, respectively, under the ESPP.

The ESPP is compensatory for financial reporting purposes.

As of February 29, 2024, 58,538 shares of common stock remained available for sale under the ESPP.

As of May 31, 2024, 55,284 shares of common stock remained available for sale under the ESPP.

NET INCOME PER COMMON SHARE

1 unchanged sentence

Diluted net income per share assumes the exercise of stock options using the treasury stock method, if dilutive.

The following is a reconciliation of the net income per share computation for the three and six months ended February 29, 2024 and February 28, 2023:

The following is a reconciliation of the net income per share computation for the three and nine months ended May 31, 2024 and 2023:

Three Months Ended

Six Months Ended

February 29, 2024

February 28, 2023

February 29, 2024

February 28, 2023

Nine Months Ended

Net income attributable to NTIC

Denominator :

Basic – weighted shares outstanding

6 unchanged sentences

When dilutive, stock options are included as equivalents using the treasury stock market method when computing the diluted net income per share.

Excluded from the computation of diluted net income per share for the three and six months ended February 29, 2024 were options outstanding to purchase 580,869 shares of common stock.

Excluded from the computation of diluted net income per share for the three and six months ended February 28, 2023, were options outstanding to purchase 305,514 shares of common stock.

Excluded from the computation of diluted net income per share for the three and nine months ended May 31, 2024 were options outstanding to purchase 305,514 shares of common stock.

Excluded from the computation of diluted net income per share for the three and nine months ended May 31, 2023 were options outstanding to purchase 322,246 shares of common stock.

STOCK-BASED COMPENSATION

A summary of stock option activities under the Northern Technologies International Corporation 2024 Stock Incentive Plan (the 2024 Plan), the Northern Technologies International Corporation Amended and Restated 2019 Stock Incentive Plan (the 2019 Plan) and the Northern Technologies International Corporation Amended and Restated 2007 Stock Incentive Plan (the 2007 Plan) is as follows:

Number of Options

Weighted Average

Exercise Price

Average Exercise

Outstanding as of August 31, 2023

Outstanding as of February 29, 2024

The weighted average per share fair value of options granted during the six months ended February 29, 2024 and February 28, 2023 was $ 5.04 and $ 4.75 , respectively.

The weighted average remaining contractual life of the options outstanding as of February 29, 2024 and February 28, 2023 was 6.31 years and 6.42 years, respectively.

The Company recognized compensation expense of $ 694,874 and $ 667,008 during the six months ended February 29, 2024 and February 28, 2023, respectively.

As of February 29, 2024, there was $ 1,693,930 of unrecognized compensation expense.

Outstanding as of May 31, 2024

Exercisable as of May 31, 2024

The weighted average per share fair value of options granted during the nine months ended May 31, 2024 and 2023 was $ 4.88 and $ 4.87 , respectively.

The weighted average remaining contractual life of the options outstanding as of May 31, 2024 and 2023 was 6.11 years and 6.16 years, respectively.

The Company recognized compensation expense of $ 343,148 and $ 1,038,022 and $ 331,303 and $ 998,311 during the three and nine months ended May 31, 2024 and 2023, respectively.

As of May 31, 2024, there was $ 1,345,262 of unrecognized compensation expense.

The amount is expected to be recognized over a period of 2.25 years.

6 unchanged sentences

The Company also sells a portfolio of bio-based and compostable (fully biodegradable) polymer resins and finished products under the Natur-Tec® brand.

The following table sets forth the Company’s net sales for the three and six months ended February 29, 2024 and February 28, 2023 by segment:

The following table sets forth the Company’s net sales for the three and nine months ended May 31, 2024 and 2023 by segment:

Three Months Ended

Six Months Ended

February 29, 2024

February 28, 2023

February 29, 2024

February 28, 2023

Nine Months Ended

ZERUST® net sales

1 unchanged sentence

Total net sales

The following table sets forth the Company’s cost of goods sold for the three and six months ended February 29, 2024 and February 28, 2023 by segment:

The following table sets forth the Company’s cost of goods sold for the three and nine months ended May 31, 2024 and 2023 by segment:

Three Months Ended

Six Months Ended

February 29, 2024

% of Product Sales*

February 28, 2023

% of Product Sales*

February 29, 2024

% of Product Sales*

February 28, 2023

% of Product Sales*

Nine Months Ended

Direct cost of goods sold

1 unchanged sentence

Total net cost of goods sold

* The percent of segment sales is calculated by dividing the direct cost of goods sold for each individual segment category by the net sales for each segment category.

______________________________

* The percent of product sales is calculated by dividing the direct cost of goods sold for each individual segment category by the net sales for each segment category.

The Company utilizes product net sales and direct and indirect cost of goods sold for each product in reviewing the financial performance of a product type.

1 unchanged sentence

Geographic Information

Net sales by geographic location for the three and six months ended February 29, 2024 and February 28, 2023 were as follows:

Three Months Ended

Six Months Ended

February 29, 2024

February 28, 2023

February 29, 2024

February 28, 2023

Net sales by geographic location for the three and nine months ended May 31, 2024 and 2023 were as follows:

Three Months Ended May 31,

Nine Months Ended May 31,

Inside the U.S.A.

4 unchanged sentences

Net sales by geographic location are based on the location of the customer.

Fees for services provided to joint ventures by geographic location as a percentage of total fees for services provided to joint ventures during the three and six months ended February 29, 2024 and February 28, 2023 were as follows:

Fees for services provided to joint ventures by geographic location as a percentage of total fees for services provided to joint ventures during the three and nine months ended May 31, 2024 and 2023 were as follows:

Three Months Ended

February 29, 2024

% of Total Fees for Services Provided to Joint Ventures

February 28, 2023

% of Total Fees for Services Provided to Joint Ventures

% of Total Fees

Joint Ventures

% of Total Fees

Joint Ventures

Czech Republic

United Kingdom

Six Months Ended

February 29, 2024

% of Total Fees for Services Provided to Joint Ventures

February 28, 2023

% of Total Fees for Services Provided to Joint Ventures

Nine Months Ended

% of Total Fees

Joint Ventures

% of Total Fees

Joint Ventures

Czech Republic

1 unchanged sentence

The geographical distribution of total property and equipment and net sales is as follows:

February 29, 2024

August 31, 2023

2 unchanged sentences

Three Months Ended

February 29, 2024

February 28, 2023

United States

Total net sales

Six Months Ended

February 29, 2024

February 28, 2023

Nine Months Ended

United States

8 unchanged sentences

Concentrations

Two joint ventures (consisting of the Company’s joint ventures in Korea and Thailand) accounted for 68.4 % of the Company’s trade joint venture receivables as of February 29, 2024, and three joint ventures (consisting of the Company’s joint ventures in South Korea, Sweden, France) accounted for 68.1 % of the Company’s trade joint venture receivables as of February 28, 2023.

Two joint ventures (consisting of the Company’s joint ventures in Korea and Thailand) accounted for 54.8 % of the Company’s trade joint venture receivables as of May 31, 2024, and two joint ventures (consisting of the Company’s joint ventures in South Korea and Thailand) accounted for 65.1 % of the Company’s trade joint venture receivables as of May 31, 2023.

Legal Matters

3 unchanged sentences

The Company discloses a contingent liability even if the liability is not probable or the amount is not estimable, or both, if there is a reasonable possibility that material loss may have been incurred.

In the opinion of management, as of February 29, 2024, the amount of liability, if any, with respect to these matters, individually or in the aggregate, will not materially affect the Company’s consolidated results of operations, financial position or cash flows.

In the opinion of management, as of May 31, 2024, the amount of liability, if any, with respect to these matters, individually or in the aggregate, will not materially affect the Company’s consolidated results of operations, financial position or cash flows.

SUPPLEMENTAL CASH FLOW INFORMATION

1 unchanged sentence

Three Months Ended

Six Months Ended

February 29, 2024

February 28, 2023

February 29, 2024

February 28, 2023

Nine Months Ended

Cash paid for interest

Income tax expense for the three and six months ended February 29, 2024 was $ 289,195 and $ 515,991 , respectively, compared to $ 181,795 and $ 292,528 , respectively, for the three and six months ended February 28, 2023.

Income tax expense for the three and nine months ended May 31, 2024 was $ 332,400 and $ 848,391 , respectively, compared to $ 542,295 and $ 834,823 , respectively, for the three and nine months ended May 31, 2023.

The expense was largely due to foreign operations.

1 unchanged sentence

The Company has recorded a full valuation allowance against the U.S.

deferred tax assets as of February 29, 2024 and August 31, 2023.

deferred tax assets as of May 31, 2024 and August 31, 2023.

MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

31 unchanged sentences

ZERUST® products and services and Natur-Tec® products.

Highlights of NTIC’s financial results for the three and six months ended February 29, 2024 include the following, with increases or decreases in each case as compared to the respective prior fiscal year quarterly period:

NTIC’s consolidated net sales increased 14.1% and 7.3% during the three and six months ended February 29, 2024, respectively, compared to the three and six months ended February 28, 2023 primarily as a result of an increase in sales and demand for Natur-Tec® and ZERUST® oil and gas products and stable sales of and demand for ZERUST® industrial products.

During the six months ended February 29, 2024, 74.6% of NTIC’s consolidated net sales were derived from sales of ZERUST® products and services and 25.4% of NTIC’s consolidated net sales were derived from sales of Natur-Tec® products.

Cost of goods sold as a percentage of net sales decreased to 60.0% during the three months ended February 29, 2024, compared to 65.5% during the three months ended February 28, 2023, and decreased to 61.8% during the six months ended February 29, 2024, compared to 66.9% during the prior fiscal year period primarily as a result of lower raw material prices overall and savings associated with the insourcing of various finished goods production.

NTIC’s equity in income from joint ventures increased 4.4% during the three months ended February 29, 2024 to $1,177,990 compared to $1,128,731 was primarily due to efforts to enhance profitability at the Company’s joint ventures, partially offset by lower joint venture sales.

NTIC’s equity in income from joint ventures decreased 1.6% during the six months ended February 29, 2024 to $2,280,231 compared to $2,318,135 during the six months ended February 28, 2023 primarily due to a decrease in net income at NTIC’s joint venture in Germany, partially offset by increases at the majority of the other joint ventures.

Net sales at the joint ventures decreased 7.9% and 6.3% to $23,479,980 and $47,040,641 during the three and six months ended February 29, 2024, respectively, compared to $25,482,590 and $50,212,879 during the three and six months ended February 28, 2023, respectively.

NTIC’s total operating expenses increased 9.4% and 7.3% to $8,613,942 and $16,922,982 during the three and six months ended February 29, 2024, respectively, compared to $7,870,989 and $15,765,746 for the three and six months ended February 28, 2023.

Highlights of NTIC’s financial results for the three and nine months ended May 31, 2024 include the following, with increases or decreases in each case as compared to the respective prior fiscal year quarterly period:

NTIC’s consolidated net sales decreased 1.4% during the three months ended May 31, 2024 compared to the three months ended May 31, 2023 primarily due to decreases in demand for ZERUST® products.

NTIC’s consolidated net sales increased 4.3% during the nine months ended May 31, 2024 compared to the nine months ended May 31, 2023 primarily as a result of an increase in sales and demand for Natur-Tec® partially offset by decreases in ZERUST® products.

During the nine months ended May 31, 2024, 73.7% of NTIC’s consolidated net sales were derived from sales of ZERUST® products and services, and 26.3% of NTIC’s consolidated net sales were derived from sales of Natur-Tec® products.

Cost of goods sold as a percentage of net sales decreased to 61.8% during each of the three and nine months ended May 31, 2024, respectively, compared to 63.9% and 65.8% during the three and nine months ended May 31, 2023, respectively, primarily as a result of lower raw material prices overall and savings associated with the insourcing of various finished goods production.

NTIC’s contribution from joint ventures operations decreased 3.6% and 0.3% during the three and nine months ended May 31, 2024 to $2,609,228 and 7,441,476 compared to $2,707,969 and 7,460,655 during the three and nine months ended May 31, 2023 primarily due to a decrease in net income at NTIC’s joint venture in Germany, partially offset by increases at the majority of the other joint ventures.

Net sales at the joint ventures decreased 2.7% and 5.1% to $25,602,072 and $72,642,714 during the three and nine months ended May 31, 2024, respectively, compared to $26,312,548 and $76,525,427 during the three and nine months ended May 31, 2023, respectively.

NTIC’s total operating expenses increased 7.1% and 7.3% to $8,978,405 and $25,901,387 during the three and nine months ended May 31, 2024, respectively, compared to $8,381,236 and $24,146,982 for the three and nine months ended May 31, 2023, respectively.

These increases were primarily due to increased personnel expenses, including new hires, benefits and travel.

NTIC incurred net income attributable to NTIC of $1,701,169, or $0.17 per diluted common share, for the three months ended February 29, 2024, compared to $411,497, or $0.04 per diluted common share, for the three months ended February 28, 2023.

NTIC incurred net income attributable to NTIC of $2,596,690 or $0.27 per diluted common share, for the six months ended February 29, 2024, compared to $913,739 or $0.09 per diluted common share, for the six months ended February 28, 2023.

NTIC incurred net income attributable to NTIC of $976,604, or $0.10 per diluted common share, for the three months ended May 31, 2024, compared to $1,059,590, or $0.11 per diluted common share, for the three months ended May 31, 2023.

NTIC incurred net income attributable to NTIC of $3,573,294, or $0.36 per diluted common share, for the nine months ended May 31, 2024, compared to $1,973,329, or $0.20 per diluted common share, for the nine months ended May 31, 2023.

Results of Operations

The following table sets forth NTIC’s results of operations for the three and six months ended February 29, 2024 and February 28, 2023.

Three Months Ended

February 29, 2024

February 28, 2023

The following table sets forth NTIC’s results of operations for the three and nine months ended May 31, 2024 and 2023.

Three Months Ended May 31,

Cost of goods sold

4 unchanged sentences

Research and development expenses

Six Months Ended

February 29, 2024

February 28, 2023

Nine Months Ended May 31,

Cost of goods sold

4 unchanged sentences

Research and development expenses

NTIC’s consolidated net sales increased 14.1% and 7.3% to $20,842,538 and $41,024,213 during the three and six months ended February 29, 2024, respectively, compared to the three and six months ended February 28, 2023.

These increases were primarily as a result of an increase in sales and demand for Natur-Tec® and ZERUST® oil and gas products and stable sales of and demand for ZERUST® industrial products.

The following table sets forth NTIC’s net sales by product segment for the three and six months ended February 29, 2024 and February 28, 2023:

Three Months Ended February 28,

Six Months Ended February 28,

February 29, 2024

February 28, 2023

February 29, 2024

February 28, 2023

NTIC’s consolidated net sales decreased 1.4% during the three months ended May 31, 2024 compared to the three months ended May 31, 2023 primarily due to decreases in demand for ZERUST® products.

NTIC’s consolidated net sales increased 4.3% during the three months ended May 31, 2024 compared to the three and nine months ended May 31, 2023.

This increase was primarily as a result of an increase in sales and demand for Natur-Tec® partially offset by decreases in ZERUST® products.

The following table sets forth NTIC’s net sales by product segment for the three and nine months ended May 31, 2024 and 2023:

Three Months Ended May 31,

Nine Months Ended May 31,

Total ZERUST® sales

1 unchanged sentence

Total net sales

During the three and six months ended February 29, 2024, 73.0% and 74.6% of NTIC’s consolidated net sales, respectively, were derived from sales of ZERUST® products and services, which increased 5.3% and 2.7% to $15,218,095 and $30,623,840, respectively, compared to $14,458,747 and $29,828,748 during the three and six months ended February 28, 2023, respectively.

These increases were primarily a result of increased demand in North America of both ZERUST® industrial and ZERUST® oil and gas products.

The following table sets forth NTIC’s net sales of ZERUST® products for the three and six months ended February 29, 2024 and February 28, 2023:

Three Months Ended

February 29, 2024

February 28, 2023

During the three and nine months ended May 31, 2024, 71.7% and 73.7% of NTIC’s consolidated net sales, respectively, were derived from sales of ZERUST® products and services, which decreased 7.8% and 1.0% to $14,837,235 and $45,461,075, respectively, compared to $16,100,674 and $45,929,422 during the three and nine months ended May 31, 2023, respectively.

These increases were primarily a result of decreased demand in North America of both ZERUST® industrial and ZERUST® oil and gas products.

The following table sets forth NTIC’s net sales of ZERUST® products for the three and nine months ended May 31, 2024 and 2023:

Three Months Ended May 31,

ZERUST® industrial net sales

ZERUST® oil and gas net sales

ZERUST® oil & gas net sales

Total ZERUST® net sales

Six Months Ended

February 29, 2024

February 28, 2023

Nine Months Ended May 31,

ZERUST® industrial net sales

ZERUST® oil and gas net sales

ZERUST® oil & gas net sales

Total ZERUST® net sales

NTIC’s total ZERUST® net sales increased during the three and six months ended February 29, 2024, compared to the prior fiscal year periods, primarily due to increased demand in North American both ZERUST® industrial business and ZERUST® oil and gas business.

NTIC’s total ZERUST® net sales decreased during the three and nine months ended May 31, 2024, compared to the prior fiscal year periods, primarily due to decreased demand in North American both ZERUST® industrial business and ZERUST® oil and gas business.

Overall, demand for ZERUST® products and services depends heavily on the overall health of the markets in which NTIC sells its products, including the automotive, oil and gas, agriculture, and mining markets, in particular.

ZERUST® oil and gas net sales increased 20.1% and 7.1% during the three and six months ended February 29, 2024 compared to the prior fiscal year periods primarily as a result of increased demand in markets in which NTIC sells its products.

ZERUST® oil and gas net sales decreased 31.9% and 7.3% during the three and nine months ended May 31, 2023 compared to the prior fiscal year periods primarily as a result of decreased demand in markets in which NTIC sells its products and the timing of delivery of products.

NTIC anticipates that its sales of ZERUST® products and services to the oil and gas industry will continue to remain subject to significant volatility from quarter to quarter as sales are recognized.

1 unchanged sentence

Because of the typical size of individual orders and overall size of NTIC’s net sales derived from sales of oil and gas products, the timing of one or more orders can materially affect NTIC’s quarterly sales compared to prior fiscal year quarters.

During the three and six months ended February 29, 2024, 27.0% and 25.4% of NTIC’s consolidated net sales were derived from sales of Natur-Tec® products, compared to 20.9% and 22.0% during the three and six months ended February 28, 2023, respectively.

Sales of Natur-Tec® products increased 47.5% and 23.9% to $5,624,443 and $10,400,373 during the three and six months ended February 29, 2024, respectively, compared $3,812,078 and $8,394,843 during the three and six months ended February 28, 2023 as a result of increased global demand.

During the three and nine months ended May 31, 2024, 28.3% and 26.3% of NTIC’s consolidated net sales, respectively, were derived from sales of Natur-Tec® products, compared to 23.2% and 22.4% during the three and nine months ended May 31, 2023, respectively.

Sales of Natur-Tec® products increased 20.1% and 22.5% to $5,848,962 and $16,249,335 during the three and nine months ended May 31, 2024, respectively, compared to $4,869,052 and $13,263,895 during the three and nine months ended May 31, 2023, respectively, as a result of increased global demand.

The demand for Natur-Tec® products in most markets has returned to pre-pandemic levels;

1 unchanged sentence

Cost of Goods Sold .

Cost of goods sold increased 4.5% and decreased 0.8% for the three and six months ended February 29, 2024, respectively, compared to the three and six months ended February 28, 2023 primarily as a result of lower raw material prices overall.

Cost of goods sold as a percentage of net sales decreased to 60.0% and 61.8% for the three and six months ended February 29, 2024, respectively, compared to 65.5% and 66.9% for the three and six months ended February 28, 2028, respectively, primarily as a result of these lower raw material prices and the insourcing of various production of products.

NTIC has taken certain actions to address inflationary pressures and pass on related cost increases to its customers and some improvements from these actions, as well as improvements in gross margin, were realized during the six months ended February 29, 2024.

Cost of goods sold decreased 4.5% and 2.1% for the three and nine months ended May 31, 2024, respectively, compared to the three and nine months ended May 31, 2023 primarily as a result of lower raw material prices overall.

Cost of goods sold as a percentage of net sales decreased to 61.8% for each of the three and nine months ended May 31, 2024, compared to 63.9% and 65.8% during the three and nine months ended May 31, 2023, respectively, primarily as a result of these lower raw material prices and the insourcing of various finished goods production.

Equity in Income from Joint Ventures.

NTIC’s equity in income from joint ventures increased 4.4% during the three months ended February 29, 2024 to $1,177,990 compared to $1,128,731 was to primarily due to efforts to enhance profitability at the Company’s joint ventures, partially offset by lower joint venture sales.

NTIC’s equity in income from joint ventures increased 3.7% and 0.3% during the three and nine months ended May 31, 2024 to $1,396,731 and 3,676,962, respectively, compared to $1,346,658 and 3,664,793, respectively, primarily due to efforts to enhance profitability at the Company’s joint ventures, partially offset by a decrease in net income at NTIC’s joint venture in Germany.

NTIC’s equity in income from joint ventures fluctuates based on net sales and profitability of the joint ventures during the respective periods.

Of the total equity in income from joint ventures, NTIC had equity in income from joint ventures of $1,204,335 attributable to EXCOR during the six months ended February 29, 2024, compared to $1,547,944 attributable to EXCOR during the six months ended February 28, 2023.

These decreases were primarily a result of a decrease in net sales by EXCOR compared to the same prior year fiscal periods, due primarily to the loss of a customer and softer demand within the region related to higher energy prices and other externalities linked to the war between Ukraine and Russia.

NTIC had equity in income from all other joint ventures of $1,075,896 during the six months ended February 29, 2024, compared to $770,191 during the six months ended February 28, 2023.

Of the total equity in income from joint ventures, NTIC had equity in income from joint ventures of $2,015,734 attributable to EXCOR during the nine months ended May 31, 2024, compared to $2,376,575 attributable to EXCOR during the nine months ended May 31, 2023.

These decreases were primarily a result of a decrease in net sales by EXCOR compared to the same prior year fiscal periods, primarily due to the loss of a customer and softer demand within the region related to higher energy prices and other externalities linked to the war between Ukraine and Russia.

NTIC had equity in income from all other joint ventures of $1,661,227 during the nine months ended May 31, 2024, compared to $1,288,218 during the nine months ended May 31, 2023.

Fees for Services Provided to Joint Ventures.

NTIC recognized fee income for services provided to joint ventures of $1,303,059 and $2,552,017 during the three and six months ended February 29, 2024, respectively, compared to $1,252,746 and $2,434,551 during the three and six months ended February 28, 2023, respectively, representing increases of 4.0% and 4.8%, respectively.

NTIC recognized fee income for services provided to joint ventures of $1,212,497 and $3,764,514 during the three and nine months ended May 31, 2024, respectively, compared to $1,361,311 and $3,795,862 during the three and nine months ended May 31, 2023, respectively, representing decreases of 10.9% and 0.8%, respectively.

Fee income for services provided to joint ventures is traditionally a function of the sales made by NTIC’s joint ventures;

however, at various joint ventures, the fee income for services is a fixed amount that does not fluctuate with the change in sales that was experienced by certain joint ventures during the three and six months ended February 29, 2024.

Total net sales of NTIC’s joint ventures decreased 7.9% and 6.3% to $23,479,980 and $47,040,641 during the three and six months ended February 29, 2024, respectively, compared to $25,482,590 and $50,212,879 during the three and six months ended February 28, 2023, respectively.

These decreases were primarily a result of decreased demand during the three and six months ended February 29, 2024 at NTIC’s joint venture in Germany due primarily to the loss of a customer and softer demand within the region, as described above.

Total net sales of NTIC’s joint ventures decreased 2.7% and 5.1% to $25,602,072 and $72,642,714 during the three and nine months ended May 31, 2024, respectively, compared to $26,312,548 and $76,525,427 during the three and nine months ended May 31, 2023, respectively.

These decreases were primarily a result of decreased demand during the three and nine months ended May 31, 2024 at NTIC’s joint venture in Germany primarily due to the loss of a customer and softer demand within the region, as described above.

Net sales of NTIC’s joint ventures are not included in NTIC’s product sales and are not included in NTIC’s consolidated financial statements.

Of the total fee income for services provided to joint ventures, fees of $412,383 were attributable to EXCOR during the six months ended February 29, 2024, compared to $396,792 attributable to EXCOR during the six months ended February 28, 2023.

Of the total fee income for services provided to joint ventures, fees of $618,236 were attributable to EXCOR during the nine months ended May 31, 2024, compared to $606,189 attributable to EXCOR during the nine months ended May 31, 2023.

Selling Expenses .

NTIC’s selling expenses increased 15.0% and 10.1% for the three and six months ended February 29, 2024, respectively, compared to the same respective periods in fiscal 2023 due primarily to an increase in personnel expense during the current fiscal year period compared to the same prior fiscal year periods.

Selling expenses as a percentage of net sales increased to 19.7% and 19.1% for the three and six months ended February 29, 2024, respectively, from 19.7% and 18.6% for the three and six months ended February 28, 2023, respectively, primarily due to the increased selling expenses as noted above.

NTIC’s selling expenses increased 8.7% and 9.6% for the three and nine months ended May 31, 2024, respectively, compared to the same respective periods in fiscal 2023 primarily due to an increase in personnel expense during the current fiscal year period compared to the same prior fiscal year periods.

Selling expenses as a percentage of net sales increased to 20.5% and 19.5% for the three and nine months ended May 31, 2024, respectively, from 18.6% and 18.6% for the three and nine months ended May 31, 2023, respectively, primarily due to the increased selling expenses as noted above.

General and Administrative Expenses .

NTIC’s general and administrative expenses increased 3.3% and 7.8% for the three and six months ended February 29, 2024, respectively, compared to the same respective periods in fiscal 2023 primarily due to increased professional services and travel and personnel expenses during the current fiscal year periods compared to the same prior fiscal year periods.

As a percentage of net sales, general and administrative expenses decreased to 15.5% and increased to 16.5% for the three and six months ended February 29, 2024, respectively, from 17.2% and 16.4% for the same respective periods in fiscal 2023 primarily due to the changes in general and administrative expenses, as noted above.

NTIC’s general and administrative expenses increased 9.2% and 8.3% for the three and nine months ended May 31, 2024, respectively, compared to the same respective periods in fiscal 2023 primarily due to increased professional services and travel and personnel expenses during the current fiscal year periods compared to the same prior fiscal year periods.

As a percentage of net sales, general and administrative expenses increased to 16.9% and 16.6% for the three and nine months ended May 31, 2024, respectively, from 15.3% and 16.0% for the same respective periods in fiscal 2023 primarily due to the changes in general and administrative expenses, as noted above.

Research and Development Expenses .

NTIC’s research and development expenses increased 8.9% and decreased 2.1% for the three and six months ended February 28, 2023, respectively, compared to the same respective periods in fiscal 2023 primarily due to the timing of expenses incurred and changes in expenses associated with development efforts.

NTIC’s research and development expenses decreased 2.9% and 2.4% for the three and nine months ended May 31, 2024, respectively, compared to the same respective periods in fiscal 2023 primarily due to the timing of expenses incurred and changes in expenses associated with development efforts.

Interest Income .

NTIC’s interest income increased to $29,210 and $75,652 during the three and six months ended February 29, 2024, respectively, compared to $3,451 and $9,619 during the three and six months ended February 28, 2023, respectively, due primarily to changes in the invested cash balances at subsidiaries.

NTIC’s interest income increased to $23,744 and $99,396 during the three and nine months ended May 31, 2024, respectively, compared to $8,876 and $18,495 during the three and nine months ended May 31, 2023, respectively, primarily due to changes in the invested cash balances at subsidiaries.

Interest Expense .

NTIC’s interest expense decreased to $77,758 and $188,896 during the three and six months ended February 29, 2024, respectively, compared to $115,144 and $206,475 during the three and six months ended February 28, 2023, respectively, due primarily to decreased borrowings during the current fiscal year periods.

NTIC’s interest expense decreased to $59,939 and $248,835 during the three and nine months ended May 31, 2024, respectively compared $136,168 and $342,643 during the three and nine months ended May 31, 2023, respectively, primarily due to decreased outstanding borrowings during the current fiscal year periods.

Income Before Income Tax Expense .

NTIC had income before income tax expense of $2,157,723 and $3,469,460 for the three and six months ended February 29, 2024, respectively, compared to $701,863 and $1,446,276 for the three and six months ended February 28, 2023, respectively.

NTIC had income before income tax expense of $1,487,722 and $4,957,182 for the three and nine months ended May 31, 2024, respectively, compared to $1,779,294 and $3,225,570 for the three and nine months ended May 31, 2023, respectively.

Income Tax Expense .

Income tax expense was $289,195 and $515,991 for the three and six months ended February 29, 2024, respectively, compared to $181,795 and $292,528 during the three and six months ended February 28, 2023, respectively.

Income tax expense was $332,400 and $848,391 for the three and nine months ended May 31, 2024, respectively, compared to $542,295 and $834,823 during the three and nine months ended May 31, 2023, respectively.

Income tax expense was calculated based on management’s estimate of NTIC’s annual effective income tax rate.

1 unchanged sentence

As a result, U.S.

income and foreign withholding taxes have not been recognized on the cumulative undistributed earnings of $23,645,685 and $20,493,861 as of February 29, 2024, and August 31, 2023, respectively.

income and foreign withholding taxes have not been recognized on the cumulative undistributed earnings of $23,645,685 and $20,493,861 as of May 31, 2024 and August 31, 2023, respectively.

To the extent undistributed earnings of NTIC’s joint ventures are distributed in the future, they are not expected to result in any material additional income tax liability after the application of foreign tax credits.

Net Income Attributable to NTIC .

Net income attributable to NTIC increased to $1,868,528, or $0.17 per diluted common share, for the three months ended February 29, 2024, compared to $411,497, or $0.04 per diluted common share, for the three months ended February 28, 2023.

Net income attributable to NTIC increased to $2,596,90, or $0.27 per diluted common share, for the six months ended February 29, 2024, compared to $913,739, or $0.09 per diluted common share, for the six months ended February 28, 2023.

Net income attributable to NTIC decreased to $976,604, or $0.10 per diluted common share, for the three months ended May 31, 2024, compared to $1,059,590, or $0.11 per diluted common share, for the three months ended May 31, 2023.

Net income attributable to NTIC increased to $3,573,294, or $0.36 per diluted common share, for the nine months ended May 31, 2024, compared to $1,973,329, or $0.20 per diluted common share, for the nine months ended May 31, 2023.

These increases were primarily due to the increase in gross profit, partially offset by the increase in operating expenses.

3 unchanged sentences

The changes in the foreign currency translations adjustment were due to the fluctuation of the U.S.

dollar compared to the Euro and other foreign currencies during the three and six months ended February 29, 2024 compared to the same respective periods in fiscal 2023.

dollar compared to the Euro and other foreign currencies during the three and nine months ended May 31, 2024 compared to the same respective periods in fiscal 2023.

Liquidity and Capital Resources

Sources of Cash and Working Capital .

NTIC’s working capital, defined as current assets less current liabilities, was $23,975,459 as of February 29, 2024, including $4,835,031 in cash and cash equivalents, compared to $22,950,184 as of August 31, 2023, including $5,406,173 in cash and cash equivalents.

NTIC’s working capital, defined as current assets less current liabilities, was $23,178,836 as of May 31, 2024, including $5,794,824 in cash and cash equivalents, compared to $22,950,184 as of August 31, 2023, including $5,406,173 in cash and cash equivalents.

NTIC believes that a combination of its existing cash and cash equivalents, available for sale securities, forecasted cash flows from future operations, anticipated distributions of earnings, anticipated fees to NTIC for services provided to its joint ventures, and funds available through existing or anticipated financing arrangements will be adequate to fund its existing operations, investments in new or existing joint ventures or subsidiaries, capital expenditures, debt repayments, cash dividends, and any stock repurchases for at least the next 12 months.

During the remainder of fiscal 2024, NTIC expects to continue to invest through its use of working capital in Zerust India, NTIC China, NTI Europe, its joint ventures, research and development, marketing efforts, resources for the application of its corrosion prevention technology in the oil and gas industry, and its Natur-Tec® bio-plastics business, although the amounts of these various investments are not known at this time.

NTIC also expects to use some of its capital resources to continue to transition some of its joint ventures as needed or appropriate, which may include additional acquisitions by NTIC of the remaining ownership interests of joint ventures not owned by NTIC, the formation of one or more new subsidiaries to assume the operations of a joint venture, and dissolutions or liquidations of one or more of its joint ventures.

NTIC also expects to use some of its capital resources to acquire remaining ownership interests of joint ventures not owned by NTIC as they become available or appropriate and for the formation of one or more new subsidiaries to assume the operations of a joint venture.

Some of these joint venture transitions may materially impact NTIC’s results of operations for a particular reporting period.

For example, the formation of a new indirect, majority owned subsidiary of NTIC to assume the operations of a former joint venture increased NTIC’s operating expenses during the six months ended February 29, 2024.

NTIC traditionally has used the cash generated from its operations, distributions of earnings from joint ventures and fees for services provided to its joint ventures to fund NTIC’s new technology investments and capital contributions to new and existing subsidiaries and joint ventures.

6 unchanged sentences

(JPM), which provides NTIC with a senior secured revolving line of credit (the Credit Facility) of up to $10.0 million, which includes a $5.0 million sublimit for standby letters of credit.

Borrowings of $1,192,645 and $3,600,000 were outstanding under the Credit Facility as of February 29, 2024 and August 31, 2023, respectively.

Borrowings of $1,988,380 and $3,600,000 were outstanding under the Credit Facility as of May 31, 2024 and August 31, 2023, respectively.

7 unchanged sentences

There is no applicable margin with respect to borrowings using a CB Floating Rate.

To secure the Credit Agreement, the Company assigned JPM a continuing security interest in all of its right, title and interested in collateral made up for the assets of the Company.

To secure the Credit Agreement, the Company assigned JPM a continuing security interest in all of its right, title and interest in collateral made up for the assets of the Company.

The Credit Agreement contains customary affirmative and negative covenants, including, among other matters, limitations on NTIC’s ability to incur additional debt, grant liens, engage in certain business operations and transactions, make certain investments, modify its organizational documents or form any new subsidiaries, subject to certain exceptions.

4 unchanged sentences

Upon the occurrence and during the continuance of any event of default, JPM may accelerate the payment of the obligations thereunder and exercise various other customary default remedies.

As of February 29, 2024, NTIC was in compliance with all debt covenants under the Credit Agreement.

As of May 31, 2024, NTIC was in compliance with all debt covenants under the Credit Agreement.

Other Credit Arrangements.

4 unchanged sentences

Both term loans are secured by an office building owned by NTIC China and the loan agreements contain certain financial and other covenants.

NTIC was in compliance with the covenants as of February 29, 2024.

The current outstanding balance for both term loans was USD $2,782,686 as of February 29, 2024 and USD $2,757,176 as of August 31, 2023.

NTIC was in compliance with the covenants as of May 31, 2024.

The current outstanding balance for both term loans was USD $2,762,049 as of May 31, 2024 and USD $2,757,176 as of August, 31, 2023.

Uses of Cash and Cash Flow .

Net cash provided by operating activities during the six months ended February 29, 2024 was $5,643,007, which resulted principally from NTIC’s net income, dividends received from joint ventures, dividend receivables from joint ventures, depreciation and amortization expense, and stock-based compensation, partially offset by equity in income from joint ventures.

Net cash provided by operating activities during the six months ended February 28, 2023 was $2,204,834, which resulted principally from NTIC’s net income, dividends received from joint ventures, depreciation and amortization expense, and stock-based compensation, partially offset by equity in income from joint ventures.

Net cash provided by operating activities during the nine months ended May 31, 2024 was $7,583,904, which resulted principally from NTIC’s net income, dividends received from joint ventures, dividend receivables from joint ventures, depreciation and amortization expense, and stock-based compensation, partially offset by equity in income from joint ventures.

Net cash provided by operating activities during the nine months ended May 31, 2023 was $3,505,803, which resulted principally from NTIC’s net income, dividends received from joint ventures, depreciation and amortization expense, and stock-based compensation, partially offset by equity in income from joint ventures.

NTIC’s cash flows from operations are impacted by significant changes in certain components of NTIC’s working capital, including inventory turnover and changes in receivables and payables.

11 unchanged sentences

This determination is handled on a case-by-case basis.

NTIC experienced a decrease in trade receivables and a decrease in inventory as of February 29, 2024, compared to August 31, 2023.

Trade receivables, excluding joint ventures, as of February 29, 2024, decreased $844,538 compared to August 31, 2023, primarily related to the timing of collections and increases in sales.

Outstanding trade receivables, excluding joint ventures balances, decreased an average of 5 days to an average of 66 days from balances outstanding from these customers as of February 29, 2024 from an average of 71 days as of August 31, 2023.

Outstanding trade receivables from joint ventures as of February 29, 2024 increased $704,017 compared to August 31, 2023, primarily due to the timing of payments and orders.

Outstanding balances from trade receivables from joint ventures increased an average of 97 days to an average of 131 days from balances outstanding from these customers as of February 29, 2024 from an average of 34 days as of August 31, 2023.

The average days outstanding of trade receivables from joint ventures as of February 29, 2024 were primarily due to the receivables balances at Thailand and South Korea.

Outstanding receivables for services provided to joint ventures as of February 29, 2024 decreased $68,883 compared to August 31, 2023, and the average days to pay decreased an average of 1 days to an average of 85 days from an average of 86 days as of August 31, 2023.

Net cash used in investing activities for the six months ended February 29, 2024 and February 28, 2023 was $1,505,927 and $1,923,336, respectively, which was primarily the result of the purchases of property and equipment, and investments in patents.

Net used in financing activities for the six months ended February 29, 2024 was $4,762,201, which resulted from dividends paid to shareholders, the repayment of borrowings under the line of credit, and dividends received by non-controlling interests, partially offset by proceeds from NTIC’s employee stock purchase plan.

Net cash used in financing activities for the six months ended February 28, 2023 was $111,605, which resulted from dividends paid to shareholders and dividends received by non-controlling interests, partially offset by proceeds from the exercise of stock options, borrowings under the line of credit and proceeds from NTIC’s employee stock purchase plan.

NTIC experienced a decrease in trade receivables as of May 31, 2024, compared to August 31, 2023.

Trade receivables, excluding joint ventures, as of May 31, 2024, decreased $1,270,274, compared to August 31, 2023, primarily related to the timing of collections.

Outstanding trade receivables, excluding joint ventures balances, decreased an average of 5 days to an average of 66 days from balances outstanding from these customers as of May 31, 2024 from an average of 71 days as of August 31, 2023.

Outstanding trade receivables from joint ventures as of May 31, 2024 increased $416,419, compared to August 31, 2023, primarily due to the timing of payments and orders.

Outstanding balances from trade receivables from joint ventures increased an average of 93 days to an average of 127 days from balances outstanding from these customers as of May 31, 2024 from an average of 34 days as of August 31, 2023.

The average days outstanding of trade receivables from joint ventures as of May 31, 2024 were primarily due to the receivables balances at Thailand and South Korea.

Outstanding receivables for services provided to joint ventures as of May 31, 2024 decreased $34,441, compared to August 31, 2023, and the average days to pay decreased an average of 11 day to an average of 96 days from an average of 86 days as of August 31, 2023.

Net cash used in investing activities for the nine months ended May 31, 2024 and 2023 was $2,601,176 and $2,678,748, respectively, which was primarily the result of the purchases of property and equipment, and investments in patents.

Net cash used in financing activities for the nine months ended May 31, 2024 was $4,587,474, which resulted from dividends paid to shareholders, the repayment of borrowings under the line of credit, and dividends received by non-controlling interest, partially offset by proceeds from NTIC’s employee stock purchase plan.

Net cash provided by financing activities for the nine months ended May 31, 2023 was $81,773, which resulted from borrowings under the line of credit and term loan and proceeds from the exercise of stock options and NTIC’s employee stock purchase plan, partially offset by dividends paid on NTIC common stock and dividends received by non-controlling interest.

Share Repurchase Plan .

1 unchanged sentence

This program has no expiration date but may be terminated by NTIC’s Board of Directors at any time.

No repurchases occurred during the six months ended February 29, 2024.

As of February 29, 2024, up to $2,640,548 in shares of NTIC common stock remained available for repurchase under NTIC’s stock repurchase program.

No repurchases occurred during the nine months ended May 31, 2024.

As of May 31, 2024, up to $2,640,548 in shares of NTIC common stock remained available for repurchase under NTIC’s stock repurchase program.

Cash Dividends .

During the six months ended February 29, 2024, NTIC’s Board of Directors declared cash dividends on the following dates in the following amounts to the following holders of NTIC’s common stock:

During the nine months ended May 31, 2024, NTIC’s Board of Directors declared cash dividends on the following dates in the following amounts to the following holders of NTIC’s common stock:

Declaration Date

5 unchanged sentences

February 14, 2024

During the six months ended February 28, 2023, NTIC’s Board of Directors declared cash dividends on the following dates in the following amounts to the following holders of NTIC’s common stock:

April 17, 2024

During the nine months ended May 31, 2023, NTIC’s Board of Directors declared cash dividends on the following dates in the following amounts to the following holders of NTIC’s common stock:

Declaration Date

5 unchanged sentences

February 15, 2023

April 21, 2023

The declaration of future dividends is not guaranteed and will be determined by NTIC’s Board of Directors in light of conditions then existing, including NTIC’s earnings, financial condition, cash requirements, restrictions in financing agreements, business conditions, and other factors.

Capital Expenditures and Commitments .

NTIC spent $1,443,762 on capital expenditures during the six months ended February 29, 2024, which related primarily to facility improvements to the warehouse facility NTIC purchased during fiscal 2023 and associated equipment.

NTIC spent $2,515,248 on capital expenditures during the nine months ended May 31, 2024, which related primarily to facility improvements to the warehouse facility NTIC purchased during fiscal 2023 and the installation of a new Enterprise Resource Planning (ERP) software system and associated equipment.

NTIC expects to spend an aggregate of approximately $600,000 to $1,100,000 on capital expenditures during fiscal 2024, which it expects will relate primarily to the installation of new Enterprise Resource Planning (ERP) software system and the purchase of new equipment and facility improvements.

Inflation and Seasonality

Although inflation in the United States and abroad historically has had little effect on NTIC, inflationary pressures adversely affected NTIC’s gross margins during the second quarter of fiscal 2024.

Although inflation in the United States and abroad historically has had little effect on NTIC, inflationary pressures adversely affected NTIC’s gross margins during the third quarter of fiscal 2024.

NTIC believes there is some seasonality in its business.

NTIC anticipates its net sales in the second fiscal quarter may be adversely affected by the long Chinese New Year, the North American holiday season and overall less corrosion taking place at lower winter temperatures worldwide.

NTIC’s net sales in the second fiscal quarter are typically adversely affected by the long Chinese New Year, the North American holiday season and overall less corrosion taking place at lower winter temperatures worldwide.

NTIC is exposed to some market risk stemming from changes in foreign currency exchange rates, commodity prices and interest rates.

7 unchanged sentences

Any outstanding advances under NTIC’s Credit Facility with JPM bear interest at a floating rate, at the option of NTIC, equal to either the CB Floating Rate or the Adjusted SOFR Rate, as defined above.

Borrowings of $1,192,645 were outstanding under the Credit Facility as of February 29, 2024.

Both term loans undertaken by NTIC China with China Construction Bank Corporation have an annual interest rate of 3.25% with interest due monthly.

The current outstanding balance as of February 29, 2024 for both term loans is USD $2,782,686.

Borrowings of $1,988,380 were outstanding under the Credit Facility as of May 31, 2024.

Both term loans undertaken by NTIC China with China Construction Bank Corporation have an annual interest

rate of 3.25% with interest due monthly.

The current outstanding balance as of May 31, 2024 for both term loans

is USD $2,762,049.

Critical Accounting Policies and Estimates

63 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements