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What changed in NORTHERN TECHNOLOGIES INTERNATIONAL CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of NORTHERN TECHNOLOGIES INTERNATIONAL CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+340 added−353 removedSource: 10-K (2023-11-21) vs 10-K (2022-11-15)

Top changes in NORTHERN TECHNOLOGIES INTERNATIONAL CORP's 2023 10-K

340 paragraphs added · 353 removed · 263 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

67 edited+11 added−11 removed128 unchanged
Biggest changeInternationally, NTIC sells its Natur-Tec® resin compounds and finished products both directly and through its wholly-owned subsidiary in China and majority-owned subsidiaries in India and Sri Lanka, and through distributors and certain joint ventures. 1 Acquisition of Zerust India On September 21, 2021, NTIC announced that it acquired the remaining 50% ownership interest in its Indian joint venture, Zerust India, for $6,250,000 in cash, effective as of September 1, 2021.
Biggest changeNTIC continues to see significant opportunities for finished bioplastic products and, therefore, continues to strengthen and expand its North American distribution network for finished Natur-Tec® bioplastic products. 1 Internationally, NTIC sells its Natur-Tec® resin compounds and finished products both directly and through its wholly-owned subsidiary in China and majority-owned subsidiaries in India and Sri Lanka, and through distributors and certain joint ventures.
NTIC was first in the world to develop the means of infusing volatile corrosion inhibiting chemical compounds (VCIs) into polyethylene and polypropylene resins.
NTIC was the first in the world to develop the means of infusing volatile corrosion inhibiting chemical compounds (VCIs) into polyethylene and polypropylene resins.
In addition, in an attempt to penetrate the oil and gas industry within certain markets more quickly, NTIC has entered into various agreements with specific organizations that have existing long-term relationships with key oil and gas industry clients.
In addition, in an attempt to penetrate the oil and gas industry within certain markets more quickly, NTIC has entered into various agreements with specific organizations that have existing long-term relationships with key oil and gas industry clients.
NTIC continues to believe the sale of its ZERUST® corrosion prevention solutions to customers in the oil and gas industry will involve long sales cycles, likely including multi-year trial periods with each user and a slow integration process thereafter. Natur-Tec ® Resin Compounds and Finished Products.
NTIC continues to believe the sale of its ZERUST® corrosion prevention solutions to customers in the oil and gas industry will involve long sales cycles, likely including multi-year trial periods with each user and a slow integration process thereafter. Natur-Tec ® Resin Compounds and Finished Products.
Natur-Tec® resin compounds are engineered for high performance, ease of processing, and reduced cost compared to most other bio-plastic materials and can be processed by converters using conventional plastic manufacturing processes and equipment. 6 Natur-Tec® resin compounds are sold in several grades tailored for a variety of applications, such as blown-film extrusion, profile extrusion, thermoforming, extrusion coating, and injection molding.
Natur-Tec® resin compounds are engineered for high performance, ease of processing, and reduced cost compared to most other bio-plastic materials and can be processed by converters using conventional plastic manufacturing processes and equipment. Natur-Tec® resin compounds are sold in several grades tailored for a variety of applications, such as blown-film extrusion, profile extrusion, thermoforming, extrusion coating, and injection molding.
Dalal consulted to several Fortune 500 companies, in the areas of product strategy, Product Lifecycle Management (PLM) and technology management. Prior to that, Mr. Dalal held positions in program management and design engineering at National Semiconductor Corporation in Santa Clara, California. Mr. Dalal received an M.B.A. degree from the University of Michigan Ross School of Business in Ann Arbor, Michigan.
Dalal consulted for several Fortune 500 companies, in the areas of product strategy, Product Lifecycle Management (PLM) and technology management. Prior to that, Mr. Dalal held positions in program management and design engineering at National Semiconductor Corporation in Santa Clara, California. Mr. Dalal received an M.B.A. degree from the University of Michigan Ross School of Business in Ann Arbor, Michigan.
Management ’ s Discussion and Analysis of Financial Condition and Results of Operations ” of this report. 3 Products NTIC derives revenues directly and/or indirectly through its subsidiaries and joint ventures from two reportable business segments based on products sold, customer base, and distribution center: ZERUST® corrosion prevention solutions and Natur-Tec® resin compounds and finished products.
Management ’ s Discussion and Analysis of Financial Condition and Results of Operations ” of this report. Products NTIC derives revenues directly and/or indirectly through its subsidiaries and joint ventures from two reportable business segments based on products sold, customer base, and distribution center: ZERUST® corrosion prevention solutions and Natur-Tec® resin compounds and finished products.
Prior to placing an order, NTIC’s technical service consultants work directly with the end users of NTIC’s ZERUST® products to analyze their specific corrosion prevention needs and develop systems to meet their performance requirements. 7 Internationally, NTIC has entered into a series of joint ventures with foreign partners (either directly or through a holding company).
Prior to placing an order, NTIC’s technical service consultants work directly with the end users of NTIC’s ZERUST® products to analyze their specific corrosion prevention needs and develop systems to meet their performance requirements. Internationally, NTIC has entered into a series of joint ventures with foreign partners (either directly or through a holding company).
These are engineered solutions where each system is tailored to a customer’s requirements depending on factors including the tank foundation design, specific environmental conditions, and tank diameter. 5 ZERUST® Zerion powder-based inhibitor solutions include the following: ● Zerion FVS is a unique inhibitor blend that is used in both the SSB Solutions and in internal pipeline protection.
These are engineered solutions where each system is tailored to a customer’s requirements depending on factors including the tank foundation design, specific environmental conditions, and tank diameter. ZERUST® Zerion powder-based inhibitor solutions include the following: ● Zerion FVS is a unique inhibitor blend that is used in both the SSB Solutions and in internal pipeline protection.
Management ’ s Discussion and Analysis of Financial Condition and Results of Operations .” Forward-looking statements are based on current expectations about future events affecting NTIC and are subject to uncertainties and factors that affect all businesses operating in a global market as well as matters specific to NTIC.
Management ’ s Discussion and Analysis of Financial Condition and Results of Operations .” 12 Forward-looking statements are based on current expectations about future events affecting NTIC and are subject to uncertainties and factors that affect all businesses operating in a global market as well as matters specific to NTIC.
Projects in South America, Europe, the Middle East, and South East Asia are still a small but growing, strategically important part of the sales growth picture. The infrastructure/assets that support the oil and gas industry are predominantly constructed using metals that are highly susceptible to corrosion.
Projects in South America, Europe, the Middle East, and Southeast Asia are still a small but growing, strategically important part of the sales growth picture. The infrastructure/assets that support the oil and gas industry are predominantly constructed using metals that are highly susceptible to corrosion.
For exceptionally harsh environments, customers may choose to use a combination of NTIC’s liquids and coatings with ZERUST® plastic and/or paper products to achieve robust corrosion protection during manufacturing, shipping, and warehousing stages. Rust Removers and Cleaners .
For exceptionally harsh environments, customers may choose to use a combination of NTIC’s liquids and coatings with ZERUST® plastic and/or paper products to achieve robust corrosion protection during manufacturing, shipping, and warehousing stages. 3 Rust Removers and Cleaners .
Furthermore, these products were also independently tested and approved for use in organic waste diversion systems by Cedar Grove, one of the largest compost operators in the United States. Sales, Marketing, and Distribution ZERUST ® Corrosion Prevention Solutions .
Furthermore, these products were also independently tested and approved for use in organic waste diversion systems by Cedar Grove, one of the largest compost operators in the United States. 6 Sales, Marketing, and Distribution ZERUST ® Corrosion Prevention Solutions .
This invisible and dry protective layer revaporizes and dissipates into the air upon removal of a diffuser from an enclosure, leaving all surfaces clean, dry, residue-free, and corrosion-free. 4 Z-CIS ® Technical Services .
This invisible and dry protective layer revaporizes and dissipates into the air upon removal of a diffuser from an enclosure, leaving all surfaces clean, dry, residue-free, and corrosion-free. Z-CIS ® Technical Services .
With respect to NTIC’s Natur-Tec® resin compounds and finished products, Ramani Narayan, Ph.D., a current director of NTIC and Distinguished Professor in the Department of Chemical Engineering & Materials Science at Michigan State University, provides his expertise and technical support to NTIC. NTIC anticipates that it will spend between $4,400,000 and $4,800,000 in fiscal 2023 on research and development activities.
With respect to NTIC’s Natur-Tec® resin compounds and finished products, Ramani Narayan, Ph.D., a current director of NTIC and Distinguished Professor in the Department of Chemical Engineering & Materials Science at Michigan State University, provides his expertise and technical support to NTIC. NTIC anticipates that it will spend between $4,400,000 and $4,800,000 in fiscal 2024 on research and development activities.
In addition, because certain barriers to entry are low, additional competitors may emerge, which likely would lead to the further commoditization of NTIC’s rust and corrosion inhibiting products. 8 With respect to the sales and marketing of ZERUST® rust and corrosion inhibiting products and services to the oil and gas industry, NTIC uses a combination of direct sales personnel, independent sales agents, and its joint venture network.
In addition, because certain barriers to entry are low, additional competitors may emerge, which likely would lead to the further commoditization of NTIC’s rust and corrosion inhibiting products. 7 With respect to the sales and marketing of ZERUST® rust and corrosion inhibiting products and services to the oil and gas industry, NTIC uses a combination of direct sales personnel, independent sales agents, and its joint venture network.
NTIC’s policy is to attempt to protect its technology by, among other things, filing patent applications and trademark applications and vigorously preserving the trade secrets covering its technology and other intellectual property rights. 9 In 1980, NTIC developed and patented the first polyolefin (plastic) based industrial corrosion inhibiting packing material in the world.
NTIC’s policy is to attempt to protect its technology by, among other things, filing patent applications and trademark applications and vigorously preserving the trade secrets covering its technology and other intellectual property rights. 8 In 1980, NTIC developed and patented the first polyolefin (plastic) based industrial corrosion inhibiting packing material in the world.
Brazil 85 % Zerust Singapore Pte Ltd Singapore (2) 60 % Zerust Vietnam Co. Ltd Vietnam (3) 60 % ZERUST-EXCOR MEXICO, S. de R.L. de C.V. Mexico 100 % ____________________ (1) Natur Tec Lanka (Pvt) Ltd. is 100% owned by Natur-Tec India Private Limited and, therefore, indirectly owned by NTIC.
Brazil 85 % Zerust Singapore Pte Ltd Singapore (2) 60 % Zerust Vietnam Co. Ltd Vietnam (3) 60 % Zerust Taiwan Co., Ltd Taiwan (4) 60 % ZERUST-EXCOR MEXICO, S. de R.L. de C.V. Mexico 100 % ____________________ (1) Natur Tec Lanka (Pvt) Ltd. is 100% owned by Natur-Tec India Private Limited and, therefore, indirectly owned by NTIC.
In the United States, NTIC markets its Natur-Tec® resin compounds and finished products through a network of national and regional distributors and independent manufacturer’s sales representatives and two NTIC direct sales employees as of August 31, 2022.
In the United States, NTIC markets its Natur-Tec® resin compounds and finished products through a network of national and regional distributors and independent manufacturer’s sales representatives and two NTIC direct sales employees as of August 31, 2023.
The following table sets forth a list of NTIC’s operating subsidiaries as of November 14, 2022, the country in which the subsidiary is organized, and NTIC’s ownership percentage in each subsidiary: Subsidiary Name Country NTIC Percent (%) Ownership HNTI Limited India 100 % Natur Tec Lanka (Pvt) Ltd Sri Lanka (1) 75 % Natur-Tec India Private Limited India 75 % NTI Asean LLC United States 60 % NTIC (Shanghai) Co., Ltd China 100 % NTIC Europe GmbH Germany 100 % Zerust Prevenção de Corrosão S.A.
The following table sets forth a list of NTIC’s operating subsidiaries as of November 17, 2023, the country in which the subsidiary is organized, and NTIC’s ownership percentage in each subsidiary: Subsidiary Name Country NTIC Percent (%) Ownership HNTI Limited India 100 % Natur Tec Lanka (Pvt) Ltd Sri Lanka (1) 75 % Natur-Tec India Private Limited India 75 % NTI Asean LLC United States 60 % NTIC (Shanghai) Co., Ltd China 100 % NTIC Europe GmbH Germany 100 % Zerust Prevenção de Corrosão S.A.
Reports filed with the SEC may be viewed at www.sec.gov. 12 Forward-Looking Statements This report on Form 10-K contains not only historical information, but also forward-looking statements that are 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.
Reports filed with the SEC may be viewed at www.sec.gov. Forward-Looking Statements This report on Form 10-K contains not only historical information, but also 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.
However, with respect to its Natur-Tec® resin compounds and finished products, there are a limited number of suppliers of the base resins used to manufacture the resin compounds and finished products. Additionally, there is growing demand for these base resins, which has caused cost increases and, more recently, supply issues.
However, with respect to its Natur-Tec® resin compounds and finished products, there are a limited number of suppliers of the base resins used to manufacture the resin compounds and finished products. Additionally, there is growing demand for these base resins, which has caused cost increases and, occasionally, supply issues.
He also holds a B.A. degree in Supply Chain Management from Eli Broad College of Business through Michigan State University. 15
He also holds a B.A. degree in Supply Chain Management from Eli Broad College of Business through Michigan State University. 14
(2) Zerust Singapore Pte Ltd is 100% owned by NTI Asean LLC and, therefore, indirectly owned by NTIC. (3) Zerust Vietnam Co. Ltd is 100% owned by Zerust Singapore Pte Ltd and, therefore, indirectly owned by NTIC.
(2) Zerust Singapore Pte Ltd is 100% owned by NTI Asean LLC and, therefore, indirectly owned by NTIC. (3) Zerust Vietnam Co. Ltd is 100% owned by Zerust Singapore Pte Ltd and, therefore, indirectly owned by NTIC. (4) Zerust Taiwan Co., Ltd is 100% owned by Zerust Singapore Pte Ltd and, therefore, indirectly owned by NTIC.
The following table sets forth a list of NTIC’s operating joint ventures as of November 14, 2022, the country in which the joint venture is organized, and NTIC’s ownership percentage in each joint venture: Joint Venture Name Country NTIC Percent (%) Ownership ACOBAL SAS France 50 % CHONG WAH-NTIA SDN. BHD.
The following table sets forth a list of NTIC’s operating joint ventures as of November 17, 2023, the country in which the joint venture is organized, and NTIC’s ownership percentage in each joint venture: Joint Venture Name Country NTIC Percent (%) Ownership ACOBAL SAS France 50 % CHONG WAH-NTIA SDN. BHD.
While NTIC believes this shows increased acceptance of corrosion solutions for the oil and gas industry, NTIC anticipates that its sales of ZERUST® products and services into the oil and gas industry will continue to remain subject to significant volatility, specifically due to economic factors, such as potential crude oil price changes and global supply/demand churn.
While NTIC believes these trends show increased acceptance of corrosion solutions for the oil and gas industry, NTIC anticipates that its sales of ZERUST® products and services into the oil and gas industry will continue to remain subject to significant volatility, specifically due to economic factors, such as potential crude oil price changes and global supply/demand churn.
Wolsfeld held an auditing position with PricewaterhouseCoopers LLP in Minneapolis, Minnesota from 1997 to 2001. Mr. Wolsfeld received a B.A. degree in Accounting from the University of Notre Dame and received his M.B.A. degree at the University of Minnesota, Carlson School of Business. Mr. Wolsfeld is a Certified Public Accountant.
Wolsfeld held an auditing position with PricewaterhouseCoopers LLP in Minneapolis, Minnesota from 1997 to 2001. Mr. Wolsfeld received a B.A. degree in Accounting from the University of Notre Dame and received his M.B.A. degree at the University of Minnesota, Carlson School of Business. Mr.
In the past and during fiscal year 2022, NTIC has experienced some delays in obtaining these base resins due to production slowdowns, which resulted from manufacturing issues, labor shortages and power restrictions in China, freight container shortages, and the war in Ukraine.
During fiscal 2022, for example, NTIC experienced some delays in obtaining these base resins due to production slowdowns, which resulted from manufacturing issues, labor shortages and power restrictions in China, freight container shortages, and the war in Ukraine.
(Zerust India), its majority-owned joint venture holding company for NTIC’s joint venture investments in the Association of Southeast Asian Nations (ASEAN) region, NTI Asean LLC (NTI Asean), certain majority-owned and wholly-owned subsidiaries, and joint venture arrangements in North America, Europe, and Asia.
(NTIC China), its wholly-owned subsidiary in India, HNTI Limited (Zerust India), its majority-owned joint venture holding company for NTIC’s joint venture investments in the Association of Southeast Asian Nations (ASEAN) region, NTI Asean LLC (NTI Asean), and certain other majority-owned and wholly-owned subsidiaries, and joint venture arrangements in North America, Europe, and Asia.
Patrick Lynch, an employee of NTIC since 1995, has been President since July 2005 and Chief Executive Officer since January 2006 and was appointed a director of NTIC in February 2004. From July 2005 to January 2006, Mr. Lynch served as Chief Operating Officer of NTIC. Mr.
Wolsfeld 49 Chief Financial Officer and Corporate Secretary G. Patrick Lynch, an employee of NTIC since 1995, has been President since July 2005 and Chief Executive Officer since January 2006 and was appointed a director of NTIC in February 2004. From July 2005 to January 2006, Mr. Lynch served as Chief Operating Officer of NTIC. Mr.
To accomplish these objectives, NTIC intends to, among other things, establish targets within its quality management standard and HSE programs to measure progress and ensure continuous improvement, provide safe and healthy workplaces for its employees, contractors and other service providers, and provide continued training to enable employees to meet their responsibility to contribute to compliance with NTIC’s HSE objectives. 11 Diversity and Inclusion Diversity and inclusion are embedded in NTIC’s values and integrated into its strategies.
To accomplish these objectives, NTIC intends to, among other things, establish targets within its quality management standard and HSE programs to measure progress and ensure continuous improvement, provide safe and healthy workplaces for its employees, contractors and other service providers, and provide continued training to enable employees to meet their responsibility to contribute to compliance with NTIC’s HSE objectives.
NTIC markets and sells its ZERUST® rust and corrosion prevention solutions to customers in the oil and gas industry across several countries either directly, through its subsidiaries, or through its joint venture partners and other strategic partners.
NTIC markets and sells its ZERUST® rust and corrosion prevention solutions to customers in the oil and gas industry in a continuously increasing number of countries either directly, through its subsidiaries, or through its joint venture partners and other strategic partners.
As of August 31, 2022, of our global workforce, 41% are females and 27% are racially or ethnically diverse. Of our management team, 40% are female and 23% are racially or ethnically diverse. Of our seven Board members, nearly 30% are female and 20% are racially or ethnically diverse. Of our U.S. workforce, 6% are veterans.
As of August 31, 2023, of our global workforce, 41% are female and 27% are racially or ethnically diverse. Of our management team, 40% are female and 23% are racially or ethnically diverse. Of our eight Board members, nearly 40% are female and nearly 40% are racially or ethnically diverse. Of our U.S. workforce, 6% are veterans.
Sales relating to this backlog are expected to be realized during first quarter of fiscal 2023. These are orders that are held by NTIC pending release instructions from the customers to be used for just-in-time production. Customers generally place orders on an “as needed” basis and expect delivery within a relatively short period of time. Governmental Regulation The U.S.
These are orders that are held by NTIC pending release instructions from the customers to be used for just-in-time production. Customers generally place orders on an “as needed” basis and expect delivery within a relatively short period of time. Governmental Regulation The U.S.
NTIC also engages in certain direct marketing activities to build its brand within the oil and gas industry, such as traditional advertising and direct mail campaigns and presence and participation at selected key trade shows and technical forums. Additionally, NTIC has worked to adapt its marketing activities in light of the COVID-19 pandemic.
NTIC also engages in certain direct marketing activities to build its brand within the oil and gas industry, such as traditional advertising and direct mail campaigns and presence and participation at selected key trade shows and technical forums.
As of August 31, 2022, NTIC’s wholly-owned subsidiary in India, HNTI Limited, had 58 full-time employees, NTIC’s wholly owned subsidiary in China had 35 full-time employees, its majority-owned subsidiary in Brazil had 20 full-time employees, its majority-owned subsidiary in India, Natur Tec India, had 9 full-time employees, its wholly owned subsidiary in Mexico had no full-time employees, and its holding company, NTI Asean, had no full-time employees.
As of August 31, 2023, NTIC’s wholly-owned subsidiary in India, HNTI Limited, had 58 full-time employees, NTIC’s wholly owned subsidiary in China had 35 full-time employees, its majority-owned subsidiary in Brazil had 20 full-time employees, its majority-owned subsidiary in India, Natur Tec India, had 9 full-time employees, its majority-owned subsidiary in Singapore, Zerust Singapore, had 1 full-time employee, its majority-owned subsidiary in Taiwan, Zerust Taiwan, had 9 full-time employees, its majority-owned subsidiary in Vietnam, Zerust Vietnam, had 6 full-time employees its wholly owned subsidiary in Mexico had no full-time employees, and its holding company, NTI Asean, had no full-time employees.
Human Capital Management Headcount and Employee Demographics As of August 31, 2022, NTIC had a total of 79 full-time employees located in North America, consisting of 18 in sales and marketing, 21 in research and development and lab, 27 in administration, and 13 in production.
Human Capital Management Headcount and Employee Demographics As of August 31, 2023, NTIC had a total of 86 full-time employees located in North America, consisting of 26 in sales and marketing, 26 in research and development and lab, 18 in administration, and 16 in production.
Dalal 53 Vice President and Director – Global Market Development – Natur-Tec® Gautam Ramdas 49 Vice President and Director – Global Market Development – Oil & Gas Brian Haglund 38 Vice President of Operations – North America 14 Vineet R.
Dalal 54 Vice President and Director – Global Market Development – Natur-Tec® Gautam Ramdas 50 Vice President and Director – Global Market Development – Oil & Gas Brian Haglund 39 Vice President of Operations – North America Vineet R.
Internationally, NTIC sells its ZERUST® corrosion prevention solutions through its wholly-owned subsidiary in China, NTIC (Shanghai) Co., Ltd. (NTIC China), starting September 1, 2021 its wholly-owned subsidiary in India, HNTI Ltd.
Internationally, NTIC sells its ZERUST® corrosion prevention solutions through its wholly-owned subsidiary in China, NTIC (Shanghai) Co., Ltd.
Employee Unions, Collective Bargaining Agreements and Work Councils There are no unions representing NTIC’s employees, and NTIC believes that its relations with its employees are good. Health, Safety and Environment Health, safety and environment (HSE) are the cornerstone of NTIC.
The average tenure of the members of NTIC’s management team is 16 years. Employee Unions, Collective Bargaining Agreements and Work Councils There are no unions representing NTIC’s employees, and NTIC believes that its relations with its employees are good. Health, Safety and Environment Health, safety and environment (HSE) are the cornerstones of NTIC.
In addition, a few raw materials and purchased parts used in NTIC’s rust and corrosion inhibiting products and Natur-Tec® finished products are sourced from suppliers who currently serve as NTIC’s sole source of supply for these materials and parts.
It is anticipated that these worldwide disruptions and supply issues will subside in fiscal 2024. 9 In addition, a few raw materials and purchased parts used in NTIC’s rust and corrosion inhibiting products and Natur-Tec® finished products are sourced from suppliers who currently serve as NTIC’s sole source of supply for these materials and parts.
For more information regarding NTIC’s joint ventures and their effect on NTIC’s operating results, see NTIC’s consolidated financial statements in “ Part II. Item 8. Financial Statements and Supplementary Data ” and “ Part II. Item 7.
Thailand (1) 30 % ____________________ (1) Indirect ownership interest through NTI Asean. 2 For more information regarding NTIC’s joint ventures and their effect on NTIC’s operating results, see NTIC’s consolidated financial statements in “ Part II. Item 8. Financial Statements and Supplementary Data ” and “ Part II. Item 7.
NTIC evaluates competing rust and corrosion inhibiting products on an ongoing basis. Some of NTIC’s competitors are established companies that may have financial resources, marketing capabilities, distribution networks and other resources substantially greater than those of NTIC.
Some of NTIC’s competitors are established companies that may have financial resources, marketing capabilities, distribution networks and other resources substantially greater than those of NTIC.
In North America, NTIC markets its Natur-Tec® resin compounds and finished products primarily through a network of regional and national distributors as well as independent agents. NTIC continues to see significant opportunities for finished bioplastic products and, therefore, continues to strengthen and expand its North American distribution network for finished Natur-Tec® bioplastic products.
In North America, NTIC markets its Natur-Tec® resin compounds and finished products primarily through a network of regional and national distributors as well as independent agents.
ZERUST ® Corrosion Prevention Solutions . In fiscal 2022, 77.5% of NTIC’s consolidated net sales were derived from developing, manufacturing and marketing ZERUST® rust and corrosion inhibiting products and services. NTIC’s consolidated net sales in fiscal 2022 included $57,459,382 in sales of ZERUST® rust and corrosion inhibiting products and services, an increase of 26.1% from such sales in fiscal 2021.
ZERUST ® Corrosion Prevention Solutions . In fiscal 2023, 77.3% of NTIC’s consolidated net sales were derived from developing, manufacturing and marketing ZERUST® rust and corrosion inhibiting products and services. NTIC’s consolidated net sales in fiscal 2023 included $61,728,364 in sales of ZERUST® rust and corrosion inhibiting products and services, an increase of 7.4% from such sales in fiscal 2022.
Other corporate officers of NTIC, their ages, and offices held, as of November 14, 2022, are as follows: Name Age Position with NTIC Vineet R.
Wolsfeld is a Certified Public Accountant. 13 Other corporate officers of NTIC, their ages, and offices held, as of November 10, 2023, are as follows: Name Age Position with NTIC Vineet R.
Each of these joint ventures generally manufactures and markets products in the geographic territory to which it is assigned. While most of NTIC’s joint ventures exclusively sell rust and corrosion inhibiting products, some of the joint ventures also sell NTIC’s Natur-Tec® resin compounds. NTIC has historically funded its investments in joint ventures with cash generated from operations.
NTIC participates in 15 active joint venture arrangements in North America, Europe, and Asia. Each of these joint ventures generally manufactures and markets products in the geographic territory to which it is assigned. While most of NTIC’s joint ventures exclusively sell rust and corrosion inhibiting products, some of the joint ventures also sell NTIC’s Natur-Tec® resin compounds.
NTIC’s consolidated net sales in fiscal 2022 included $4,608,232 in sales made to customers in the oil and gas industry, an increase of 21.5% from such sales in fiscal 2021.
NTIC’s consolidated net sales in fiscal 2023 included $7,801,986 in sales made to customers in the oil and gas industry, an increase of 69.3% from such sales in fiscal 2022.
NTIC’s consolidated net sales in fiscal 2022 included $16,699,508 in sales of Natur-Tec® resins and finished products, an increase of 52.7% compared to sales in fiscal 2021.
NTIC’s consolidated net sales in fiscal 2023 included $18,174,588 in sales of Natur-Tec® resins and finished products, an increase of 8.8% compared to sales in fiscal 2022.
NTIC advises you, however, to consult any further disclosures NTIC makes on related subjects in its annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K that NTIC files with or furnishes to the SEC. 13 INFORMATION ABOUT OUR EXECUTIVE OFFICERS The two individuals named below have been designated by NTIC’s Board of Directors as “executive officers” of NTIC.
NTIC advises you, however, to consult any further disclosures NTIC makes on related subjects in its annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K that NTIC files with or furnishes to the SEC.
NTIC ’ s Subsidiaries and Joint Venture Network NTIC has ownership interests in 10 operating subsidiaries in North America, South America, Europe, and Asia.
NTIC ’ s Subsidiaries and Joint Venture Network NTIC has ownership interests in 11 operating subsidiaries in North America, South America, Europe, and Asia, the results of which are fully consolidated in NTIC’s consolidated financial statements.
United Kingdom 50 % ZERUST A.Ş. Turkey 50 % ZERUST AB Sweden 50 % ZERUST CONSUMER PRODUCTS, LLC United States 50 % ZERUST OY Finland 50 % ZERUST SPECIALTY TECH CO. LTD. Thailand (1) 30 % ZERUST-NIC (TAIWAN) CORP. Taiwan (1) 30 % ____________________ (1) Indirect ownership interest through NTI Asean.
United Kingdom 50 % ZERUST A.Ş. Turkey 50 % ZERUST AB Sweden 50 % ZERUST CONSUMER PRODUCTS, LLC United States 50 % ZERUST OY Finland 50 % ZERUST SPECIALTY TECH CO. LTD.
Although NTIC believes it can obtain these raw materials and parts from other suppliers, an unexpected loss of supply over a short period of time, including as a result of the worldwide disruption in supply issues, may not allow NTIC time to replace these sources in the ordinary course of business. 10 Backlog NTIC had an estimated order backlog of $5,856,655 as of August 31, 2022, compared to $4,192,000 as of August 31, 2021, which was generally across all business units.
Although NTIC believes it can obtain these raw materials and parts from other suppliers, an unexpected loss of supply over a short period of time, including as a result of future worldwide disruptions in supply, may not allow NTIC time to replace these sources in the ordinary course of business.
NTIC’s rust and corrosion inhibiting products for the oil and gas industry include ZERUST® Flange Savers®, ZERUST® ReCAST-SSB solutions, and ZERUST® chemicals, including Zerion powders and gels, in addition to many of the standard industrial ZERUST® rust and corrosion inhibiting products previously described.
NTIC’s rust and corrosion inhibiting products for the oil and gas industry include ZERUST® Flange Savers®, ZERUST® Zif Tape, ZERUST® ReCAST-SSB solutions, and ZERUST® chemicals, including Zerion powders and gels, in addition to many of the standard industrial ZERUST® rust and corrosion inhibiting products previously described. 4 ZERUST® Flange Savers® are specially designed covers that have been impregnated with a proprietary ZERUST® inhibitor formulation to provide corrosion protection for flanges, valves, and welded joints.
NTIC has wholly-owned or majority-owned subsidiaries to conduct its business in Brazil, Mexico, Vietnam and Singapore. In addition, effective as of September 1, 2021, NTIC purchased the remaining 50% ownership interest in its Indian joint venture, HNTI Limited, and has continued selling its ZERUST products in India through this wholly-owned subsidiary.
NTIC has wholly owned or majority-owned subsidiaries to conduct its business in Brazil, Mexico, Vietnam, and Singapore. In addition, NTIC sells its ZERUST products in India through this wholly-owned subsidiary, HNTI Limited.
Target customers for Natur-Tec® resin compounds include plastics converters and foodservice ware brands that would purchase Natur-Tec® resin compounds to manufacture and sell their own finished bio-based and compostable end products, such as film, bags, and cutlery. Additionally, NTIC has targeted retailers and customers that may have applications for our products related to the COVID-19 pandemic.
Target customers for Natur-Tec® resin compounds include plastics converters and foodservice ware brands that would purchase Natur-Tec® resin compounds to manufacture and sell their own finished bio-based and compostable end products, such as film, bags, and cutlery. In June 2022, the State of California passed a law intended to reduce single-use plastics.
NTIC’s Natur-Tec® resin compounds and finished products are produced at facilities in India, China, Malaysia, and the United States. NTIC’s Natur-Tec® resin compounds can be shipped to manufacturing facilities around the world, where they then can be converted into finished products, such as film or piece of cutlery.
NTIC’s Natur-Tec® resin compounds can be shipped to manufacturing facilities around the world, where they then can be converted into finished products, such as film or pieces of cutlery. NTIC’s Natur-Tec® finished products are manufactured using NTIC’s Natur-Tec® resin compounds by select sub-contractors. Competition ZERUST ® Corrosion Prevention Solutions .
In June 2022, the State of California passed a law intended to reduce single-use plastics. Notably, the bill provides that, by 2032, all packaging must be recyclable or compostable. Accordingly, NTIC expects the market in California for bio-plastic packaging solutions to grow substantially in the coming decade.
Notably, the bill provides that, by 2032, all packaging must be recyclable or compostable. Accordingly, NTIC expects the market in California for bio-plastic packaging solutions to grow substantially in the coming decade. Internationally, NTIC uses Natur-Tec India, Natur Tec Lanka, NTIC China and a network of international distributors to market its Natur-Tec® resin compounds and finished products.
NTIC’s Natur-Tec® finished products are manufactured using NTIC’s Natur-Tec® resin compounds by select sub-contractors. Competition ZERUST ® Corrosion Prevention Solutions . While NTIC is unaware of any third parties with which NTIC competes on a worldwide basis with respect to its corrosion prevention solutions, NTIC does compete with several third parties on a regional basis.
While NTIC is unaware of any third parties with which NTIC competes on a worldwide basis with respect to its corrosion prevention solutions, NTIC does compete with several third parties on a regional basis. NTIC evaluates competing rust and corrosion inhibiting products on an ongoing basis.
These connection points often corrode under aggressive industrial environments and harsh operating conditions, thereby causing costly maintenance, operational, and safety problems. ZERUST® Flange Savers® are available in various sizes to accommodate different pipe diameters, pressure ratings, and international standards for pipeline valves and flanges.
ZERUST® Flange Savers® are available in various sizes to accommodate different pipe diameters, pressure ratings, and international standards for pipeline valves and flanges.
Internationally, NTIC uses Natur-Tec India, Natur Tec Lanka, NTIC China and a network of international distributors to market its Natur-Tec® resin compounds and finished products. The government of India recently announced a phased ban on the manufacture and sale of single-use plastics beginning in July 2022. The first phase bans earbuds and plastic sticks used in balloons and ice cream.
The government of India recently announced a phased ban on the manufacture and sale of single-use plastics beginning in July 2022. The first phase bans earbuds and plastic sticks used in balloons and ice cream. The second phase bans plastic cigarette packets and plastic bags less than 100 microns thick. Notably, compostable plastics are exempt from this ban.
Due to supply chain disruptions associated with the COVID-19 pandemic and otherwise, NTIC experienced longer lead times for raw materials and experienced raw material cost increases during fiscal 2022 compared to prior fiscal years.
While NTIC experienced longer lead times for raw materials and experienced raw material cost increases during fiscal 2022 as a result of supply chain disruptions, lead times and raw material costs declined during fiscal 2023.
Their ages and the offices held, as of November 14, 2022, are as follows: Name Age Position with NTIC G. Patrick Lynch 55 President and Chief Executive Officer Matthew C. Wolsfeld 48 Chief Financial Officer and Corporate Secretary G.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS The two individuals named below have been designated by NTIC’s Board of Directors as “executive officers” of NTIC. Their ages and the offices held, as of November 10, 2023, are as follows: Name Age Position with NTIC G. Patrick Lynch 56 President and Chief Executive Officer Matthew C.
The payment of a dividend by an entity is determined by a joint vote of the owners and is not at the sole discretion of NTIC. NTIC accounts for the investments and financial results of its joint ventures in its consolidated financial statements utilizing the equity method of accounting.
NTIC has historically funded its investments in joint ventures with cash generated from operations. NTIC accounts for the investments and financial results of its joint ventures in its consolidated financial statements utilizing the equity method of accounting.
In fiscal 2022, NTIC experienced a significant recovery in many of these areas to pre-pandemic levels, but still expects some of these customers will be the last businesses to fully re-open and operate at full pre-pandemic capacities, and accordingly, anticipates that the COVID-19 pandemic will continue to adversely affect sales of Natur-Tec® products into fiscal 2023. Resin Compounds .
Beginning in fiscal 2022 and throughout 2023, NTIC experienced a significant recovery in many of these areas to pre-pandemic levels. NTIC anticipates that college campuses and other venues will return to pre-pandemic levels of operation in 2024. 5 Resin Compounds .
NTIC provides compensation and benefits that are competitive and comply with applicable laws, and NTIC commits to a fair and living wage. Values and Ethics In connection with NTIC’s core values, NTIC acts in accordance with its Code of Ethics.
NTIC provides compensation and benefits that are competitive and comply with applicable laws, and NTIC commits to a fair and living wage. NTIC’s employees have immediate eligibility to participate in NTIC’s 401(k) employee savings plan. Employees are immediately vested upon contributing to the 401(k) employee savings plan. NTIC matches 401(k) contributions made by employes and may also make profit-sharing contributions.
The second phase bans plastic cigarette packets and plastic bags less than 100 microns thick. Notably, compostable plastics are exempt from this ban. Accordingly, NTIC expects the market in India for bio-plastic packaging solutions to continue to grow substantially.
Accordingly, NTIC expects the market in India for bio-plastic packaging solutions to continue to grow substantially. NTIC’s Natur-Tec® resin compounds and finished products are produced at facilities in India, China, Malaysia, and the United States.
Removed
As a result of the acquisition of Zerust India, NTIC’s revenues and operating expenses increased and its equity in income from joint ventures decreased during fiscal 2022 as compared to fiscal 2021. See Note 3 to NTIC’s consolidated financial statements for a discussion of Zerust India.
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In fiscal 2023, sales of ZERUST® corrosion prevention solutions to large customers in the oil and gas industry became more consistent, with these customers beginning to re-order products. Sales within the U.S. also stabilized somewhat, and key customer relationships were expanded.
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The results of these subsidiaries are fully consolidated in NTIC’s consolidated financial statements, except that HNTI Limited only became a wholly owned subsidiary as of September 1, 2021; and therefore, its results of operations are not included in NTIC’s consolidated financial statements for fiscal 2021 included in this report as the investment and financial results of this joint venture are consolidated utilizing the equity method of accounting. 2 NTIC participates in 16 active joint venture arrangements in North America, Europe, and Asia.
Added
Oil and gas pipeline segments are connected by flanges and welded joints of varying sizes, designs, and materials. These connection points often corrode under aggressive industrial environments and harsh operating conditions, thereby causing costly maintenance, operational, and safety problems.
Removed
In connection with the ongoing conflict between Russia and Ukraine, we terminated our Russian joint venture, Mostnic-Zerust, in May 2022, and believe this will not have an adverse effect on our results of operations or financial condition, given the immateriality of this entity.
Added
Backlog NTIC had an estimated order backlog of $5,337,717 as of August 31, 2023, compared to $5,856,655 as of August 31, 2022, which was generally across all business units. Sales relating to this backlog are expected to be realized during first quarter of fiscal 2024.
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NTIC receives funds from its joint ventures as fees received for services that NTIC provides to its joint ventures and as dividend distributions. The fees for services provided to joint ventures are determined based on either a flat fee or a percentage of sales depending on local laws and tax regulations.
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Turnover NTIC continually monitors employee turnover rates as its success depends upon retaining highly trained engineering, manufacturing and operations personnel. The average tenure of our employees is nine years. 10 Management Team NTIC believes its management team has the experience necessary to effectively execute its strategy and advance its product and technology leadership.
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With respect to NTIC’s joint venture in Germany (EXCOR), NTIC recognizes an agreed upon quarterly fee for services. NTIC recognizes equity income from each joint venture based on the overall profitability of the joint venture. Such profitability is subject to variability from quarter to quarter, which, in turn, subjects NTIC’s earnings to variability from quarter to quarter.
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NTIC monitors conditions that could lead to safety incidents and keeps track of injuries through reporting systems in accordance with the laws in the jurisdictions in which NTIC operates. NTIC tracks this data to assess the quality of its safety performance.
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The profits of each joint venture are shared by the respective joint venture owners in accordance with their respective ownership percentages.
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NTIC defines lost time incidents as work-related incidents where a worker sustains an injury that results in time away from work. NTIC had only one lost time incident in each 2023 and 2022. Diversity and Inclusion Diversity and inclusion are embedded in NTIC’s values and integrated into its strategies.
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NTIC typically directly or indirectly owns 50% or less of each of its joint venture entities and, thus, does not control the decisions of these entities regarding whether dividends are paid and, if so, what amount is paid in a given year.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

111 edited+33 added−20 removed168 unchanged
Biggest changeRisks Related to NTIC ’ s Business and Industry ● Any weakness in the global economy, and in particular in the United States, Europe, India and China, and in the automotive industry, may negatively impact NTIC’s business, operating results, and financial condition. ● The COVID-19 pandemic has adversely impacted and will likely continue to adversely impact NTIC’s business, operating results and financial condition. ● NTIC’s business may be negatively impacted by inflation. ● Supply chain disruptions could interrupt product manufacturing, increase product costs and result in lost sales, which may have a material adverse effect on NTIC’s business, operating results and financial condition. ● Disruptions to the distribution channels for NTIC’s products may negatively impact NTIC’s business, operating results, and financial condition. ● NTIC’s dependence on key suppliers puts NTIC at risk of interruptions in the availability of its products, which could reduce its net sales and adversely affect its operating results and harm its reputation. ● Increases in prices for raw materials and components used in NTIC’s products could adversely affect NTIC’s operating results. ● NTIC relies on others for its production and any interruptions of these arrangements could disrupt NTIC’s ability to fill its customers’ orders. ● Changes to trade regulation, quotas, duties, or tariffs, caused by the changing U.S. and geopolitical environments or otherwise, may negatively impact NTIC’s business, operating results, and financial condition. ● Global credit and financial markets in the past have experienced disruptions, including diminished liquidity and credit availability and rapid fluctuations in market valuations, which, if they happen again, could negatively impact NTIC’s business, operating results, and financial condition. ● NTIC has limited staffing, faces challenges caused by its aging workforce and given its limited resources, it may not effectively manage its growth. ● The evolution of the automotive industry towards electric vehicles could adversely affect our business.
Biggest changeRisks Related to NTIC ’ s Business and Industry ● Any weakness in the global economy, and in particular in the United States, Europe, India and China, and in the automotive industry, has negatively impacted and in the future may negatively impact NTIC’s business, operating results, and financial condition. ● COVID-19 has adversely impacted and may continue to adversely impact NTIC’s business, operating results and financial condition. ● NTIC’s business in the past has been and in the future may be negatively impacted by inflation. ● Supply chain disruptions in the past have interrupted and in the future could interrupt product manufacturing, increase product costs and result in lost sales, which have had and in the future may have a material adverse effect on NTIC’s business, operating results and financial condition. ● Disruptions to the distribution channels for NTIC’s products in the past have negatively impacted and in the future may negatively impact NTIC’s business, operating results, and financial condition. ● NTIC’s dependence on key suppliers puts NTIC at risk of interruptions in the availability of its products, which could reduce its net sales and adversely affect its operating results and harm its reputation. ● Increases in prices for raw materials and components used in NTIC’s products in the past have adversely affected and in the future could adversely affect NTIC’s operating results. ● NTIC relies on others for its production and any interruptions of these arrangements could disrupt NTIC’s ability to fill its customers’ orders. ● Changes to trade regulation, quotas, duties, or tariffs, caused by the changing U.S. and geopolitical environments or otherwise, have negatively impacted in the past and in the future may negatively impact NTIC’s business, operating results, and financial condition. ● Global credit and financial markets in the past have experienced disruptions, including diminished liquidity and credit availability and rapid fluctuations in market valuations, which, if they happen again, could negatively impact NTIC’s business, operating results, and financial condition. ● NTIC has limited staffing, faces challenges caused by its aging workforce and given its limited resources, it may not effectively manage its growth. ● The evolution of the automotive industry towards electric vehicles could adversely affect NTIC’s business.
If sales of NTIC ’ s products and services by this joint venture were to decline significantly or if NTIC ’ s relationships with this joint venture were to deteriorate significantly, NTIC ’ s operating results likely would be adversely affected.
If sales of NTIC ’ s products and services by this joint venture were to significantly decline or if NTIC ’ s relationships with this joint venture were to significantly deteriorate, NTIC ’ s operating results likely would be adversely affected.
Accordingly, if sales of NTIC’s products and services by this joint venture were to decline significantly or if NTIC’s relationships with this joint venture were to deteriorate significantly such that the joint venture terminated or was not motivated to sell NTIC’s products and services, NTIC’s operating results likely would be adversely affected.
Accordingly, if sales of NTIC’s products and services by this joint venture were to significantly decline or if NTIC’s relationships with this joint venture were to significantly deteriorate such that the joint venture terminated or was not motivated to sell NTIC’s products and services, NTIC’s operating results likely would be adversely affected.
Effective as of September 1, 2021, NTIC acquired the remaining 50% ownership interest in its Indian joint venture, HNTI. It is possible that as part of its succession planning efforts with respect to its joint venture partners that NTIC may complete similar acquisitions in the future.
Effective as of September 1, 2021, NTIC acquired the remaining 50% ownership interest in its Indian joint venture, HNTI. It is possible that as part of its succession planning efforts with respect to its joint venture partners, NTIC may complete similar acquisitions in the future.
The increasing global focus on climate change and the need for corporate change also may lead to new regional, federal, and/or global legal and regulatory requirements to reduce or mitigate the effects of greenhouse gases. Inconsistency of regulations in the countries in which we operate may affect the costs of compliance with such legal or regulatory requirements.
The increasing global focus on climate change and the need for corporate change also may lead to new regional, federal, and/or global legal and regulatory requirements to reduce or mitigate the effects of greenhouse gases. The inconsistency of regulations in the countries in which we operate may affect the costs of compliance with such legal or regulatory requirements.
NTIC’s business has been and could in the future be materially and adversely affected by severe weather.
NTIC’s business has been and in the future could be materially and adversely affected by severe weather.
In addition, joint ventures, alliances, and acquisitions involve a number of risks, including: ● diversion of management’s attention; ● difficulties in assimilating the operations and products of a new joint venture or acquired business or in realizing projected efficiencies, cost savings, and revenue synergies; 34 ● potential loss of key employees or customers of the new joint venture or acquired business or adverse effects on existing business relationships with suppliers and customers; ● adverse impact on overall profitability if the new joint venture or acquired business does not achieve the financial results projected in NTIC’s valuation models; ● reallocation of amounts of capital from other operating initiatives and/or an increase in NTIC’s leverage and debt service requirements to pay the joint venture capital contribution or the acquisition purchase price, which could in turn restrict NTIC’s ability to access additional capital when needed or to pursue other important elements of NTIC’s business strategy; ● inaccurate assessment of undisclosed, contingent, or other liabilities or problems and unanticipated costs associated with the new joint venture or acquisition; and ● incorrect estimates made in the accounting for acquisitions, occurrence of non-recurring charges, and write-off of significant amounts of goodwill that could adversely affect NTIC’s operating results.
In addition, joint ventures, alliances, and acquisitions involve a number of risks, including: ● diversion of management’s attention; ● difficulties in assimilating the operations and products of a new joint venture or acquired business or in realizing projected efficiencies, cost savings, and revenue synergies; ● potential loss of key employees or customers of the new joint venture or acquired business or adverse effects on existing business relationships with suppliers and customers; 34 ● adverse impact on overall profitability if the new joint venture or acquired business does not achieve the financial results projected in NTIC’s valuation models; ● reallocation of amounts of capital from other operating initiatives and/or an increase in NTIC’s leverage and debt service requirements to pay the joint venture capital contribution or the acquisition purchase price, which could in turn restrict NTIC’s ability to access additional capital when needed or to pursue other important elements of NTIC’s business strategy; ● inaccurate assessment of undisclosed, contingent, or other liabilities or problems and unanticipated costs associated with the new joint venture or acquisition; and ● incorrect estimates made in the accounting for acquisitions, occurrence of non-recurring charges, and write-off of significant amounts of goodwill that could adversely affect NTIC’s operating results.
These risks include: ● difficulties in managing and staffing international operations and the required infrastructure costs, including legal, tax, accounting, and information technology; ● the imposition of additional U.S. and foreign governmental controls or regulations, new trade restrictions, and restrictions on the activities of foreign agents, representatives, and distributors, the imposition of costly and lengthy export licensing requirements and changes in duties and tariffs, license obligations, and other non-tariff barriers to trade; ● the imposition of U.S. and/or international sanctions against a country, company, person, or entity with whom NTIC does business that would restrict or prohibit continued business with the sanctioned country, company, person, or entity; ● pricing pressure that NTIC or its joint ventures, distributors, representatives, and agents may experience internationally; ● laws and business practices favoring local companies; ● adverse currency exchange rate fluctuations; ● longer payment cycles and difficulties enforcing agreements and collecting receivables through certain foreign legal systems; ● national and international conflicts, including foreign policy changes or terrorist acts; ● difficulties in enforcing or defending intellectual property rights; ● multiple, changing, and often inconsistent enforcement of laws and regulations; and ● the potential payment of U.S. income taxes on certain earnings of joint ventures upon repatriation.
These risks include: 21 ● difficulties in managing and staffing international operations and the required infrastructure costs, including legal, tax, accounting, and information technology; ● the imposition of additional U.S. and foreign governmental controls or regulations, new trade restrictions, and restrictions on the activities of foreign agents, representatives, and distributors, the imposition of costly and lengthy export licensing requirements and changes in duties and tariffs, license obligations, and other non-tariff barriers to trade; ● the imposition of U.S. and/or international sanctions against a country, company, person, or entity with whom NTIC does business that would restrict or prohibit continued business with the sanctioned country, company, person, or entity; ● pricing pressure that NTIC or its joint ventures, distributors, representatives, and agents may experience internationally; ● laws and business practices favoring local companies; ● adverse currency exchange rate fluctuations; ● longer payment cycles and difficulties enforcing agreements and collecting receivables through certain foreign legal systems; ● national and international conflicts, including foreign policy changes or terrorist acts; ● difficulties in enforcing or defending intellectual property rights; ● multiple, changing, and often inconsistent enforcement of laws and regulations; and ● the potential payment of U.S. income taxes on certain earnings of joint ventures upon repatriation.
Any changes in foreign currency exchange rates would be reflected as a foreign currency translation adjustment and would not change NTIC’s equity in income from joint ventures reflected in its consolidated statements of operations. NTIC does not hedge against its foreign currency exchange rate risk. 26 Economic uncertainty in developing markets could adversely affect NTIC ’ s revenue and earnings.
Any changes in foreign currency exchange rates would be reflected as a foreign currency translation adjustment and would not change NTIC’s equity in income from joint ventures reflected in its consolidated statements of operations. NTIC does not hedge against its foreign currency exchange rate risk. Economic uncertainty in developing markets could adversely affect NTIC ’ s revenue and earnings.
Finally, changes to international trade agreements could result in additional tariffs, duties, or other charges on raw materials or components we import into the U.S. NTIC relies on others for its production and any interruptions of these arrangements could disrupt NTIC ’ s ability to fill its customers ’ orders.
Finally, changes to international trade agreements could result in additional tariffs, duties, or other charges on raw materials or components we import into the U.S. 18 NTIC relies on others for its production and any interruptions of these arrangements could disrupt NTIC ’ s ability to fill its customers ’ orders.
Our failure to recruit and train new employees and to ensure they obtain the adequate qualifications and experience could result in reduced revenues, loss of customer goodwill and a material negative impact on our results of operations. Given NTIC ’ s limited resources, it may not effectively manage its growth.
Our failure to recruit and train new employees and to ensure they obtain adequate qualifications and experience could result in reduced revenues, loss of customer goodwill and a material negative impact on our results of operations. Given NTIC ’ s limited resources, it may not effectively manage its growth.
For example, the rapid growth in demand for bioplastics products globally has increased the demand and the price for plastic resins, and limited suppliers of such plastic resins may experience shortages caused by demand outpacing their production capabilities, which could result in NTIC’s inability to produce its Natur-Tec® products promptly or in the volumes demanded.
The rapid growth in demand for bioplastics products globally has increased the demand and the price for plastic resins, and limited suppliers of such plastic resins may experience shortages caused by demand outpacing their production capabilities, which could result in NTIC’s inability to produce its Natur-Tec® products promptly or in the volumes demanded.
NTIC may also have limited legal recourse in the event it encounters patent or trademark infringers, which could adversely affect NTIC’s business, results of operations, and financial condition. 25 Uncertainties with respect to the Chinese legal system may adversely affect the operations of NTIC China. NTIC China is subject to laws and regulations applicable to foreign investment in China.
NTIC may also have limited legal recourse in the event it encounters patent or trademark infringers, which could adversely affect NTIC’s business, results of operations, and financial condition. Uncertainties with respect to the Chinese legal system may adversely affect the operations of NTIC China. NTIC China is subject to laws and regulations applicable to foreign investment in China.
In many of the countries in which NTIC sells its products directly or indirectly through NTIC China, Zerust Brazil, Natur-Tec India, Natur-Tec Lanka, Zerust Mexico, Zerust Singapore, Zerust Vietnam and NTI Asean, its joint ventures, distributors, representatives, and agents are, to some degree, subject to political, economic, and/or social instability.
In many of the countries in which NTIC sells its products directly or indirectly through NTIC China, Zerust Brazil, Natur-Tec India, Natur-Tec Lanka, Zerust Mexico, Zerust Singapore, Zerust Taiwan, Zerust Vietnam, and NTI Asean, its joint ventures, distributors, representatives, and agents are, to some degree, subject to political, economic, and/or social instability.
In addition, the growth of the market will create some pressure on price for applications today considered commodities, including in particular NTIC’s current Natur-Tec® finished products. NTIC relies on its joint ventures, distributors, manufacturer ’ s sales representatives, and other agents to market and sell its products.
In addition, the growth of the market will create some pressure on price for applications today considered commodities, including in particular NTIC’s current Natur-Tec® finished products. 28 NTIC relies on its joint ventures, distributors, manufacturer ’ s sales representatives, and other agents to market and sell its products.
Internationally, the government of India recently announced a phased ban on the manufacture and sale of single-use plastics beginning in July 2022. Similarly, in January 2021, China implemented a ban on single-use plastic utensils, bags and certain other single-use plastic items.
Internationally, the government of India announced a phased ban on the manufacture and sale of single-use plastics beginning in July 2022. Similarly, in January 2021, China implemented a ban on single-use plastic utensils, bags and certain other single-use plastic items.
In addition, any equity financings may be dilutive to NTIC ’ s stockholders. The expansion of NTIC’s corrosion prevention solutions into the oil and gas industry and the continued expansion of NTIC’s Natur-Tec® resin compounds and finished products will continue to require resources during fiscal 2023 and beyond.
In addition, any equity financings may be dilutive to NTIC ’ s stockholders. The expansion of NTIC’s corrosion prevention solutions into the oil and gas industry and the continued expansion of NTIC’s Natur-Tec® resin compounds and finished products will continue to require resources during fiscal 2024 and beyond.
NTIC is unable to predict the prospects for a global economic recovery, but the longer the duration of such adverse and uncertain economic conditions, the greater the risks NTIC faces in operating its business. 20 NTIC has limited staffing and will continue to be dependent upon key employees.
NTIC is unable to predict the prospects for a global economic recovery, but the longer the duration of such adverse and uncertain economic conditions, the greater the risks NTIC faces in operating its business. 19 NTIC has limited staffing and will continue to be dependent upon key employees.
Additionally, the war between Russia and Ukraine and the resulting sanctions by U.S. and European governments have resulted in and may continue to result in commodity price fluctuations, which have decreased our margins and the margins of our joint ventures and resulted in decreased joint venture profitability, which will likely continue during fiscal 2023.
Additionally, the war between Russia and Ukraine and the resulting sanctions by U.S. and European governments have resulted in and may continue to result in commodity price fluctuations, which have decreased our margins and the margins of our joint ventures and resulted in decreased joint venture profitability, which will likely continue during fiscal 2024.
Risks Related to NTIC ’ s Common Stock ● The trading volume of NTIC’s common stock is typically very low, leaving NTIC’s common stock open to risk of high volatility and the price and trading volume has been, and may continue to be, volatile. ● A large percentage of NTIC’s outstanding common stock is held by insiders, and, as a result, the trading market for NTIC’s common stock is not as liquid as the stock of other public companies. 17 Risks Related to NTIC ’ s Business and Industry Any weakness in the global economy, and in particular in the United States, Europe, India and China, and in the automotive industry, may negatively impact NTIC ’ s business, operating results, and financial condition.
Risks Related to NTIC ’ s Common Stock ● The trading volume of NTIC’s common stock is typically very low, leaving NTIC’s common stock open to risk of high volatility and the price and trading volume has been, and may continue to be, volatile. ● A large percentage of NTIC’s outstanding common stock is held by insiders, and, as a result, the trading market for NTIC’s common stock is not as liquid as the stock of other public companies. 16 Risks Related to NTIC ’ s Business and Industry Any weakness in the global economy, and in particular in the United States, Europe, India and China, and in the automotive industry, has negatively impacted and in the future may negatively impact NTIC ’ s business, operating results, and financial condition.
NTIC’s strategy of expanding its corrosion prevention solutions into the oil and gas industry and continuing the expansion of its Natur-Tec® bioplastics resin compounds and finished products, either directly or indirectly through joint ventures and independent distributors and agents, is risky and subject to all of the risks inherent in the establishment of a new business enterprise, including: ● the absence of a significant operating history; ● the lack of commercialized products; ● the lack of market acceptance of new products; ● expected substantial and continual losses for such businesses for the foreseeable future; ● the lack of manufacturing experience and limited marketing experience; ● an expected reliance on third parties for the manufacture and commercialization of some of the products; ● a competitive environment characterized by numerous, well-established and well-capitalized competitors; ● insufficient capital and other resources; and ● reliance on key personnel and the need to hire and train local support in a timely manner in order to support customer needs; and ● NTIC’s dependence on manufacturing and logistical services provided by contractors could give rise to product defect or warranty liability. 28 NTIC uses third-party manufacturers to produce the majority of its products.
NTIC’s strategy of expanding its corrosion prevention solutions into the oil and gas industry and continuing the expansion of its Natur-Tec® bioplastics resin compounds and finished products, either directly or indirectly through joint ventures and independent distributors and agents, is risky and subject to all of the risks inherent in the establishment of a new business enterprise, including: ● the absence of a significant operating history; ● the lack of commercialized products; ● the lack of market acceptance of new products; ● expected substantial and continual losses for such businesses for the foreseeable future; ● the lack of manufacturing experience and limited marketing experience; ● an expected reliance on third parties for the manufacture and commercialization of some of the products; ● a competitive environment characterized by numerous, well-established and well-capitalized competitors; ● insufficient capital and other resources; ● reliance on key personnel and the need to hire and train local support in a timely manner in order to support customer needs; and ● NTIC’s dependence on manufacturing and logistical services provided by contractors could give rise to product defect or warranty liability.
However, we may incur increased costs relating to the assessment and disclosure of climate-related risks and increased litigation risks related to disclosures made pursuant to the new rules, either of which could materially and adversely affect our future results of operations and financial condition. Severe weather could have a material adverse effect on our business.
However, we may incur increased costs relating to the assessment and disclosure of climate-related risks and increased litigation risks related to disclosures made pursuant to the new rules, either of which could materially and adversely affect our future results of operations and financial condition. Severe weather could have a material adverse effect on NTIC ’ s business.
NTIC relies on suppliers for certain raw materials and components used in its products. For reasons of quality assurance, cost effectiveness, or availability, NTIC procures certain raw materials and components from sole or limited source suppliers. Among the limited source suppliers NTIC does business with are the manufacturers of plastic resins used in Natur-Tec® products.
For reasons of quality assurance, cost effectiveness, or availability, NTIC procures certain raw materials and components from sole or limited source suppliers. Among the limited source suppliers NTIC does business with are the manufacturers of plastic resins used in Natur-Tec® products.
In addition, weaknesses in the worldwide economy, including the imposition of higher tariffs and withdrawal from the Trans-Pacific Partnership, may adversely impact the ability of suppliers to provide NTIC with materials and components, which could adversely affect NTIC’s business and operating results.
In addition, weaknesses in the worldwide economy, including the imposition of higher tariffs, the withdrawal from the Trans-Pacific Partnership and sanctions on Russia, may adversely impact the ability of suppliers to provide NTIC with materials and components, which could adversely affect NTIC’s business and operating results.
Although the price of crude oil neared an all-time high in fiscal 2022, low global crude oil prices have been and may in the future be caused OPEC decisions and other macroeconomic factors affecting supply and demand.
Although the price of crude oil neared an all-time high in fiscal 2022, prices receded in 2023, and low global crude oil prices have been and may in the future be caused by OPEC decisions and other macroeconomic factors affecting supply and demand.
As of November 14, 2022, Inter Alia Holding Company, or Inter Alia, beneficially owned approximately 12.8% of NTIC’s outstanding common stock. Inter Alia is an entity partially owned by G. Patrick Lynch, NTIC’s President and Chief Executive Officer and director, as well as two other members of the Lynch family. Mr.
As of November 10, 2023, Inter Alia Holding Company, or Inter Alia, beneficially owned approximately 12.8% of NTIC’s outstanding common stock. Inter Alia is an entity partially owned by G. Patrick Lynch, NTIC’s President and Chief Executive Officer and director, as well as two other members of the Lynch family. Mr.
The results of operations and future prospects of NTIC China may be adversely affected by, among other things, changes in China’s political, economic, and social conditions, changes in the relationship between China and its western trade partners, changes in policies of the Chinese government, changes in laws and regulations or in the interpretation of existing laws and regulations, changes in foreign exchange regulations, measures that may be introduced to control inflation, such as interest rate increases, and changes in the rates or methods of taxation.
The results of operations and future prospects of NTIC China may be adversely affected by, among other things, changes in China’s political, economic, and social conditions, escalating tensions between China and Taiwan, changes in the relationship between China and its western trade partners, changes in policies of the Chinese government, changes in laws and regulations or in the interpretation of existing laws and regulations, changes in foreign exchange regulations, measures that may be introduced to control inflation, such as interest rate increases, changes in the rates or methods of taxation, and increasing tensions between the United States and China.
Risks Related to NTIC ’ s International Operations and the Foreign Markets in which NTIC Operates ● NTIC’s international business, which is conducted primarily through its subsidiaries and joint ventures, requires management attention and financial resources and exposes NTIC to difficulties and risks presented by international economic, political, legal, accounting, and business factors. ● If sales of NTIC’s products and services by its joint venture in Germany were to decline significantly or if NTIC’s relationships with this joint venture were to deteriorate significantly, NTIC’s operating results likely would be adversely affected. ● NTIC’s acquisition of the remaining 50% ownership interest of HNTI and any future similar acquisitions involve risk. ● The ongoing conflict between Russia and Ukraine may adversely affect our business and results of operations. ● NTIC China’s operations may be adversely affected by China’s evolving economic, political, and social conditions and intellectual property rights are difficult to enforce in China, which could harm NTIC’s business, results of operations, or financial condition. ● Uncertainties with respect to the Chinese legal system may adversely affect the operations of NTIC China. ● Failure to comply with the U.S.
Risks Related to NTIC ’ s International Operations and the Foreign Markets in which NTIC Operates ● NTIC’s international business, which is conducted primarily through its subsidiaries and joint ventures, requires management attention and financial resources and exposes NTIC to difficulties and risks presented by international economic, political, legal, accounting, and business factors. ● If sales of NTIC’s products and services by its joint venture in Germany were to decline significantly or if NTIC’s relationships with this joint venture were to deteriorate significantly, NTIC’s operating results likely would be adversely affected. ● NTIC’s acquisition of the remaining 50% ownership interest of HNTI Limited and any future similar acquisitions involve risk. ● The ongoing war between Russia and Ukraine may adversely affect NTIC’s business and results of operations. ● The ongoing war between Israel and Hamas may adversely affect NTIC’s business and results of operations. ● The operations of NTIC China may be adversely affected by China’s evolving economic, political, and social conditions, as well as increasing tensions between the United States and China. ● Intellectual property rights are difficult to enforce in China, which could harm NTIC’s business, results of operations, or financial condition. 15 ● Uncertainties with respect to the Chinese legal system may adversely affect the operations of NTIC China. ● Failure to comply with the U.S.
Any changes or potential changes in trade policies in the United States, including changes made by the Biden administration, and the potential corresponding actions by other countries in which NTIC does business could adversely and materially affect NTIC’s business, results of operations, and financial condition.
Any changes or potential changes in trade policies in the United States and the potential corresponding actions by other countries in which NTIC does business could adversely and materially affect NTIC’s business, results of operations, and financial condition.
The evolution of the automotive industry towards electric vehicles could adversely affect our business. The global automotive industry is experiencing a period of significant technological change, including the development and use of electric vehicles, which do not contain as many components that require our ZERUST products and solutions.
The evolution of the automotive industry towards electric vehicles could adversely affect NTIC ’ s business. The global automotive industry is experiencing a period of significant technological change, including the development and use of electric vehicles, which do not contain as many components that require NTIC’s ZERUST® products and solutions.
The broader consequences of this conflict, which may include additional international sanctions, embargoes, regional instability, and geopolitical shifts; increased tensions between the United States and countries in which we operate; and the extent of the conflict’s effect on our business and results of operations as well as the global economy, cannot be predicted.
The broader consequences of this conflict, which may include additional international sanctions, embargoes, regional instability, and geopolitical shifts; increased tensions between the United States and countries in which NTIC operates; and the extent of the conflict’s effect on NTIC’s business and results of operations, as well as the global economy, cannot be predicted.
Increased demand for electric vehicles which do not contain as many components requiring our ZERUST products and solutions will adversely affect our net sales and other operating results and business. 21 Risks Related to NTIC ’ s Joint Ventures NTIC ’ s liquidity and financial position rely on the receipt of fees for services provided to its joint ventures and dividend distributions from its joint ventures.
However, increased demand for electric vehicles, which do not contain as many components requiring these products and solutions, will still adversely affect NTIC’s net sales and other operating results and business. 20 Risks Related to NTIC ’ s Joint Ventures NTIC ’ s liquidity and financial position rely on the receipt of fees for services provided to its joint ventures and dividend distributions from its joint ventures.
Such risks include, but are not limited to, adverse effects on macroeconomic conditions, including inflation, demand for our products and potential recessionary economic conditions; increased cyber security threats; adverse changes in trade policies, taxes, government regulations, and tariffs; our ability to maintain or increase our prices in response to rising shipping costs; our ability to implement and execute our business strategy, particularly with regard to our joint ventures; disruptions in global supply chains; our exposure to foreign currency fluctuations; and constraints, volatility, or disruption in the capital markets.
Such risks include, but are not limited to, adverse effects on macroeconomic conditions, including inflation, demand for NTIC’s products and potential recessionary economic conditions; increased cyber security threats; adverse changes in trade policies, taxes, government regulations, and tariffs; NTIC’s ability to implement and execute its business strategy, particularly with regard to its joint ventures; disruptions in global supply chains; its exposure to foreign currency fluctuations; and constraints, volatility, or disruption in the capital markets.
NTIC believes the ongoing conflict between Russia and Ukraine and the continued impact of high rates of inflation may create uncertainty among its existing and prospective customers, which may cause them to halt oil and gas projects or elect to decrease capital improvement budgets, either of which could harm NTIC’s ability to sell its products into the oil and gas industry.
NTIC believes the ongoing war between Russia and Ukraine may create uncertainty among its existing and prospective customers, which may cause them to halt oil and gas projects or elect to decrease capital improvement budgets, either of which could harm NTIC’s ability to sell its products into the oil and gas industry.
Any difficulties in the assimilation of acquired businesses into NTIC’s internal control framework could harm its operating results or cause NTIC to fail to meet its financial reporting obligations. Also, acquisitions require the consent of PNC Bank, National Association under NTIC’s loan agreement with PNC Bank.
Any difficulties in the assimilation of acquired businesses into NTIC’s internal control framework could harm its operating results or cause NTIC to fail to meet its financial reporting obligations. Also, acquisitions require the consent of the lender under NTIC’s loan agreement.
While the persistent inflation experienced in fiscal 2021 and fiscal 2022 has somewhat stabilized recently, increases in inflation have impacted the cost of raw materials, the overall demand for NTIC’s products, labor, and the margins NTIC and its joint ventures are able to realize on the sale of products, all of which have had and could continue to have a negative impact on NTIC’s business, financial position, results of operations and cash flows.
While the persistent inflation experienced in fiscal 2022 began stabilizing in fiscal 2023, initial increases in inflation impacted the cost of raw materials, the overall demand for NTIC’s products, labor, and the margins NTIC and its joint ventures are able to realize on the sale of products, all of which have had and could continue to have a negative impact on NTIC’s business, financial position, results of operations and cash flows.
To the extent the current conflict between Russia and Ukraine adversely affects our business, it may also have the effect of heightening many other risks disclosed herein, any of which could materially and adversely affect our business and results of operations.
To the extent the ongoing war between Russia and Ukraine adversely affects NTIC’s business, it may also have the effect of heightening many other risks disclosed herein, any of which could materially and adversely affect NTIC’s business and results of operations.
During fiscal 2022, 77.5% of NTIC’s consolidated net sales were derived from sales of ZERUST® rust and corrosion inhibiting products and services.
During fiscal 2023, 77.3% of NTIC’s consolidated net sales were derived from sales of ZERUST® rust and corrosion inhibiting products and services.
In addition, NTIC relies upon certain contractors for logistical services. Although NTIC’s arrangements with its contract manufacturers and contractors may contain provisions for warranty expense reimbursement, NTIC may remain responsible to its customers for warranty service in the event of product defects and could experience an unanticipated product defect or warranty liability.
Although NTIC’s arrangements with its contract manufacturers and contractors may contain provisions for warranty expense reimbursement, NTIC may remain responsible to its customers for warranty service in the event of product defects and could experience an unanticipated product defect or warranty liability. In addition, product defects could harm NTIC’s reputation amongst its customers.
Additionally, new environmental laws, rules, and regulations, such as certain provisions of the Inflation Reduction Act of 2022, which includes measures to reduce emissions, may be enacted, which may adversely affect NTIC’s business.
Additionally, new environmental laws, rules, and regulations with provisions similar to those of the Inflation Reduction Act of 2022, which includes measures to reduce emissions, may be enacted, which may adversely affect NTIC’s business.
Given the nature of our business and our global operations, political, economic, and other conditions in foreign countries and regions, including geopolitical risks such as the current conflict between Russia and Ukraine, may adversely affect our business and results of operations.
Given the nature of NTIC’s business and its global operations, political, economic, and other conditions in foreign countries and regions, including geopolitical risks, such as the ongoing war between Russia and Ukraine, may adversely affect NTIC’s business and results of operations.
In addition, commercial laws in some developing countries can be vague, inconsistently administered, and retroactively applied. If NTIC is deemed not to be in compliance with applicable laws in developing countries where NTIC conducts business, its prospects and business in those countries could be harmed, which could then have a material adverse impact on NTIC’s operating results and financial position.
If NTIC is deemed not to be in compliance with applicable laws in developing countries where NTIC conducts business, its prospects and business in those countries could be harmed, which could then have a material adverse impact on NTIC’s operating results and financial position.
The number of shares of NTIC’s common stock being traded daily is often very low, and on some trading days, there is no trading volume at all. During fiscal 2022, the daily trading volume ranged from 0 shares to 40,600 shares.
The number of shares of NTIC’s common stock being traded daily is often very low, and on some trading days, there is no trading volume at all. During fiscal 2023, the daily trading volume ranged from 400 shares to 340,700 shares.
Adverse economic and financial market conditions may negatively affect NTIC’s customers and its markets, thereby negatively impacting its business and operating results.
Adverse economic and financial market conditions have negatively affected and in the future may negatively affect NTIC’s customers and its markets, thereby negatively impacting NTIC’s business and operating results.
Since a significant portion of NTIC’s ZERUST® rust and corrosion inhibiting products and services are sold to customers in the automotive industry, adverse economic conditions affecting the automotive industry, in particular, may result in an adverse effect on NTIC’s net sales and its other operating results.
Since a significant portion of NTIC’s ZERUST® rust and corrosion inhibiting products and services are sold to customers in the automotive industry, adverse economic conditions affecting the automotive industry or other events that may adversely affect the automotive industry, such as the recent UAW strike, may result in an adverse effect on NTIC’s net sales and its other operating results.
As of November 14, 2022, NTIC had 9,366,357 shares of common stock outstanding, 22.4% of which were beneficially owned by directors, executive officers, principal stockholders, and their respective affiliates.
As of November 10, 2023, NTIC had 9,427,599 shares of common stock outstanding, 22.4% of which were beneficially owned by directors, executive officers, principal stockholders, and their respective affiliates.
Although we have not experienced any material labor shortage to date, we have recently observed an overall tightening and increasingly competitive labor market.
Although we have not experienced any material labor shortage to date, we have observed an overall tightening and increasingly competitive labor market in the past two years.
These laws, rules, and regulations may be subject to change by the Biden administration, which has stalled construction of the Keystone XL Pipeline and may in the future take action to further restrict such activities.
These laws, rules, and regulations may be subject to change by the Biden administration, which denied a key permit in the construction of the Keystone XL Pipeline, leading to the abandonment of the project, and may in the future take action to further restrict such activities.
Additional international sanctions against Russia may be imposed, which could further increase these costs.
Additional international sanctions on Russia may be imposed, which could again increase these costs.
Such risks include the financial instability among customers in these regions, political instability, fraud or corruption, and other non-economic factors, such as the impact of the COVID-19 pandemic and irregular trade flows that need to be managed successfully with the help of the local governments.
Such risks include the financial instability among customers in these regions, political instability, fraud or corruption, and other non-economic factors, such as the impact of COVID-19 and irregular trade flows that need to be managed successfully with the help of the local governments. In addition, commercial laws in some developing countries can be vague, inconsistently administered, and retroactively applied.
We terminated our joint venture in Russia in May 2022, which we believe will not have an adverse effect on our results of operations or financial condition given the immateriality of the joint venture.
NTIC terminated its joint venture in Russia in May 2022, which also did not have an adverse effect on its results of operations or financial condition given the immateriality of the joint venture.
No assurance can be provided, however, that such insurance will be available or adequate in the event of a claim. 29 The sale of ZERUST ® rust and corrosion inhibiting products into the oil and gas industry is risky in light of the hazards typically associated with such operations and the significant amount of potential liability involved, which could adversely affect NTIC ’ s business if ZERUST ® rust and corrosion inhibiting products are involved, even if the cause of such events was not related to NTIC ’ s products.
The sale of ZERUST ® rust and corrosion inhibiting products into the oil and gas industry is risky in light of the hazards typically associated with such operations and the significant amount of potential liability involved, which could adversely affect NTIC ’ s business if ZERUST ® rust and corrosion inhibiting products are involved, even if the cause of such events was not related to NTIC ’ s products.
NTIC’s liquidity and financial position in part rely on NTIC’s receipt of fees for services that NTIC provides to its joint ventures and dividend distributions from its joint ventures. During fiscal 2022, NTIC recognized $5,085,823 in fees and $5,723,176 in dividend distributions from its joint ventures.
NTIC’s liquidity and financial position in part rely on NTIC’s receipt of fees for services that NTIC provides to its joint ventures and dividend distributions from its joint ventures. During fiscal 2023, NTIC recognized $5,189,185 in fees and $5,639,198 in dividend distributions from its joint ventures.
Changes in laws and regulations, including changes in accounting standards and taxation changes, including tax rate changes, new tax laws, including the changes to U.S. federal tax laws included in the Inflation Reduction Act of 2022, such as a 1% excise tax on stock repurchases, and revised tax law interpretations, also may adversely affect NTIC’s operating results.
Changes in laws and regulations, including changes in accounting standards and taxation changes, including tax rate changes, new tax laws, including the changes to U.S. federal tax laws included in the Inflation Reduction Act of 2022, such as a 1% excise tax on stock repurchases, and revised tax law interpretations, also may adversely affect NTIC’s operating results. 30 Fluctuations in NTIC ’ s effective tax rate could have a significant impact on NTIC ’ s financial position, results of operations, or cash flows.
Also, the failure to comply with applicable legal and regulatory obligations could result in the disruption of NTIC’s shipping and sales activities. 22 Several factors, including implications of withdrawal by the U.S. from, or revision to, international trade agreements, foreign policy changes between the U.S. and other countries, weakened international economic conditions, or the impact of sovereign debt defaults by certain European countries, could adversely affect our international net sales.
Several factors, including implications of withdrawal by the U.S. from, or revision to, international trade agreements, foreign policy changes between the U.S. and other countries, weakened international economic conditions, or the impact of sovereign debt defaults by certain European countries, could adversely affect our international net sales.
The operations of NTIC China may be adversely affected by China ’ s evolving economic, political, and social conditions.
The operations of NTIC China may be adversely affected by China ’ s evolving economic, political, and social conditions, as well as increasing tensions between the United States and China.
NTIC ’ s quarterly results are typically unpredictable and subject to variation. NTIC’s quarterly operating results vary from quarter to quarter for a variety of reasons. For example, NTIC’s quarterly sales to joint ventures can be affected by individual orders to joint ventures.
NTIC’s quarterly operating results vary from quarter to quarter for a variety of reasons. For example, NTIC’s quarterly sales to joint ventures can be affected by individual orders to joint ventures.
During fiscal 2022, the sale price of NTIC’s common stock ranged from a low of $9.05 per share to a high of $18.00 per share, and the daily trading volume ranged from 0 shares to 40,600 shares. It is likely that the price and trading volume of NTIC’s common stock will continue to fluctuate in the future.
During fiscal 2023, the sale price of NTIC’s common stock ranged from a low of $10.10 per share to a high of $15.00 per share, and the daily trading volume ranged from 400 shares to 340,700 shares. It is likely that the price and trading volume of NTIC’s common stock will continue to fluctuate in the future.
In particular, NTIC has experienced more intense competition with respect to many of its traditional ZERUST® rust and corrosion inhibiting products and services, which has led to decreased pricing and smaller margins for NTIC.
In particular, NTIC has experienced more intense competition with respect to many of its traditional ZERUST® rust and corrosion inhibiting products and services, which has led to decreased pricing and smaller margins for NTIC. 26 NTIC ’ s ZERUST ® rust and corrosion inhibiting products and services generate a significant portion of NTIC ’ s net sales and the net sales of NTIC ’ s joint ventures.
Prolonged supply chain disruptions impacting NTIC and its third-party manufacturers could interrupt product manufacturing, increase product costs and result in lost sales, which may have a material adverse effect on NTIC’s business, operating results and financial condition. Disruptions to the distribution channels for NTIC ’ s products may negatively impact NTIC ’ s business, operating results, and financial condition.
Additionally, the impacts supply chain disruptions have on NTIC’s third-party manufacturers are not within NTIC’s control. Prolonged supply chain disruptions impacting NTIC and its third-party manufacturers could interrupt product manufacturing, increase product costs and result in lost sales, which may have a material adverse effect on NTIC’s business, operating results and financial condition.
Furthermore, transportation delays, increases on shipping containers, more extensive travel restrictions, closures or disruptions of businesses and facilities or social, economic, political or labor instability in the affected areas may impact the operations of NTIC’s suppliers, which could in turn adversely affect NTIC, and its revenues and operating costs.
Furthermore, transportation delays, increased shipping containers rates, closures or disruptions of businesses and facilities or social, economic, political or labor instability in the affected areas may impact the operations of NTIC’s suppliers, which could in turn adversely affect NTIC, and its revenues and operating costs. Any of these disruptions may negatively impact NTIC’s business, operating results, and financial condition.
In addition, product defects could harm NTIC’s reputation amongst its customers. The commercial success of NTIC ’ s Natur-Tec ® resin compounds and finished products depends on the widespread market acceptance of products manufactured with bio-based and biodegradable resins.
The commercial success of NTIC ’ s Natur-Tec ® resin compounds and finished products depends on the widespread market acceptance of products manufactured with bio-based and biodegradable resins.
Suppliers of such raw materials and components may decide, or be required, for reasons beyond NTIC’s control, to cease supplying such raw materials and components to NTIC or to raise their prices. 19 Shortages of raw materials, quality control problems, production capacity constraints, or delays by suppliers could negatively affect NTIC’s ability to meet its production obligations and result in increased prices for affected parts.
Shortages of raw materials, quality control problems, production capacity constraints, or delays by suppliers could negatively affect NTIC’s ability to meet its production obligations and result in increased prices for affected parts, and NTIC may be forced to find new suppliers for certain raw materials.
Fluctuations of Crude Oil Prices: The sale of NTIC’s ZERUST® rust and corrosion inhibiting products into the oil and gas industry, particularly in the United States, has historically been hampered by low/unstable global crude oil prices.
However, in fiscal 2023, this seasonality began to decrease somewhat as opportunities increased globally. Fluctuations of Crude Oil Prices: The sale of NTIC’s ZERUST® rust and corrosion inhibiting products into the oil and gas industry, particularly in the United States, has historically been hampered by low/unstable global crude oil prices.
Furthermore, NTIC’s customers and raw material suppliers’ operations have been and could in the future be adversely affected by such hurricanes and other extreme or seasonal weather conditions. For example, during fiscal year 2021, extreme weather caused supply chain disruptions and caused delays in receiving base resins. Adverse weather can also directly impede NTIC’s operations.
Furthermore, NTIC’s customers and raw material suppliers’ operations have been and could in the future be adversely affected by such hurricanes and other extreme or seasonal weather conditions. Adverse weather can also directly impede NTIC’s operations.
Such variability in operating results makes the prediction of NTIC’s net sales, earnings, and other operating results for each quarter difficult and increases the risk of unanticipated variations in quarterly operating results.
Such variability in operating results makes the prediction of NTIC’s net sales, earnings, and other operating results for each quarter difficult and increases the risk of unanticipated variations in quarterly operating results. NTIC’s quarterly results have been and, in the future, may be below the expectations of public market analysts and investors.
Such changes included the imposition of additional tariffs on imported products in an effort to address trade imbalances, specifically with China, the withdrawal of the U.S. from the Trans-Pacific Partnership, and the renegotiation of the North American Free Trade Agreement. In response to such actions, certain countries imposed retaliatory actions against the U.S.
Within recent years, for example, trade policy changes included the imposition of additional tariffs on imported products in an effort to address trade imbalances, specifically with China, the withdrawal of the U.S. from the Trans-Pacific Partnership, the renegotiation of the North American Free Trade Agreement, and sanctions on Russia.
While NTIC has taken steps to minimize the impact of these increased costs by working closely with its suppliers and customers, there can be no assurances that unforeseen events impacting the supply chain will not have a material adverse effect on NTIC in the future.
While NTIC took steps to minimize the impact of these increased costs by working closely with its suppliers and customers and, in some cases, identifying new suppliers of certain raw materials, and while these issues improved in late fiscal 2023 and are expected to continue improving in fiscal 2024, there can be no assurances that unforeseen events impacting the supply chain will not have a material adverse effect on NTIC in the future.
While this is also true with respect to the other joint venture entities of which additional information is provided in NTIC’s consolidated financial statements and in certain other sections of this report, the significance is not as great as with EXCOR. 23 NTIC ’ s acquisition of the remaining 50% ownership interest of HNTI and any future similar acquisitions involve risk.
While this is also true with respect to the other joint venture entities of which additional information is provided in NTIC’s consolidated financial statements and in certain other sections of this report, the significance is not as great as with EXCOR.
NTIC ’ s strategy of expanding its corrosion prevention solutions into the oil and gas industry and continuing the expansion of its Natur-Tec ® bioplastics resin compounds and finished products is risky and may not prove to be successful, which could harm NTIC ’ s operating results and financial condition.
Additionally, projects NTIC completes for oil and gas industry customers typically involve short turnaround times, and failure to meet these expectations could damage NTIC’s ability to successfully promote its corrosion prevention solutions into the oil and gas industry. 27 NTIC ’ s strategy of expanding its corrosion prevention solutions into the oil and gas industry and continuing the expansion of its Natur-Tec ® bioplastics resin compounds and finished products is risky and may not prove to be successful, which could harm NTIC ’ s operating results and financial condition.
The traditional plastics market sector is well-established with entrenched competitors with whom NTIC competes. Pricing for traditional plastics has been highly volatile in recent years, which drives, to some extent, the commercial and other support for bioplastics.
Pricing for traditional plastics has been highly volatile in recent years, which drives, to some extent, the commercial and other support for bioplastics.
NTIC and its subsidiaries and joint ventures engage in sales outside of the United States and is, therefore, negatively impacted by such actions.
In response to some of these actions, certain countries imposed retaliatory actions against the U.S. NTIC and its subsidiaries and joint ventures engage in sales outside of the United States and is, therefore, negatively impacted by such actions.
To mitigate the ramifications of such an occurrence, NTIC maintains liability insurance specifically applicable to its ownership positions in its joint venture arrangements in excess of any insurance the joint ventures may maintain.
To mitigate the ramifications of such an occurrence, NTIC maintains liability insurance specifically applicable to its ownership positions in its joint venture arrangements in excess of any insurance the joint ventures may maintain. No assurance can be provided, however, that such insurance will be available or adequate in the event of a claim.
If NTIC’s employees, joint ventures, distributors, third-party sales representatives, or other agents are found to have engaged in such practices, NTIC could suffer severe penalties, including criminal and civil penalties, disgorgement, and other remedial measures, including further changes or enhancements to its procedures, policies, and controls and potential personnel changes and disciplinary actions.
If NTIC’s employees, joint ventures, distributors, third-party sales representatives, or other agents are found to have engaged in such practices, NTIC could suffer severe penalties, including criminal and civil penalties, disgorgement, and other remedial measures, including further changes or enhancements to its procedures, policies, and controls and potential personnel changes and disciplinary actions. 25 Certain private and foreign companies, including some of NTIC’s competitors, are not subject to prohibitions as strict as those under the FCPA or, even if subjected to strict prohibitions, such prohibitions may be laxly enforced in practice.
The procedures and controls NTIC uses to monitor these threats and mitigate its exposure may not be sufficient to prevent cyber security incidents. The result of these incidents could include disrupted operations, lost opportunities, misstated financial data, liability for stolen assets or information, increased costs arising from the implementation of additional security protective measures, litigation, and reputational damage.
The result of these incidents could include disrupted operations, lost opportunities, misstated financial data, liability for stolen assets or information, increased costs arising from the implementation of additional security protective measures, litigation, and reputational damage. Any remedial costs or other liabilities related to cyber security incidents may not be fully insured or indemnified by other means.
Any of these disruptions may negatively impact NTIC’s business, operating results, and financial condition. NTIC ’ s dependence on key suppliers puts NTIC at risk of interruptions in the availability of its products, which could reduce its net sales and adversely affect its operating results and harm its reputation.
NTIC ’ s dependence on key suppliers puts NTIC at risk of interruptions in the availability of its products, which could reduce its net sales and adversely affect its operating results and harm its reputation. NTIC relies on suppliers for certain raw materials and components used in its products.
NTIC cannot predict whether such approvals would be forthcoming or the terms on which PNC Bank would approve such acquisitions. These risks, among others, could be heightened if NTIC completes a large acquisition or multiple transactions within a relatively short period of time. 24 The ongoing conflict between Russia and Ukraine may adversely affect our business and results of operations.
These risks, among others, could be heightened if NTIC completes a large acquisition or multiple transactions within a relatively short period of time. 23 The ongoing war between Russia and Ukraine may adversely affect NTIC ’ s business and results of operations.
In light of increased global demand for bioplastics, production slowdowns due to manufacturing issues, labor shortages and power restrictions in China, freight container shortages, the war in Ukraine, and the lingering effects of the COVID-19 pandemic, the prices of certain plastic resins increased in fiscal 2021 and fiscal 2022 and have remained higher than pre-pandemic prices, which could adversely affect gross margins on NTIC’s Natur-Tec® products.
In light of increased global demand for bioplastics, production slowdowns due to manufacturing issues, labor shortages and power restrictions in China, freight container shortages, the war in Ukraine, and the lingering effects of COVID-19, the prices of certain plastic resins increased in fiscal 2022 and, through the majority of fiscal 2023, remained above historical levels.
These laws, regulations, and interpretations could impose restrictions on NTIC’s and NTIC China’s ownership or operations or NTIC’s interests in China and could adversely affect NTIC’s business, results of operations, and financial condition.
These laws, regulations, and interpretations could impose restrictions on NTIC’s and NTIC China’s ownership or operations or NTIC’s interests in China and could adversely affect NTIC’s business, results of operations, and financial condition. 24 Local regulations in China related to the electric power shortage that began in 2021 may adversely affect NTIC China’s operations or the operations of our suppliers with facilities in China.
NTIC is subject to income taxes as well as non-income based taxes in both the United States and various foreign jurisdictions. Judgment is required in determining the worldwide provision for income taxes, other tax liabilities, interest, and penalties. Future events could change management’s assessment. NTIC operates within multiple taxing jurisdictions and is subject to tax audits in these jurisdictions.
Judgment is required in determining the worldwide provision for income taxes, other tax liabilities, interest, and penalties. Future events could change management’s assessment. NTIC operates within multiple taxing jurisdictions and is subject to tax audits in these jurisdictions. These audits can involve complex issues, which may require an extended period of time to resolve.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. PROPERTIES NTIC’s principal executive offices, production facilities, and domestic research and development operations are located at 4201 Woodland Road, Circle Pines, Minnesota 55014. NTIC owns this real estate and building. NTIC also owns real estate and a building in Beachwood, Ohio, which it uses for office, manufacturing, laboratory, and warehouse space.
Biggest changeItem 2. PROPERTIES NTIC’s principal executive offices, production facilities, and domestic research and development operations are located at 4201 Woodland Road, Circle Pines, Minnesota 55014. NTIC also purchased the property immediately adjacent to this property, located at 4203 Woodland Road, which includes a 26,000 square foot industrial building, for $1,200,000 in February 2023.
Internationally, NTIC’s subsidiaries in Brazil, India, Mexico, and China all lease office, warehouse, and laboratory space.
Additionally, NTIC has contract warehousing agreements in California and Indiana to hold and release stock products to customers. Internationally, NTIC’s subsidiaries in Brazil, India, Mexico, and China all lease office, warehouse, and laboratory space.
In addition, as a result of the HNTI acquisition, NTIC also leases office, warehouse, and laboratory space in Chennai, India. Additionally, NTIC has contract warehousing agreements in California and Indiana to hold and release stock products to customers. NTIC’s management considers its current properties suitable and adequate for its current and foreseeable needs.
NTIC also leases office, warehouse, and laboratory space in Chennai, India. 36 NTIC’s management considers its current properties suitable and adequate for its current and foreseeable needs.
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NTIC continues to renovate this building, which will be used primarily for warehousing space and light industrial production. NTIC owns this real estate and these buildings. NTIC also owns real estate and a building in Beachwood, Ohio, which it uses for office, manufacturing, laboratory, and warehouse space.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeMARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information NTIC’s common stock is listed for trading on the Nasdaq Global Market under the symbol “NTIC.” Dividends During fiscal 2022, NTIC’s Board of Directors declared cash dividends on the following dates in the following amounts to holders of record of the Company’s common stock as of the following record dates: Declaration Date Amount Record Date Payable Date October 20, 2021 $ 0.07 November 3, 2021 November 17, 2021 January 21, 2022 $ 0.07 February 2, 2022 February 16, 2022 April 22, 2022 $ 0.07 May 4, 2022 May 18, 2022 July 20, 2022 $ 0.07 August 3, 2022 August 17, 2022 On October 20, 2022, NTIC’s Board of Directors declared a cash dividend of $0.07 per share of NTIC’s common stock, payable on November 16, 2022 to stockholders of record on November 3, 2022.
Biggest changeMARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information NTIC’s common stock is listed for trading on the Nasdaq Global Market under the symbol “NTIC.” Dividends During fiscal 2023, NTIC’s Board of Directors declared cash dividends on the following dates in the following amounts to holders of record of the Company’s common stock as of the following record dates: Declaration Date Amount Record Date Payable Date October 20, 2022 $0.07 November 3, 2022 November 16, 2022 January 20, 2023 $0.07 February 1, 2023 February 15, 2023 April 21, 2023 $0.07 May 3, 2023 May 17, 2023 July 17, 2023 $0.07 August 2, 2023 August 16, 2023 On October 18, 2023, NTIC’s Board of Directors declared a cash dividend of $0.07 per share of NTIC’s common stock, payable on November 15, 2023 to stockholders of record on November 1, 2023.
Recent Sales of Unregistered Equity Securities NTIC did not sell any shares of its common stock or any other equity securities of NTIC that were not registered under the Securities Act of 1933, as amended, during the fourth quarter of fiscal 2022.
Recent Sales of Unregistered Equity Securities NTIC did not sell any shares of its common stock or any other equity securities of NTIC that were not registered under the Securities Act of 1933, as amended, during the fourth quarter of fiscal 2023.
Issuer Purchases of Equity Securities NTIC did not purchase any shares of its common stock or other equity securities of NTIC during the fourth quarter of fiscal 2022. As of August 31, 2022, up to $2,640,548 in shares of NTIC common stock remained available for repurchase under NTIC’s stock repurchase program. Item 6. [RESERVED] 37
Issuer Purchases of Equity Securities NTIC did not purchase any shares of its common stock or other equity securities of NTIC during the fourth quarter of fiscal 2023. As of August 31, 2023, up to $2,640,548 in shares of NTIC common stock remained available for repurchase under NTIC’s stock repurchase program.
Number of Record Holders As of August 31, 2022, there were 158 record holders of NTIC’s common stock. This does not include shares held in “street name” or beneficially owned.
Number of Record Holders As of August 31, 2023, there were 154 record holders of NTIC’s common stock. This does not include shares held in “street name” or beneficially owned.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThis increase was primarily due to $2,375,167 in incremental expenses due to the Zerust India acquisition during fiscal 2022 and increased personnel, travel, and research and development expenses. ● Since NTIC acquired the remaining 50% ownership interest of Zerust India effective September 1, 2021, NTIC recognized a gain of $3,951,550 during fiscal 2022, which is included in “Remeasurement gain on acquisition of equity method investee” on NTIC’s consolidated statements of operations. ● NTIC incurred net income attributable to NTIC of $6,324,700, or $0.66 per diluted common share, for fiscal 2022, compared to net income attributable to NTIC of $6,281,238, or $0.64 per diluted common share, for fiscal 2021.
Biggest changeThis increase was primarily due to increased personnel expenses, including new hires, benefits and travel, sales commissions, and expenses incurred during the current fiscal year periods in connection with Zerust Taiwan, a new indirect, majority owned subsidiary, formed to assume the operations of a former joint venture in Taiwan. ● NTIC incurred net income attributable to NTIC of $2,912,276, or $0.30 per diluted common share, compared to $6,324,700, or $0.66 per diluted common share, for fiscal 2022.
NTIC’s primary business is corrosion prevention products and services, marketed mainly under the ZERUST® brand. NTIC has been selling its proprietary ZERUST® products and services to the automotive, electronics, electrical, mechanical, military, and retail consumer markets for almost 50 years and, more recently, has also expanded into the oil and gas industry.
NTIC’s primary business is corrosion prevention marketed mainly under the ZERUST® brand. NTIC has been selling its proprietary ZERUST® products and services to the automotive, electronics, electrical, mechanical, military, and retail consumer markets for almost 50 years and, more recently, has also expanded into the oil and gas industry.
The consolidated financial statements included in this report include the accounts of Northern Technologies International Corporation, its wholly-owned subsidiaries, Northern Technologies Holding Company, LLC, NTIC (Shanghai) Co., Ltd., NTIC Europe GmbH and ZERUST-EXCOR MEXICO, S. de R.L. de C.V., NTIC’s majority-owned subsidiary in Brazil, Zerust Prevenção de Corrosão S.A., NTIC’s majority-owned holding company, NTI Asean LLC, and NTIC’s majority-owned subsidiary in India, Natur-Tec India Private Limited, Natur-Tec Lanka, Zerust Singapore Pte Ltd (Zerust Singapore) and Zerust Vietnam Co.
The consolidated financial statements included in this report include the accounts of Northern Technologies International Corporation, its wholly-owned subsidiaries, Northern Technologies Holding Company, LLC, NTIC (Shanghai) Co., Ltd., NTIC Europe GmbH ZERUST-EXCOR MEXICO, S. de R.L. de C.V., and HNTI Limited, NTIC’s majority-owned subsidiary in Brazil, Zerust Prevenção de Corrosão S.A., NTIC’s majority-owned holding company, NTI Asean LLC, and NTIC’s majority-owned subsidiary in India, Natur-Tec India Private Limited, Natur-Tec Lanka, Zerust Singapore Pte Ltd (Zerust Singapore), Zerust Vietnam Co.
Translation gains or losses are reported as an element of accumulated other comprehensive income (loss). NTIC (excluding NTIC China, Zerust Brazil, Natur-Tec India, Natur-Tec Lanka, NTI Asean, Zerust Singapore, Zerust Vietnam, Zerust Mexico, Zerust India, NTI Europe, and NTIC’s joint ventures) conducts all foreign transactions based on the U.S. dollar.
Translation gains or losses are reported as an element of accumulated other comprehensive income (loss). NTIC (excluding NTIC China, Zerust Brazil, Natur-Tec India, Natur-Tec Lanka, NTI Asean, Zerust Singapore, Zerust Vietnam, Zerust Taiwan, Zerust Mexico, Zerust India, NTI Europe, and NTIC’s joint ventures) conducts all foreign transactions based on the U.S. dollar.
Net cash used in investing activities during fiscal 2022 was $7,108,174, which was primarily the result of the purchase of the remaining 50% ownership interest in Zerust India, purchases of property and equipment, investment in joint venture and investments in patents.
Net cash used in investing activities during fiscal 2022 was $7,108,174, which was primarily the result of the purchase of the remaining 50% ownership interest in Zerust India, purchases of property and equipment, an investment in joint venture, and investments in patents.
Examples of such events or circumstances include, but are not limited to, a significant adverse change in legal or business climate, an adverse regulatory action or unanticipated competition. 52 Recoverability of Long-Lived Assets NTIC reviews its long-lived assets whenever events or changes in circumstances indicate the carrying amount of the assets may not be recoverable and determines potential impairment by comparing the carrying value of the assets with expected net cash flows expected to be provided by operating activities of the business or related products.
Examples of such events or circumstances include, but are not limited to, a significant adverse change in legal or business climate, an adverse regulatory action or unanticipated competition. 51 Recoverability of Long-Lived Assets NTIC reviews its long-lived assets whenever events or changes in circumstances indicate the carrying amount of the assets may not be recoverable and determines potential impairment by comparing the carrying value of the assets with expected net cash flows expected to be provided by operating activities of the business or related products.
Revenue is recognized when transfer of control occurs as defined by the terms in the customer agreement, generally upon shipment of product. 51 With respect to recording revenue related to fees earned for services provided to NTIC’s joint ventures, amounts are earned when product is shipped from joint venture facilities, at which point a sale is deemed to have occurred and results in obligation for the joint venture to pay the royalty and recognition of the fee by NTIC.
Revenue is recognized when transfer of control occurs as defined by the terms in the customer agreement, generally upon shipment of product. 50 With respect to recording revenue related to fees earned for services provided to NTIC’s joint ventures, amounts are earned when product is shipped from joint venture facilities, at which point a sale is deemed to have occurred and results in obligation for the joint venture to pay the royalty and recognition of the fee by NTIC.
In the event NTIC determines that it would be able to realize its deferred income tax assets in the future in excess of their net recorded amount, NTIC makes an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. 53 Recent Accounting Pronouncements See Note 2 to NTIC’s consolidated financial statements for a discussion of recent accounting pronouncements.
In the event NTIC determines that it would be able to realize its deferred tax assets in the future in excess of their net recorded amount, NTIC makes an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. 52 Recent Accounting Pronouncements See Note 2 to NTIC’s consolidated financial statements for a discussion of recent accounting pronouncements.
The expenses incurred in support of its joint ventures are direct expenses that NTIC incurs related to its joint ventures and include such items as employee compensation and benefit expenses, travel expense, insurance, consulting expense, legal expense, and lab supplies and testing expense. See Note 15 to NTIC’s consolidated financial statements for other related party transaction disclosures.
The expenses incurred in support of its joint ventures are direct expenses that NTIC incurs related to its joint ventures and include such items as employee compensation and benefit expenses, travel expense, insurance, consulting expense, legal expense, and lab supplies and testing expense. See Note 13 to NTIC’s consolidated financial statements for other related party transaction disclosures.
Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities. 42 Results of Operations Fiscal Year 2022 Compared to Fiscal Year 2021 The following table sets forth NTIC’s results of operations for fiscal 2022 and fiscal 2021.
Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities. 42 Results of Operations Fiscal Year 2023 Compared to Fiscal Year 2022 The following table sets forth NTIC’s results of operations for fiscal 2023 and fiscal 2022.
In North America, NTIC sells its ZERUST® corrosion prevention solutions through a network of independent distributors and agents supported by a direct sales force. 38 Internationally, NTIC sells its ZERUST® corrosion prevention solutions through its wholly-owned subsidiary in China, NTIC (Shanghai) Co., Ltd.
In North America, NTIC sells its ZERUST® corrosion prevention solutions through a network of independent distributors and agents supported by a direct sales force. 39 Internationally, NTIC sells its ZERUST® corrosion prevention solutions through its wholly-owned subsidiary in China, NTIC (Shanghai) Co., Ltd.
This section provides a brief summary of NTIC’s financial results and financial condition for fiscal 2022 compared to 2021. ● Sales and Expense Components . This section provides a brief description of the significant line items in NTIC’s consolidated statements of operations. ● Results of Operations .
This section provides a brief summary of NTIC’s financial results and financial condition for fiscal 2023 compared to 2022. ● Sales and Expense Components . This section provides a brief description of the significant line items in NTIC’s consolidated statements of operations. ● Results of Operations .
In fiscal 2023, NTIC expects to continue to invest directly and through its use of working capital in Zerust India, NTIC China, Zerust Mexico, 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.
In 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.
Interest expense results primarily from interest associated with any borrowings under NTIC’s line of credit with PNC Bank. Income Tax Expense . Income tax expense includes federal income taxes, foreign withholding taxes, income tax of consolidated entities in foreign jurisdictions, state income tax, and changes to NTIC’s deferred tax valuation allowance.
Interest expense results primarily from interest associated with any borrowings under NTIC’s line of credit with JPM. Income Tax Expense . Income tax expense includes federal income taxes, foreign withholding taxes, income tax of consolidated entities in foreign jurisdictions, state income tax, and changes to NTIC’s deferred tax valuation allowance.
NTIC recognizes revenue from the sale of its products primarily upon shipment of the products. Net Sales, To Joint Ventures . Net sales, to joint ventures represents net sales by NTIC to NTIC’s joint ventures, but not sales by NTIC either directly to end users or to distributors or sales by NTIC’s joint ventures.
Net sales, excluding joint ventures represents net sales by NTIC either directly to end users or to distributors worldwide, but not sales to NTIC’s joint ventures and not sales by NTIC’s joint ventures. NTIC recognizes revenue from the sale of its products primarily upon shipment of the products. Net Sales, To Joint Ventures .
In North America, NTIC markets its Natur-Tec® resin compounds and finished products primarily through a network of regional and national distributors as well as independent agents. NTIC continues to see significant opportunities for finished bioplastic products and, therefore, continues to strengthen and expand its North American distribution network for finished Natur-Tec® bioplastic products.
With respect to NTIC’s Natur-Tec® business, NTIC markets its Natur-Tec® resin compounds and finished products in North America primarily through a network of regional and national distributors as well as independent agents. NTIC continues to see significant opportunities for finished bioplastic products and, therefore, continues to strengthen and expand its North American distribution network for finished Natur-Tec® bioplastic products.
On January 15, 2015, NTIC’s Board of Directors authorized the repurchase of up to $3,000,000 in shares of NTIC common stock through open market purchases or unsolicited or solicited privately negotiated transactions. This program has no expiration date but may be terminated by NTIC’s Board of Directors at any time. No repurchases occurred during fiscal 2022 or fiscal 2021.
Stock Repurchase Program On January 15, 2015, NTIC’s Board of Directors authorized the repurchase of up to $3,000,000 in shares of NTIC common stock through open market purchases or unsolicited or solicited privately negotiated transactions. This program has no expiration date but may be terminated by NTIC’s Board of Directors at any time.
This section provides a brief overview of NTIC’s subsidiaries and its joint venture network, the joint ventures which are considered individually significant to NTIC’s consolidated assets and income, and how NTIC’s joint ventures are accounted for by NTIC. ● Impact of the COVID-19 Pandemic .
This section provides a brief overview of NTIC’s subsidiaries and its joint venture network, the joint ventures which are considered individually significant to NTIC’s consolidated assets and income, and how NTIC’s joint ventures are accounted for by NTIC. ● Financial Overview .
Since NTIC’s investments in its joint ventures are accounted for using the equity method, any changes in foreign currency exchange rates would be reflected as a foreign currency translation adjustment and would not change NTIC’s equity in income from joint ventures reflected in its consolidated statements of operations.
Since NTIC’s investments in its joint ventures are accounted for using the equity method, any changes in foreign currency exchange rates would be reflected as a foreign currency translation adjustment and would not change NTIC’s equity in income from joint ventures reflected in its consolidated statements of operations. NTIC does not hedge against its foreign currency exchange rate risk.
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 fiscal 2022 and are expected to persist into fiscal 2023. NTIC believes there is some seasonality in its business.
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 fiscal 2023. NTIC believes there is some seasonality in its business.
(NTIC China), starting September 1, 2021 its wholly-owned subsidiary in India, HNTI Ltd., its majority-owned joint venture holding company for NTIC’s joint venture investments in the Association of Southeast Asian Nations (ASEAN) region, NTI Asean LLC (NTI Asean), certain majority-owned and wholly-owned subsidiaries, and joint venture arrangements in North America, Europe, and Asia.
(NTIC China), its wholly-owned subsidiary in India, HNTI Limited (Zerust India), its majority-owned joint venture holding company for NTIC’s joint venture investments in the Association of Southeast Asian Nations (ASEAN) region, NTI Asean LLC (NTI Asean), and certain majority-owned and wholly-owned subsidiaries, and joint venture arrangements in North America, Europe, and Asia.
During fiscal 2021, NTIC’s Board of Directors declared cash dividends on the following dates in the following amounts to holders of record of NTIC common stock as of the following record dates: Declaration Date Amount Record Date Payable Date January 15, 2021 $ 0.065 February 3, 2021 February 17, 2021 April 23, 2021 $ 0.065 May 5, 2021 May 19, 2021 July 21, 2021 $ 0.065 August 4, 2021 August 18, 2021 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, including without limitation the effect of COVID-19 on NTIC’s business, operating results and financial condition.
Cash Dividends During fiscal 2023, NTIC’s Board of Directors declared cash dividends on the following dates in the following amounts to holders of record of NTIC common stock as of the following record dates: Declaration Date Amount Record Date Payable Date October 20, 2022 $0.07 November 3, 2022 November 16, 2022 January 20, 2023 $0.07 February 1, 2023 February 15, 2023 April 21, 2023 $0.07 May 3, 2023 May 17, 2023 July 17, 2023 $0.07 August 2, 2023 August 16, 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, including without limitation the effect of COVID-19 on NTIC’s business, operating results and financial condition.
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 increases in sales which was experienced by certain joint ventures during fiscal 2022.
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 experienced by certain joint ventures.
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 or dissolutions or liquidations of one or more of its joint ventures.
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.
As such, since NTIC acquired the remaining 50% ownership interest of Zerust India effective September 1, 2021, NTIC recognized a gain of $3,951,550 during fiscal 2022. This gain is included in “Remeasurement gain on acquisition of equity method investee” on NTIC’s consolidated statements of operations. Income Before Income Tax Expense .
As such, since NTIC acquired the remaining 50% ownership interest of Zerust India effective September 1, 2021, NTIC recognized a gain of $3,951,550 during fiscal 2022. This gain is included in “Remeasurement gain on acquisition of equity method investee” on NTIC’s consolidated statements of operations for fiscal 2022. There was no comparable gain during fiscal 2023.
NTIC ’ s Subsidiaries and Joint Venture Network NTIC has ownership interests in 10 operating subsidiaries in North America, South America, Europe, and Asia, which are listed in “ Part I. Item 1. Business ” of this annual report on Form 10-K.
NTIC ’ s Subsidiaries and Joint Venture Network NTIC has ownership interests in 11 operating subsidiaries in North America, South America, Europe, and Asia, which are listed in “ Part I. Item 1. Business ” of this annual report on Form 10-K. The results of these subsidiaries are fully consolidated in NTIC’s consolidated financial statements.
The average days outstanding of trade receivables from joint ventures as of August 31, 2022 were primarily due to the receivables balances at South Korea and Thailand.
The average days outstanding of trade receivables from joint ventures as of August 31, 2023 were primarily due to the receivables balances at Zerust Consumer Products and South Korea.
As a result, U.S. income and foreign withholding taxes have not been recognized on the cumulative undistributed earnings of $21,256,923 and $24,702,778 as of August 31, 2022 and August 31, 2021, respectively.
As a result, U.S. income and foreign withholding taxes have not been recognized on the cumulative undistributed earnings of $20,493,861 and $21,256,923 as of August 31, 2023 and August 31, 2022, respectively.
Because the functional currency of NTIC’s foreign operations and investments in its foreign joint ventures is the applicable local currency, NTIC is exposed to foreign currency exchange rate risk arising from transactions in the normal course of business.
Market Risk NTIC is exposed to some market risk stemming from changes in foreign currency exchange rates, commodity prices and interest rates. 48 Because the functional currency of NTIC’s foreign operations and investments in its foreign joint ventures is the applicable local currency, NTIC is exposed to foreign currency exchange rate risk arising from transactions in the normal course of business.
Outstanding trade receivables, excluding joint ventures balances, as of August 31, 2022 decreased by an average of 3 days to an average of 72 days from balances outstanding from these customers as of August 31, 2021.
Outstanding trade receivables, excluding joint ventures balances, increased by an average of 8 days to an average of 80 days from balances outstanding from these customers as of August 31, 2023 from an average of 72 days as of August 31, 2022.
Other Comprehensive Income – Foreign Currency Translations Adjustment . 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 fiscal 2022 compared to fiscal 2021. 45 Liquidity and Capital Resources Sources of Cash and Working Capital .
Other Comprehensive Income – Foreign Currency Translations Adjustment . 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 fiscal 2023 compared to fiscal 2022.
NTIC considers EXCOR to be individually significant to NTIC’s consolidated assets and income as of August 31, 2022 and 2021. Therefore, NTIC provides certain additional information regarding this entity in the notes to NTIC’s consolidated financial statements and in this section of this report. Additional information related to NTIC’s joint ventures is available in “ Part I. Item 1.
NTIC considers EXCOR to be individually significant to NTIC’s consolidated assets and income as of August 31, 2023 and 2022. Therefore, NTIC provides certain additional information regarding this entity in the notes to NTIC’s consolidated financial statements and in this section of this report.
As of August 31, 2022, up to $2,640,548 in shares of NTIC common stock remained available for repurchase under NTIC’s stock repurchase program. Cash Dividends .
As of August 31, 2023, 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 fiscal 2023 or fiscal 2022.
During fiscal 2022, 22.5% of NTIC’s consolidated net sales were derived from sales of Natur-Tec® products, compared to 19.4% during fiscal 2021. Sales of Natur-Tec® products increased 52.7% to $16,699,508 during fiscal 2022 compared to $10,939,385 during fiscal 2021 as a result of increased global demand.
During fiscal 2023, 22.7% of NTIC’s consolidated net sales were derived from sales of Natur-Tec® products, compared to 22.5% during fiscal 2022. Sales of Natur-Tec® products increased 8.8% to $18,174,588 during fiscal 2023 compared to $16,699,508 during fiscal 2022 as a result of increased global demand.
Outstanding trade receivables from joint ventures as of August 31, 2022 increased $73,053 compared to August 31, 2021 primarily due to the timing of payments.
Outstanding trade receivables from joint ventures as of August 31, 2023 decreased $509,949 compared to August 31, 2022 primarily due to the timing of payments.
Most of NTIC’s products are manufactured by third parties, and its cost of goods sold for those products consists primarily of the price invoiced by its third-party vendors. For the portion of products that NTIC manufactures, NTIC’s cost of goods sold for those products consists primarily of direct labor, allocated manufacturing overhead, raw materials, and components.
For the portion of products that NTIC manufactures, NTIC’s cost of goods sold for those products consists primarily of direct labor, allocated manufacturing overhead, raw materials, and components.
NTIC anticipates that its earnings will continue to be adversely affected by both the COVID-19 pandemic and worldwide supply disruptions, among other factors.
NTIC anticipates that its earnings will continue to be adversely affected to some extent by inflation and worldwide supply chain disruptions, among other factors.
As a percentage of net sales, general and administrative expenses decreased to 14.3% for fiscal 2022 from 14.6% for fiscal 2021 primarily due to the increase in net sales, partially offset by the increase in general and administrative expenses. Research and Development Expenses .
As a percentage of net sales, general and administrative expenses increased to 16.5% for fiscal 2023 from 14.3% for fiscal 2022 primarily due to the increase in general and administrative expenses, as noted above. Research and Development Expenses .
NTIC’s interest expense increased to $89,096 in fiscal 2022 compared to $16,086 in fiscal 2021 due primarily to increased outstanding borrowings under the line of credit during fiscal 2022 and increased interest rates during fiscal 2022 compared to fiscal 2021. Remeasurement Gain on Acquisition of Equity Method Investee .
Interest Expense . NTIC’s interest expense increased to $461,805 in fiscal 2023 compared to $89,096 in fiscal 2022 primarily due to increased outstanding borrowings under the line of credit, new term loans incurred by NTIC’s subsidiary in China, and increased average interest rates during fiscal 2023. 44 Remeasurement Gain on Acquisition of Equity Method Investee .
Although NTIC has taken certain actions to address inflationary pressures and pass on as much of the related cost increases to its customers as possible, it expects some of these inflationary pressures to persist into fiscal 2023. Some improvements from these actions as well as some improvements in gross margin were realized during the second half of fiscal 2022.
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 some improvements in gross margin, were realized during fiscal 2023. Equity in Income from Joint Ventures .
Investments in Joint Ventures and Recoverability of Investments in Joint Ventures NTIC’s investments in its joint ventures are accounted for using the equity method. NTIC assesses its joint ventures for impairment on an annual basis as of August 31 of each year as part of its fiscal year end analysis.
NTIC assesses its joint ventures for impairment on an annual basis as of August 31 of each year as part of its fiscal year end analysis.
The sale of ZERUST® corrosion prevention solutions to customers in the oil and gas industry typically involves long sales cycles, often including multi-year trial periods with each customer and a slow integration process thereafter. Natur-Tec® bio-based and compostable plastics are manufactured using NTIC’s patented and/or proprietary technologies and are intended to replace conventional petroleum-based plastics.
The sale of ZERUST® corrosion prevention solutions to customers in the oil and gas industry typically involves long sales cycles, often including multi-year trial periods with each customer and a slow integration process thereafter.
NTIC’s net sales in the second fiscal quarter were adversely affected by the long Chinese New Year, the North American holiday season, and overall less corrosion taking place at lower winter temperatures worldwide. Market Risk NTIC is exposed to some market risk stemming from changes in foreign currency exchange rates, commodity prices and interest rates.
NTIC’s net sales in the second fiscal quarter were 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 sells its ZERUST® products and services and its Natur-Tec® products either directly, through its subsidiaries, or via a network of joint ventures, independent distributors, and agents. Net sales, excluding joint ventures represents net sales by NTIC either directly to end users or to distributors worldwide, but not sales to NTIC’s joint ventures and not sales by NTIC’s joint ventures.
NTIC derives net sales from the sale of its ZERUST® products and services and its Natur-Tec® products. NTIC sells its ZERUST® products and services and its Natur-Tec® products either directly, through its subsidiaries, or via a network of joint ventures, independent distributors, and agents.
NTIC’s working capital, defined as current assets less current liabilities, was $23,169,480 as of August 31, 2022, including $5,333,890 in cash and cash equivalents and $5,590 in available for sale securities, compared to $25,230,893 as of August 31, 2021, including $7,680,641 in cash and cash equivalents and $4,634 in available for sale securities.
Liquidity and Capital Resources Sources of Cash and Working Capital NTIC’s working capital, defined as current assets less current liabilities, was $22,950,184 as of August 31, 2023, including $5,406,173 in cash and cash equivalents, compared to $23,169,480 as of August 31, 2022, including $5,333,890 in cash and cash equivalents and $5,590 in available for sale securities.
NTIC experienced an increase in trade receivables and inventory as of August 31, 2022 compared to August 31, 2021. Trade receivables, excluding joint ventures, as of August 31, 2022 increased $2,091,353 compared to August 31, 2021, primarily related to an increase in sales.
NTIC experienced an increase in trade receivables and a decrease in inventory as of August 31, 2023 compared to August 31, 2022. Trade receivables, excluding joint ventures, as of August 31, 2023 increased $1,508,200 compared to August 31, 2022, primarily related to a correlating increase in sales and timing differences.
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.
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 fiscal 2023. 45 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.
Fees for Services Provided to Joint Ventures . NTIC recognized fee income for services provided to joint ventures of $5,767,682 during fiscal 2022 compared to $5,964,260 during fiscal 2021, representing a decrease of 3.3%, or $196,578.
NTIC recognized fee income for services provided to joint ventures of $5,189,185 during fiscal 2023 compared to $5,767,682 during fiscal 2022, representing a decrease of 10.0%.
Of the increase for fiscal 2022, $3,951,550 was due to the gain from the Zerust India acquisition. Sales and Expense Components The following is a description of the primary components of net sales and expenses: Net Sales, Excluding Joint Ventures . NTIC derives net sales from the sale of its ZERUST® products and services and its Natur-Tec® products.
During fiscal 2022, $3,951,550, or $0.41 per diluted common share, was due to the gain from the Zerust India acquisition. Sales and Expense Components The following is a description of the primary components of net sales and expenses: Net Sales, Excluding Joint Ventures .
NTIC does not hedge against its foreign currency exchange rate risk. 48 Some raw materials used in NTIC’s products are exposed to commodity price changes. The primary commodity price exposures are with a variety of plastic resins.
Some raw materials used in NTIC’s products are exposed to commodity price changes. The primary commodity price exposures are with a variety of plastic and bioplastic resins.
Outstanding balances from trade receivables from joint ventures increased by an average of 10 days as of August 31, 2022 to an average of 85 days from an average of 75 days from balances outstanding from these customers compared to August 31, 2021.
Outstanding balances from trade receivables from joint ventures decreased an average of 66 days to an average of 20 days from balances outstanding from these customers as of August 31, 2023 from an average of 86 days as of August 31, 2022.
Net cash provided by operating activities during fiscal 2021 was $2,892,940, which resulted principally from NTIC’s net income, dividends received from joint ventures, stock-based compensation, depreciation, amortization and increases in accounts payable and accrued liabilities, partially offset by NTIC’s equity in income from joint ventures and an increase in accounts receivable and prepaid expenses and other.
Uses of Cash and Cash Flow Net cash provided by operating activities during fiscal 2023 was $5,541,219, which resulted principally from NTIC’s net income, dividends received from joint ventures, depreciation and amortization expense, stock-based compensation and a decrease in inventory, partially offset by deferred income tax and equity in income from joint ventures and an increase in accounts receivable and a decrease in accounts payable.
Overall, demand for ZERUST® products and services depends heavily on the overall health of the market segments to which NTIC sells its products, including the automotive, oil and gas, agriculture, and mining markets in particular. Beginning in fiscal 2021 and continuing in fiscal 2022, the automotive industry experienced a microchip shortage that has decreased the production of vehicles.
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.
The fees for services provided to joint ventures are determined based on either a flat fee or a percentage of sales depending on local laws and tax regulations. With respect to NTIC’s joint venture in Germany (EXCOR), NTIC recognizes an agreed upon quarterly fee for services.
NTIC’s receives funds from its joint ventures as fees for services that NTIC provides to its joint ventures and as dividend distributions. The fees for services provided to joint ventures are determined based on either a flat fee or a percentage of sales depending on local laws and tax regulations.
NTIC recognizes equity income from each joint venture based on the overall profitability of the joint venture. Such profitability is subject to variability from quarter to quarter, which, in turn, subjects NTIC’s earnings to variability from quarter to quarter. The profits of each joint venture are shared by the respective joint venture owners in accordance with their respective ownership percentages.
With respect to NTIC’s joint venture in Germany (EXCOR), NTIC recognizes an agreed upon quarterly fee for services. NTIC recognizes equity income from each joint venture based on the overall profitability of the joint venture. Such profitability is subject to variability from quarter to quarter, which, in turn, subjects NTIC’s earnings to variability from quarter to quarter.
Selling expenses as a percentage of net sales decreased to 17.6% for fiscal 2022 compared to 21.3% in fiscal 2021 primarily due to the increase in net sales, partially offset by the increased selling expenses, as previously described. 44 General and Administrative Expenses .
Selling expenses as a percentage of net sales increased to 19.1% for fiscal 2023 compared to 17.6% in fiscal 2022 primarily due to increased selling expenses, as noted above. General and Administrative Expenses .
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 $834,725 were attributable to EXCOR during fiscal 2022 compared to $920,902 attributable to EXCOR during fiscal 2021. Selling Expenses .
Of the total fee income for services provided to joint ventures, fees of $816,089 were attributable to EXCOR during fiscal 2023 compared to $834,725 attributable to EXCOR during fiscal 2022. Selling Expenses .
NTIC’s research and development expenses increased 8.5% in fiscal 2022 compared to fiscal 2021 primarily due to increased personnel and development efforts. Interest Income . NTIC’s interest income decreased to $49,241 in fiscal 2022 compared to $151,875 in fiscal 2021 due primarily to changes to the invested cash balances. Interest Expense .
NTIC’s research and development expenses increased 4.0% in fiscal 2023 compared to fiscal 2022 primarily due to the timing of expenses incurred and an increase in expenses associated with development efforts. Interest Income . NTIC’s interest income decreased to $28,490 in fiscal 2023 compared to $49,241 in fiscal 2022 primarily due to changes to the invested cash balances.
The following table sets forth NTIC’s net sales by product segment for fiscal 2022 and fiscal 2021: Fiscal 2022 Fiscal 2021 $ Change % Change Total ZERUST® sales $ 57,459,382 $ 45,554,434 $ 11,904,948 26.1 % Total Natur-Tec® sales 16,699,508 10,939,385 5,760,123 52.7 % Total net sales $ 74,158,890 $ 56,493,819 $ 17,665,071 31.3 % During fiscal 2022, 77.5% of NTIC’s consolidated net sales were derived from sales of ZERUST® products and services, which increased 26.1% to $57,459,382 compared to $45,554,434 during fiscal 2021.
The following table sets forth NTIC’s net sales by product segment for fiscal 2023 and fiscal 2022: Fiscal 2023 Fiscal 2022 $ Change % Change Total ZERUST® sales $ 61,728,364 $ 57,459,382 $ 4,268,982 7.4 % Total Natur-Tec® sales 18,174,588 16,699,508 1,475,080 8.8 % Total net sales $ 79,902,952 $ 74,158,890 $ 5,744,062 7.7 % During fiscal 2023, 77.3% of NTIC’s consolidated net sales were derived from sales of ZERUST® products and services, which increased 7.4% to $61,728,364 compared to $57,459,382 during fiscal 2022.
Net income attributable to NTIC was $6,324,700, or $0.66 per diluted common share, for fiscal 2022 compared to net income attributable to NTIC of $6,281,238, or $0.64 per diluted common share, for fiscal 2021, an increase of $43,462 or $0.02 per diluted share.
Net income attributable to NTIC decreased to $2,912,276, or $0.30 per diluted common share, for fiscal 2023 compared to $6,324,700, or $0.66 per diluted common share, for fiscal 2022.
There is no assurance that any financing transaction will be available on terms acceptable to NTIC or at all or that any financing transaction will not be dilutive to NTIC’s current stockholders. 46 Uses of Cash and Cash Flow.
There is no assurance that any financing transaction will be available on terms acceptable to NTIC or at all or that any financing transaction will not be dilutive to NTIC’s current stockholders. Credit Agreement with JPMorgan Chase Bank, N.A. On January 6, 2023, NTIC entered into a Credit Agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A.
Cost of goods sold increased 38.4% in fiscal 2022 compared to fiscal 2021 primarily as a result of the increase in net sales, as described above, and price increases on raw materials used in NTIC’s products, as well as increased labor and shipping costs.
Cost of goods sold increased 2.0% in fiscal 2023 compared to fiscal 2022 primarily as a result of the increase in net sales, as described above.
NTIC had income before income tax expense of $9,059,770 for fiscal 2022 compared to income before income tax expense of $8,458,642 for fiscal 2021. Income Tax Expense . Income tax expense was $1,873,836 during fiscal 2022 compared to $1,461,905 during fiscal 2021 for an effective tax rate of 20.7% and 17.3%, respectively.
Income tax expense was $1,349,600 during fiscal 2023 compared to $1,873,836 during fiscal 2022 for an effective tax rate of 24.2% and 20.7% during both fiscal 2023 and 2022, respectively.
This decrease was primarily a result of decreased demand during fiscal 2022 due in part to geopolitical uncertainty and the Zerust India acquisition since its sales were included in NTIC’s net sales in fiscal 2022 but not fiscal 2021.
Net sales at the joint ventures decreased 3.3% to $100,682,316 during fiscal 2023 compared to $104,077,748 during fiscal 2022. This decrease was primarily a result of decreased demand during fiscal 2023 due in part to geopolitical uncertainty. 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.
NTIC’s revenue recognition policy for sales to its joint ventures is the same as NTIC’s policy for sales to unaffiliated customers. NTIC recognizes revenue from the sale of its products to joint ventures primarily upon shipment of the products. Cost of Goods Sold .
NTIC recognizes revenue from the sale of its products to joint ventures primarily upon shipment of the products. Cost of Goods Sold . Most of NTIC’s products are manufactured by third parties, and its cost of goods sold for those products consists primarily of the price invoiced by its third-party vendors.
Net cash used in financing activities for fiscal 2021 was $1,522,209, which resulted from dividends paid on NTIC common stock and dividends paid to a non-controlling interest, partially offset by proceeds from NTIC’s employee stock purchase plan and proceeds from stock option exercises. 47 Share Repurchase Plan .
Net cash provided by financing activities for fiscal 2023 was $2,053,798, which resulted from borrowings under the term loan and proceeds from the exercise of stock options and NTIC’s employee stock purchase plan, partially offset by repayments on the line of credit, dividends paid on NTIC common stock and dividends received by non-controlling interest.
Capital Expenditures and Commitments . NTIC spent $1,496,674 on capital expenditures during fiscal 2022, which related primarily to the purchase of new equipment and facility improvements. NTIC expects to spend an aggregate of approximately $1,200,000 to $1,500,000 on capital expenditures during fiscal 2023, which it expects will relate primarily to the purchase of new equipment and facility improvements.
The building will be used primarily for warehousing space and light industrial production. NTIC expects to spend an aggregate of approximately $1,600,000 to $2,100,000 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.
Ltd (Zerust Vietnam). NTIC’s consolidated financial statements do not include the accounts of any of its joint ventures. Effective as of September 1, 2021, HNTI Limited has been consolidated in NTIC’s consolidated financial statements.
Ltd (Zerust Vietnam) and Zerust Taiwan Co. Ltd (Zerust Taiwan). NTIC’s consolidated financial statements do not include the accounts of any of its joint ventures. Investments in Joint Ventures and Recoverability of Investments in Joint Ventures NTIC’s investments in its joint ventures are accounted for using the equity method.
The microchip shortage and the corresponding decrease in the production of vehicles is anticipated to continue into fiscal 2023. 43 ZERUST® oil and gas net sales increased 21.5% during fiscal 2022 compared to fiscal 2021 primarily as a result of new opportunities with new customers, partially offset by reduced demand as a result of the COVID-19 pandemic.
ZERUST® oil and gas net sales increased 69.3% during fiscal 2023 compared to fiscal 2022 primarily as a result of new opportunities with new and existing customers.
Fiscal 2022 % of Net Sales Fiscal 2021 % of Net Sales $ Change % Change Net sales, excluding joint ventures $ 71,190,801 96.0 % $ 53,470,623 94.6 % $ 17,720,178 33.1 % Net sales, to joint ventures 2,968,089 4.0 % 3,023,196 5.4 % (55,107 ) (1.8 )% Cost of goods sold 51,090,298 68.9 % 36,920,814 65.4 % 14,169,484 38.4 % Equity in income from joint ventures 4,725,918 6.4 % 7,465,214 13.2 % (2,739,296 ) (36.7 )% Fees for services provided to joint ventures 5,767,682 7.8 % 5,964,260 10.6 % (196,578 ) (3.3 )% Selling expenses 13,038,180 17.6 % 12,016,974 21.3 % 1,021,206 8.5 % General and administrative expenses 10,600,603 14.3 % 8,262,173 14.6 % 2,338,430 28.3 % Research and development expenses 4,775,334 6.4 % 4,400,479 7.8 % 374,855 8.5 % Net Sales .
Fiscal 2023 % of Net Sales Fiscal 2022 % of Net Sales $ Change % Change Net sales $ 79,902,952 100.0 % $ 74,158,890 100.0 % $ 5,744,062 7.7 % Cost of goods sold 52,099,121 65.2 % 51,090,298 68.9 % 1,008,823 2.0 % Equity in income from joint ventures 6,452,719 8.1 % 4,725,918 6.4 % 1,726,801 36.5 % Fees for services provided to joint ventures 5,189,185 6.5 % 5,767,682 7.8 % (578,497 ) (10.0 %) Selling expenses 15,290,897 19.1 % 13,038,180 17.6 % 2,252,717 17.3 % General and administrative expenses 13,166,270 16.5 % 10,600,603 14.3 % 2,565,667 24.2 % Research and development expenses 4,967,922 6.2 % 4,775,334 6.4 % 192,588 4.0 % Net Sales .
This increase was primarily due an increase in gross margin and the remeasurement gain related to the acquisition of Zerust India of $3,951,550 included in “Remeasurement gain on acquisition of equity method investee” on NTIC’s consolidated statements of operations, partially offset by increases in operating expenses and cost of goods sold and decreases in joint venture income contribution.
This decrease was a primarily due to the $3,951,550 remeasurement gain on acquisition of equity method investee recognized during fiscal 2022, which did not repeat in fiscal 2023, and to a lesser extent, the increase in operating expenses, partially offset by the increase in gross profit.
This increase was primarily a result of $9,967,464 in incremental sales as a result of the Zerust India acquisition during fiscal 2022 and increased demand across all market segments. Net sales to joint ventures decreased 1.8% to $2,968,089 during fiscal 2022 compared to $3,023,196 during fiscal 2021.
NTIC’s consolidated net sales increased 7.7% to $79,902,952 during fiscal 2023 compared to $74,158,890 during fiscal 2022. This increase was primarily a result of increased demand across all market segments, including ZERUST® oil and gas.
Outstanding receivables for services provided to joint ventures as of August 31, 2022 increased $259,990 compared to August 31, 2021, and the average days to pay increased an average of 20 days to an average of 112 days compared to August 31, 2021.
Outstanding receivables for services provided to joint ventures as of August 31, 2023 decreased $468,523 compared to August 31, 2022, and the average days to pay decreased an average of 21 days to an average of 191 days from an average of 112 days as of August 31, 2022. 47 Net cash used in investing activities during fiscal 2023 was $3,343,124, which was primarily the result of the purchase of property and equipment, and investments in patents.
NTIC’s selling expenses increased 8.5% in fiscal 2022 compared to fiscal 2021 due primarily to incremental expenses due to the Zerust India acquisition, as well as an increase in travel and personnel expenses compared to the expenses incurred during fiscal 2021.
NTIC’s selling expenses increased 17.3% in fiscal 2023 compared to fiscal 2022 primarily due to an increase in personnel expense in fiscal 2023 compared to fiscal 2022, as well as expenses incurred in fiscal 2023 in connection with the startup of a new indirect, majority owned subsidiary formed to assume the operations of a former joint venture in Taiwan and increased selling commissions.
This decrease was primarily due to the fact that Zerust India is now a consolidated subsidiary within NTIC’s financial statements and an increase in operating expenses and a decrease in gross margins at the joint ventures. NTIC’s equity in income from joint ventures fluctuates based on net sales and profitability of the joint ventures during the respective periods.
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 $2,852,229 attributable to EXCOR during fiscal 2023.
Under the loan agreement, NTIC is subject to a minimum fixed charge coverage ratio of 1.10:1.00. As of August 31, 2022, NTIC was in compliance with all debt covenants under the Amended and Restated Loan Agreement.
As of August 31, 2023, NTIC was in compliance with all debt covenants under the Credit Agreement. 46 Other Credit Arrangements On each of April 10, 2023 and May 30, 2023, the Company’s wholly-owned subsidiary in China, NTIC China, entered into a loan agreement with China Construction Bank Corporation.
Cost of goods sold as a percentage of net sales increased to 68.9% during fiscal 2022 compared to 65.4% during fiscal 2021 primarily due to price increases on raw materials used in NTIC’s products, as well as increased labor and shipping costs.
Cost of goods sold as a percentage of net sales decreased to 65.2% during fiscal 2023 compared to 68.9% during fiscal 2022 primarily as a result of lower raw material prices and increased sales made to customers in the ZERUST® oil and gas industry, which products carry higher margins than our ZERUST® industrial products and a reallocation of certain personnel expenses from the cost of goods sold to general and administrative expense.
Removed
This section provides a brief summary of the impacts to date and potential future impacts of the COVID-19 pandemic. ● Worldwide Supply Chain Disruptions . This section provides a brief summary of the impacts to date and potential future impacts of worldwide supply chain disruptions. ● Financial Overview .
Added
In fiscal 2023, sales of ZERUST® corrosion prevention solutions to large customers in the oil and gas industry became more consistent, with these customers beginning to re-order products. Sales within the U.S. also stabilized, and key customer relationships have been expanded.
Removed
NTIC’s technical service consultants work directly with the end users of NTIC’s ZERUST® rust and corrosion inhibiting products to analyze their specific needs and develop systems to meet their performance requirements.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

1 edited+2 added−1 removed5 unchanged
Biggest changeSome raw materials used in NTIC’s products are exposed to commodity price changes. The primary commodity price exposures are with a variety of plastic resins. Any outstanding advances under NTIC’s revolving line of credit with PNC Bank bear interest at an annual rate based on daily BSBY plus 2.50%.
Biggest changeSome raw materials used in NTIC’s products are exposed to commodity price changes. The primary commodity price exposures are with a variety of plastic resins.
Removed
As of August 31, 2022, NTIC had borrowings of $5,900,000 under the line of credit that existed as of that date. 54
Added
With respect to interest rate risk, 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 $3,600,000 were outstanding under the Credit Facility as of August 31, 2023.
Added
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 August 31, 2023 for both term loans is USD $2,757,176. 53

Other NTIC 10-K year-over-year comparisons