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What changed in NORTHERN TECHNOLOGIES INTERNATIONAL CORP's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of NORTHERN TECHNOLOGIES INTERNATIONAL CORP's 2023 and 2024 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 2024 report.

+283 added−301 removedSource: 10-K (2024-11-19) vs 10-K (2023-11-21)

Top changes in NORTHERN TECHNOLOGIES INTERNATIONAL CORP's 2024 10-K

283 paragraphs added · 301 removed · 224 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

66 edited+7 added−11 removed129 unchanged
Biggest changeLynch is also an officer and director of Inter Alia Holding Company, a holding company that is a significant stockholder of NTIC. Prior to joining NTIC, Mr. Lynch held positions in sales management for Fuji Electric Co., Ltd. in Tokyo, Japan and programming project management for BMW AG in Munich, Germany. Mr.
Biggest changeLynch held various positions with NTIC, including Vice President of Strategic Planning, Corporate Secretary and Project Manager. Mr. Lynch is also an officer and director of Inter Alia Holding Company, which is a significant stockholder of NTIC. Prior to joining NTIC, Mr.
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 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.
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.
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. 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. 5 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.
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.
Management ’ s Discussion and Analysis of Financial Condition and Results of Operations ” of this report. 2 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.
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.
The government of India 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.
He also holds an M.S. degree in Electrical and Computer Engineering from Oregon State University, and a B.Eng. degree in Electronics Engineering from Karnatak University, India. Gautam Ramdas, an employee of NTIC since 2005, has served as Vice President and Director – Global Market Development – Oil & Gas since 2005. Prior to joining NTIC, Mr.
He also holds an M.S. degree in Electrical and Computer Engineering from Oregon State University, and a B.Eng. degree in Electronics Engineering from Karnatak University, India. 13 Gautam Ramdas, an employee of NTIC since 2005, has served as Vice President and Director – Global Market Development – Oil & Gas since 2005. Prior to joining NTIC, Mr.
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.
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. Management Team NTIC believes its management team has the experience necessary to effectively execute its strategy and advance its product and technology leadership.
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.
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. In 1980, NTIC developed and patented the first polyolefin (plastic) based industrial corrosion inhibiting packing material in the world.
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.
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.
NTIC receives fees for providing technical support, marketing assistance, and other services to its joint ventures based primarily on the net sales of the individual joint ventures in accordance with the terms of the joint venture arrangements. Such services include consulting, legal, insurance, technical, and marketing services. In China, NTIC sells its products and services through NTIC China.
NTIC receives fees for providing technical support, marketing assistance, and other services to its joint ventures based primarily on the net sales of the individual joint ventures in accordance with the terms of the joint venture arrangements. Such services include consulting, legal, insurance, technical, and marketing services. 6 In China, NTIC sells its products and services through NTIC China.
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.
Brazil 85% Zerust Singapore Pte Ltd Singapore (2) 60% Zerust Vietnam Co. Ltd Vietnam (3) 60% Zerust Taiwan Co., Ltd Taiwan (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.
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 .
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 .
NTIC believes these profit-sharing contributions are a meaningful way of sharing NTIC’s success with its employees. 11 To further the goal of sharing NTIC’s success with its employees and incentivizing strong employee performance, NTIC may award cash bonuses to its employees.
NTIC believes these profit-sharing contributions are a meaningful way of sharing NTIC’s success with its employees. To further the goal of sharing NTIC’s success with its employees and incentivizing strong employee performance, NTIC may award cash bonuses to its employees.
Additionally, NTIC markets and sells a portfolio of proprietary bio-based and certified compostable (fully biodegradable) polymer resin compounds and finished products under the Natur-Tec® brand. These products are intended to reduce NTIC’s customers’ carbon footprint and provide environmentally sound waste disposal options.
Additionally, NTIC markets and sells a portfolio of proprietary bio-based and certified compostable (fully biodegradable) polymer resin compounds and finished products under the Natur-Tec® brand. These sustainable packaging products are intended to reduce NTIC’s customers’ carbon footprint and provide environmentally sound waste disposal options.
The term “bio-plastics” encompasses a broad category of plastics that are either bio-based, which means derived from renewable resources such as corn or cellulosic/plant material or blends thereof, or are engineered to be fully commercially compostable, or both.
The term “bio-plastics” encompasses a broad category of plastics that are either bio-based, which means derived from renewable resources such as corn or cellulosic/plant material or blends thereof, or are engineered to be fully commercially compostable, or both. Resin Compounds .
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.
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 2024 and 2023. Diversity and Inclusion Diversity and inclusion are embedded in NTIC’s values and integrated into its strategies.
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.
The average tenure of the members of NTIC’s management team is 17 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.
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 has been selling its proprietary ZERUST® products and services to the automotive, electronics, electrical, mechanical, military, and retail consumer markets for over 50 years and, more recently, has also expanded into the oil and gas industry.
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.
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, 2024.
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.
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, Vietnam, and the United States.
The bags are available in various SKU configurations, including retail packs that are sold to the consumer either through retail outlets or through online stores and industrial case packs that are sold to commercial and industrial customers primarily through wholesalers and distributors.
The bags are available in various SKU configurations, including retail packs that are sold to the consumer either through retail outlets or through online stores and industrial case packs that are sold to commercial and industrial customers primarily through national and regional wholesalers and distributors.
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.
The following table sets forth a list of NTIC’s operating subsidiaries as of November 19, 2024, 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.
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.
As of August 31, 2024, 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 40 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.
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.
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 $4,800,000 and $5,000,000 in fiscal 2025 on research and development activities.
Malaysia (1) 30 % EXCOR KORROSIONSSCHUTZ – TECHNOLOGIEN UND PRODUKTE GMBH Germany 50 % EXCOR SP. Z.O.O. Poland 50 % EXCOR-ZERUST S.R.O. Czech Republic 50 % KOREA ZERUST CO., LTD. South Korea (1) 30 % PT. CHEMINDO – NTIA Indonesia (1) 30 % TAIYONIC LTD. Japan 50 % ZERUST – DNEPR Ukraine 50 % ZERUST (U.K.) LTD.
Malaysia (1) 30% EXCOR KORROSIONSSCHUTZ – TECHNOLOGIEN UND PRODUKTE GMBH Germany 50% EXCOR SP. Z.O.O. Poland 50% EXCOR-ZERUST S.R.O. Czech Republic 50% KOREA ZERUST CO., LTD. South Korea (1) 30% PT. CHEMINDO – NTIA Indonesia (1) 30% TAIYONIC LTD. Japan 50% ZERUST – DNEPR Ukraine 50% ZERUST (U.K.) LTD. United Kingdom 50% ZERUST A.Ş.
Increased environmental and sustainability awareness at the corporate and consumer level, improved technical properties and product functionality, as well as recent foreign, state, and local governmental regulations banning the use of conventional plastics or mandating the use of certain biodegradable or compostable products, including regulations in China, India and California, have also fueled this interest in bio-based and biodegradable-compostable plastics.
Increased environmental and sustainability awareness at the corporate and consumer level, improved technical properties and product functionality, as well as recent foreign, state, and local governmental regulations banning the use of conventional plastics or mandating the use of certain biodegradable or compostable products, including regulations in China, India and certain states in the U.S., have also fueled this interest in bio-based and biodegradable-compostable plastics.
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.
The following table sets forth a list of NTIC’s operating joint ventures as of November 19, 2024, 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.
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. 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 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, NTIC (Shanghai) Co., Ltd., and majority-owned subsidiaries in India, Natur-Tec India Private Limited, and Sri Lanka, Natur Tec Lanka (Pvt) Ltd, and through distributors and certain joint ventures.
The Natur-Tec® biopolymer resin compound portfolio includes formulations that have been optimized for a variety of applications, including blown-film extrusion, extrusion coating, injection molding, and engineered plastics.
The Natur-Tec® biopolymer resin compound portfolio includes formulations that have been optimized for a variety of applications, including blown-film extrusion, coatings, injection molding, thermoforming, profile extrusion and engineered plastics.
All statements other than statements of historical facts included in this report or expressed by NTIC orally from time to time that address activities, events, or developments that NTIC expects, believes, or anticipates will or may occur in the future are forward-looking statements, including, in particular, the statements about NTIC’s plans, objectives, strategies, and prospects regarding, among other things, NTIC’s financial condition, results of operations and business, the anticipated effect of COVID-19 and its acquisition of Zerust India on NTIC’s business, operating results and financial condition, and the outcome of contingencies, such as legal proceedings.
All statements other than statements of historical facts included in this report or expressed by NTIC orally from time to time that address activities, events, or developments that NTIC expects, believes, or anticipates will or may occur in the future are forward-looking statements, including, in particular, the statements about NTIC’s plans, objectives, strategies, and prospects regarding, among other things, NTIC’s financial condition, results of operations and business, operating results and financial condition, and the outcome of contingencies, such as legal proceedings.
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 .
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, coated paper or food serviceware. NTIC’s Natur-Tec® finished products are manufactured using NTIC’s Natur-Tec® resin compounds by select sub-contractors. Competition ZERUST ® Corrosion Prevention Solutions .
NTIC offers employees the opportunity to work remotely, requiring Tuesday in-person attendance for office staff employees and permitting remote work in the discretion of individual employees the remaining days of the week. Values and Ethics In connection with NTIC’s core values, NTIC acts in accordance with its Code of Ethics.
NTIC’s part-time employees receive compensation for paid holidays as well. NTIC offers employees the opportunity to work remotely, requiring Tuesday in-person attendance for office staff employees and permitting remote work in the discretion of individual employees the remaining days of the week. Values and Ethics In connection with NTIC’s core values, NTIC acts in accordance with its Code of Ethics.
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.
Sales relating to this backlog are expected to be realized during first quarter of fiscal 2025. 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.
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.
Dalal 55 Vice President and Director – Global Market Development – Natur-Tec® Gautam Ramdas 51 Vice President and Director – Global Market Development – Oil & Gas Brian Haglund 40 Vice President of Operations – North America Vineet R.
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 and finished products are produced at facilities in India, China, Vietnam, 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 cutlery. NTIC’s Natur-Tec® finished products are manufactured using NTIC’s Natur-Tec® resin compounds by select sub-contractors.
NTIC is guided by its Policy Statement on HSE, which sets forth NTIC’s HSE objectives, including ensuring that all activities across the value chain are conducted in a manner which is consistent with NTIC’s quality management standard and HSE programs, ensuring that business activities are conducted to prevent harm and protect health and safety, and developing, manufacturing, distributing and marketing products and services with full regard for HSE aspects.
NTIC is dedicated to investing in the future of the planet and NTIC’s people and intends to continue to invest in HSE protection and improvements in a timely manner consistent with available technology. 10 NTIC is guided by its Policy Statement on HSE, which sets forth NTIC’s HSE objectives, including ensuring that all activities across the value chain are conducted in a manner which is consistent with NTIC’s quality management standard and HSE programs, ensuring that business activities are conducted to prevent harm and protect health and safety, and developing, manufacturing, distributing and marketing products and services with full regard for HSE aspects.
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.
As of August 31, 2024, of our North American workforce, 41% are female, 32% are racially or ethnically diverse and 6% are veterans. Of our global 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.
As part of its compensation package, NTIC provides employees with access to a medical plan with an employee-funded health savings account option. The medical plan has no co-pay, and employees are not required to contribute toward premium costs. Dental, vision, life, and long and short-term disability insurance plans are also available to NTIC’s employees.
As part of its compensation package, NTIC provides employees with access to a medical plan with an employee-funded health savings account option. The medical plan has no co-pay, and employees are not required to contribute toward premium costs.
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.
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.
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.
While NTIC experienced longer lead times for raw materials during fiscal 2024 as a result of supply chain disruptions, raw material costs declined somewhat in fiscal 2024 compared to fiscal 2023.
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.
NTIC accounts for the investments and financial results of its joint ventures in its consolidated financial statements utilizing the equity method of accounting.
NTIC’s Natur-Tec® finished products are manufactured using NTIC’s Natur-Tec® resin compounds by select sub-contractors. NTIC is ISO 9001 certified with respect to the manufacturing of its products. NTIC believes that the process of ISO 9001 certification serves as an excellent total quality management tool, enabling NTIC to ensure consistency in the performance of its products.
NTIC is ISO 9001 certified with respect to the manufacturing of its products. NTIC believes that the process of ISO 9001 certification serves as an excellent total quality management tool, enabling NTIC to ensure consistency in the performance of its products.
ZERUST® ReCAST-SSB solutions protect the Soil Side Bottoms (SSB) of aboveground storage tanks through a variety of unique and highly effective delivery systems designed by the Zerust Oil & Gas team to deliver proprietary Zerion FVS corrosion inhibitor to spaces under tank bottoms that are susceptible to significant corrosion.
ZERUST® Flange Savers® are available in various sizes to accommodate different pipe diameters, pressure ratings, and international standards for pipeline valves and flanges. 4 ZERUST® ReCAST-SSB solutions protect the Soil Side Bottoms (SSB) of aboveground storage tanks through a variety of unique and highly effective delivery systems designed by the Zerust Oil & Gas team to deliver proprietary Zerion FVS corrosion inhibitor to spaces under tank bottoms that are susceptible to significant corrosion.
NTIC prides itself on offering employment arrangements that include competitive time off policies and flexibility. NTIC’s full-time employees are eligible for paid holidays and vacation time based on the length of their service, ranging from 15 to 25 days. NTIC’s part-time employees receive compensation for paid holidays as well.
Dental, vision, life, and long and short-term disability insurance plans are also available to NTIC’s employees. 11 NTIC prides itself on offering employment arrangements that include competitive time off policies and flexibility. NTIC’s full-time employees are eligible for paid holidays and vacation time based on the length of their service, ranging from 15 to 25 days.
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.
Human Capital Management Headcount and Employee Demographics As of August 31, 2024, NTIC had a total of 95 employees, with 93 full-time employees and 2 part-time employees, located in North America, consisting of 27 in sales and marketing, 28 in research and development and lab, 21 in administration, and 19 in production.
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.
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. 9 Backlog NTIC had an estimated order backlog of $5,837,430 as of August 31, 2024, compared to $5,337,717 as of August 31, 2023, which was generally across all business units.
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.
ZERUST ® Corrosion Prevention Solutions . In fiscal 2024, 74.2% 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 2024 included $63,092,575 in sales of ZERUST® rust and corrosion inhibiting products and services, an increase of 2.2% from such sales in fiscal 2023.
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.
Patrick Lynch, an employee of NTIC since 1995, has been President since July 2005 and Chief Executive Officer since January 2006 and has served as a director of NTIC since February 2004. Mr. Lynch served as President of North American Operations of NTIC from May 2004 to July 2005. Prior to May 2004, Mr.
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’s consolidated net sales in fiscal 2024 included $21,966,942 in sales of Natur-Tec® resins and finished products, an increase of 20.9% compared to sales in fiscal 2023.
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’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.
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.
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% ____________________ (1) Indirect ownership interest through NTI Asean. 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.
(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.
(2) Zerust Singapore Pte Ltd is 100% owned by NTI Asean LLC and, therefore, indirectly owned by NTIC. (3) Zerust Vietnam Co. Ltd and Zerust Taiwan Co., Ltd are 100% owned by Zerust Singapore Pte Ltd and, therefore, indirectly owned by NTIC. NTIC participates in 15 active joint venture arrangements in North America, Europe, and Asia.
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 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. 12 INFORMATION ABOUT OUR EXECUTIVE OFFICERS The two individuals named below have been designated by NTIC’s Board of Directors as “executive officers” of NTIC.
This rapid self-diffusing capability is designed for sealed void spaces, protection of large/complex assets like heat exchangers, and heater-treaters. Natur-Tec ® Resin Compounds and Finished Products. NTIC manufactures and sells a broad range of bioplastic packaging solutions, including bio-based and certified compostable (fully biodegradable) polymer resin compounds, and finished products under the Natur-Tec® brand.
This rapid self-diffusing capability is designed for sealed void spaces, protection of large/complex assets like heat exchangers, and heater-treaters. Natur-Tec ® Resin Compounds and Finished Products.
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.
These connection points often corrode under aggressive industrial environments and harsh operating conditions, thereby causing costly maintenance, operational, and safety problems.
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.
Accordingly, NTIC expects the U.S. market for bio-plastic solutions to grow substantially during the next several years. 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 owns several patents outside the area of corrosion protection both in the United States and in countries of strategic relevance to NTIC, including the above-noted countries. In addition to seeking patent protection, NTIC maintains an extensive portfolio of trademarks in countries where NTIC has a presence directly or through its subsidiaries and joint ventures.
These patent and patent applications have been extended to countries of strategic relevance to NTIC, including Canada, Europe, UK, India, and China. 8 In addition to seeking patent protection, NTIC maintains an extensive portfolio of trademarks in countries where NTIC has a presence directly or through its subsidiaries and joint ventures.
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.
However, with respect to its Natur-Tec® resin compounds and finished products, there are a limited number of domestic and international suppliers of the base resins used to manufacture the resin compounds and finished products, which occasionally contributes to supply issues. During fiscal 2024, for example, NTIC experienced some delays in obtaining these base resins due primarily to international shipping issues.
Lynch received an M.B.A. degree from the University of Michigan Ross School of Business in Ann Arbor, Michigan. Matthew C. Wolsfeld, an employee of NTIC since February 2001, has been NTIC’s Chief Financial Officer since November 2001 and Corporate Secretary since November 2004. Mr. Wolsfeld was Controller of NTIC from May 2001 through November 2001. Prior to joining NTIC, Mr.
Wolsfeld, an employee of NTIC since February 2001, has been NTIC’s Chief Financial Officer since November 2001 and Corporate Secretary since November 2004. Mr. Wolsfeld was Controller of NTIC from May 2001 through November 2001. Prior to joining NTIC, Mr. Wolsfeld held an auditing position with PricewaterhouseCoopers LLP in Minneapolis, Minnesota from 1997 to 2001. Mr.
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.
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. Other corporate officers of NTIC, their ages, and offices held, as of November 8, 2024, are as follows: Name Age Position with NTIC Vineet R.
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.
Each of these joint ventures generally manufactures and markets products in the geographic territory to which it is assigned. NTIC’s joint ventures exclusively sell rust and corrosion inhibiting products. NTIC has historically funded its investments in joint ventures with cash generated from operations.
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.
Their ages and the offices held, as of November 8, 2024, are as follows: Name Age Position with NTIC G. Patrick Lynch 57 President and Chief Executive Officer Matthew C. Wolsfeld 50 Chief Financial Officer and Corporate Secretary G.
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 2024 included $9,229,279 in sales made to customers in the oil and gas industry, an increase of 18.3% from such sales in fiscal 2023. In fiscal 2024, sales of ZERUST® corrosion prevention solutions to large customers in the oil and gas industry continued to become more consistent, with these customers continuing to re-order products.
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.
Sales within the U.S. also stabilized somewhat, and key customer relationships were expanded.
Removed
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.
Added
While most of NTIC’s subsidiaries exclusively sell rust and corrosion inhibiting products, some of the subsidiaries also sell NTIC’s Natur-Tec® resin compounds and finished goods.
Removed
On September 19, 2022, NTIC announced the signing of an initial contract with BP Exploration (Caspian Sea) Limited p.l.c. to supply chemical corrosion protection services for 12 storage tanks through December 2025, representing the largest contract to date for oil and gas storage tank solutions.
Added
Financial Statements and Supplementary Data ” and “ Part II. Item 7.
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ZERUST® Flange Savers® are available in various sizes to accommodate different pipe diameters, pressure ratings, and international standards for pipeline valves and flanges.
Added
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. Oil and gas pipeline segments are connected by flanges and welded joints of varying sizes, designs, and materials.
Removed
Natur-Tec® resins and finished products sales in North America and finished product sales at NTIC’s majority-owned subsidiary in India and at NTIC’s subsidiary in China, experienced reduced demand globally as a result of the COVID-19 pandemic.
Added
In fiscal 2024, 25.8% of NTIC’s consolidated net sales were derived from a broad range of bioplastic packaging solutions, including bio-based and certified compostable (fully biodegradable) polymer resin compounds, and finished products under the Natur-Tec® brand.
Removed
The COVID-19 pandemic had a significant impact on demand from many large users of bioplastics, including college campuses, stadiums, arenas, restaurants, and corporate office complexes. Additionally, demand for apparel packaging solutions was impacted by ongoing COVID- related lockdowns and supply-chain bottlenecks in Asia.
Added
Notably, the bill provides that, by 2032, all packaging must be recyclable or compostable. Additionally, as of November 19, 2024, Colorado, Connecticut, Delaware, Hawaii, Maine, New Jersey, New York, Oregon, Rhode Island Vermont and Washington had each enacted some form of ban on plastic bags.
Removed
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 .
Added
NTIC owns several patents outside the area of corrosion protection both in the United States and in countries of strategic relevance to NTIC, including the above-noted countries. NTIC holds 5 patents and patent applications in the Unites States covering various applications for biobased and compostable plastics.
Removed
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.
Added
Lynch held positions in sales management for Fuji Electric Co., Ltd. in Tokyo, Japan, and programming project management for BMW AG in Munich, Germany. Mr. Lynch received a Master of Business Administration degree from the University of Michigan Ross School of Business. Matthew C.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

63 edited+36 added−37 removed212 unchanged
Biggest changeIf 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.
Biggest changeHowever, there is no guarantee that NTIC’s employees, joint ventures, distributors, independent representatives, or other agents have not or will not engage in conduct undetected by NTIC’s processes and for which NTIC might be held responsible under the FCPA or other anticorruption laws. 25 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.
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.
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.
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.
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; ● 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.
NTIC’s business is subject to a number of other miscellaneous risks that may adversely affect NTIC’s operating results, and financial condition, such as natural or man-made disasters, an unexpected business loss of supply due to a force majeure event or global pandemics that may result in shortages of raw materials, higher commodity costs, an increase in insurance premiums, and other adverse effects on NTIC’s business; the continued threat of terrorist acts and war that may result in heightened security and higher costs for import and export shipments of components or finished goods; and the ability of NTIC’s management to adapt to unplanned events.
NTIC’s business is subject to a number of other miscellaneous risks that may adversely affect NTIC’s operating results, and financial condition, such as natural or man-made disasters, an unexpected business loss of supply due to a force majeure event or global pandemics that may result in shortages of raw materials, higher commodity costs, an increase in insurance premiums, and other adverse effects on NTIC’s business; the continued threat of terrorist acts and war that may result in heightened security and higher costs for import and export shipments of components or finished goods; and the ability of NTIC’s management to adapt to unplanned events. 35
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. ● 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.
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 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.
Repercussions of severe weather conditions may include: ● curtailment of services or reduced demand for products; ● weather-related damage to facilities and equipment, resulting in suspension of operations; ● inability to deliver equipment, personnel and products to job sites in accordance with contract schedules or increased transportation or other operating costs; and ● loss of productivity.
Repercussions of severe weather conditions may include: 33 ● curtailment of services or reduced demand for products; ● weather-related damage to facilities and equipment, resulting in suspension of operations; ● inability to deliver equipment, personnel and products to job sites in accordance with contract schedules or increased transportation or other operating costs; and ● loss of productivity.
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.
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. NTIC has limited staffing and will continue to be dependent upon key employees.
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.
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 wars between Russia and Ukraine and 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. ● Uncertainties with respect to the Chinese legal system may adversely affect the operations of NTIC China. ● Failure to comply with the U.S.
New climate disclosure rules, if adopted by the SEC, may increase our costs and litigation risks, which would materially and adversely affect our future results of operations and financial condition.
New climate disclosure rules adopted by the SEC may increase our costs and litigation risks, which would materially and adversely affect our future results of operations and financial condition.
Acquisitions, such as the HNTI acquisition, involve a number of risks, the occurrence of which could adversely affect NTIC’s business, reputation, financial condition, and operating results, including: ● diversion of management's attention to manage and integrate the acquired business; ● disruption to existing operations and plans; ● inability to effectively manage the expanded operations; ● difficulties or delays, which may be exacerbated by the impact of COVID-19, in integrating and assimilating information and financial systems, internal controls, operations, manufacturing processes and products of an acquired business or in realizing projected efficiencies, growth prospects, cost savings, and other synergies; ● potential loss of key employees, customers or suppliers of the acquired businesses or adverse effects on existing business relationships with employees, customers or suppliers; ● write-off of significant amounts of goodwill, other intangible assets, and/or long-lived assets as a result of deterioration in the performance of an acquired business, adverse market conditions, changes in the competitive landscape, changes in laws or regulations that restrict activities of an acquired business, or as a result of a variety of other circumstances; ● violation of confidentiality, intellectual property, and non-compete obligations or agreements by employees of an acquired business or lack of or inadequate formal intellectual property protection mechanisms in place at an acquired business; ● adverse impact on overall profitability if NTIC’s expanded operations do not achieve the growth prospects, net sales, net earnings, cost and/or revenue synergies, or other financial results projected in NTIC’s valuation models, delays in the realization thereof or costs or charges incurred to achieve any revenue or cost synergies; ● reallocation of amounts of capital from other operating initiatives and/or an increase in leverage and debt service requirements to pay acquisition purchase prices, which could in turn restrict NTIC’s ability to access additional capital when needed or limit its ability to pursue other important elements of its business strategy; ● inaccurate assessment of additional post-acquisition, undisclosed, contingent or other liabilities or problems, unanticipated costs associated with an acquisition; and ● impacts as a result of purchase accounting adjustments, incorrect estimates made in the accounting for acquisitions, incurrence of non-recurring charges, or other potential financial accounting or reporting impacts.
Acquisitions involve a number of risks, the occurrence of which could adversely affect NTIC’s business, reputation, financial condition, and operating results, including: ● diversion of management’s attention to manage and integrate the acquired business; ● disruption to existing operations and plans; ● inability to effectively manage the expanded operations; ● difficulties or delays in integrating and assimilating information and financial systems, internal controls, operations, manufacturing processes and products of an acquired business or in realizing projected efficiencies, growth prospects, cost savings, and other synergies; ● potential loss of key employees, customers or suppliers of the acquired businesses or adverse effects on existing business relationships with employees, customers or suppliers; ● write-off of significant amounts of goodwill, other intangible assets, and/or long-lived assets as a result of deterioration in the performance of an acquired business, adverse market conditions, changes in the competitive landscape, changes in laws or regulations that restrict activities of an acquired business, or as a result of a variety of other circumstances; ● violation of confidentiality, intellectual property, and non-compete obligations or agreements by employees of an acquired business or lack of or inadequate formal intellectual property protection mechanisms in place at an acquired business; ● adverse impact on overall profitability if NTIC’s expanded operations do not achieve the growth prospects, net sales, net earnings, cost and/or revenue synergies, or other financial results projected in NTIC’s valuation models, delays in the realization thereof or costs or charges incurred to achieve any revenue or cost synergies; ● reallocation of amounts of capital from other operating initiatives and/or an increase in leverage and debt service requirements to pay acquisition purchase prices, which could in turn restrict NTIC’s ability to access additional capital when needed or limit its ability to pursue other important elements of its business strategy; ● inaccurate assessment of additional post-acquisition, undisclosed, contingent or other liabilities or problems, unanticipated costs associated with an acquisition; and ● impacts as a result of purchase accounting adjustments, incorrect estimates made in the accounting for acquisitions, incurrence of non-recurring charges, or other potential financial accounting or reporting impacts.
Although the length, impact and outcome of the military conflict between Israel and Hamas are highly unpredictable, this conflict could lead to significant market and other disruptions, including disruptions to the oil and gas industry, significant volatility in commodity prices and supply of energy resources, instability in financial markets, supply chain interruptions, political and social instability and other material and adverse effects on macroeconomic conditions.
Although the length, impact and outcome of this conflict between Israel and Hamas are highly unpredictable, it could lead to significant market and other disruptions, including disruptions to the oil and gas industry, significant volatility in commodity prices and supply of energy resources, instability in financial markets, supply chain interruptions, political and social instability and other material and adverse effects on macroeconomic conditions.
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.
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 2025 and beyond.
Although NTIC maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers, distributors, and joint ventures to make required payments, and such losses historically have been within NTIC’s expectations and the provisions established, NTIC cannot guarantee that it will continue to experience the same loss rates that it has in the past, especially if there are weaknesses in the worldwide economy.
Although NTIC maintains allowances for credit losses for estimated losses resulting from the inability of its customers, distributors, and joint ventures to make required payments, and such losses historically have been within NTIC’s expectations and the provisions established, NTIC cannot guarantee that it will continue to experience the same loss rates that it has in the past, especially if there are weaknesses in the worldwide economy.
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.
Such risks include the financial instability among customers in these regions, political instability, fraud or corruption, and other non-economic factors, 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.
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.
In the future, 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.
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.
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 wars between Russia and Ukraine and Israel and Hamas may adversely affect NTIC ’ s business and results of operations.
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.
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 may result in an adverse effect on NTIC’s net sales and its other operating results.
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.
However, in fiscal 2023 and fiscal 2024, this seasonality decreased 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.
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.
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 wars between Russia and Ukraine and Israel and Hamas, may adversely affect NTIC’s business and results of operations.
In an effort to increase climate change disclosure, the SEC proposed climate disclosure rules that would require new climate-related disclosure in SEC filings, as described below. Adverse publicity or climate-related litigation that may result from such enhanced disclosure or stockholder perception could have a negative impact on our business.
In an effort to increase climate change disclosure, on March 6, 2024, the SEC adopted climate disclosure rules that require new climate-related disclosure in SEC filings, as described below. Adverse publicity or climate-related litigation that may result from such enhanced disclosure or stockholder perception could have a negative impact on our business.
For instance, the benefits of the HNTI acquisition or any future acquisition may take more time than expected to develop or integrate into NTIC’s operations, and NTIC cannot guarantee that either the HNTI or any future acquisitions will, in fact, produce any long-term benefits.
For instance, the benefits of such acquisitions may take more time than expected to develop or integrate into NTIC’s operations, and NTIC cannot guarantee that such acquisitions will, in fact, produce any long-term benefits.
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.
As of November 19, 2024, Inter Alia Holding Company, or Inter Alia, beneficially owned approximately 12.7% 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 a result, climate change could negatively affect our business and operations. 33 In addition, public company stockholders are increasingly sensitive to the climate change impacts and mitigation efforts of companies, are increasingly seeking enhanced disclosure on the risks, challenges, governance implications, and financial impacts of climate change faced by companies and are demanding that companies take a proactive approach to addressing perceived environmental risks, including risks associated with climate change, relating to their operations.
In addition, public company stockholders are increasingly sensitive to the climate change impacts and mitigation efforts of companies, are increasingly seeking enhanced disclosure on the risks, challenges, governance implications, and financial impacts of climate change faced by companies and are demanding that companies take a proactive approach to addressing perceived environmental risks, including risks associated with climate change, relating to their operations.
In addition, NTIC’s management information systems are vulnerable to damage or interruption from natural or man-made disasters, including terrorist attacks, attacks by computer viruses or hackers, power loss to computer systems, Internet outages, and telecommunications or data network failure. Any such interruption could adversely affect NTIC’s business and operating results.
In addition, NTIC’s management information systems are vulnerable to damage or interruption from natural or man-made disasters, including terrorist attacks, attacks by computer viruses or hackers, power loss to computer systems, Internet outages, and telecommunications or data network failure.
The ongoing war between Israel and Hamas may adversely affect NTIC’s business and results of operations. On October 7, 2023, Hamas, a U.S. designated terrorist organization, launched a series of coordinated attacks from the Gaza Strip onto Israel.
The ongoing war between Israel and Hamas may adversely affect NTIC’s business and results of operations. On October 7, 2023, Hamas, a U.S. designated terrorist organization, launched a series of coordinated attacks from the Gaza Strip onto Israel. On October 8, 2023, Israel formally declared war on Hamas, which is ongoing as of the date of this filing.
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.
While the persistent inflation experienced in fiscal 2022 stabilized in fiscal 2023 and fiscal 2024, relatively high levels of inflation continued to impact 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.
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 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 metal components that require NTIC’s ZERUST® products and solutions.
Regulatory Guidelines: The Oil & Gas sector is very conservative and, in addition to long-term trials on-site, client decision makers typically default to guidelines from the American Petroleum Institute (API), Association of Materials Protection and Performance (AMPP), Pipeline Hazardous Materials Safety Administration (PHMSA), European Committee for the Study of Corrosion (CEOCOR), etc.
Regulatory Guidelines: The Oil & Gas sector is very conservative and, in addition to long-term trials on-site, client decision makers typically default to guidelines from the American Petroleum Institute (API), Association of Materials Protection and Performance (AMPP), Pipeline and Hazardous Materials Safety Administration (PHMSA), an agency of the United States Department of Transportation responsible for developing and enforcing regulations for the safe, reliable and environmentally sound transportation of energy and other hazardous materials, European Committee for the Study of Corrosion (CEOCOR), etc.
During fiscal 2023, 77.3% of NTIC’s consolidated net sales were derived from sales of ZERUST® rust and corrosion inhibiting products and services.
During fiscal 2024, 74.2% of NTIC’s consolidated net sales were derived from sales of ZERUST® rust and corrosion inhibiting products and services.
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.
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.
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.
Also, the failure to comply with applicable legal and regulatory obligations could result in the disruption of NTIC’s shipping and sales activities. 21 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.
NTIC may not have adequate market makers and market making activity to prevent manipulation in its common stock. The price and trading volume of NTIC ’ s common stock has been, and may continue to be, volatile. The market price and trading volume of NTIC’s common stock price historically has fluctuated over a wide range.
The price and trading volume of NTIC ’ s common stock has been, and may continue to be, volatile. The market price and trading volume of NTIC’s common stock price historically has fluctuated over a wide range.
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.
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 2024, NTIC recognized $5,251,782 in fees and $2,997,164 in dividend distributions from its joint ventures.
The loss or interruption of services of any of NTIC’s key personnel, including in particular its technical personnel, the inability to identify, attract, or retain qualified personnel in the future, delays in hiring qualified personnel, or any employee slowdowns, strikes, or similar actions could make it difficult for NTIC to manage its business and meet key objectives, which could harm NTIC’s business, operating results, and financial condition.
The loss or interruption of services of any of NTIC’s key personnel, including in particular its technical personnel, the inability to identify, attract, or retain qualified personnel in the future, delays in hiring qualified personnel, or any employee slowdowns, strikes, or similar actions could make it difficult for NTIC to manage its business and meet key objectives, which could harm NTIC’s business, operating results, and financial condition. 19 Although we have not experienced any material labor shortage to date, we have observed an overall tightening and increasingly competitive labor market in recent years.
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 NTIC took steps to minimize the impact of these increased costs by working closely with its suppliers and customers, these issues may persist in fiscal 2025, and 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 EXCOR’s financial performance has not significantly deteriorated, it's profitability has decreased over the past few years as compared to prior years which has adversely affected NTIC’s financial results. 22 NTIC ’ s acquisition of the remaining 50% ownership interest of HNTI and any future similar acquisitions involve risk.
EXCOR’s profitability has decreased over the past few years as compared to prior years, which has adversely affected NTIC’s financial results. 22 NTIC ’ s acquisition of the remaining 50% ownership interest of HNTI and any future similar acquisitions involve risk. Effective as of September 1, 2021, NTIC acquired the remaining 50% ownership interest in its Indian joint venture, HNTI.
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.
During fiscal 2024, the sale price of NTIC’s common stock ranged from a low of $10.08 per share to a high of $19.63 per share, and the daily trading volume ranged from 634 shares to 1,006,875 shares. It is likely that the price and trading volume of NTIC’s common stock will continue to fluctuate 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.
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.
Transactions that could be affected by this concentration of ownership include proxy contests, tender offers, mergers, or other purchases of common stock that could give stockholders the opportunity to realize a premium over the then-prevailing market price for shares of NTIC’s common stock.
Transactions that could be affected by this concentration of ownership include proxy contests, tender offers, mergers, or other purchases of common stock that could give stockholders the opportunity to realize a premium over the then-prevailing market price for shares of NTIC’s common stock. 32 General Risk Factors Climate change, or legal, regulatory, or market measures to address climate change, may negatively affect our business and operations.
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, which may result, in part, from government action at the federal, state or local level. For example, in June 2022, the State of California passed a law intended to reduce single-use plastics.
The commercial success of NTIC’s Natur-Tec® resin compounds and finished products depends on the continued expansion of the market for biodegradable plastics and widespread market acceptance of products manufactured with bio-based and biodegradable resins, which may result, in part, from government policies promoting sustainable practices at the federal, state or local level.
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.
As of November 19, 2024, NTIC had 9,470,507 shares of common stock outstanding, 24.3% of which were beneficially owned by directors, executive officers, principal stockholders, and their respective affiliates.
NTIC may incur substantial costs if its competitors initiate litigation to challenge the validity of its patents or if it initiates any proceedings to protect its proprietary rights, and if the outcome of any such litigation is unfavorable to NTIC, its business and operating results could be materially adversely affected.
NTIC may incur substantial costs if its competitors initiate litigation to challenge the validity of its patents or if it initiates any proceedings to protect its proprietary rights, and if the outcome of any such litigation is unfavorable to NTIC, its business and operating results could be materially adversely affected. 31 In addition, NTIC relies substantially on trade secrets and proprietary know-how that it seeks to protect, in part, by confidentiality agreements with its employees and consultants.
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.
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. 17 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.
We are currently assessing the impact of the new rules, if adopted as proposed, but at this time, we cannot predict the costs of implementation or any potential adverse impacts resulting from the new rules if adopted.
We are currently assessing the impact of the new rules, but at this time, due in part to pending legal action related to the adoption of the new rules, we cannot predict the costs of implementation or any potential adverse impacts resulting from the new rules.
Securities litigation, whether with or without merit, could result in substantial costs and divert management’s attention and resources, which could harm NTIC’s business, operating results, and financial condition as well as the market price of its common stock. 32 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.
Securities litigation, whether with or without merit, could result in substantial costs and divert management’s attention and resources, which could harm NTIC’s business, operating results, and financial condition as well as the market price of its common stock.
Food and Drug Administration. ● NTIC’s reliance upon patents, trademark laws, trade secrets, and contractual provisions to protect its proprietary rights may not be sufficient to protect its intellectual property. ● NTIC has identified a material weakness in its internal controls, and cannot provide assurances that this weakness will be effectively remediated or that additional material weaknesses will not occur in the future. ● Any changes in U.S. generally accepted accounting principles might adversely affect NTIC’s operating results.
Food and Drug Administration. ● NTIC’s reliance upon patents, trademark laws, trade secrets, and contractual provisions to protect its proprietary rights may not be sufficient to protect its intellectual property. ● Any changes in U.S. generally accepted accounting principles might adversely affect NTIC’s operating results.
Federal Reserve and other central banks to increase interest rates, which could increase the cost of capital available to NTIC and depress economic growth, could also negatively impact our business. 17 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 may have a material adverse effect on NTIC ’ s business, operating results and financial condition.
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 may have a material adverse effect on NTIC ’ s business, operating results and financial condition.
NTIC believes low global crude oil prices constrain capital improvement budgets of its existing and prospective customers and may result in personnel turnover at its oil and gas customers or prospects.
The price of crude oil remained moderate and relatively stable in fiscal 2024, partially due to decreased inflationary pressures and ample global supplies. NTIC believes low global crude oil prices constrain capital improvement budgets of its existing and prospective customers and may result in personnel turnover at its oil and gas customers or prospects.
Any NTIC stockholder wishing to sell his, her, or its stock may cause a significant fluctuation in the trading price of NTIC’s common stock. In addition, low trading volume of a stock increases the possibility that, despite rules against such activity, the price of the stock may be manipulated by persons acting in their own self-interest.
In addition, low trading volume of a stock increases the possibility that, despite rules against such activity, the price of the stock may be manipulated by persons acting in their own self-interest. NTIC may not have adequate market makers and market making activity to prevent manipulation in its common stock.
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.
Additionally, NTIC believes the ongoing wars between Russia and Ukraine and Israel and Hamas 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. 29 Global Events: The sale of Zerust Oil & Gas solutions to Oil & Gas sector clients is impacted by geopolitical tensions and other events in key oil producing regions like the Middle East.
During fiscal 2023, the automobile sector represented approximately 40-45% of ZERUST® industrial net sales in North America and 55-60% of net sales of NTIC’s joint ventures. NTIC continues to seek additional applications of its ZERUST® products and solutions related to electric vehicles and batteries.
During fiscal 2024, the automobile sector represented approximately 40-45% of ZERUST® industrial net sales in North America and 55-60% of net sales of NTIC’s joint ventures.
Accordingly, any weakness in the global economy, particularly the United States, Europe, India and China, and in the automotive industry, including decreased production resulting from the ongoing microchip shortage, have negatively impacted and may continue to negatively impact NTIC’s business, operating results, and financial condition.
Any weakness in the global economy, particularly the United States, Europe, India and China, and in the automotive industry have negatively impacted and may continue to negatively 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.
The expansion of NTIC’s existing international operations and entry into additional international markets requires management attention and financial resources. The sale and shipping of products and services across international borders subjects NTIC to extensive and complicated U.S. and foreign governmental trade regulations. Compliance with such regulations is costly and exposes NTIC to penalties for non-compliance.
Whether and to what extent such issues persist cannot be predicted. The sale and shipping of products and services across international borders subjects NTIC to extensive and complicated U.S. and foreign governmental trade regulations. Compliance with such regulations is costly and exposes NTIC to penalties for non-compliance.
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.
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. 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.
Foreign Corrupt Practices Act could subject NTIC to penalties and legal expenses. ● Fluctuations in foreign currency exchange rates could result in declines in NTIC’s earnings and changes in NTIC’s foreign currency translation adjustments. ● Economic uncertainty in developing markets could adversely affect NTIC’s revenue and earnings.
Foreign Corrupt Practices Act could subject NTIC to penalties and legal expenses. ● Fluctuations in foreign currency exchange rates could result in declines in NTIC’s earnings and changes in NTIC’s foreign currency translation adjustments. ● Economic uncertainty in developing markets could adversely affect NTIC’s revenue and earnings. 15 Risks Related to NTIC ’ s Products ● NTIC faces intense competition in almost all of its product lines, including from competitors that have substantially greater resources than NTIC does.
Of the total equity in income from joint ventures of $6,452,719 during fiscal 2023, NTIC had equity in income from joint ventures of $2,852,229 attributable to EXCOR. Of the total fee income for services provided to joint ventures of $5,189,185 during fiscal 2023, fees of $816,089 were attributable to EXCOR.
Of the total equity in income from joint ventures of $4,223,296 during fiscal 2024, NTIC had equity in income from joint ventures of $2,299,274 attributable to EXCOR. Of the total fee income for services provided to joint ventures of $5,251,782 during fiscal 2024, fees of $828,932 were attributable to EXCOR.
NTIC faces various cyber security threats, including cyber security attacks to its information technology infrastructure and attempts by others to gain access to its proprietary or sensitive information. The procedures and controls NTIC uses to monitor these threats and mitigate its exposure may not be sufficient to prevent cyber security incidents.
NTIC ’ s business could be negatively impacted by cyber security threats. In the ordinary course of NTIC’s business, NTIC uses its management information systems to store and access proprietary business information. NTIC faces various cyber security threats, including cyber security attacks to its information technology infrastructure and attempts by others to gain access to its proprietary or sensitive information.
Although resin prices began dropping in late fiscal 2023, future elevated prices could adversely affect gross margins on NTIC’s Natur-Tec® products. Similarly, if shortages of resins arise again in the future, the cost and/or production of NTIC’s products could be adversely affected.
If similar shortages of raw materials arise again in the future, the cost and/or production of NTIC’s products could be adversely affected.
While these conditions had improved by the end of fiscal 2023 and are expected to continue to stabilize in fiscal 2024, it is possible that NTIC may encounter similar conditions again in the future. Similar delays and elevated costs in the future could have a material adverse effect on NTIC’s consolidated results of operations.
Increased shipping costs and delays adversely affected NTIC’s consolidated results of operations during fiscal 2024, and we anticipate that these factors will continue to impact us during fiscal 2025. Similar delays and elevated costs in the future could have a material adverse effect on NTIC’s consolidated results of operations.
NTIC ’ s business in the past has been and in the future may be negatively impacted by inflation. Increases in inflation may have a negative impact on NTIC’s business.
Increases in inflation may have a negative impact on NTIC’s business.
Sustained levels of high inflation caused the U.S.
Sustained levels of high inflation caused the U.S. Federal Reserve and other central banks to increase interest rates. Although the U.S.
Even if these confidentiality agreements are not breached, NTIC’s trade secrets may otherwise become known or be independently developed by competitors. 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.
These agreements may be breached, and NTIC may not have adequate remedies for any such breach. Even if these confidentiality agreements are not breached, NTIC’s trade secrets may otherwise become known or be independently developed by competitors.
NTIC believes that its Natur-Tec® resin compounds comply with all FDA requirements. However, failure to comply with FDA regulations could subject NTIC to administrative, civil, or criminal penalties. NTIC has identified a material weakness in its internal controls, and cannot provide assurances that this weakness will be effectively remediated or that additional material weaknesses will not occur in the future.
NTIC believes that its Natur-Tec® resin compounds comply with all FDA requirements. However, failure to comply with FDA regulations could subject NTIC to administrative, civil, or criminal penalties. Any change in accounting principles generally accepted in the United States of America requiring NTIC to consolidate its joint ventures could adversely affect NTIC ’ s operating results.
Removed
Risks Related to NTIC ’ s Products ● NTIC faces intense competition in almost all of its product lines, including from competitors that have substantially greater resources than NTIC does.
Added
In fiscal 2024, several events softened demand within the automotive industry which indirectly adversely impacted NTIC, including the United Auto Workers strike, automotive plant closures, a slowdown in the production of electric vehicles, the high price of vehicles, high interest rates and an overall sluggish automotive market.
Removed
COVID-19 has adversely impacted and may continue to adversely impact NTIC ’ s business, operating results and financial condition.
Added
Federal Reserve lowered interest rates by 0.50 percentage points in September 2024, it is not known whether additional action will be taken to lower interest rates and if this decrease, and any other decreases, will have an impact on inflation.
Removed
As a result of COVID-19 and related government mandated restrictions on NTIC’s business, as well as the businesses of its joint ventures, customers and suppliers, disruption to NTIC’s business and the manufacture and sale of its products and services continued to occur during fiscal 2023, including in particular in China.
Added
High rates of interest or similar increases to interest rates in the future could increase the cost of capital available to NTIC and depress economic growth and could also negatively impact our business.
Removed
While demand in China improved in fiscal 2023 as a result of government restrictions being lifted, NTIC has continued to experience softened demand. This decreased demand may have a material adverse effect on NTIC’s business, operating results and financial condition in fiscal 2024.
Added
Supply chain disruptions in fiscal 2024 related primarily to international shipping issues, as described below, which at times resulted in longer lead times, temporary raw material outages and higher shipping expenses.
Removed
Due to the international reach of COVID-19, NTIC anticipates that its international subsidiaries and joint ventures will continue to be adversely impacted by the causes listed above, as well as other local issues that may arise, which will likely continue to have a material adverse effect on NTIC’s international subsidiaries and joint venture operations and equity in income from joint ventures.
Added
Additionally, the impacts supply chain disruptions have on NTIC’s third-party manufacturers are not within NTIC’s control.
Removed
A resurgence of COVID-19 and any related government mandated restrictions could have a significant adverse effect on economies and financial markets globally, which could have a significant adverse effect on NTIC’s business, operating results and financial condition. Any of these events could materially adversely affect NTIC’s business, operating results and financial condition and could adversely affect NTIC’s stock price.
Added
During fiscal 2024, a confluence of factors caused disruptions to international shipping, increasing costs and delaying shipments. Attacks on ships entering the Red Sea en route to the Suez Canal, an important waterway for vessels moving between Asia and the United States, by Houthi rebels in Yemen has forced ships to take longer routes.
Removed
Supply chain disruptions, which were initially brought about by the impact of COVID-19, persisted during fiscal 2023. These disruptions resulted in longer lead times for raw materials and increased product costs and shipping expenses.
Added
In addition, the sustained drought in Panama reduced capacity in the Panama Canal, further impacting the global supply chain.
Removed
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. During fiscal 2022 and fiscal 2023, NTIC experienced supply chain disruptions, initially as a result of the COVID-19 pandemic, shipping container shortages, and changes in global demand.
Added
In March 2024, a cargo ship crashed into the Francis Scott Key Bridge in the Port of Baltimore, the largest U.S. port by volume for deliveries of automotive vehicles and components, which lead to the suspension of activity in the Port of Baltimore, causing shipping vessels to be rerouted, causing congestion and delays in other ports.
Removed
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.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeNTIC 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.
Biggest changeNTIC also leases office, warehouse, and laboratory space in Chennai, India. 37 NTIC’s management considers its current properties suitable and adequate for its current and foreseeable needs.

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 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.
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 of The Nasdaq Stock Market under the symbol “NTIC.” Dividends During fiscal 2024, 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 18, 2023 $0.07 November 1, 2023 November 15, 2023 January 17, 2024 $0.07 January 31, 2024 February 14, 2024 April 17, 2024 $0.07 May 1, 2024 May 15, 2024 July 17, 2024 $0.07 July 31, 2024 August 14, 2024 On October 16, 2024, NTIC’s Board of Directors declared a cash dividend of $0.07 per share of NTIC’s common stock, payable on November 13, 2024 to stockholders of record on October 30, 2024.
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.
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 2024. As of August 31, 2024, up to $2,640,548 in shares of NTIC common stock remained available for repurchase under NTIC’s stock repurchase program.
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.
This does not include shares held in “street name” or beneficially owned. 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 2024.
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 its business, operating results, and financial condition.
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. Number of Record Holders As of August 31, 2024, there were 156 record holders of NTIC’s common stock.
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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 changeFinancial Overview NTIC’s management, including its chief executive officer, who is NTIC’s chief operating decision maker, reports and manages NTIC’s operations in two reportable business segments based on products sold, customer base, and distribution center: ZERUST® products and services and Natur-Tec® products. 40 Highlights of NTIC’s financial results for fiscal 2023 include the following, with increases or decreases in each case as compared to fiscal 2022: ● NTIC’s consolidated net sales increased 7.7% primarily as a result of an increase in sales of and demand for both ZERUST® and Natur-Tec® products. 77.3% of NTIC’s consolidated net sales were derived from sales of ZERUST® products and services, which increased 7.4%, and 22.7% of NTIC’s consolidated net sales were derived from sales of Natur-Tec®, which increased 8.8%. ● Cost of goods sold as a percentage of net sales decreased to 65.2% compared to 68.9% during fiscal 2022 primarily as a result of lower raw material prices overall and increased sales made to customers in the oil and gas industry, which products carry higher margins than ZERUST® industrial products and Natur-Tec® products. ● NTIC’s total joint venture operations increased 10.9% to $11,641,904 compared to $10,493,600 during fiscal 2022.
Biggest changeFinancial Overview NTIC’s management, including its chief executive officer, who is NTIC’s chief operating decision maker, reports and manages NTIC’s operations in two reportable business segments based on products sold, customer base, and distribution center: ZERUST® products and services and Natur-Tec® products. 41 Highlights of NTIC’s financial results for fiscal 2024 include the following, with increases or decreases in each case as compared to fiscal 2023: ● NTIC’s consolidated net sales increased 6.5% primarily due to increased sales and demand for Natur-Tec® and, to a lesser extent, ZERUST® products. 74.2% of NTIC’s consolidated net sales were derived from sales of ZERUST® products and services, which increased 2.2%, and 25.8% of NTIC’s consolidated net sales were derived from sales of Natur-Tec® products, which increased 20.9%. ● Cost of goods sold as a percentage of net sales decreased to 60.3% from 65.2% primarily as a result of lower raw material prices overall and savings associated with the insourcing of various finished goods production. ● NTIC’s contribution from total joint venture operations decreased 18.6% to $9,475,078 compared to $11,641,904 during fiscal 2023 primarily due to a one-time gain on the liquidation of a previously written-off investment in NTIC’s former joint venture in China, Tianjin Zerust of $1,986,027 in fiscal 2023.
Under NTIC’s agreements with its joint ventures in which the fees for services are described, 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 of the joint venture to pay the royalty and recognition of the fee by NTIC. Selling Expenses .
Under NTIC’s agreements with its joint ventures in which the fees for services are described, 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 of the joint venture to pay the royalty and recognition of the fee by NTIC. 42 Selling Expenses .
NTIC typically owns only 50% or less of its joint venture entities and, thus, does not control the decisions of these entities regarding whether to pay dividends and, if paid, how much they should be in a given year. 41 Fees for Services Provided to Joint Ventures .
NTIC typically owns only 50% or less of its joint venture entities and, thus, does not control the decisions of these entities regarding whether to pay dividends and, if paid, how much they should be in a given year. Fees for Services Provided to Joint Ventures .
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.
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 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.
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.
Market Risk NTIC is exposed to some market risk stemming from changes in foreign currency exchange rates, commodity prices and interest rates. 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.
NTIC elects to account for these fees on a cash basis for certain joint ventures when uncertainty exists surrounding the collections of such fees. Accounts Receivable Trade receivables arise from sales of NTIC’s products and services to NTIC’s joint ventures and to unaffiliated customers.
NTIC elects to account for these fees on a cash basis for certain joint ventures when uncertainty exists surrounding the collections of such fees. 51 Accounts Receivable Trade receivables arise from sales of NTIC’s products and services to NTIC’s joint ventures and to unaffiliated customers.
To the extent undistributed earnings of NTIC’s joint ventures are distributed in the future, they are not expected to result in any material additional income tax liability after the application of foreign tax credits. Net Income Attributable to NTIC .
To the extent undistributed earnings of NTIC’s joint ventures are distributed in the future, they are not expected to result in any material additional income tax liability after the application of foreign tax credits. 45 Net Income Attributable to NTIC .
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.
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. 50 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.
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.
In fiscal 2025, NTIC expects to continue to invest through its use of working capital in Zerust India, NTIC China, NTI Europe, its joint ventures, research and development, marketing efforts, resources for the application of its corrosion prevention technology in the oil and gas industry, and its Natur-Tec® bio-plastics business, although the amounts of these various investments are not known at this time.
NTIC’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.
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 over 50 years and, more recently, has also expanded into the oil and gas industry.
Additionally, NTIC markets and sells a portfolio of proprietary bio-based and certified compostable (fully biodegradable) polymer resin compounds and finished products under the Natur-Tec® brand. These products are intended to reduce NTIC’s customers’ carbon footprint and provide environmentally sound waste disposal options.
Additionally, NTIC markets and sells a portfolio of proprietary bio-based and certified compostable (fully biodegradable) polymer resin compounds and finished products under the Natur-Tec® brand. These sustainable packaging products are intended to reduce NTIC’s customers’ carbon footprint and provide environmentally sound waste disposal options.
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.
In fiscal 2024, 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.
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.
NTIC considers EXCOR to be individually significant to NTIC’s consolidated assets and income as of August 31, 2024 and 2023. 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.
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.
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, specifically EXCOR.
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.
In North America, NTIC sells its ZERUST® corrosion prevention solutions through a network of independent distributors and agents supported by a direct sales force. 40 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 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 .
This section provides a brief summary of NTIC’s financial results and financial condition for fiscal 2024 compared to 2023. ● 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 .
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.
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 2024 compared to fiscal 2023.
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 .
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 2024. 44 Equity in Income from Joint Ventures .
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.
NTIC recognizes revenue from the sale of its products 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.
NTIC typically offers payment terms to joint ventures of net 90 days. NTIC does not accrue interest on past due accounts receivable. NTIC reviews the credit histories of its customers, including its joint ventures, before extending unsecured credit. NTIC values accounts and notes receivable net of an allowance for doubtful accounts.
NTIC typically offers payment terms to joint ventures of net 90 days. NTIC does not accrue interest on past due accounts receivable. NTIC reviews the credit histories of its customers, including its joint ventures, before extending unsecured credit. NTIC values accounts receivable net of an allowance for credit losses.
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.
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 $2,299,274 attributable to EXCOR during fiscal 2024 compared to $2,852,229 in fiscal 2023.
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 believes there is some seasonality in its business. 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.
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.
Cash Dividends During fiscal 2024, 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 18, 2023 $0.07 November 1, 2023 November 15, 2023 January 17, 2024 $0.07 January 31, 2024 February 14, 2024 April 17, 2024 $0.07 May 1, 2024 May 15, 2024 July 17, 2024 $0.07 July 31, 2024 August 14, 2024 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.
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.
Outstanding trade receivables, excluding joint ventures balances, increased by an average of 3 days to an average of 83 days from balances outstanding from these customers as of August 31, 2024 from an average of 80 days as of August 31, 2023.
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.
As a result, U.S. income and foreign withholding taxes have not been recognized on the cumulative undistributed earnings of $23,465,685 and $20,493,861 as of August 31, 2024 and August 31, 2023, respectively.
Net cash provided by financing activities for fiscal 2022 was $3,188,377, which resulted from borrowings under the line of credit and proceeds from the exercise of stock options and NTIC’s employee stock purchase plan, partially offset by dividends paid on NTIC common stock and dividends received by non-controlling interest.
Net cash used in financing activities for fiscal 2024 was $2,957,280, which resulted from dividends paid on NTIC common stock and dividends received by non-controlling interest and was partially offset by borrowings under the line of credit and proceeds from the exercise of stock options and NTIC’s employee stock purchase plan.
(“JPM”), which provides NTIC with a senior secured revolving line of credit (the “Credit Facility”) of up to $10.0 million, and replaced NTIC’s prior loan agreement with PNC Bank, National Association. The Credit Facility includes a $5.0 million sublimit for standby letters of credit. Borrowings of $3,600,000 were outstanding under the Credit Facility as of August 31, 2023.
(“JPM”), which provides NTIC with a senior secured revolving line of credit (the “Credit Facility”) of up to $10.0 million, and replaced NTIC’s prior loan agreement. The Credit Facility includes a $5.0 million sublimit for standby letters of credit. Borrowings of $4,291,608 were outstanding under the Credit Facility as of August 31, 2024.
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.
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.
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 .
Selling expenses as a percentage of net sales increased to 19.3% for fiscal 2024 compared to 19.1% in fiscal 2023 primarily due to increased selling expenses, as noted above, and partially offset by increased net sales. General and Administrative Expenses .
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 experienced an increase in trade receivables and an increase in inventory as of August 31, 2024 compared to August 31, 2023. Trade receivables, excluding joint ventures, as of August 31, 2024 increased $3,152,937 compared to August 31, 2023, primarily related to a correlating increase in sales and timing differences.
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.
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.
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.
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. 47 NTIC’s cash flows from operations are impacted by significant changes in certain components of NTIC’s working capital, including inventory turnover and changes in receivables and payables.
Based on this definition, NTIC has identified the following critical accounting policies. Although NTIC believes that its estimates and assumptions are reasonable, they are based upon information available when they are made.
Based on this definition, NTIC has identified the following critical accounting policies. Although NTIC believes that its estimates and assumptions are reasonable, they are based upon information available when they are made. Actual results may differ significantly from these estimates under different assumptions or conditions.
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.
Outstanding balances from trade receivables from joint ventures increased an average of 44 days to an average of 64 days from balances outstanding from these customers as of August 31, 2024 from an average of 20 days as of August 31, 2023.
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.
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.
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.
Outstanding trade receivables from joint ventures as of August 31, 2024 increased $201,100 compared to August 31, 2023 primarily due to the timing of payments.
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 .
As a percentage of net sales, general and administrative expenses increased to 16.7% for fiscal 2024 from 16.5% for fiscal 2023 primarily due to increased general and administrative expenses, as noted above, and partially offset by increased net sales. Research and Development Expenses .
NTIC also expects to use some of its capital resources to continue to transition some of its joint ventures as needed or appropriate, which may include additional acquisitions by NTIC of the remaining ownership interests of joint ventures not owned by NTIC, the formation of one or more new subsidiaries to assume the operations of a joint venture, and dissolutions or liquidations of one or more of its joint ventures.
NTIC also expects to use some of its capital resources to acquire remaining ownership interests of joint ventures not owned by NTIC as they become available or appropriate and for the formation of one or more new subsidiaries to assume the operations of a joint venture.
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.
Borrowings of $4,291,608 were outstanding under the Credit Facility as of August 31, 2024. Both term loans undertaken by NTIC China with China Construction Bank Corporation have an annual interest rate of 3.25% with interest due monthly. The current outstanding balance as of August 31, 2024 for both term loans is a total of USD $2,820,835.
NTIC measures the cost of employee services received in exchange for stock options or other stock-based awards based on the grant-date fair value of the award and recognizes the cost over the period the employee is required to provide services for the award. Inventory Valuation NTIC’s inventories consist primarily of production materials and finished goods.
That cost is measured based on the fair value of the equity or liability instruments issued. NTIC measures the cost of employee services received in exchange for stock options or other stock-based awards based on the grant-date fair value of the award and recognizes the cost over the period the employee is required to provide services for the award.
Unless terminated earlier, the Credit Facility will mature on January 6, 2024, and the principal amount thereunder, together with all accrued unpaid interest and other amounts owing thereunder, if any, will be payable in full on such date.
Unless terminated earlier, the Credit Facility, together with all accrued unpaid interest and other amounts owing thereunder, if any, will be payable in full on the maturity date. On January 5, 2024, NTIC and JPM renewed the Credit Agreement to extend the maturity date of the Credit Facility from January 6, 2024 to January 6, 2025.
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.
Income tax expense was $1,325,797 during fiscal 2024 compared to $1,349,600 during fiscal 2023 for an effective tax rate of 17.3% and 24.2% during fiscal 2024 and 2023, respectively.
Income Before Income Tax Expense . NTIC had income before income tax expense of $5,587,331 for fiscal 2023 compared to income before income tax expense of $9,059,770 for fiscal 2022. Income Tax Expense .
Income Before Income Tax Expense . NTIC had income before income tax expense of $7,647,181 for fiscal 2024 compared to income before income tax expense of $5,587,331 for fiscal 2023. Income Tax Expense .
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.
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, construction, agriculture, and mining markets in particular. ZERUST® oil and gas net sales increased 18.3% during fiscal 2024 compared to fiscal 2023 primarily due to increased demand.
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.
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. 48 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.
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 the equity in income from joint ventures reflected in NTIC’s 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 the equity in income from joint ventures reflected in NTIC’s consolidated statements of operations. 52 Stock-Based Compensation NTIC recognizes compensation cost relating to share-based payment transactions, including grants of employee stock options and transactions under NTIC’s employee stock purchase plan, in its consolidated financial statements.
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 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.
Before extending unsecured credit to customers, excluding NTIC’s joint ventures, NTIC reviews customers’ credit histories and will establish an allowance for uncollectible accounts based upon factors surrounding the credit risk of specific customers and other information. Accounts receivable over 30 days are considered past due for most customers. NTIC does not accrue interest on past due accounts receivable.
NTIC’s typical contractual terms for trade receivables, excluding joint ventures, are traditionally 30 days and 90 days for trade receivables from its joint ventures. Before extending unsecured credit to customers, excluding NTIC’s joint ventures, NTIC reviews customers’ credit histories and will establish an allowance for uncollectible accounts based upon factors surrounding the credit risk of specific customers and other information.
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.
This program has no expiration date but may be terminated by NTIC’s Board of Directors at any time. As of August 31, 2024, up to $2,640,548 in shares of NTIC common stock remained available for repurchase under NTIC’s stock repurchase program. No repurchases occurred during fiscal 2024 or fiscal 2023.
NTIC purchases production materials and finished goods based on forecasted demand and records inventory at the lower of cost or net realizable value. Cost is determined by the first-in, first-out (FIFO) method. Management regularly assesses inventory valuation based on current and forecasted usage, demand and pricing, shelf life, customer inventory-related contractual obligations, and other considerations.
Inventory Valuation NTIC’s inventories consist primarily of production materials and finished goods. NTIC purchases production materials and finished goods based on forecasted demand and records inventory at the lower of cost or net realizable value. Cost is determined by the first-in, first-out (FIFO) method.
NTIC anticipates that its sales of ZERUST® products and services into the oil and gas industry will continue to remain subject to significant volatility from quarter to quarter as sales are recognized, specifically due to the volatility of oil prices.
NTIC anticipates that its sales of ZERUST® products and services into the oil and gas industry will continue to remain subject to significant volatility from quarter to quarter as sales are recognized. Demand for oil and gas products around the world depends primarily on market acceptance and the reach of NTIC’s distribution network.
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.
The average days outstanding of trade receivables from joint ventures as of August 31, 2024 were primarily due to the receivables balances at joint ventures in the United States, Japan and Thailand.
If accounts receivables in excess of the provided allowance are determined uncollectible, they are charged to selling expense in the period that the determination is made. Accounts receivable are deemed uncollectible based on NTIC exhausting reasonable efforts to collect. NTIC’s typical contractual terms for receivables for services provided to its joint ventures are 90 days.
Accounts receivable are deemed uncollectible based on NTIC exhausting reasonable efforts to collect. NTIC’s typical contractual terms for receivables for services provided to its joint ventures are 90 days.
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.
During fiscal 2024, 25.8% of NTIC’s consolidated net sales were derived from sales of Natur-Tec® products, compared to 22.7% during fiscal 2023. Sales of Natur-Tec® products increased 20.9% to $21,966,942 during fiscal 2024 compared to $18,174,588 during fiscal 2023 due to increased global demand.
Both term loans are secured by an office building owned by NTIC China and the loan agreements contain certain financial and other covenants. NTIC was in compliance with the covenants as of August 31, 2023. The current outstanding balance as of August 31, 2023 for both term loans is USD $2,757,176.
Both term loans have an annual interest rate of 3.25% with interest due monthly. Both term loans are secured by an office building owned by NTIC China and the loan agreements contain certain financial and other covenants. NTIC was in compliance with the covenants as of August 31, 2024.
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.
The primary commodity price exposures are with a variety of plastic and bioplastic resins. 49 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.
If actual results differ from management estimates with respect to the actual or projected selling of inventories at amounts less than their carrying amounts, NTIC would adjust its inventory balances accordingly.
Management regularly assesses inventory valuation based on current and forecasted usage, demand and pricing, shelf life, customer inventory-related contractual obligations, and other considerations. If actual results differ from management estimates with respect to the actual or projected selling of inventories at amounts less than their carrying amounts, NTIC would adjust its inventory balances accordingly.
With respect to such research and development contracts, NTIC accrues proceeds received under the contracts and offsets research and development expenses incurred in equal installments over the timelines associated with completion of the contracts’ specific objectives and milestones. Remeasurement Gain on Acquisition of Equity Method Investee.
With respect to such research and development contracts, NTIC accrues proceeds received under the contracts and offsets research and development expenses incurred in equal installments over the timelines associated with completion of the contracts’ specific objectives and milestones. Interest Income . Interest income consists of interest earned on investments, which typically consist of investment-grade, interest-bearing securities and money market accounts.
Upon the occurrence and during the continuance of any event of default, JPM may accelerate the payment of the obligations thereunder and exercise various other customary default remedies.
Upon the occurrence and during the continuance of any event of default, JPM may accelerate the payment of the obligations thereunder and exercise various other customary default remedies. As of August 31, 2024, NTIC was in compliance with all debt covenants under the Credit Agreement.
Net cash provided by operating activities during fiscal 2022 was $1,146,078, which resulted principally from NTIC’s net income, dividends received from joint ventures, depreciation and amortization expense, stock-based compensation and increases in accounts payable, partially offset by the remeasurement gain on acquisition of equity method investee, deferred income tax and equity in income from joint ventures and an increase in accounts receivable and inventory.
Uses of Cash and Cash Flow Net cash provided by operating activities during fiscal 2024 was $5,883,193, which resulted principally from NTIC’s net income, dividends received from joint ventures, dividends receivable from joint venture, depreciation and amortization expense, stock-based compensation and changes in working capital, partially offset by equity in income from joint ventures, deferred income tax and an increase in trade receivables and inventories.
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.
Some of these joint venture transactions may materially impact NTIC’s results of operations for a particular reporting period. 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.
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 .
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 $828,932 were attributable to EXCOR during fiscal 2024 compared to $816,089 attributable to EXCOR during fiscal 2023. Selling Expenses .
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%.
Fees for Services Provided to Joint Ventures . NTIC recognized fee income for services provided to joint ventures of $5,251,782 during fiscal 2024 compared to $5,189,185 during fiscal 2023, representing an increase of 1.2%.
Actual results may differ significantly from these estimates under different assumptions or conditions. 49 Principles of Consolidation NTIC evaluates its voting and variable interests in entities on a qualitative and quantitative basis.
Principles of Consolidation NTIC evaluates its voting and variable interests in entities on a qualitative and quantitative basis.
NTIC utilizes the asset and liability method of accounting for income taxes, which requires an asset and liability approach to financial accounting and reporting for income taxes.
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 utilizes the asset and liability method of accounting for income taxes, which requires an asset and liability approach to financial accounting and reporting for income taxes.
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.
The following table sets forth NTIC’s net sales by product segment for fiscal 2024 and fiscal 2023: Fiscal 2024 Fiscal 2023 $ Change % Change Total ZERUST® sales $ 63,092,575 $ 61,728,364 $ 1,364,211 2.2 % Total Natur-Tec® sales 21,966,942 18,174,588 3,792,354 20.9 % Total net sales $ 85,059,517 $ 79,902,952 $ 5,156,565 6.5 % During fiscal 2024, 74.2% of NTIC’s consolidated net sales were derived from sales of ZERUST® products and services, which increased 2.2% to $63,092,575 compared to $61,728,364 during fiscal 2023.
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.
Some raw materials used in NTIC’s products are exposed to commodity price changes.
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.
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. Each term loan provided NTIC China with a RMB 10,000,000 (USD $1.45 million). The term loans mature in April 2025 and June 2025, respectively, unless extended.
NTIC’s equity in income from joint ventures increased 36.5% to $6,452,719 during fiscal 2023 compared to $4,725,918 during fiscal 2022. The increase was reflective of the one-time gain on the liquidation of previously written-off investment in Tianjin Zerust of $1,986,027, partially offset by decreases in equity income correlating to the decrease in sales at the joint ventures.
NTIC’s equity in income from joint ventures decreased 34.6% to $4,223,296 during fiscal 2024 compared to $6,452,719 during fiscal 2023 primarily due to a $1,986,027 one-time gain on the liquidation of a previously written-off investment in NTIC’s former joint venture in China, Tianjin Zerust in fiscal 2023, as well as a decrease in net income at NTIC’s joint venture in Germany.
Key internal factors include existing inventory levels, stock reorder points, customer forecasts and customer requested payment terms. Key external factors include the availability of primary raw materials and sub-contractor production lead times. NTIC’s typical contractual terms for trade receivables, excluding joint ventures, are traditionally 30 days and 90 days for trade receivables from its joint ventures.
NTIC considers internal and external factors when assessing the use of its available working capital, specifically when determining inventory levels and credit terms of customers. Key internal factors include existing inventory levels, stock reorder points, customer forecasts and customer requested payment terms. Key external factors include the availability of primary raw materials and sub-contractor production lead times.
This 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.
This increase was primarily due to increased personnel expenses, including new hires, benefits and travel. ● NTIC incurred net income attributable to NTIC of $5,409,082, or $0.55 per diluted common share, compared to $2,912,276, or $0.30 per diluted common share, for fiscal 2024.
This increase was primarily a result of increased demand in North America.
This increase was primarily a result of increased demand in North America for ZERUST® oil and gas products, partially offset by a slight decrease in demand for ZERUST® industrial products.
Each quarter, NTIC prepares an analysis of its ability to collect outstanding receivables that provides a basis for an allowance estimate for doubtful accounts. In doing so, NTIC evaluates the age of its receivables, past collection history, current financial conditions of key customers and its joint ventures, and economic conditions.
Each quarter, NTIC prepares an analysis of its ability to collect outstanding receivables that provides a basis for an allowance estimate for credit losses. NTIC determines the allowance for credit losses based on historical information, changes in current economic conditions and reasonable and supportable forecasts of future economic conditions.
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.
Liquidity and Capital Resources Sources of Cash and Working Capital NTIC’s working capital, defined as current assets less current liabilities, was $23,682,276 as of August 31, 2024, including $4,952,184 in cash and cash equivalents, $4,291,608 outstanding under NTIC’s line of credit and $2,820,835 outstanding under NTIC China’s term loans, compared to $22,950,184 as of August 31, 2023, including $5,406,173 in cash and cash equivalents, $3,600,000 outstanding under NTIC’s line of credit and $2,757,176 outstanding under NTIC China’s term loans.
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.
NTIC expects to spend an aggregate of approximately $1,600,000 to $2,100,000 on capital expenditures during fiscal 2025, which it expects will relate primarily to the purchase of new equipment and facility improvements. Inflation and Seasonality Inflation in the United States and abroad historically has had minimal effect on NTIC and did not adversely affect NTIC’s gross margins during fiscal 2024.
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.
Net sales at the joint ventures decreased 4.7% to $95,940,014 during fiscal 2024 compared to $100,682,316 during fiscal 2023. This decrease was primarily a result of decreased demand during fiscal 2024 at NTIC’s joint venture in Germany primarily due to softer demand within the region, as described above.
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 .
Fiscal 2024 % of Net Sales Fiscal 2023 % of Net Sales $ Change % Change Net sales $ 85,059,517 N/A $ 79,902,952 N/A $ 5,156,565 6.5 % Cost of goods sold 51,273,155 60.3 % 52,099,121 65.2 % (825,965 ) (1.6 )% Equity in income from joint ventures 4,223,296 N/A 6,452,719 N/A (2,229,423 ) (34.6 )% Fees for services provided to joint ventures 5,251,782 N/A 5,189,185 N/A 62,597 1.2 % Selling expenses 16,413,672 19.3 % 15,290,897 19.1 % 1,122,775 7.3 % General and administrative expenses 14,176,494 16.7 % 13,166,270 16.5 % 1,010,224 7.7 % Research and development expenses 4,802,791 5.6 % 4,967,922 6.2 % (165,131 ) (3.3 )% 43 Net Sales .
Net sales at the joint ventures decreased 3.3% to $100,682,316 compared to $104,077,748 during fiscal 2022. ● NTIC’s total operating expenses increased 17.6% to $33,425,089 compared to $28,414,117 during fiscal 2022.
Net sales at NTIC’s joint ventures, which are not consolidated with NTIC’s net sales, decreased 4.7% to $95,940,014 compared to $100,682,316 during fiscal 2023. ● NTIC’s total operating expenses increased 5.9% to $35,392,957 compared to $33,425,089 during fiscal 2023.
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.
NTIC’s consolidated net sales increased 6.5% to $85,059,517 during fiscal 2024 compared to $79,902,952 during fiscal 2023. This increase was primarily due to increased sales and demand for Natur-Tec® and, to a lesser extent, ZERUST® products.
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.
Net cash used in investing activities during fiscal 2024 was $3,418,228, which was primarily the result of purchases of property and equipment and, to a lesser extent, investments in patents. Net cash used in investing activities during fiscal 2023 was $3,343,124, which was primarily the result of purchases of property and equipment and, to a lesser extent, investments in patents.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeBoth 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
Biggest changeBoth 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, 2024 for both term loans is a total of USD $2,820,835. 53
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.
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 $4,291,608 were outstanding under the Credit Facility as of August 31, 2024.

Other NTIC 10-K year-over-year comparisons