NORTHERN TECHNOLOGIES INTERNATIONAL CORP

Previous wording

NTIC develops and markets proprietary, environmentally beneficial products and services in over 65 countries either directly or via a network of subsidiaries, joint ventures, independent distributors, and agents. 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. 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.

Current wording

NTIC develops and markets proprietary, environmentally beneficial products and services in over 65 countries either directly or via a network of subsidiaries, joint ventures, independent distributors, and agents. 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 sustainable packaging products are intended to reduce NTIC’s customers’ carbon footprint and provide environmentally sound waste disposal options.

Previous wording

Natur-Tec® bio-based and compostable plastics are manufactured using NTIC’s patented and/or proprietary technologies and are intended to replace conventional petroleum-based plastics. The 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. These resin compounds are certified to be fully biodegradable in a commercial composting environment and are currently being used to produce finished products, including can liners, shopping and grocery bags, lawn and leaf bags, branded apparel packaging bags and accessories, and various foodservice items, such as disposable cutlery, drinking straws, food-handling gloves, and coated paper products. In North America, NTIC markets its Natur-Tec® resin compounds and finished products primarily through a network of regional and national distributors as well as independent agents. 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.

Current wording

Natur-Tec® bio-based and compostable plastics are manufactured using NTIC’s patented and/or proprietary technologies and are intended to replace conventional petroleum-based plastics. The 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. These resin compounds are certified to be fully biodegradable in a commercial composting environment and are currently being used to produce finished products, including can liners, shopping and grocery bags, lawn and leaf bags, branded apparel packaging bags and accessories, and various foodservice items, such as disposable cutlery, drinking straws, food-handling gloves, and coated paper products. In North America, NTIC markets its Natur-Tec® resin compounds and finished products primarily through a network of regional and national distributors as well as independent agents. 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.

Previous wording

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

Current wording

Highlights of NTIC’s financial results for the three months ended November 30, 2024 include the following, with increases or decreases in each case as compared to the prior fiscal year quarterly period:

Previous wording

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

Current wording

The following table sets forth NTIC’s results of operations for the three months ended November 30, 2024 and 2023.

Previous wording

Net Sales. NTIC’s consolidated net sales decreased 1.4% during the three months ended May 31, 2024 compared to the three months ended May 31, 2023 primarily due to decreases in demand for ZERUST® products. NTIC’s consolidated net sales increased 4.3% during the three months ended May 31, 2024 compared to the three and nine months ended May 31, 2023. This increase was primarily as a result of an increase in sales and demand for Natur-Tec® partially offset by decreases in ZERUST® products.

Current wording

Net Sales. NTIC’s consolidated net sales increased 5.7% to $21,338,393 during the three months ended November 30, 2024 compared to the three months ended November 30, 2023. This increase was primarily due to increased sales and demand for Natur-Tec® and, to a significantly lesser extent, ZERUST® products.

Previous wording

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

Current wording

The following table sets forth NTIC’s net sales by product segment for the three months ended November 30, 2024 and 2023:

Previous wording

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

Current wording

The following table sets forth NTIC’s net sales of ZERUST® products for the three months ended November 30, 2024 and 2023:

Previous wording

NTIC’s total ZERUST® net sales decreased during the three and nine months ended May 31, 2024, compared to the prior fiscal year periods, primarily due to decreased demand in North American both ZERUST® industrial business and ZERUST® oil and gas business. Overall, demand for ZERUST® products and services depends heavily on the overall health of the markets in which NTIC sells its products, including the automotive, oil and gas, agriculture, and mining markets, in particular.

Current wording

ZERUST® industrial net sales increased during the three months ended November 30, 2024, compared to the same prior fiscal year period, primarily due to increased demand for North American ZERUST® industrial products. 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.

Previous wording

ZERUST® oil and gas net sales decreased 31.9% and 7.3% during the three and nine months ended May 31, 2023 compared to the prior fiscal year periods primarily as a result of decreased demand in markets in which NTIC sells its products and the timing of delivery of products. NTIC anticipates that its sales of ZERUST® products and services to the oil and gas industry will continue to remain subject to significant volatility from quarter to quarter as sales are recognized. Demand for oil and gas products around the world depends primarily on market acceptance and the reach of NTIC’s distribution network. Because of the typical size of individual orders and overall size of NTIC’s net sales derived from sales of oil and gas products, the timing of one or more orders can materially affect NTIC’s quarterly sales compared to prior fiscal year quarters.

Current wording

ZERUST® oil and gas net sales increased 0.4% during the three months ended November 30, 2024 compared to the same period last fiscal year primarily due to increased demand. 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. Because of the typical size of individual orders and overall size of NTIC’s net sales derived from sales of oil and gas products, the timing of one or more orders can materially affect NTIC’s quarterly sales compared to prior fiscal year quarters.

Previous wording

Cost of Goods Sold. Cost of goods sold decreased 4.5% and 2.1% for the three and nine months ended May 31, 2024, respectively, compared to the three and nine months ended May 31, 2023 primarily as a result of lower raw material prices overall. Cost of goods sold as a percentage of net sales decreased to 61.8% for each of the three and nine months ended May 31, 2024, compared to 63.9% and 65.8% during the three and nine months ended May 31, 2023, respectively, primarily as a result of these lower raw material prices and the insourcing of various finished goods production. NTIC has taken certain actions to address inflationary pressures and pass on related cost increases to its customers and some improvements from these actions, as well as improvements in gross margin, were realized during the nine months ended May 31, 2024.

Current wording

Cost of Goods Sold. Cost of goods sold increased 2.6% for the three months ended November 30, 2024 compared to the three months ended November 30, 2023 primarily as a result of lower raw material prices overall and the continued effect of cost containment measures. Cost of goods sold as a percentage of net sales decreased to 61.7% for the three months ended November 30, 2024 compared to 63.7% for the three months ended November 30, 2023 due primarily to the lower raw material prices and the insourcing of various finished goods production. 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 the three months ended November 30, 2024.

Previous wording

Equity in Income from Joint Ventures. NTIC’s equity in income from joint ventures increased 3.7% and 0.3% during the three and nine months ended May 31, 2024 to $1,396,731 and 3,676,962, respectively, compared to $1,346,658 and 3,664,793, respectively, primarily due to efforts to enhance profitability at the Company’s joint ventures, partially offset by a decrease in net income at NTIC’s joint venture in Germany. NTIC’s equity in income from joint ventures fluctuates based on net sales and profitability of the joint ventures during the respective periods. Of the total equity in income from joint ventures, NTIC had equity in income from joint ventures of $2,015,734 attributable to EXCOR during the nine months ended May 31, 2024, compared to $2,376,575 attributable to EXCOR during the nine months ended May 31, 2023. These decreases were primarily a result of a decrease in net sales by EXCOR compared to the same prior year fiscal periods, primarily due to the loss of a customer and softer demand within the region related to higher energy prices and other externalities linked to the war between Ukraine and Russia. NTIC had equity in income from all other joint ventures of $1,661,227 during the nine months ended May 31, 2024, compared to $1,288,218 during the nine months ended May 31, 2023.

Current wording

Equity in Income from Joint Ventures. NTIC’s equity in income from joint ventures increased 2.5% to $1,129,593 during the three months ended November 30, 2024 compared to $1,102,241 during the three months ended November 30, 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 $623,750 attributable to EXCOR during the three months ended November 30, 2024 compared to $513,453 attributable to EXCOR during the three months ended November 30, 2023. This increase was due to a slight increase in net sales by EXCOR compared to the prior fiscal year period. NTIC had equity in income from all other joint ventures of $505,843 during the three months ended November 30, 2024, compared to $588,788 during the three months ended November 30, 2023.

Previous wording

Fees for Services Provided to Joint Ventures. NTIC recognized fee income for services provided to joint ventures of $1,212,497 and $3,764,514 during the three and nine months ended May 31, 2024, respectively, compared to $1,361,311 and $3,795,862 during the three and nine months ended May 31, 2023, respectively, representing decreases of 10.9% and 0.8%, respectively. Fee income for services provided to joint ventures is traditionally a function of the sales made by NTIC’s joint ventures; however, at various joint ventures, the fee income for services is a fixed amount that does not fluctuate with the change in sales that was experienced by certain joint ventures during the three and nine months ended May 31, 2024. Total net sales of NTIC’s joint ventures decreased 2.7% and 5.1% to $25,602,072 and $72,642,714 during the three and nine months ended May 31, 2024, respectively, compared to $26,312,548 and $76,525,427 during the three and nine months ended May 31, 2023, respectively. These decreases were primarily a result of decreased demand during the three and nine months ended May 31, 2024 at NTIC’s joint venture in Germany primarily due to the loss of a customer and softer demand within the region, as described above. Net sales of NTIC’s joint ventures are not included in NTIC’s product sales and are not included in NTIC’s consolidated financial statements. Of the total fee income for services provided to joint ventures, fees of $618,236 were attributable to EXCOR during the nine months ended May 31, 2024, compared to $606,189 attributable to EXCOR during the nine months ended May 31, 2023.

Current wording

Fees for Services Provided to Joint Ventures. NTIC recognized fee income for services provided to joint ventures of $1,284,119 during the three months ended November 30, 2024 compared to $1,248,958 during the three months ended November 30, 2023, representing an increase of 2.8%, or $35,161. 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 during the three months ended November 30, 2024, specifically EXCOR. Net sales at the joint ventures increased to $23,837,010 during the three months ended November 30, 2024 compared to $23,560,661 for the three months ended November 30, 2023, representing an increase of 1.2%. This increase was primarily a result of increased demand during the three months ended November 30, 2024 at NTIC’s joint venture in Germany primarily, as described above. Net sales of NTIC’s joint ventures are not included in NTIC’s product sales and are not included in NTIC’s consolidated financial statements. Of the total fee income for services provided to joint ventures, fees of $206,329 were attributable to EXCOR during the three months ended November 30, 2024 compared to $205,643 attributable to EXCOR during the three months ended November 30, 2023.

Previous wording

Selling Expenses. NTIC’s selling expenses increased 8.7% and 9.6% for the three and nine months ended May 31, 2024, respectively, compared to the same respective periods in fiscal 2023 primarily due to an increase in personnel expense during the current fiscal year period compared to the same prior fiscal year periods. Selling expenses as a percentage of net sales increased to 20.5% and 19.5% for the three and nine months ended May 31, 2024, respectively, from 18.6% and 18.6% for the three and nine months ended May 31, 2023, respectively, primarily due to the increased selling expenses as noted above.

Current wording

Selling Expenses. NTIC’s selling expenses increased 15.8% for the three months ended November 30, 2024 compared to the same period in fiscal 2024 primarily as a result of increased personnel expense during the current fiscal year period compared to the same prior fiscal year period due primarily to an expansion in the ZERUST® oil and gas sales team. Selling expenses as a percentage of net sales increased to 20.0% for the three months ended November 30, 2024 compared to 18.3% during the three months ended November 30, 2023 primarily due to increased selling expenses, as noted above, and partially offset by increased net sales.

Previous wording

General and Administrative Expenses. NTIC’s general and administrative expenses increased 9.2% and 8.3% for the three and nine months ended May 31, 2024, respectively, compared to the same respective periods in fiscal 2023 primarily due to increased professional services and travel and personnel expenses during the current fiscal year periods compared to the same prior fiscal year periods. As a percentage of net sales, general and administrative expenses increased to 16.9% and 16.6% for the three and nine months ended May 31, 2024, respectively, from 15.3% and 16.0% for the same respective periods in fiscal 2023 primarily due to the changes in general and administrative expenses, as noted above.

Current wording

General and Administrative Expenses. NTIC’s general and administrative expenses increased 9.7% for the three months ended November 30, 2024 compared to the same period in fiscal 2024 primarily due to increased professional services and travel and personnel expenses during the current fiscal year period compared to the same prior fiscal year period. As a percentage of net sales, general and administrative expenses increased to 18.1% for the three months ended November 30, 2024 from 17.4% for the three months ended November 30, 2023 primarily due to increased general and administrative expenses, as noted above, and partially offset by increased net sales.

Previous wording

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

Current wording

Interest Income. NTIC’s interest income decreased to $25,567 during the three months ended November 30, 2024 compared to $46,442 during the three months ended November 30, 2023 primarily due to changes in the invested cash balances and rate of return at various subsidiaries.

Previous wording

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

Current wording

Interest Expense. NTIC’s interest expense increased to $120,220 during the three months ended November 30, 2024 compared to $111,138 during the three months ended November 30, 2023 primarily due to increased outstanding average borrowings during the current fiscal year period.

Previous wording

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

Current wording

Income Before Income Tax Expense. NTIC had income before income tax expense of $1,012,018 for the three months ended November 30, 2024 compared to income before income tax expense of $1,311,737 for the three months ended November 30, 2023.

Previous wording

Income Tax Expense. Income tax expense was $332,400 and $848,391 for the three and nine months ended May 31, 2024, respectively, compared to $542,295 and $834,823 during the three and nine months ended May 31, 2023, respectively. Income tax expense was calculated based on management’s estimate of NTIC’s annual effective income tax rate.

Current wording

Income Tax Expense. Income tax expense was $217,871 during the three months ended November 30, 2024 compared to $226,796 during the three months ended November 30, 2023. Income tax expense was calculated based on management’s estimate of NTIC’s annual effective income tax rate.

Previous wording

NTIC considers the earnings of certain foreign joint ventures to be indefinitely invested outside the United States on the basis of estimates that NTIC’s future domestic cash generation will be sufficient to meet future domestic cash needs. As a result, U.S. income and foreign withholding taxes have not been recognized on the cumulative undistributed earnings of $23,645,685 and $20,493,861 as of May 31, 2024 and August 31, 2023, respectively. To the extent undistributed earnings of NTIC’s joint ventures are distributed in the future, they are not expected to result in any material additional income tax liability after the application of foreign tax credits.

Current wording

NTIC considers the earnings of certain foreign joint ventures to be indefinitely invested outside the United States on the basis of estimates that NTIC’s future domestic cash generation will be sufficient to meet future domestic cash needs. As a result, U.S. income and foreign withholding taxes have not been recognized on the cumulative undistributed earnings of $24,548,560 and $23,465,685 as of November 30, 2024 and August 31, 2024, respectively. To the extent undistributed earnings of NTIC’s joint ventures are distributed in the future, they are not expected to result in any material additional income tax liability after the application of foreign tax credits.

Previous wording

Net Income Attributable to NTIC. Net income attributable to NTIC decreased to $976,604, or $0.10 per diluted common share, for the three months ended May 31, 2024, compared to $1,059,590, or $0.11 per diluted common share, for the three months ended May 31, 2023. Net income attributable to NTIC increased to $3,573,294, or $0.36 per diluted common share, for the nine months ended May 31, 2024, compared to $1,973,329, or $0.20 per diluted common share, for the nine months ended May 31, 2023. These increases were primarily due to the increase in gross profit, partially offset by the increase in operating expenses.

Current wording

Net Income Attributable to NTIC. Net income attributable to NTIC decreased to $561,091, or $0.06 per diluted common share, for the three months ended November 30, 2024 compared to $895,521, or $0.09 per diluted common share, for the three months ended November 30, 2023. This decrease was primarily due to the increase in operating expenses, partially offset by the increase in gross profit and income from our joint venture operations.

Previous wording

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 the three and nine months ended May 31, 2024 compared to the same respective periods in fiscal 2023.

Current wording

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 the three months ended November 30, 2024 compared to the same period in fiscal 2024.

Previous wording

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

Current wording

Sources of Cash and Working Capital.** **NTIC’s working capital, defined as current assets less current liabilities, was $22,183,428 as of November 30, 2024, including $5,569,834 in cash and cash equivalents, $4,518,734 outstanding under NTIC’s line of credit and $2,761,592 outstanding under NTIC China’s term loans, compared to $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.

Previous wording

In order to take advantage of new product and market opportunities to expand its business and increase its revenues and assist with joint venture transitions, NTIC may decide to finance such opportunities by additional borrowing under its revolving line of credit or raising additional financing through the issuance of debt or equity securities. 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.

Current wording

In order to take advantage of new product and market opportunities to expand its business and increase its revenues and assist with joint venture transitions, NTIC may decide to finance such opportunities by additional borrowings under its revolving line of credit or raising additional financing through the issuance of debt or equity securities. 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.

Previous wording

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. (JPM), which provides NTIC with a senior secured revolving line of credit (the Credit Facility) of up to $10.0 million, which includes a $5.0 million sublimit for standby letters of credit. Borrowings of $1,988,380 and $3,600,000 were outstanding under the Credit Facility as of May 31, 2024 and August 31, 2023, respectively.

Current wording

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. (JPM), which provided 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 included a $5.0 million sublimit for standby letters of credit. Borrowings of $4,518,734 were outstanding under the Credit Facility as of November 30, 2024. The Company was in compliance with all covenants under the Credit Agreement as of November 30, 2024.

Previous wording

Unless terminated earlier, the principal amount under the Credit Facility, together with all accrued unpaid interest and other amounts owing thereunder, if any, will be payable in full on the maturity date. On January 5, 2024, the Company and JPM renewed its Credit Agreement to extend the maturity date of the Credit Facility from January 6, 2024 to January 6, 2025. All other terms of the Credit Facility and the Credit Agreement remain the same. It is anticipated that the Credit Facility will be renewed each year for one additional year for the immediate foreseeable future.

Current wording

The principal amount under the Credit Facility, together with all accrued unpaid interest and other amounts owing thereunder, if any, will be payable in full on the January 5, 2026 maturity date, unless the Credit Facility is extended or renewed or terminated earlier. It is anticipated that the Credit Facility will be renewed each year for one additional year for the immediate foreseeable future.

Previous wording

Borrowings under the Credit Agreement bear interest at a floating rate, at the option of NTIC, equal to either the CB Floating Rate or the Adjusted SOFR Rate. The term “CB Floating Rate” means the greater of the Prime Rate in the United States or 2.50%. The term “Adjusted SOFR Rate” means the term secured overnight financing rate for either one, three or six months (depending on the interest period selected by NTIC) plus 0.10% per annum. With respect to any borrowings using an Adjusted SOFR Rate, there is an applicable margin of 2.15% applied per annum. There is no applicable margin with respect to borrowings using a CB Floating Rate.

Current wording

Borrowings under the Credit Agreement bear interest at a floating rate, at the option of NTIC, equal to either the CB Floating Rate or the Adjusted SOFR Rate. The term “CB Floating Rate” means the greater of the Prime Rate in the United States or 2.50%. The term “Adjusted SOFR Rate” means the term secured overnight financing rate for either one, three or six months (depending on the interest period selected by NTIC) plus 0.10% per annum. With respect to any borrowings using an Adjusted SOFR Rate, there is an applicable margin of 2.15% applied per annum. There is no applicable margin with respect to borrowings using a CB Floating Rate. The weighted average interest rate was 7.07% and 7.43% for the three months ended November 30, 2024 and 2023.

Previous wording

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

Current wording

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

Previous wording

The Credit Agreement also contains customary events of default, including, without limitation, payment defaults, material inaccuracy of representations and warranties, covenant defaults, bankruptcy and insolvency proceedings, cross-defaults to certain other agreements, breach of any financial covenant and change of control. 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 May 31, 2024, NTIC was in compliance with all debt covenants under the Credit Agreement.

Current wording

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

Previous wording

*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). Each of the term loans matures after one year with the principal due at that time, after which an extension of the loan agreement is required. 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 May 31, 2024. The current outstanding balance for both term loans was USD $2,762,049 as of May 31, 2024 and USD $2,757,176 as of August, 31, 2023.

Current wording

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. 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 November 30, 2024. The current outstanding balance as of November 30, 2024 for both term loans is a total of USD $2,761,592.

Previous wording

Uses of Cash and Cash Flow. Net cash provided by operating activities during the nine months ended May 31, 2024 was $7,583,904, which resulted principally from NTIC’s net income, dividends received from joint ventures, dividend receivables from joint ventures, depreciation and amortization expense, and stock-based compensation, partially offset by equity in income from joint ventures. Net cash provided by operating activities during the nine months ended May 31, 2023 was $3,505,803, which resulted principally from NTIC’s net income, dividends received from joint ventures, depreciation and amortization expense, and stock-based compensation, partially offset by equity in income from joint ventures.

Current wording

Uses of Cash and Cash Flow. Net cash provided by operating activities during the three months ended November 30, 2024 was $2,395,066 which resulted principally from a decrease in trade receivables and technical fee receivables, NTIC’s net income, an increase in accounts payable, depreciation and amortization expense, and stock-based compensation, partially offset by equity in income from joint ventures and an increase in inventory and prepaid expenses. Net cash provided by operating activities during the three months ended November 30, 2023 was $3,076,892, which resulted principally from a decrease in dividends receivable from joint venture and trade receivables, NTIC’s net income, dividends received from joint ventures, a decrease in inventories, depreciation and amortization expense, and stock-based compensation, partially offset by equity in income from joint ventures and an increase in prepaid expenses and other, technical fee receivables and accounts payable.

Previous wording

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

Current wording

NTIC experienced a decrease in trade receivables and inventory as of November 30, 2024 compared to August 31, 2024. Trade receivables, as of November 30, 2024 decreased $3,105,369 compared to August 31, 2024, primarily related to timing differences of sales.

Previous wording

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

Current wording

Outstanding trade receivables, decreased an average of 6 days to an average of 69 days from balances outstanding from these customers as of November 30, 2024 from an average of 75 days as of August 31, 2024.

Previous wording

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

Current wording

Outstanding receivables for services provided to joint ventures as of November 30, 2024 decreased $64,688 compared to August 31, 2024, and the average days to pay increased an average of 7 days to an average of 83 days from an average of 76 days as of August 31, 2024.

Previous wording

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

Current wording

Net cash used in investing activities for the three months ended November 30, 2024 was $1,258,336, which was primarily the result of the purchases of property and equipment, and investments in patents. Net cash used in investing activities for the three months ended November 30, 2023 was $423,871, which was primarily the result of the purchases of property and equipment, and investments in patents.

Previous wording

Net cash used in financing activities for the nine months ended May 31, 2024 was $4,587,474, which resulted from dividends paid to shareholders, the repayment of borrowings under the line of credit, and dividends received by non-controlling interest, partially offset by proceeds from NTIC’s employee stock purchase plan. Net cash provided by financing activities for the nine months ended May 31, 2023 was $81,773, which resulted from borrowings under the line of credit and term loan and proceeds from the exercise of stock options and NTIC’s employee stock purchase plan, partially offset by dividends paid on NTIC common stock and dividends received by non-controlling interest.

Current wording

Net cash used in financing activities for the three months ended November 30, 2024 was $393,341, which resulted from dividends paid to shareholders, partially offset by borrowings under the line of credit, and proceeds from NTIC’s employee stock purchase plan. Net cash used in financing activities for the three months ended November 30, 2023 was $2,019,836, which resulted from dividends paid to shareholders, the repayment of borrowings under the line of credit, and dividends received by non-controlling interests, partially offset by proceeds from NTIC’s employee stock purchase plan.

Previous wording

Share Repurchase Plan. On January 15, 2015, NTIC’s Board of Directors authorized the repurchase of up to $3,000,000 in shares of NTIC common stock through open market purchases or unsolicited or solicited privately negotiated transactions. This program has no expiration date but may be terminated by NTIC’s Board of Directors at any time. No repurchases occurred during the nine months ended May 31, 2024. As of May 31, 2024, up to $2,640,548 in shares of NTIC common stock remained available for repurchase under NTIC’s stock repurchase program.

Current wording

Share Repurchase Plan. On January 15, 2015, NTIC’s Board of Directors authorized the repurchase of up to $3,000,000 in shares of NTIC common stock through open market purchases or unsolicited or solicited privately negotiated transactions. This program has no expiration date but may be terminated by NTIC’s Board of Directors at any time. As of November 30, 2024, up to $2,640,548 in shares of NTIC common stock remained available for repurchase under NTIC’s stock repurchase program. No repurchases occurred during the three months ended November 30, 2024.

Previous wording

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.

Current wording

Cash Dividends. On October 16, 2024, the Company’s Board of Directors declared a cash dividend of $0.07 per share of the Company’s common stock, payable on November 13, 2024 to stockholders of record on October 30, 2024. On October 18, 2023, the Company’s Board of Directors declared a cash dividend of $0.07 per share of the Company’s common stock, payable on November 15, 2023 to stockholders of record on November 1, 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.

Previous wording

Capital Expenditures and Commitments. NTIC spent $2,515,248 on capital expenditures during the nine months ended May 31, 2024, which related primarily to facility improvements to the warehouse facility NTIC purchased during fiscal 2023 and the installation of a new Enterprise Resource Planning (ERP) software system and associated equipment. NTIC expects to spend an aggregate of approximately $600,000 to $1,100,000 on capital expenditures during fiscal 2024, which it expects will relate primarily to the installation of new Enterprise Resource Planning (ERP) software system and the purchase of new equipment and facility improvements.

Current wording

Capital Expenditures and Commitments. NTIC spent $1,219,616 on capital expenditures during the three months ended November 30, 2024, which related primarily to facility improvements to the warehouse facility NTIC purchased during fiscal 2023 and the installation of a new Enterprise Resource Planning (ERP) software system and associated equipment. NTIC expects to spend an aggregate of approximately $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.

Previous wording

Although inflation in the United States and abroad historically has had little effect on NTIC, inflationary pressures adversely affected NTIC’s gross margins during the third quarter of fiscal 2024. NTIC believes there is some seasonality in its business. NTIC’s net sales in the second fiscal quarter are typically adversely affected by the long Chinese New Year, the North American holiday season and overall less corrosion taking place at lower winter temperatures worldwide.

Current wording

Inflation in the United States and abroad historically has had minimal effect on NTIC and did not adversely affect NTIC’s gross margins during the first quarter of fiscal 2025. NTIC believes there is some seasonality in its business. NTIC anticipates its net sales in the second fiscal quarter may be adversely affected by the long Chinese New Year, the North American holiday season and overall less corrosion taking place at lower winter temperatures worldwide.

Previous wording

Any outstanding advances under NTIC’s Credit Facility with JPM bear interest at a floating rate, at the option of NTIC, equal to either the CB Floating Rate or the Adjusted SOFR Rate, as defined above. Borrowings of $1,988,380 were outstanding under the Credit Facility as of May 31, 2024.

Current wording

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 $4,518,734 were outstanding under the Credit Facility as of November 30, 2024.