UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended May 31, ~~2022~~2023

☐

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to __________________

Commission File Number: 001-11038

____________________

NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation or organization)

41-0857886

(I.R.S. Employer Identification No.)

4201 Woodland Road

P.O. Box 69

Circle Pines, Minnesota55014

(Address of principal executive offices) (Zip Code)

(763) 225-6600
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.02 per share	NTIC	Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July ~~8, 2022,~~13, 2023, there were ~~9,232,483~~9,369,923 shares of common stock of the registrant outstanding.

NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION

FORM 10-Q

May 31, ~~2022~~2023

TABLE OF CONTENTS

Description			Page

PART I—FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Balance Sheets as of May 31, ~~2022~~2023 (unaudited) and August 31, ~~2021~~2022 (audited)	3

	Consolidated Statements of Operations (unaudited) for the Three and Nine Months Ended May 31, ~~2022~~2023 and ~~2021~~2022	4

	Consolidated Statements of Comprehensive Income (unaudited) for the Three and Nine Months Ended May 31, ~~2022~~2023 and ~~2021~~2022	5

	Consolidated Statements of Equity (unaudited) for the Three and Nine Months Ended May 31, ~~2022~~2023 and ~~2021~~2022	6

	Consolidated Statements of Cash Flows (unaudited) for the Nine Months Ended May 31, ~~2022~~2023 and ~~2021~~2022	7

	Notes to Consolidated Financial Statements (unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2119

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3732

Item 4.	Controls and Procedures	3733

PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	3834

Item 1A.	Risk Factors	3834

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3934

Item 3.	Defaults Upon Senior Securities	3935

Item 4.	Mine Safety Disclosures	4035

Item 5.	Other Information	4035

Item 6.	Exhibits	4035

SIGNATURES		4036

_________________

This quarterly report on Form 10-Q contains certain forward-looking statements that are within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created by those sections. For more information, see “Part I. Financial Information – Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Forward-Looking Statements.”

_________________

As used in this report, references to “NTIC,” the “Company,” “we,” “our” or “us,” unless the context otherwise requires, refer to Northern Technologies International Corporation and its wholly-owned and majority-owned subsidiaries, all of which are consolidated on NTIC’s consolidated financial statements.

As used in this report, references to: (1) “NTIC China” refer to NTIC’s wholly-owned subsidiary in China, NTIC (Shanghai) Co., Ltd.; (2) “NTI Europe” refer to NTIC’s wholly-owned subsidiary in Germany, NTIC Europe GmbH; (3) “Zerust Mexico” refer to NTIC’s wholly-owned subsidiary in Mexico, ZERUST-EXCOR MEXICO, S. de R.L. de C.V.; (4) “Zerust India” refer to NTIC’s wholly-owned subsidiary in India effective as of September 1, 2021, HNTI Limited (formerly Harita-NTI ~~Limited;~~Limited); and (5)“NTI Asean” refer to NTIC’s majority-owned holding company subsidiary, NTI Asean LLC, which holds investments in certain entities that operate in the Association of Southeast Asian Nations (ASEAN) region.

NTIC’s consolidated financial statements do not include the accounts of any of its joint ventures. Except as otherwise indicated, references in this report to NTIC’s joint ventures do not include any of NTIC’s wholly-owned or majority-owned subsidiaries.

As used in this report, references to “EXCOR” refer to NTIC’s joint venture in Germany, Excor Korrosionsschutz – Technologien und Produkte GmbH.

All trademarks, trade names or service marks referred to in this report are the property of their respective owners.

PART I - FINANCIAL INFORMATION

~~ITEM 1.~~~~FINANCIAL STATEMENTS~~

ITEM 1.

FINANCIAL STATEMENTS

NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS AS OF MAY 31, ~~2022~~2023 (UNAUDITED)

AND AUGUST 31, ~~2021~~2022 (AUDITED)

	May 31, 2022			August 31, 2021			May 31, 2023			August 31, 2022
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	6,123,269		$	7,680,641		$	6,195,194		$	5,333,890
Available for sale securities		5,574			4,634			—			5,590
Receivables:
Trade, excluding joint ventures, less allowance for doubtful accounts of $382,000 as of May 31, 2022 and August 31, 2021		13,834,580			11,128,805
Trade, excluding joint ventures, less allowance for doubtful accounts
of $439,000 as of May 31, 2023 and August 31, 2022								15,311,650			14,136,930
Trade, joint ventures		857,172			624,808			668,847			697,861
Fees for services provided to joint ventures		1,243,214			1,505,127			1,226,010			1,765,117
Income taxes		418,967			386,574			155,828			—
Inventories		13,866,229			11,114,207			13,900,812			16,341,729
Prepaid expenses		2,619,260			1,302,293			1,831,566			1,953,764
Total current assets		38,968,265			33,747,089		$	39,289,907		$	40,234,881

PROPERTY AND EQUIPMENT, NET		12,071,277			11,821,458		$	13,810,930		$	12,170,493
OTHER ASSETS:
Investments in joint ventures		22,194,433			27,623,768			22,855,448			21,814,754
Deferred income taxes		0			92,554
Patents and trademarks, net		717,795			709,572
Intangible asset, net								6,281,625			6,633,878
Goodwill		4,782,376			0			4,782,376			4,782,376
Intangible asset, net		6,029,650			0
Operating lease right of use asset		421,601			376,438			293,137			557,571
Total other assets		34,145,855			28,802,332			34,212,586			33,788,579
Total assets	$	85,185,397		$	74,370,879		$	87,313,423		$	86,193,953

LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable	$	6,004,897		$	4,290,972		$	4,687,675		$	7,796,494
Term loan								2,812,504			—
Line of credit		4,700,000			0			5,200,000			5,900,000
Income taxes payable		99,865			178,923			—			30,742
Accrued liabilities:
Payroll and related benefits		2,029,241			2,879,468			2,035,785			2,297,543
Other		1,333,153			894,497			734,414			667,292
Current portion of operating lease		74,331			272,336
Current portion of operating leases								80,183			373,330
Total current liabilities		14,241,487			8,516,196		$	15,550,561		$	17,065,401
LONG-TERM LIABILITIES:
Deferred income tax, net		1,920,970			0			1,618,960			1,700,015
Operating lease, less current portion		347,270			104,102
Operating leases, less current portion								212,954			184,241
Total long-term liabilities		2,268,240			104,102		$	1,831,914		$	1,884,256

COMMITMENTS AND CONTINGENCIES (Note 14)
COMMITMENTS AND CONTINGENCIES (Note 12)

EQUITY:
Preferred stock, no par value; authorized 10,000 shares; none issued and outstanding		0			0			—			—
Common stock, $0.02 par value per share; authorized 15,000,000 shares as of May 31, 2022 and August 31, 2021; issued and outstanding 9,232,483 and 9,184,811, respectively		184,650			183,696
Common stock, $0.02 par value per share; authorized 15,000,000 shares as of May 31, 2023 and August 31, 2022; issued and outstanding 9,369,923 and 9,232,483, respectively								187,398			184,650
Additional paid-in capital		19,706,248			18,736,268			21,426,721			19,939,131
Retained earnings		50,714,961			46,973,094			51,662,515			50,716,613
Accumulated other comprehensive loss		(5,383,400	)		(3,525,030	)		(6,879,447	)		(7,245,132	)
Stockholders’ equity		65,222,459			62,368,028			66,397,187			63,595,262
Non-controlling interests		3,453,211			3,382,553			3,533,761			3,649,034
Total equity		68,675,670			65,750,581			69,930,948			67,244,296
Total liabilities and equity	$	85,185,397		$	74,370,879		$	87,313,423		$	86,193,953

See notes to consolidated financial statements.

NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

FOR THE THREE AND NINE MONTHS ENDED MAY 31, ~~2022~~2023 AND ~~2021~~2022

	Three Months Ended May 31,						Nine Months Ended May 31,
	2023			2022			2023			2022
NET SALES:
Net sales	$	20,969,726		$	18,964,921		$	59,193,317		$	53,906,973
Cost of goods sold		13,280,584			12,722,833			38,747,865			36,977,620
Gross profit		7,689,142			6,242,088			20,445,452			16,929,353

JOINT VENTURE OPERATIONS:
Equity in income from joint ventures		1,346,658			1,364,597			3,664,793			3,662,178
Fees for services provided to joint ventures		1,361,311			1,329,988			3,795,862			3,835,755
Total joint venture operations		2,707,969			2,694,585			7,460,655			7,497,933

OPERATING EXPENSES:
Selling expenses		3,723,165			3,450,308			10,649,316			9,659,457
General and administrative expenses		3,150,643			2,560,487			9,365,431			7,675,622
Research and development expenses		1,150,711			1,102,942			3,401,885			3,557,437
Total operating expenses		8,024,519			7,113,737			23,416,632			20,892,516

OPERATING INCOME		2,372,592			1,822,936			4,489,475			3,534,770

REMEASUREMENT GAIN ON ACQUISITION OF EQUITY METHOD INVESTEE		—			—			—			3,951,550

INTEREST INCOME		8,876			15,925			18,495			36,777
INTEREST EXPENSE		(136,168	)		(23,784	)		(342,643	)		(34,079	)

INCOME BEFORE INCOME TAX EXPENSE		2,245,300			1,815,077			4,165,327			7,489,018

INCOME TAX EXPENSE		542,295			604,314			834,823			1,260,437

NET INCOME		1,703,005			1,210,763			3,330,504			6,228,581

NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTERESTS		177,409			210,596			417,418			551,808

NET INCOME ATTRIBUTABLE TO NTIC	$	1,525,596		$	1,000,167		$	2,913,086		$	5,676,773

NET INCOME ATTRIBUTABLE TO NTIC PER COMMON SHARE:
Basic	$	0.16		$	0.11		$	0.31		$	0.62
Diluted	$	0.16		$	0.11		$	0.30		$	0.59

WEIGHTED AVERAGE COMMON SHARES ASSUMED OUTSTANDING:
Basic		9,369,923			9,227,912			9,355,776			9,216,216
Diluted		9,628,069			9,578,797			9,702,610			9,682,646
CASH DIVIDENDS DECLARED PER COMMON SHARE	$	0.07		$	0.07		$	0.21		$	0.21

Three Months Ended May 31,

Nine Months Ended May 31,

2022

2021

2022

2021

NET SALES:

Net sales, excluding joint ventures
$ 18,436,253 $ 14,164,604 $ 51,654,355 $ 38,619,353
Net sales, to joint ventures
528,668 1,253,920 2,252,618 2,361,165
Total net sales
18,964,921 15,418,524 53,906,973 40,980,518

Cost of goods sold
12,722,833 10,152,582 36,977,620 26,997,582
Gross profit
6,242,088 5,265,942 16,929,353 13,982,936

JOINT VENTURE OPERATIONS:

Equity in income from joint ventures
1,364,597 2,033,536 3,662,178 5,779,260
Fees for services provided to joint ventures
1,329,988 1,589,621 3,835,755 4,388,866
Total joint venture operations
2,694,585 3,623,157 7,497,933 10,168,126

OPERATING EXPENSES:

Selling expenses
3,450,308 3,171,657 9,659,457 8,745,433
General and administrative expenses
2,560,487 2,072,195 7,675,622 6,125,151
Research and development expenses
1,102,942 1,066,493 3,557,437 3,217,410
Total operating expenses
7,113,737 6,310,345 20,892,516 18,087,994

OPERATING INCOME
1,822,936 2,578,754 3,534,770 6,063,068

REMEASUREMENT GAIN ON ACQUISITION OF EQUITY METHOD INVESTEE
0 0 3,951,550 0
INTEREST INCOME
15,925 10,676 36,777 95,852
INTEREST EXPENSE
(23,784 ) (3,044 ) (34,079 ) (10,661 )
INCOME BEFORE INCOME TAX EXPENSE
1,815,077 2,586,386 7,489,018 6,148,259

INCOME TAX EXPENSE
604,314 276,338 1,260,437 929,588
NET INCOME
1,210,763 2,310,048 6,228,581 5,218,671

NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTERESTS
210,596 256,132 551,808 589,781
NET INCOME ATTRIBUTABLE TO NTIC
$ 1,000,167 $ 2,053,916 $ 5,676,773 $ 4,628,890

NET INCOME ATTRIBUTABLE TO NTIC PER COMMON SHARE:

Basic
$ 0.11 $ 0.23 $ 0.62 $ 0.51
Diluted
$ 0.11 $ 0.21 $ 0.59 $ 0.47

WEIGHTED AVERAGE COMMON SHARES ASSUMED OUTSTANDING:

Basic
9,227,912 9,109,861 9,216,216 9,107,243
Diluted
9,578,797 9,972,000 9,682,646 9,829,052

CASH DIVIDENDS DECLARED PER COMMON SHARE
$ 0.07 $ 0.065 $ 0.21 $ 0.13

See notes to consolidated financial statements.

NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

FOR THE THREE AND NINE MONTHS ENDED MAY 31, ~~2022~~2023 AND ~~2021~~

2022

Three Months Ended May 31,

Nine Months Ended May 31,

2022

2021

2022

2021

NET INCOME
$ 1,210,763 $ 2,310,048 $ 6,228,581 $ 5,218,671
OTHER COMPREHENSIVE INCOME– FOREIGN CURRENCY TRANSLATION ADJUSTMENT
(1,554,022 ) 262,267 (1,936,791 ) 757,273
COMPREHENSIVE INCOME
(343,259 ) 2,572,315 4,291,790 5,975,944
COMPREHENSIVE INCOME ATTRIBUTABLE TO NON- CONTROLLING INTERESTS
(181,283 ) 266,771 (473,385 ) 654,551
COMPREHENSIVE INCOME ATTRIBUTABLE TO NTIC
$ (161,976 ) $ 2,305,544 $ 4,765,175 $ 5,321,393

	Three Months Ended May 31,						Nine Months Ended May 31,
	2023			2022			2023			2022
NET INCOME	$	1,703,005		$	1,210,763		$	3,330,504		$	6,228,581
OTHER COMPREHENSIVE INCOME (LOSS) – FOREIGN CURRENCY TRANSLATION ADJUSTMENT		(92,228	)		(1,554,024	)		388,568			(1,936,793	)
COMPREHENSIVE INCOME (LOSS)		1,610,777			(343,261	)		3,719,072			4,291,788
COMPREHENSIVE LOSS ATTRIBUTABLE TO NON-CONTROLLING INTERESTS		(190,118	)		(181,283	)		(440,301	)		(473,385	)
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO NTIC	$	1,800,895		$	(161,978	)	$	4,159,373		$	4,765,173

See notes to consolidated financial statements.

NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)

FOR THE THREE AND NINE MONTHS ENDED MAY 31, ~~2022~~2023 AND ~~2021~~2022

	STOCKHOLDERS’ EQUITY – THREE MONTHS ENDED MAY 31, 2023 AND 2022
										Accumulated
					Additional					Other			Non-
	Common Stock				Paid-in		Retained			Comprehensive			Controlling			Total
	Shares		Amount		Capital		Earnings			Income (Loss)			Interests			Equity

BALANCE AT FEBRUARY 28, 2023		9,366,357	$	187,327	$	21,058,721	$	50,792,813		$	(6,774,510	)	$	3,443,643		$	68,707,994
Stock issued for employee stock purchase plan		3,566		71		36,697		—			—			—			36,768
Stock option expense		—		—		331,303		—			—			—			331,303
Dividends paid to stockholders		—		—		—		(655,894	)		—			—			(655,894	)
Dividend received by non-controlling interest		—		—		—		—			—			(100,000	)		(100,000	)
Net income		—		—		—		1,525,596			—			177,409			1,703,005
Other comprehensive income (loss)		—		—		—		—			(104,937	)		12,709			(92,228	)
BALANCE AT MAY 31, 2023		9,369,923	$	187,398	$	21,426,721	$	51,662,515		$	(6,879,447	)	$	3,533,761		$	69,930,948

BALANCE AT FEBRUARY 28, 2022		9,221,517	$	184,430	$	19,379,032	$	50,361,068		$	(3,858,689	)	$	3,371,928		$	69,437,767
Stock issued for employee stock purchase plan		2,966		59		35,054		—			—			—			35,113
Stock options exercised		8,000		161		59,279		—			—			—			59,440
Stock option expense		—		—		232,883		—			—			—			232,883
Dividends paid to stockholders		—		—		—		(646,274	)		—			—			(646,274	)
Dividend received by non-controlling interest		—		—		—		—			—			(100,000	)		(100,000	)
Net income		—		—		—		1,000,167			—			210,594			1,210,763
Other comprehensive loss		—		—		—		—			(1,524,711	)		(29,311	)		(1,554,022	)
BALANCE AT MAY 31, 2022		9,232,483	$	184,650	$	19,706,248	$	50,714,961		$	(5,383,400	)	$	3,453,211		$	68,675,670

STOCKHOLDERS’ EQUITY – THREE MONTHS ENDED MAY 31, 2022 AND 2021

Accumulated

Additional

Other

Non-

Common Stock

Paid-in

Retained

Comprehensive

Controlling

Total

Shares

Amount

Capital

Earnings

Income (Loss)

Interests

Equity

BALANCE AS OF FEBRUARY 28, 2022
9,221,517 $ 184,430 $ 19,379,032 $ 50,361,068 $ (3,858,689 ) $ 3,371,926 $ 69,437,767
Stock issued for employee stock purchase plan
2,966 59 35,054 0 0 0 35,113
Stock options exercised
8,000 161 59,279 0 0 0 59,440
Stock option expense
— 0 232,883 0 0 0 232,883
Dividends paid to stockholders
— 0 0 (646,274 ) 0 0 (646,274 )
Dividend received by non-controlling interest
— 0 0 0 0 (100,000 ) (100,000 )
Net income
— 0 0 1,000,167 0 210,596 1,210,763
Other comprehensive gain
— 0 0 0 (1,524,711 ) (29,311 ) (1,554,022 )
BALANCE AS OF MAY 31, 2022
9,232,483 $ 184,650 $ 19,706,248 $ 50,714,961 $ (5,383,400 ) $ 3,453,211 $ 68,675,670

BALANCE AS OF FEBRUARY 28, 2021
9,104,636 $ 182,093 $ 17,793,646 $ 44,455,982 $ (2,969,563 ) $ 3,232,806 $ 62,694,964
Stock issued for employee stock purchase plan
5,225 104 38,038 0 0 0 38,142
Stock option expense
— 0 160,834 0 0 0 160,834
Dividends paid to stockholders
— 0 0 (592,141 ) 0 0 (592,141 )
Net income
— 0 0 2,053,916 0 256,132 2,310,048
Other comprehensive gain
— 0 0 0 251,628 10,639 262,267
BALANCE AS OF MAY 31, 2021
9,109,861 $ 182,197 $ 17,992,518 $ 45,917,757 $ (2,717,935 ) $ 3,499,577 $ 64,874,114

	STOCKHOLDERS’ EQUITY – NINE MONTHS ENDED MAY 31, 2022 AND 2021																		STOCKHOLDERS’ EQUITY – NINE MONTHS ENDED MAY 31, 2023 AND 2022
										Accumulated																		Accumulated
					*Additional*					*Other*			*Non-*										Additional					Other			Non-
	*Common Stock*				*Paid-in*		*Retained*			*Comprehensive*			*Controlling*			*Total*			Common Stock				Paid-in		Retained			Comprehensive			Controlling			Total
	*Shares*		*Amount*		*Capital*		*Earnings*			*Income (Loss)*			*Interests*			*Equity*			Shares		Amount		Capital		Earnings			Income (Loss)			Interests			Equity

BALANCE AS OF AUGUST 31, 2021		9,184,811	$	183,696	$	18,736,268	$	46,973,094		$	(3,525,030	)	$	3,382,553		$	65,750,581
BALANCE AT AUGUST 31, 2022																				9,232,483	$	184,650	$	19,939,131	$	50,716,613		$	(7,245,132	)	$	3,649,034		$	67,244,296
Stock issued for employee stock purchase plan		5,601		112		73,533		0			0			0			73,645			7,186		143		75,321		—			—			—			75,464
Stock options exercised		42,071		842		197,798		0			0			0			198,640			130,254		2,605		413,958		—			—			—			416,563
Stock option expense		—		0		698,649		0			0			0			698,649			—		—		998,311		—			—			—			998,311
Dividends paid to stockholders		—		0		0		(1,934,906	)		0			0			(1,934,906	)		—		—		—		(1,967,184	)		—			—			(1,967,184	)
Dividend received by non-controlling interest		—		0		0		0			0			(402,729	)		(402,729	)		—		—		—		—			—			(555,574	)		(555,574	)
Net income		—		0		0		5,676,773			0			551,808			6,228,581			—		—		—		2,913,086			—			417,418			3,330,504
Other comprehensive income		—		0		0		0			(1,858,370	)		(78,421	)		(1,936,791	)		—		—		—		—			365,685			22,883			388,568
BALANCE AS OF MAY 31, 2022		9,232,483	$	184,650	$	19,706,248	$	50,714,961		$	(5,383,400	)	$	3,453,211		$	68,675,670
BALANCE AT MAY 31, 2023																				9,369,923	$	187,398	$	21,426,721	$	51,662,515		$	(6,879,447	)	$	3,533,761		$	69,930,948

BALANCE AS OF AUGUST 31, 2020		9,099,990	$	182,000	$	17,415,043	$	42,472,810		$	(3,410,438	)	$	3,045,026		$	59,704,441
BALANCE AT AUGUST 31, 2021																				9,184,811	$	183,696	$	18,736,268	$	46,973,092		$	(3,525,030	)	$	3,382,553		$	65,750,581
Stock issued for employee stock purchase plan		9,871		197		74,137		0			0			0			74,334			5,601		112		73,533		—			—			—			73,645
Stock options exercised																				42,071		842		197,798		—			—			—			198,640
Stock option expense		—		0		503,338		0			0			0			503,338			—		—		698,649		—			—			—			698,649
Dividends paid to stockholders		—		0		0		(1,183,943	)		0			0			(1,183,943	)		—		—		—		(1,934,906	)		—			—			(1,934,906	)
Dividend received by non-controlling interest		—		0		0		0			0			(200,000	)		(200,000	)		—		—		—		—			—			(402,729	)		(402,729	)
Net income		—		0		0		4,628,890			0			589,781			5,218,671			—		—		—		5,676,775			—			551,808			6,228,581
Other comprehensive income		—		0		0		0			692,503			64,770			757,273
BALANCE AS OF MAY 31, 2021		9,109,861	$	182,197	$	17,992,518	$	45,917,757		$	(2,717,935	)	$	3,499,577		$	64,874,114
Other comprehensive loss																				—		—		—		—			(1,858,370	)		(78,421	)		(1,936,791	)
BALANCE AT MAY 31, 2022																				9,232,483	$	184,650	$	19,706,248	$	50,714,961		$	(5,383,400	)	$	3,453,211		$	68,675,670

See notes to consolidated financial statements.

NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE NINE MONTHS ENDED MAY 31, ~~2022~~2023 AND ~~2021~~

2022

	Nine Months Ended May 31,						Nine Months Ended May 31,
	2022			2021			2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	6,228,581		$	5,218,671		$	3,330,504		$	6,228,581
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation		698,649			503,338			998,311			698,649
Change in allowance for doubtful accounts		0			30,000
Depreciation expense		722,443			681,484			766,091			722,443
Amortization expense		474,121			151,710			441,603			474,121
Loss on disposal of assets								(8,534	)		—
Remeasurement gain on acquisition of equity method investee		(3,951,550	)		0			—			(3,951,550	)
Equity in income from joint ventures		(3,662,178	)		(5,779,260	)		(3,664,793	)		(3,662,178	)
Dividends received from joint ventures		5,723,176			3,505,455			3,510,716			5,723,176
Deferred income taxes		152,372			(8,526	)		(76,114	)		152,372
Changes in current assets and liabilities:
Receivables:
Trade, excluding joint ventures		(1,348,254	)		(2,904,707	)		(1,502,567	)		(1,348,254	)
Trade, joint ventures		(232,364	)		(564,149	)		29,014			(232,364	)
Fees for services provided to joint ventures		261,913			(499,954	)		539,107			261,913
Income taxes		(134,942	)		(223,024	)		(155,828	)		(134,942	)
Inventories		(2,093,668	)		(177,927	)		2,254,758			(2,093,668	)
Prepaid expenses and other		(635,478	)		(223,457	)		184,516			(635,478	)
Accounts payable		908,605			703,100			(2,902,121	)		908,605
Income tax payable		(420,529	)		(162,615	)		(29,401	)		(420,529	)
Accrued liabilities		(912,803	)		803,555			(209,459	)		(912,803	)
Net cash provided by operating activities		1,778,094			1,053,695			3,505,803			1,778,094

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Zerust India business, net of cash acquired (see Note 3)		(5,062,003	)		0
Acquisition of Zerust India business, net of cash acquired								—			(5,062,003	)
Purchase of available for sale securities		(941	)		(800,000	)		—			(941	)
Proceeds from the sale of available for sale securities		0			1,219,670			5,590			—
Investment in joint venture		(341,392	)		0			—			(341,392	)
Purchases of property and equipment		(961,704	)		(723,441	)		(2,607,988	)		(961,704	)
Proceeds from the sale of property and equipment								13,000			—
Investments in patents		(164,994	)		(96,009	)		(89,350	)		(164,994	)
Net cash used in investing activities		(6,531,034	)		(399,780	)		(2,678,748	)		(6,531,034	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Dividend received by non-controlling interest		(402,729	)		(200,000	)		(555,574	)		(402,729	)
Repayments on the line of credit								(700,000	)		—
Proceeds from line of credit		4,700,000			0			—			4,700,000
Proceeds from term loan								2,812,504			—
Dividends paid on NTIC common stock		(1,934,906	)		(1,183,943	)		(1,967,184	)		(1,934,906	)
Proceeds from the exercise of stock options		198,640			0			416,563			198,640
Proceeds from employee stock purchase plan		73,645			74,334			75,464			73,645
Net cash provided by (used in) financing activities		2,634,650			(1,309,609	)
Net cash provided by financing activities								81,773			2,634,650

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		560,918			133,585			(47,524	)		560,918


NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(1,557,372	)		(522,109	)		861,304			(1,557,372	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		7,680,641			6,403,032			5,333,890			7,680,641

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	6,123,269		$	5,880,923		$	6,195,194		$	6,123,269

See notes to consolidated financial statements.

NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.~~INTERIM FINANCIAL INFORMATION~~

INTERIM FINANCIAL INFORMATION

In the opinion of management, the accompanying unaudited consolidated financial statements contain all necessary adjustments, which are of a normal recurring nature, and present fairly the consolidated financial position of Northern Technologies International Corporation and its subsidiaries (the Company) as of May 31, ~~2022~~ 2023 and August 31, ~~2021,~~ 2022, the results of the Company’s operations and other comprehensive income for the three and nine months ended May 31, ~~2022~~ 2023 and ~~2021,~~2022, the changes in stockholders’ equity for the three and nine months ended May 31, ~~2022~~ 2023 and ~~2021,~~2022, and the Company’s cash flows for the nine months ended May 31, ~~2022~~ 2023 and ~~2021,~~2022, in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP).

These consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the Company’s annual report on Form 10-K10-K for the fiscal year ended August 31, ~~2021.~~ 2022. These consolidated financial statements also should be read in conjunction with the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section appearing in this report.

Operating results for the three and nine months ended May 31, ~~2022~~ 2023 are not necessarily indicative of the results that may be expected for the full fiscal year ending August 31, ~~2022.~~2023.

The Company evaluates events occurring after the date of the consolidated financial statements requiring recording or disclosure in the consolidated financial statements.

~~Impact of COVID-~~19 ~~Pandemic~~

~~As a result of the novel coronavirus (COVID-~~19) pandemic and related government mandated restrictions on the Company’s business as well as the businesses of its joint ventures, customers and suppliers, disruption to the Company’s business and the manufacture and sale of its products and services continued to occur during the ~~first~~~~nine~~ ~~months of fiscal~~ ~~2022~~ ~~and is expected to continue during the remainder of fiscal~~ ~~2022~~ ~~and into fiscal~~ ~~2023.~~ ~~In the~~ ~~first~~~~nine~~ ~~months of fiscal~~ ~~2022,~~ the Company continued to be impacted by shipping issues, including freight container shortages, shipping delays, and increased costs, and supply chain issues, including longer lead times and raw material cost increases.

2.~~ACCOUNTING PRONOUNCEMENTS~~

~~Recently Issued Accounting Pronouncements~~

ACCOUNTING PRONOUNCEMENTS

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.~~2016~~-~~13,~~ 2016-13, Measurement of Credit Losses on Financial Instruments, which revises guidance for the accounting for credit losses on financial instruments within its scope, and in November 2018, issued ASU No.~~2018~~-19 2018-19 and in April 2019, issued ASU No.~~2019~~-04 2019-04 and in May 2019, issued ASU No.~~2019~~-~~05,~~ 2019-05, and in November 2019, issued ASU No.~~2019~~-~~11,~~ 2019-11, which amended the standard. The new standard introduces an approach, based on expected losses, to estimate credit losses on certain types of financial instruments and modifies the impairment model for available-for-sale debt securities. The new approach to estimating credit losses (referred to as the current expected credit losses model) applies to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, held-to-maturity debt securities, net investments in leases and off-balance-sheet credit exposures. This ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted. Entities are required to apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company is still evaluating the impact of this ASU.

~~Although there are several other new accounting pronouncements issued or proposed by the FASB, which the Company has adopted or will adopt, as applicable, the Company does~~ ~~not~~ ~~believe any of these accounting pronouncements has had or will have a material impact on the Company’s consolidated financial position or operating results.~~

3.~~BUSINESS COMBINATION~~

On ~~September 21, 2021,~~ ~~the Company announced that it acquired the remaining 50% ownership interest in its Indian joint venture, Harita-NTI Limited (Zerust India), for $6,250,000 in cash, effective as of~~ ~~September~~ 1,~~2021,~~ ~~the date the Company obtained control. Prior to~~ ~~September 1, 2021,~~ the Company owned 50% of the outstanding capital stock of Zerust India. The Company had historically accounted for this investment under the equity method of accounting. This purchase was funded with cash on hand and borrowings under the Company’s revolving line of credit. The Company undertook the acquisition to enhance its Zerust business in India.

~~The purchase price of $6,250,000 was funded with cash on hand and borrowings under the Company’s revolving line of credit, which was increased in connection with the transaction to $5,000,000.~~

~~Because the Company increased its ownership interest in Zerust India to 100%, the acquisition of Zerust India has been accounted for in accordance with Accounting Standards Codification (ASC)~~ ~~805,~~ ~~Business Combinations, by using the acquisition method of accounting. Effective~~ ~~September 1, 2021,~~ ~~Zerust India became a consolidated subsidiary within the Company’s financial statements.~~

~~The following table summarizes the purchase price allocation that includes the fair values of the separately identifiable assets acquired and liabilities assumed as of~~ ~~September 1, 2021:~~

Cash and cash equivalents
$ 1,187,997
Trade account receivable
1,954,769
Inventories
886,650
Prepaid expenses and other
396,545
Property, plant and equipment
219,077
Operating lease, right of use asset
355,000
Customer relationships
6,347,000
Goodwill
4,782,376
Current liabilities
(1,370,314 )
Deferred tax liability
(1,904,100 )
Operating lease liability
(355,000 )

Net assets acquired
$ 12,500,000
Less:

Fair value of previously held equity method investment
(1,637,362 )

Cumulative foreign currency translation
(661,088 )

Gain recognized on acquisition
(3,951,550 )
(6,250,000 )
Cash paid for acquisition
$ 6,250,000

The excess of the fair value of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill. The fair values assigned to tangible and identifiable intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions. The fair values of assets acquired and liabilities assumed ~~may~~ ~~be subject to change as additional information is received.~~

The fair value of the intangible asset associated with customer relationships was estimated using a discounted cash flow method with the application of the multi-period excess earnings method. Under this method, an intangible asset’s fair value is equal to the present value of the incremental after-tax cash flows attributable to only the subject intangible asset after deducting contributory asset charges.

The rate used to discount the estimated future net cash flows to their present values for the intangible assets was based upon a weighted average cost of capital calculation. The discount rate was determined after consideration of market rates of return on debt and equity capital, the weighted average return on invested capital and the risk associated with achieving forecasted sales related to the assets acquired from Zerust India. The weighted average discount rate used to determine the fair value of the customer relationships was ~~15.3%.~~

~~The amortization period for the intangible assets is~~ 15 years. The intangible assets are being amortized on a straight-line basis, which is consistent with the pattern that the economic benefits of the intangible assets are expected to be utilized based upon estimated cash flows generated from such asset. Goodwill associated with the acquisition was primarily attributable to the expansion opportunity of the Company’s Zerust business in India.

Authoritative guidance on accounting for business combinations requires that an acquirer re-measure its previously held equity interest in the acquisition at its acquisition date fair value and recognize the resulting gain or loss in earnings. As such, since the Company acquired the remaining ~~50%~~ ~~ownership interest of Zerust India effective~~ ~~September 1, 2021,~~ ~~the Company recognized a gain of $3,951,550 during the~~ ~~nine~~ ~~months ended~~ ~~May 31, 2022.~~ ~~This gain is included in “Remeasurement gain on acquisition of equity method investee” on the Company’s consolidated statements of operations for the~~ ~~nine~~ ~~months ended~~ ~~May 31, 2022.~~

~~The Company has included the financial results of Zerust India in the consolidated financial statements from~~ ~~September 1, 2021.~~ Net revenue and net income related to Zerust India since the date of acquisition totaled $7,260,964 and $664,775, respectively. The transaction costs associated with the acquisition were approximately $0 and $115,000, respectively, and are recorded in general and administrative expense as incurred during the ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~May 31, 2022.~~

~~Unaudited consolidated pro forma information assuming the acquisition had occurred on~~ ~~September 1, 2020~~ ~~for the~~ ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~May 31, 2021~~ ~~would have an increase in net sales $2,405,098 and $6,697,005, respectively. Unaudited pro forma net income, assuming the acquisition had occurred on~~ ~~September 1, 2020,~~ ~~for the~~ ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~May 31, 2021~~ ~~was~~ ~~not~~ ~~considered material to the Company’s consolidated net income. The unaudited consolidated pro forma combined financial information does~~ ~~not~~ ~~purport to be indicative of the results which would have been obtained had the acquisition been completed as of the beginning of the earliest period presented or of results that~~ ~~may~~ ~~be obtained in the future. In addition, they do~~ ~~not~~ ~~include any benefits that~~ ~~may~~ ~~result from the acquisition due to synergies that~~ ~~may~~ ~~be derived from the elimination of any duplicative costs.~~

4.~~INVENTORIES~~

INVENTORIES

Inventories consisted of the following:

	May 31, 2022		August 31, 2021		May 31, 2023		August 31, 2022
Production materials	$	4,946,106	$	4,453,688	$	4,723,520	$	6,496,656
Finished goods		8,920,123		6,660,519		9,177,292		9,845,073
	$	13,866,229	$	11,114,207	$	13,900,812	$	16,341,729

5.~~PROPERTY AND EQUIPMENT, NET~~
4.
PROPERTY AND EQUIPMENT, NET

Property and equipment, net consisted of the following:

	May 31, 2022			August 31, 2021			May 31, 2023			August 31, 2022
Land	$	310,365		$	310,365		$	496,965		$	310,365
Buildings and improvements		14,098,634			13,149,258			16,733,247			14,778,759
Machinery and equipment		5,569,711			5,453,679			5,960,024			5,643,320
		19,978,710			18,913,302			23,190,236			20,732,444
Less accumulated depreciation		(7,907,433	)		(7,091,844	)		(9,379,306	)		(8,561,951	)
	$	12,071,277		$	11,821,458		$	13,810,930		$	12,170,493

On February 28, 2023, the Company purchased the property immediately adjacent to NTIC’s headquarters in Circle Pines, Minnesota, which includes a 26,000 square foot industrial building, for $1,200,000. The building will be used primarily for warehousing space and light industrial production.

Depreciation expense was $277,253 and $766,091 for the three and nine months ended May 31, 2023, respectively, compared to $291,452 and $722,443 for the three and nine months ended May 31, 2022, respectively.

6.~~PATENTS AND TRADEMARKS, NET~~
5.
INTANGIBLE ASSETS, NET

~~Patents and trademarks,~~Intangible assets, net consisted of the following:

							As of May 31, 2023
	May 31, 2022			August 31, 2021			Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Patents and trademarks	$	3,183,500		$	3,018,507		$	3,315,005	$	(2,639,897	)	$	675,108
Less accumulated amortization		(2,465,705	)		(2,308,935	)
	$	717,795		$	709,572
Customer relationships								6,347,000		(740,483	)		5,606,517
Total intangible assets, net							$	9,662,005	$	(3,380,380	)	$	6,281,625

	As of August 31, 2022
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Patents and trademarks	$	3,225,655	$	(2,515,644	)	$	710,011
Customer relationships		6,347,000		(423,133	)		5,923,867
Total intangible assets, net	$	9,572,655	$	(2,938,777	)	$	6,633,878

Amortization expense related to intangible assets was $146,730 and $441,603 for the three and nine months ended May 31, 2023, respectively, compared to $158,490 and $474,121 for the three and nine months ended May 31, 2022, respectively.

As of May 31, 2023, future amortization expense related to intangible assets for each of the next five fiscal years and thereafter is estimated as follows:

Remainder of fiscal 2023	$	167,471
Fiscal 2024		589,746
Fiscal 2025		589,746
Fiscal 2026		589,746
Fiscal 2027		589,746
Thereafter		3,755,170
Total	$	6,281,625

7.~~INVESTMENTS IN JOINT VENTURES~~
6.
INVESTMENTS IN JOINT VENTURES

The consolidated financial statements of the Company’s foreign joint ventures are initially prepared using the accounting principles accepted in the respective joint ventures’ countries of domicile. Amounts related to foreign joint ventures reported in the below tables and the accompanying consolidated financial statements have subsequently been adjusted to conform with U.S. GAAP in all material respects. All material profits on sales recorded that remain on the consolidated balance sheet from the Company to its joint ventures and from joint ventures to other joint ventures have been eliminated for financial reporting purposes.

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

As of May 31, 2022

Total

EXCOR

All Other

Current assets
$ 55,305,950 $ 25,677,287 $ 29,628,663
Total assets
59,037,744 27,727,623 31,310,121
Current liabilities
13,289,392 2,978,114 10,311,279
Noncurrent liabilities
1,223,185 0 1,223,185
Joint ventures’ equity
44,601,335 24,749,509 19,851,826
Northern Technologies International Corporation’s share of joint ventures’ equity
22,194,433 12,374,756 9,819,677
Northern Technologies International Corporation’s share of joint ventures’ undistributed earnings
20,844,284 12,343,851 8,500,433

	As of May 31, 2023
	Total		EXCOR		All Other
Current assets	$	55,424,661	$	26,845,344	$	28,579,317
Total assets		59,769,982		28,974,034		30,795,948
Current liabilities		13,229,032		3,008,256		10,220,776
Noncurrent liabilities		300,142		-		300,142
Joint ventures’ equity		46,240,808		25,965,777		20,275,031
Northern Technologies International Corporation’s share of joint ventures’ equity		22,855,448		12,982,891		9,872,553
Northern Technologies International Corporation’s share of joint ventures’ undistributed earnings		20,493,861		12,075,524		8,418,337

	Three Months Ended May 31, 2022						Three Months Ended May 31, 2023
	Total		EXCOR		All Other		Total		EXCOR		All Other
Net sales	$	26,594,077	$	10,397,916	$	16,196,160	$	26,312,548	$	10,735,862	$	15,576,686
Gross profit		10,626,570		4,990,697		5,635,873		10,494,244		5,085,837		5,408,407
Net income		2,714,979		1,654,389		1,060,590		2,692,444		1,654,151		1,038,293
Northern Technologies International Corporation’s share of equity in income from joint ventures		1,364,597		824,784		539,813		1,346,658		828,631		518,027
Northern Technologies International Corporation’s dividends received from joint ventures		252,000		0		252,000		45,977		—		45,977

	Nine Months Ended May 31, 2022						Nine Months Ended May 31, 2023
	Total		EXCOR		All Other		Total		EXCOR		All Other
Net sales	$	78,218,839	$	31,010,578	$	47,208,261	$	76,525,427	$	30,590,265	$	45,935,162
Gross profit		31,504,531		15,118,133		16,386,398		30,223,623		14,539,314		15,684,309
Net income		7,344,175		4,646,123		2,698,052		7,308,398		4,761,608		2,546,790
Northern Technologies International Corporation’s share of equity in income from joint ventures		3,662,178		2,324,605		1,337,572		3,664,793		2,376,575		1,288,218
Northern Technologies International Corporation’s dividends received from joint ventures		5,723,176		4,255,200		1,467,976		3,510,716		2,459,500		1,051,216

	As of August 31, 2021						As of August 31, 2022
	Total		EXCOR		All Other⁽¹⁾		Total		EXCOR		All Other
Current assets	$	69,394,796	$	33,886,655	$	35,508,141	$	52,428,831	$	26,047,914	$	26,380,917
Total assets		73,814,402		36,211,520		37,602,882		55,854,457		27,932,532		27,921,925
Current liabilities		16,366,398		5,386,377		10,980,021		10,981,833		2,943,895		8,037,938
Noncurrent liabilities		1,455,524		0		1,455,524		1,138,980		—		1,138,980
Joint ventures’ equity		55,992,480		30,825,144		25,167,336		43,733,644		24,988,637		18,745,007
Northern Technologies International Corporation’s share of joint ventures’ equity		27,623,768		15,412,574		12,211,194		21,814,754		12,494,320		9,320,434
Northern Technologies International Corporation’s share of joint ventures’ undistributed earnings		24,702,778		14,697,490		10,005,288		21,256,923		12,463,415		8,793,508

Three Months Ended May 31, 2021

Total

EXCOR

All Other⁽¹⁾

Net sales
$ 31,959,539 $ 12,103,263 $ 19,856,276
Gross profit
14,280,775 6,863,786 7,416,989
Net income
4,051,518 2,068,326 1,983,192
Northern Technologies International Corporation’s share of equity in income from joint ventures
2,033,536 1,039,576 993,960
Northern Technologies International Corporation’s dividends received from joint ventures
181,952 0 181,952

	Nine Months Ended May 31, 2021						Three Months Ended May 31, 2022
	Total		EXCOR		All Other⁽¹⁾		Total		EXCOR		All Other
Net sales	$	87,795,284	$	32,196,843	$	55,598,441	$	26,594,077	$	10,397,916	$	16,196,160
Gross profit		39,802,014		18,661,980		21,140,034		10,626,570		4,990,697		5,635,873
Net income		11,540,949		6,351,721		5,189,228		2,714,979		1,654,389		1,060,590
Northern Technologies International Corporation’s share of equity in income from joint ventures		5,779,260		3,182,691		2,596,569		1,364,597		824,784		539,813
Northern Technologies International Corporation’s dividends received from joint ventures		3,505,455		1,809,900		1,695,555		252,000		—		252,000

~~__________~~

(1~~) Includes Zerust India since Zerust India was~~ ~~not~~ ~~a consolidated subsidiary of the Company as of~~ ~~August 31, 2021~~ or ~~May 31, 2021.~~ ~~See Note~~ 3 ~~entitled “Business Combination.”~~

	Nine Months Ended May 31, 2022
	Total		EXCOR		All Other
Net sales	$	78,218,839	$	31,010,578	$	47,208,261
Gross profit		31,504,531		15,118,133		16,386,398
Net income		7,344,175		4,646,123		2,698,052
Northern Technologies International Corporation’s share of equity in income from joint ventures		3,662,178		2,324,605		1,337,572
Northern Technologies International Corporation’s dividends received from joint ventures		5,723,176		4,255,200		1,467,976

8.~~INTANGIBLE ASSET, NET~~
7.
CORPORATE DEBT

~~Intangible asset, net consisted of~~On January 6, 2023, the ~~following as of~~ ~~May 31, 2022:~~

May 31, 2022

August 31, 2021

Customer relationships
$ 6,347,000 $ 0
Less accumulated amortization
(317,350 ) 0
Net Carrying Amount
$ 6,029,650 $ 0

~~The customer relationships were established as~~Company entered into a ~~part of purchase accounting related to our Zerust India acquisition. See Note~~ 3 ~~entitled “Business Combination.” The~~Credit Agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A. (“JPM”), which provides the Company amortizes the intangible asset related to the customer relationships using the straight-line method over the estimated useful lives of the asset, which is 15 years. Total amortization expense was $105,783 and $317,350 for the ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~May 31, 2022,~~ ~~respectively. Amortization expense is estimated to be $423,000 in each of the next~~ ~~five~~ ~~fiscal years.~~

9.~~CORPORATE DEBT~~

~~The Company has~~with a senior secured revolving line of credit ~~with PNC Bank, National Association (PNC Bank)~~(the “Credit Facility”) of ~~$7,000,000~~up to $10.0 million, which includes a $5.0 million sublimit for standby letters of credit. Borrowings of $5,200,000 under the new Credit Agreement were outstanding May 31, 2023. Borrowings of $5,900,000 were outstanding as of ~~May~~August 31, 2022 ~~which~~under the previous credit agreement.

Unless terminated earlier, the Credit Facility will ~~decrease to $5,000,000 effective~~ ~~August 16, 2022.~~ ~~The line of credit has a maturity date of~~ mature on January ~~7, 2023~~ 6, 2024, and ~~bears~~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. Borrowings under the Credit Agreement bear interest at ~~an annual~~a floating rate, at the option of the Company, equal to either the ~~daily Bloomberg Short-Term Bank Yield Index plus 250 basis points (2.50%)~~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 ~~line~~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 the Company) plus 0.10% per annum. With respect to any borrowings using an Adjusted SOFR Rate, there is an applicable margin of ~~credit~~2.15% applied per annum. There is ~~governed under an Amended~~no applicable margin with respect to borrowings using a CB Floating Rate.

To secure the Credit Agreement, the Company assigned to JPM a continuing security interest in all of its right, title and ~~Restated Loan Agreement dated~~ ~~August 31, 2021.~~interested in collateral made up for the assets of the Company.

On ~~May 20, 2022,~~ The Credit Agreement contains customary affirmative and negative covenants, including, among other matters, limitations on the Company’s ability to incur additional debt, grant liens, engage in certain business operations and transactions, make certain investments, modify its organizational documents or form any new subsidiaries, subject to certain exceptions. Further, the Credit Agreement contains a negative covenant that restricts the ability of the Company to redeem or repurchase its common stock or pay dividends if the result of which would cause an event of default under the Credit Agreement. The Credit Agreement also requires the Company to maintain ~~financial flexibility,~~a Fixed Charge Coverage Ratio of at least 1.25 to 1.00. The term “Fixed Charge Coverage Ratio” means the ratio, computed for the Company ~~issued an Amended~~on a consolidated basis, of net income plus income tax expense, plus amortization expense, plus depreciation expense, plus interest expense, and ~~Restated Revolving Line~~plus dividends received from joint ventures, minus unfinanced capital expenditures and equity in income from joint ventures, all computed for the twelve month period then ending, to scheduled principal payments made, plus scheduled finance lease payments made, plus interest expense paid, plus income tax expense paid, and plus cash distributions and dividends paid, all computed for the same twelve month period then ending.

The Credit Agreement also contains customary events of ~~Credit Note~~default, including, without limitation, payment defaults, material inaccuracy of representations and warranties, covenant defaults, bankruptcy and insolvency proceedings, cross-defaults to ~~PNC Bank, which increased~~certain other agreements, breach of any financial covenant and change of control. Upon the ~~Company’s line~~occurrence and during the continuance of ~~credit from $5,000,000 to $7,000,000 until~~ ~~August 16, 2022,~~ ~~at which time~~any event of default, JPM may accelerate the ~~line of credit will go back to $5,000,000 until its expiration date on~~ ~~January 7, 2023.~~ ~~Additionally, on~~ ~~January 4, 2022,~~ ~~the Company issued an Amended and Restated Revolving Line of Credit Note, which extended the maturity date to~~ ~~January 7, 2023~~ and revised the rate at which amounts outstanding under the line of credit bear interest to equal a per annum rate equal to the daily Bloomberg Short-Term Bank Yield Index plus 250 basis points (2.50%). The other material termspayment of the ~~line of credit were~~ ~~not~~ ~~affected by these amendments or~~obligations thereunder and exercise various other ~~immaterial amendments that have been executed since~~customary default remedies.

In connection with the execution of the Credit Agreement described above, on January 6, 2023, the Amended and Restated Loan Agreement dated August 31, ~~2021.~~

~~Borrowings of $4,700,000 were outstanding under the line of credit as of~~ ~~May 31, 2022~~ 2021 between Northern Technologies International Corporation and ~~0 amounts were outstanding as of~~ ~~August 31, 2021.~~ ~~Such outstanding borrowings were used primarily to fund the Company’s acquisition of the remaining ownership interest of Zerust India. The average interest rate during each of the~~ ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~May 31, 2022~~ PNC Bank, National Association was ~~2.92% and 2.69%, respectively.~~terminated.

~~The obligations~~In accordance with ASC Topic No. 470, “Debt – Modifications and Extinguishments” (Topic 470), the transactions noted above were determined to be a modification of the ~~Company under~~existing debt.

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 ~~a lien on all of~~an office building owned by NTIC China and the ~~Company’s personal property, excepting~~loan agreements contain certain ~~liens consented to in writing by PNC. The loan agreement contains covenants, including affirmative~~ financial ~~covenants, such as the maintenance of a minimum fixed charge coverage ratio of~~ ~~1.10:1.00,~~ ~~and negative covenants, which, among other things, limit the incurrence of additional indebtedness, loans and equity investments, disposition of assets, mergers and consolidations~~ and other ~~matters customarily restricted in such agreements. As of~~ ~~May 31, 2022,~~ ~~the~~covenants. The Company was in compliance with ~~all debt covenants.~~

Asthe covenants as of May 31, ~~2022~~ ~~and~~ ~~August 31, 2021,~~ ~~the Company did~~ ~~not~~ ~~have any letters~~2023. The current outstanding balance as of ~~credit outstanding with respect to the letter of credit sub-facility available under the revolving line of credit with PNC Bank. As of~~ May 31, ~~2022~~ ~~and~~ ~~August 31, 2021,~~ ~~the Company had $72,418 of letters of credit with JP Morgan Chase Bank that are performance based and set to expire between~~ ~~2021~~ ~~and~~ ~~2022.~~2023 for both term loans was USD $2,812,504.

8.	**~~10.~~STOCKHOLDERS’ EQUITY**

During the nine months ended May 31, ~~2022,~~ 2023, the Company’s Board of Directors declared cash dividends on the following dates in the following amounts to holders of record of the Company’s common stock as of the following record dates:

Declaration Date

Amount

Record Date

Payable Date
October 20, 2021
$ 0.07
November 3, 2021

November 17, 2021
January 21, 2022
$ 0.07
February 2, 2022

February 16, 2022
April 22, 2022
$ 0.07
May 4, 2022

May 18, 2022

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

On ~~April 23, 2020,~~ ~~the Company announced the temporary suspension of its quarterly cash dividend pending clarity on the financial impact of COVID-~~19 ~~on the Company. On~~ ~~January 15, 2021,~~ ~~the Company announced the reinstatement of its quarterly cash dividend.~~ During the nine months ended May 31, ~~2021,~~ 2022, the Company’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
January 15, 2021
$ 0.065
February 3, 2021

February 17, 2021
April 23, 2021
$ 0.065
May 5, 2021

May 19, 2021

Declaration Date	Amount	Record Date	Payable Date
October 20, 2021	$0.07	November 3, 2021	November 17, 2021
January 21, 2022	$0.07	February 2, 2022	February 16, 2022
April 22, 2022	$0.07	May 4, 2022	May 18, 2022

During the nine months ended May 31, ~~2022~~ 2023 and ~~2021,~~2022, the Company repurchased no shares of its common stock.

~~During the~~ ~~nine~~ ~~months ended~~ ~~May 31, 2022,~~ ~~the Company granted stock options under the Northern Technologies International Corporation~~ ~~2019~~ ~~Stock Incentive Plan (as amended, the~~ ~~2019~~ Plan) to purchase an aggregate of 174,840 shares of its common stock to various employees and directors. The weighted average per share exercise price of the stock options is $16.97. The exercise price of the stock options is equal to the fair market value of the Company’s common stock on the date of grant. During the ~~nine~~ ~~months ended~~ ~~May 31, 2022,~~ stock options to purchase an aggregate of 51,218 shares of common stock were exercised at a weighted average exercise price of $6.60 per share, resulting in the net issuance of 42,071 shares of common stock since some of the options were exercised on a net cashless exercise basis.

~~During the~~ ~~nine~~ ~~months ended~~ ~~May 31, 2021,~~ ~~the Company granted stock options under the~~ ~~2019~~ Plan to purchase an aggregate of 419,874 shares of its common stock to various employees and directors. The weighted average per share exercise price of the stock options is $8.24. The exercise price of the stock options is equal to the fair market value of the Company’s common stock on the date of grant. During the ~~nine~~ ~~months ended~~ ~~May 31, 2021,~~ no ~~stock options to purchase common stock were exercised.~~

The Company issued ~~2,636~~3,620 and ~~4,646~~2,636 shares of common stock on September 1, ~~2021~~ 2022 and ~~2020,~~2021, respectively, under the Northern Technologies International Corporation Employee Stock Purchase Plan (ESPP). The Company issued ~~2,966~~3,566 and ~~5,225~~2,966 shares of common stock on March 1, ~~2022~~ 2023 and ~~2021,~~2022, respectively, under the ESPP. The ESPP is compensatory for financial reporting purposes. As of May 31, ~~2021,~~ ~~69,220~~2023,62,034 shares of common stock remained available for sale under the ESPP.

~~11.~~~~NET INCOME PER COMMON SHARE~~
9.
NET INCOME PER COMMON SHARE

Basic net income per common share is computed by dividing net income by the weighted average number of common shares outstanding. Diluted net income per share assumes the exercise of stock options using the treasury stock method, if dilutive.

The following is a reconciliation of the net income per share computation for the three and nine months ended May 31, ~~2022~~ 2023 and ~~2021:~~2022:

	Three Months Ended May 31,				Nine Months Ended May 31,				Three Months Ended May 31,				Nine Months Ended May 31,
Numerator:	2022		2021		2022		2021		2023		2022		2023		2022
Net income attributable to NTIC	$	1,000,167	$	2,053,916	$	5,676,773	$	4,628,890	$	1,525,596	$	1,000,167	$	2,913,086	$	5,676,773

Denominator:
Basic – weighted shares outstanding		9,227,912		9,109,861		9,216,216		9,107,243		9,369,923		9,227,912		9,355,776		9,216,216
Weighted shares assumed upon exercise of stock options		350,886		862,139		466,430		721,809		258,146		350,885		346,834		466,430
Diluted – weighted shares outstanding		9,578,797		9,972,000		9,682,646		9,829,052		9,628,069		9,578,797		9,702,610		9,682,646
Basic net income per share:	$	0.11	$	0.23	$	0.62	$	0.51	$	0.16	$	0.11	$	0.31	$	0.62
Diluted net income per share:	$	0.11	$	0.21	$	0.59	$	0.47	$	0.16	$	0.11	$	0.30	$	0.59

The dilutive impact summarized above relates to the periods when the average market price of the Company’s common stock exceeded the exercise price of the potentially dilutive option securities granted. Net income per common share was based on the weighted average number of common shares outstanding during the periods when computing basic net income per share. When dilutive, stock options are included as equivalents using the treasury stock market method when computing the diluted net income per share. Excluded from the computation of diluted net income per share for the three and nine months ended May 31, ~~2022~~ 2023 were options outstanding to purchase ~~327,793~~322,246 shares of common stock. Excluded from the computation of diluted net income per share for the three and nine months ended May 31, ~~2021~~ 2022 were options outstanding to purchase ~~136,221~~327,793 shares of common stock.

~~12.~~~~STOCK-BASED COMPENSATION~~

10.	STOCK-BASED COMPENSATION

~~The Company has~~ ~~three~~ ~~stock-based compensation plans~~A summary of stock option activities under ~~which stock options or other stock-based awards have been granted:~~ the Northern Technologies International Corporation Amended and Restated 2019 Stock Incentive Plan (the 2019 Plan) and the Northern Technologies International Corporation Amended and Restated 2007 Stock Incentive Plan ((the 2007 Plan) ~~and the Northern Technologies International Corporation Employee Stock Purchase Plan. The~~ ~~2019~~ ~~Plan replaced the~~ ~~2007~~ ~~Plan with respect to future grants; and, therefore,~~ no ~~further awards~~ ~~may~~ ~~be made under the~~ ~~2007~~ ~~Plan. The Compensation Committee of the Board of Directors and the Board of Directors administer these plans.~~is as follows:

~~The~~ ~~2019~~ Plan provides for the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, stock unit awards, performance awards, and stock bonuses to eligible recipients to enable the Company and its subsidiaries to attract and retain qualified individuals through opportunities for equity participation in the Company and to reward those individuals who contribute to the achievement of the Company’s economic objectives. On ~~January 15, 2021,~~ ~~the Company’s stockholders approved certain amendments to the~~ ~~2019~~ ~~Plan, including an increase in the number of shares of common stock available for issuance under the plan by an additional 800,000 shares. Subject to adjustment as provided in the~~ ~~2019~~ ~~Plan, up to a maximum of 1,600,000 shares of the Company’s common stock are issuable under the~~ ~~2019~~ ~~Plan. Options granted generally have a term of~~ ~~ten~~ ~~years and become exercisable over a~~ ~~one- or~~ ~~three-year period beginning on the~~ ~~one~~-year anniversary of the date of grant. Options are granted at per share exercise prices equal to the market value of the Company’s common stock on the date of grant. The Company issues new shares upon the exercise of options. As of ~~May 31, 2022,~~ ~~options to purchase an aggregate of 895,484 shares of the Company’s common stock were outstanding under the~~ ~~2019~~ ~~Plan and 704,516 shares of the Company’s common stock remain available for grant under the~~ ~~2019~~ ~~Plan. As of~~ ~~May 31, 2022,~~ ~~options to purchase an aggregate of 654,789 shares of the Company’s common stock were outstanding under the~~ ~~2007~~ ~~Plan.~~

~~The Company granted options to purchase an aggregate of 174,840 and 419,874 shares of its common stock during the~~ ~~nine~~ ~~months ended~~ ~~May 31, 2022~~ ~~and~~ ~~2021,~~ respectively. The fair value of option grants is determined at the date of grant using the Black-Scholes option pricing model with the assumptions listed below. The Company recognized compensation expense of $232,883 and $698,649 during the ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~May 31, 2022,~~ ~~respectively, and compensation expense of $160,834 and $503,338 during the~~ ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~May 31, 2021,~~ ~~respectively, related to the options that vested during such time period. As of~~ ~~May 31, 2022,~~ ~~the total compensation cost for non-vested options~~ ~~not~~ ~~yet recognized in the Company’s consolidated statements of operations was $1,242,602. Stock-based compensation expense of $232,883 is expected through the remainder of fiscal~~ ~~2022~~ ~~and $671,526 and $338,193 is expected to be recognized during fiscal~~ ~~2023~~ ~~and fiscal~~ ~~2024,~~ ~~respectively, based on outstanding options as of~~ ~~May 31, 2022.~~ ~~Future option grants will impact the compensation expense recognized. Stock-based compensation expense is included in general and administrative expense on the consolidated statements of operations.~~

~~The fair value of each option grant is estimated on the grant date using the Black-Scholes option pricing model with the following assumptions and results for the grants:~~

Three and Nine Months Ended May 31,

2022

2021

Dividend yield
1.65 % 2.37 %
Expected volatility
45.4 % 45.6 %
Expected life of option (in years)
10 10
Average risk-free interest rate
0.77 % 0.28 %

	Number of Options Outstanding			Weighted Average Exercise Price
Outstanding as of August 31, 2022		1,544,727		$	10.23
Granted		277,613		$	11.41
Exercised		(178,331	)	$	6.03
Outstanding as of May 31, 2023		1,644,009		$	10.88
Exercisable as of May 31, 2023		1,166,772		$	10.51

The weighted average per share fair value of options granted during the nine months ended May 31, 2023 and 2022 was $4.87 and ~~2021~~ ~~was~~ $7.29, ~~and $3.12,~~ respectively. The weighted average remaining contractual life of the options outstanding as of May 31, 2023 and 2022 ~~and~~ ~~2021~~was ~~6.02~~6.16 years and ~~6.40~~6.02 years, respectively.

~~13.~~~~SEGMENT AND GEOGRAPHIC INFORMATION~~The Company recognized compensation expense of $339,423 and $998,311 and $232,883 and $698,649 during the three and nine months ended May 31, 2023 and 2022, respectively. As of May 31, 2023, there was $1,366,860 of unrecognized compensation expense. The amount is expected to be recognized over a period of 2.5 years

11.	SEGMENT AND GEOGRAPHIC INFORMATION

Segment Information

The Company’s chief operating decision maker is its Chief Executive Officer. The Company’s business is organized into 2two reportable segments: ZERUST® and Natur-Tec®. The Company has been selling its proprietary ZERUST® rust and corrosion inhibiting products and services to the automotive, electronics, electrical, mechanical, military and retail consumer markets for ~~over~~ 45almost 50 years and, more recently, has targeted and expanded into the oil and gas industry. The Company also sells a portfolio of bio-based and compostable (fully biodegradable) polymer resins and finished products under the Natur-Tec® brand.

The following table sets forth the Company’s net sales for the three and nine months ended May 31, ~~2022~~ 2023 and ~~2021~~2022 by segment:

	Three Months Ended May 31,				Nine Months Ended May 31,				Three Months Ended May 31,				Nine Months Ended May 31,
	2022		2021		2022		2021		2023		2022		2023		2022
ZERUST® net sales	$	14,446,832	$	12,378,215	$	41,988,394	$	32,882,882	$	16,100,674	$	14,446,832	$	45,929,422	$	41,988,394
Natur-Tec® net sales		4,518,089		3,040,309		11,918,579		8,097,636		4,869,052		4,518,089		13,263,895		11,918,579
Total net sales	$	18,964,921	$	15,418,524	$	53,906,973	$	40,980,518	$	20,969,726	$	18,964,921	$	59,193,317	$	53,906,973

The following table sets forth the Company’s cost of goods sold for the three and nine months ended May 31,~~2022~~ 2023 and ~~2021~~2022 by segment:

	Three Months Ended May 31,										Nine Months Ended May 31,										Three Months Ended May 31,										Nine Months Ended May 31,
	2022		% of Product Sales*			2021		% of Product Sales*			2022		% of Product Sales*			2021		% of Product Sales*			2023		% of Product Sales*			2022		% of Product Sales*			2023		% of Product Sales*			2022		% of Product Sales*
Direct cost of goods sold
ZERUST®	$	8,409,392		58.2	%	$	7,091,220		57.3	%	$	25,267,333		60.2	%	$	18,928,272		57.6	%	$	9,116,091		56.6	%	$	8,409,392		58.2	%	$	26,410,796		57.5	%	$	25,267,333		60.2	%
Natur-Tec®		3,432,152		76.0	%		2,251,996		74.1	%		9,129,686		76.6	%		5,703,807		70.4	%		3,576,676		73.5	%		3,432,152		76.0	%		10,078,385		76.0	%		9,129,686		76.6	%
Indirect cost of goods sold		881,289		—			809,366		—			2,580,601		—			2,365,503		—			587,817		—			881,289		—			2,258,684		—			2,580,601		—
Total net cost of goods sold	$	12,722,833				$	10,152,582				$	36,977,620				$	26,997,582				$	13,280,584				$	12,722,833				$	38,747,865				$	36,977,620

______________________

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

The Company utilizes product net sales and direct and indirect cost of goods sold for each product in reviewing the financial performance of a product type. Further allocation of Company expenses or assets, aside from amounts presented in the tables above, is not utilized in evaluating product performance, nor does such allocation occur for internal financial reporting.

Geographic Information

Net sales by geographic location for the three and nine months ended May 31, ~~2022~~ 2023 and ~~2021~~2022 were as follows:

	Three Months Ended May 31,				Nine Months Ended May 31,				Three Months Ended May 31,				Nine Months Ended May 31,
	2022		2021		2022		2021		2023		2022		2023		2022
Inside the U.S.A. to unaffiliated customers	$	6,884,726	$	6,717,886	$	18,157,010	$	16,198,372	$	7,729,820	$	6,884,726	$	21,958,978	$	18,157,010
Outside the U.S.A. to:
Joint ventures in which the Company is a shareholder directly and indirectly		528,665		1,253,919		2,252,618		2,361,165		732,437		528,665		2,895,665		2,252,618
Unaffiliated customers		11,551,530		7,446,719		33,497,345		22,420,981		12,507,469		11,551,530		34,338,674		33,497,345
	$	18,964,921	$	15,418,524	$	53,906,973	$	40,980,518	$	20,969,726	$	18,964,921	$	59,193,317	$	53,906,973

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

Fees for services provided to joint ventures by geographic location as a percentage of total fees for services provided to joint ventures during the three and nine months ended May 31, ~~2022~~ 2023 and ~~2021~~2022 were as follows:

	Three Months Ended May 31,										Three Months Ended May 31,
	2022		% of Total Fees for Services Provided to Joint Ventures			2021		% of Total Fees for Services Provided to Joint Ventures			2023		% of Total Fees for Services Provided to Joint Ventures			2022		% of Total Fees for Services Provided to Joint Ventures
Poland											$	224,288		16.5	%	$	171,181		12.9	%
Germany	$	204,316		15.4	%	$	232,026		14.6	%		209,398		15.4	%		204,316		15.4	%
Poland		171,181		12.9	%		226,174		14.2	%
Japan		168,075		12.6	%		200,270		12.6	%		152,593		11.2	%		168,075		12.6	%
Sweden												144,981		10.7	%		130,681		9.8	%
France		123,869		9.3	%		119,172		7.5	%		128,149		9.4	%		123,869		9.3	%
Sweden		130,681		9.8	%		127,710		8.0	%
United Kingdom		89,363		6.7	%		113,886		7.2	%
Thailand		95,574		7.2	%		108,842		6.8	%
Finland		92,036		6.9	%		75,577		4.8	%		103,879		7.6	%		92,036		6.9	%
Czech Republic		84,797		6.4	%		109,680		6.9	%		99,090		7.3	%		84,797		6.4	%
Thailand												82,725		6.1	%		95,574		7.2	%
United Kingdom												83,586		6.1	%		89,363		6.7	%
South Korea		78,542		5.9	%		78,507		4.9	%		61,669		4.5	%		78,542		5.9	%
Other		91,554		6.9	%		197,777		12.4	%		70,953		5.2	%		91,554		6.9	%
	$	1,329,988		100.0	%	$	1,589,621		100.0	%	$	1,361,311		100.0	%	$	1,329,988		100.0	%

Nine Months Ended May 31,

2022

% of Total Fees for Services Provided to Joint Ventures

2021

% of Total Fees for Services Provided to Joint Ventures

Germany
$ 639,738 16.7 % $ 692,770 15.8 %
Poland
520,807 13.6 % 626,527 14.3 %
Japan
486,815 12.7 % 561,725 12.8 %
France
355,827 9.3 % 322,717 7.4 %
Sweden
337,929 8.8 % 365,095 8.3 %
United Kingdom
271,027 7.1 % 247,560 5.6 %
Thailand
271,046 7.1 % 306,151 7.0 %
Finland
257,635 6.7 % 223,356 5.1 %
Czech Republic
224,280 5.8 % 268,571 6.1 %
South Korea
205,342 5.4 % 241,805 5.5 %
Other
265,309 6.9 % 532,589 12.1 %
$ 3,835,755 100.0 % $ 4,388,866 100.0 %

	Nine Months Ended May 31,
	2023		% of Total Fees for Services Provided to Joint Ventures			2022		% of Total Fees for Services Provided to Joint Ventures
Poland	$	610,911		16.1	%	$	520,807		13.6	%
Germany		606,189		16.0	%		639,738		16.7	%
Japan		454,308		12.0	%		486,815		12.7	%
Sweden		358,032		9.4	%		337,929		8.8	%
France		356,444		9.4	%		355,827		9.3	%
Finland		285,931		7.5	%		257,635		6.7	%
Czech Republic		270,422		7.1	%		224,280		5.8	%
Thailand		257,282		6.8	%		271,046		7.1	%
United Kingdom		206,925		5.5	%		271,027		7.1	%
South Korea		190,866		5.0	%		205,342		5.4	%
Other		198,552		5.2	%		265,309		6.8	%
	$	3,795,862		100.0	%	$	3,835,755		100.0	%

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

	As of May 31, 2022		As of August 31, 2021		At May 31, 2023		At August 31, 2022
China	$	5,528,663	$	5,110,071	$	5,805,738	$	5,826,898
Other		617,674		453,199		770,863		565,022
United States		6,642,735		6,967,761		7,234,329		5,778,573
Total property and equipment and patents	$	12,789,072	$	12,531,031
Total property and equipment, net					$	13,810,930	$	12,170,493

	Three Months Ended May 31,				Nine Months Ended May 31,
	2023		2022		2023		2022
China	$	3,318,373	$	3,624,396	$	9,936,808	$	11,845,989
Brazil		1,488,510		1,554,364		4,062,718		3,786,670
India		5,145,423		4,824,004		14,356,708		13,369,769
Other		3,287,600		2,077,431		8,878,105		6,747,535
United States		7,729,820		6,884,726		21,958,978		18,157,010
Total net sales	$	20,969,726	$	18,964,921	$	59,193,317	$	53,906,973

Three Months Ended May 31,

Nine Months Ended May 31,

2022

2021

2022

2021

China
$ 3,624,396 $ 4,037,493 $ 11,845,989 13,025,127
Brazil
1,554,364 1,237,586 3,786,670 2,756,008
India
4,824,004 1,540,734 13,369,769 4,036,208
Other
2,077,431 1,884,825 6,747,535 4,964,803
United States
6,884,726 6,717,886 18,157,010 16,198,372
Total net sales
$ 18,964,921 $ 15,418,524 $ 53,906,973 $ 40,980,518

Long-lived assets consist of property and ~~equipment and patents.~~equipment. These assets are periodically reviewed to assure the net realizable value from the estimated future production based on forecasted sales exceeds the carrying value of the assets.

Sales to the Company’s joint ventures are included in the foregoing segment and geographic information; however, sales by the Company’s joint ventures to other parties are not included. The foregoing segment and geographic information represents only sales recognized directly by the Company and sold in that geographic territory.

All joint venture operations, including equity in income, fees for services and related dividends, are primarily related to ZERUST® products and services.

~~14.~~~~COMMITMENTS AND CONTINGENCIES~~

~~Annual Bonus Plan~~

On ~~August 26, 2021,~~ the Compensation Committee of the Board of Directors of the Company approved the material terms of an annual bonus plan for the Company’s executive officers as well as certain officers and employees for the fiscal year ending ~~August 31, 2022.~~ ~~For fiscal~~ ~~2022,~~ as in past years, the total amount available under the bonus plan for all plan participants, including executive officers, is dependent upon the Company’s earnings before interest, taxes, and other income (EBITOI), as adjusted to take into account amounts to be paid under the bonus plan and certain other adjustments (Adjusted EBITOI). Each plan participant’s percentage of the overall bonus pool is based upon the number of plan participants, the individual’s annual base salary, and the individual’s position and level of responsibility within the Company. In the case of each of the Company’s executive officer participants, 75% of the amount of their individual bonus payout will be determined based upon the Company’s actual EBITOI for fiscal ~~2022~~ ~~compared to a pre-established target EBITOI for fiscal~~ ~~2022,~~ and 25% of the payout will be determined based upon such executive officer’s achievement of certain pre-established individual performance objectives. The payment of bonuses under the plan is discretionary, and bonuses ~~may~~ be paid to executive officer participants in both cash and shares of the Company’s common stock, the exact amount and percentages of which are determined by the Company’s Board of Directors, upon recommendation of the Compensation Committee, after the completion of the Company’s consolidated financial statements for fiscal ~~2022.~~ ~~There was $1,200,000 recognized for management bonuses for the~~ ~~nine~~ ~~months ended~~ ~~May 31, 2022,~~ ~~compared to $1,800,000 recognized for management bonuses for the~~ ~~nine~~ ~~months ended~~ ~~May 31, 2021.~~
12.
COMMITMENTS AND CONTINGENCIES

Concentrations

~~Three~~Two joint ventures (consisting of the Company’s joint ventures in South Korea and Thailand) accounted for 65.1% of the Company’s trade joint venture receivables as of May 31, 2023, and three joint ventures (consisting of the Company’s joint ventures in South Korea, Japan and Thailand) accounted for 62.3% of the Company’s trade joint venture receivables as of May 31, 2022~~and~~ ~~three~~ ~~joint ventures (consisting of the Company’s joint ventures in India, South Korea and Thailand) accounted for 73.7% of the Company’s trade joint venture receivables as of~~ ~~May 31, 2021.~~

Legal Matters

From time to time, the Company is subject to various other claims and legal actions in the ordinary course of its business. The Company records a liability in its consolidated financial statements for costs related to claims, including future legal costs, settlements and judgments, where the Company has assessed that a loss is probable and an amount could be reasonably estimated. If the reasonable estimate of a probable loss is a range, the Company records the most probable estimate of the loss or the minimum amount when no amount within the range is a better estimate than any other amount. The Company discloses a contingent liability even if the liability is not probable or the amount is not estimable, or both, if there is a reasonable possibility that material loss may have been incurred. In the opinion of management, as of May 31, ~~2022,~~ 2023, the amount of liability, if any, with respect to these matters, individually or in the aggregate, will not materially affect the Company’s consolidated results of operations, financial position or cash flows.

13.	FAIR VALUE MEASUREMENTS

~~15.~~

Assets and liabilities that are measured at fair value on a recurring basis primarily relate to marketable equity securities. These items are marked-to-market at each reporting period, and the Company estimates that market value approximates costs.

The following tables provide information by level for assets and liabilities that are measured at fair value on a recurring basis:

Fair Value Measurements~~SUPPLEMENTAL CASH FLOW INFORMATION~~

Using Inputs Considered as

Fair value as of

May 31, 2023

Level 1

Level 2

Level 3

Available for sale securities

—

Fair Value Measurements
Using Inputs Considered as

Fair value as of
August 31, 2022

Level 1

Level 2

Level 3

Available for sale securities
$ 5,590 $ 5,590 $ — $ —
17
There were no transfers between Level 1, Level 2, or Level 3 during the three and nine months ended May 31, 2023 or 2022.
14.
SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental disclosures of cash flow information consisted of:

Three Months Ended May 31,

Nine Months Ended May 31,

2022

2021

2022

2021

Cash paid for interest
$ 23,784 $ 3,044 $ 34,079 $ 10,661

Three Months Ended May 31,

Nine Months Ended May 31,

2023

2022

2023

2022

Cash paid for interest
$ 136,168 $ 23,784 $ 342,643 $ 34,079

~~16.~~~~INCOME TAXES~~
15.
INCOME TAXES

Income tax expense for the three and nine months ended May 31, ~~2022~~ 2023 was $542,295 and $834,823, respectively, compared to $604,314 and $1,260,437, respectively, ~~compared to $276,338 and $929,588, respectively,~~ for the three and nine months ended May 31, ~~2021.~~ 2022. The expense was largely due to foreign operations. The Company has federal and state tax credit carry forwards, net operating loss carry forwards and foreign tax carry forwards. The Company has recorded a full valuation allowance against the U.S. deferred tax assets as of May 31, ~~2022~~ 2023 and August 31, ~~2021.~~2022.

20

~~ITEM 2.~~
ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management’s Discussion and Analysis provides material historical and prospective disclosures intended to enable investors and other users to assess NTIC’s financial condition and results of operations. Statements that are not historical are forward-looking and involve risks and uncertainties discussed under the heading “Part I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Forward-Looking Statements” in this report and under “Part 1. Item 1A. Risk Factors” in our annual report on Form 10-K for the fiscal year ended August 31, ~~2021.~~2022. The following discussion of the results of the operations and financial condition of NTIC should be read in conjunction with NTIC’s consolidated financial statements and the related notes thereto included under the heading “Part I. Item 1. Financial Statements.”

Business Overview

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 45~~almost 50 years and, ~~in recent years,~~more recently, has ~~targeted and~~also expanded into the oil and gas industry. Additionally, NTIC ~~also~~ 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.

NTIC’s ZERUST® rust and corrosion inhibiting products include plastic and paper packaging, liquids, coatings, rust removers, cleaners, and diffusers as well as engineered solutions designed specifically for the oil and gas industry. NTIC also offers worldwide, on-site, technical consulting for rust and corrosion prevention issues. NTIC’s technical service consultants work directly with the end users of NTIC’s ZERUST® rust and corrosion inhibiting products to analyze their specific needs and develop systems to meet their performance requirements. In North America, NTIC sells its ZERUST® corrosion prevention solutions through a network of independent distributors and agents supported by a direct sales force.

Internationally, NTIC sells its ZERUST® corrosion prevention solutions through its wholly-owned subsidiary in China, NTIC (Shanghai) Co., Ltd. (NTIC China), starting September 1, 2021 its wholly-owned subsidiary in India, ~~Harita-NTI~~HNTI Ltd. (Zerust India), its majority-owned joint venture holding company for NTIC’s joint venture investments in the Association of Southeast Asian Nations (ASEAN) region, NTI Asean LLC (NTI Asean), certain majority-owned and wholly-owned subsidiaries, and joint venture arrangements in North America, Europe, and Asia. NTIC also sells products directly to its European joint venture partners through its wholly-owned subsidiary in Germany, NTIC Europe GmbH (NTI Europe).

One of NTIC’s strategic initiatives is to expand into and penetrate other markets for its ZERUST® corrosion prevention technologies. Consequently, for the past several years, NTIC has focused significant sales and marketing efforts on the oil and gas industry, as the infrastructure that supports that industry is typically constructed using metals that are highly susceptible to corrosion. NTIC believes that its ZERUST® corrosion prevention solutions will minimize maintenance downtime on critical oil and gas industry infrastructure, extend the life of such infrastructure, and reduce the risk of environmental pollution due to leaks caused by corrosion.

NTIC markets and sells its ZERUST® rust and corrosion prevention solutions to customers in the oil and gas industry ~~across several~~in a continuously increasing number of countries either directly, through its subsidiaries, or through its joint venture partners and other strategic partners. The sale of ZERUST® corrosion prevention solutions to customers in the oil and gas industry typically involves long sales cycles, often including multi-year trial periods with each customer and a slow integration process thereafter.

2119

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 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.

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.

~~Acquisition~~Impact of ~~Zerust India~~
~~On September 21, 2021, NTIC announced that it acquired the remaining 50% ownership interest in its Indian joint venture, Zerust India, for $6,250,000 in cash, effective as of September 1, 2021.~~COVID-19

As a result of the ~~acquisition of Zerust India, NTIC’s revenues~~novel coronavirus (COVID-19) and operating expenses increased and its equity in income from joint ventures decreased during the three and nine months ended May 31, 2022 as compared to the three and nine months ended May 31, 2021, and it is anticipated that the acquisition will continue to have these effectsrelated government mandated restrictions on NTIC’s ~~financial results during~~business, as well as the ~~remainder~~businesses of ~~fiscal 2022.~~
~~See Note 3 to NTIC’s consolidated financial statements for a discussion of Zerust India.~~
~~Impact of the COVID-19 Pandemic~~
The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and shipping, created significant volatility and disruption in financial markets and resulted in an economic recession. The outbreak and continuing rapid spread of COVID-19 has resulted in the curtailment of business activities worldwide from time to time and has caused weakened economic conditions, both in the United States and abroad.
As part of efforts to contain the spread of COVID-19, federal, state, local and foreign governments imposed various restrictions on the conduct of business and travel, some of which remain in place in whole or in part and some of which have been or may be reinstated. Government restrictions, such as stay-at-home orders, quarantines and worker absenteeism as a result of COVID-19, led to a significant number of business closures and slowdowns. These business closures and slowdowns adversely impacted and may continue to adversely impact NTIC directly and caused some of NTIC’sits joint ventures, customers and suppliers, disruption to ~~operate at a fraction of their capacities or wholly lock down, which disrupted~~the Company’s business and ~~may continue to disrupt NTIC’s sales~~the manufacture and ~~production.~~
~~As the events surrounding the COVID-19 pandemic unfolded, NTIC’s primary focus was, and continues to be, the health, safety and wellbeing~~sale of its employees, customers and suppliers. In order to continue its operations, as permitted by respective state, local and foreign governments, NTIC has adopted numerous safety measures in accordance with U.S. Centers for Disease Control and Prevention, World Health Organization, and federal, state, local and foreign guidance in order to protect its employees, customers and suppliers. These safety measures include, but are not limited to, adhering to social distancing protocols, enabling the majority of its employees to work from home, suspending non-essential travel, disinfecting facilities and workspaces extensively and frequently, suspending all non-essential visitors and requiring employees who must be present at NTIC’s facilities to wear face coverings. NTIC expects to continue such safety measures for the foreseeable future and may take further actions, or adapt these existing policies, as government authorities may require or recommend or as it may determine to be in the best interests of its employees, customers and suppliers.
22

NTIC has been balancing its safety-focused approach with the needs of its customers. Government mandated measures resulting in the substantial curtailment of business activities generally have excluded certain essential businessesproducts and services ~~including certain manufacturing. With the exception of the temporary closures of NTIC’s facilities in China and India~~continued to occur during the COVID-19 pandemic in 2020 and again sporadically during 2021 and 2022, NTIC’s manufacturing activities are generally considered part of the “critical sector” with respect to state and local government orders. This has allowed NTIC to continue to receive orders and provide uninterrupted order fulfillment to its customers. However, its facilities have been operating at a reduced capacity in order to abide by local government requirements and recommendations, such as social distancing practices, and in response to reduced demand. During the first nine months of fiscal ~~2022, certain~~2023, including in particular in China, and may continue during the remainder of NTIC’s facilities continued to be impacted by reduced levels of production, manufacturing inefficiencies due to the reconfiguration of certain of its manufacturing processes in order to implement social distancing protocols and reduced demand. NTIC has engaged and continues to engage in communications with its suppliers in an attempt to identify and mitigate supply chain risks and shipping delays and proactively manage inventory levels in order to align production with demand.fiscal 2023. While domestic and international governmental measures may be modified or extended, NTIC currently expects that its global facilities will remain operational, although operating at reduced production capacity at certain of its facilities. However, such expectation is dependent upon future governmental actions and demand for NTIC’s products, the stability of its global supply chain and the ability of carriers to transport supplies to its facilities and products to its customers.
~~As a result of the global economic slowdown caused by the COVID-19 pandemic, NTIC experienced softened~~ demand in ~~various regions and markets~~China improved during the ~~nine months ended May 31, 2022, which had an adverse effect on NTIC’s operating results and financial condition. NTIC expects this softness in sales to continue through at least the fourth~~third quarter of fiscal 2022. In addition, NTIC has experienced supply shortages and price increases on raw materials and increased labor costs, which have adversely affected its margins. NTIC has also experienced increased shipping costs and shipping delays2023 as a result of ~~freight container shortages. These issues have persisted into~~government restrictions that were lifted, NTIC continued to experience softened demand for its products in China during the ~~fourth quarter~~first nine months of fiscal 2022 and are expected to persist into fiscal 2023, especially in light of recently increased inflationary pressures. Due to the international reach of COVID-19, NTIC’s international joint ventures have also been adversely impacted. It is not possible to predict how long the pandemic will last or the time that it will take for economic activity to return to prior pre-pandemic levels for all business units.2023.

~~Any of these events could materially adversely affect NTIC’s business, operating results and financial condition.~~
Worldwide Supply Chain Disruptions

Worldwide supply chain disruptions, which were initially brought about by the impact of ~~the~~ COVID-19, ~~pandemic,~~ have persisted despite the recovery in the global economy and financial markets. These issues continued during the first nine months of fiscal ~~2022~~2023 and, although these issues have shown some improvement, are expected to continue to some degree throughout the remainder of ~~fiscal 2022 and into~~ fiscal 2023. NTIC has experienced longer lead times for raw materials, has been forced to find new suppliers of certain raw materials, and has experienced raw material cost increases compared to prior fiscal quarters. Additionally, NTIC has experienced significantly longer shipping times and significant price increases per shipping container compared to prior fiscal quarters due to ocean freight capacity issues resulting from increased demand for shipping and reduced capacity and equipment. These and other issues resulting from worldwide supply chain disruptions have improved but are expected to continue ~~through~~to some degree throughout the remainder of ~~fiscal 2022 and into~~ fiscal 2023 and could continue to have a material adverse effect on NTIC’s business, operating results and financial condition. The precise financial impact and duration, however, cannot be reasonably estimated at this time.
23

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

Highlights of NTIC’s financial results for the three and nine months ended May 31, ~~2022~~2023 include the following, with increases or decreases in each case as compared to the respective prior fiscal year period:

●
NTIC’s consolidated net sales increased ~~23.0%~~10.6% and ~~31.5%~~9.8% during the three and nine months ended May 31, 2022, respectively, compared to the three and nine months ended May 31, 2021. NTIC’s consolidated net sales for the three and nine months ended May 31, 2022 were positively affected by incremental sales as a result of the Zerust India acquisition and increased demand.
●
During the three and nine months ended May 31, 2022, 76.2% and 77.9% of NTIC’s consolidated net sales, respectively, were derived from sales of ZERUST® products and services, which increased 16.7% and 27.7% to $14,446,832 and $41,988,394, respectively, compared to $12,378,215 and $32,882,882 during the three and nine months ended May 31, 2021, respectively. These increases were due to incremental sales as a result of the Zerust India acquisition and increased sales to new and existing customers due to increased global demand compared to the prior fiscal year periods. NTIC’s consolidated net sales for the nine months ended May 31, 2022 included $3,054,918 of sales made to customers in the oil and gas industry compared to $1,947,420 for the nine months ended May 31, 2021.
●
~~Net sales of Natur-Tec® products increased 48.6% and 47.2% during the three and nine months ended May 31, 2022,~~2023, respectively, compared to the three and nine months ended May 31, 2022 primarily ~~due to~~as a result of an increase in ~~finished product~~ sales ~~in North America~~of and atdemand for both ZERUST® and Natur-Tec® products, as well as targeted price increases on certain products. During the nine months ended May 31, 2023, 77.6% of NTIC’s ~~majority-owned subsidiary in India, Natur-Tec India Private Limited.~~consolidated net sales were derived from sales of ZERUST® products and services, which increased 9.4% over the prior fiscal year period, and 22.4% of NTIC’s consolidated net sales were derived from sales of Natur-Tec®
20

●
Cost of goods sold as a percentage of net sales ~~increased~~decreased to 63.3% and 65.5% during the three and nine months ended May 31, 2023, respectively, compared to 67.1% and 68.6% during the three and nine months ended May 31, 2022, respectively, ~~compared to 65.8% and 65.9% during the three months ended May 31, 2021, respectively,~~ primarily as a result of ~~price increases on~~lower raw ~~materials used~~material prices overall and increased sales made to customers in ~~NTIC’s~~the oil and gas industry, which products ~~as well as increased labor~~carry higher margins than ZERUST® industrial products and ~~shipping costs, partially offset by increased net sales.~~Natur-Tec® products.

●
NTIC’s equity in income from joint ventures decreased ~~32.9%~~1.3% and ~~36.6%~~increased 0.1% during the three and nine months ended May 31, 2023, respectively, to $1,346,658 and $3,664,793, respectively, compared to $1,364,597 and $3,662,178 during the three and nine months ended May 31, 2022, ~~respectively,~~respectively. These immaterial changes were reflective of the immaterial change in sales at the joint ventures. Net sales at the joint ventures decreased 1.1% and 2.2% to ~~$1,364,597~~$26,312,548 and ~~$3,662,178, respectively, compared to $2,033,536 and $5,779,260~~$76,525,427 during the three and nine months ended May 31, 2021, respectively. These decreases were primarily due to the fact that Zerust India is now a consolidated subsidiary within NTIC’s financial statements and an increase in operating expenses and a decrease in gross margins at the joint ventures.
●
~~Net sales at the joint ventures decreased 16.8% and 10.9%~~2023, respectively, compared to $26,594,077 and $78,218,839 during the three and nine months ended May 31, 2022, ~~respectively, compared to $31,959,539 and $87,795,284 during the three and nine months ended May 31, 2021,~~ respectively. These decreases were primarily a result of decreased demand during the current year periods and the Zerust India acquisition since its sales were included in NTIC’s net sales in the prior fiscal year periods.

●
NTIC’s total operating expenses increased ~~12.7%~~12.8% and ~~15.5%~~12.1% to ~~$7,113,737~~$8,024,519 and ~~$20,892,516~~$23,416,632 during the three and nine months ended May 31, ~~2022,~~2023, respectively, compared to ~~$6,310,345~~$7,113,737 and ~~$18,087,994~~$20,892,516 for the three and nine months ended May 31, ~~2021,~~2022, respectively. These increases were primarily due to ~~$630,874~~increased personnel expenses, including new hires, benefits and ~~$1,710,075 in incremental~~travel, and expenses ~~due to the Zerust India acquisition~~incurred during the ~~three and nine months ended May 31, 2022, respectively, and increased personnel, travel, and research and development expenses.~~
24

●
~~Since NTIC acquired~~current fiscal year periods in connection with the ~~remaining 50% ownership interest~~startup of ~~Zerust India effective September 1, 2021, NTIC recognized~~ a ~~gain~~new indirect, majority owned subsidiary formed to assume the operations of ~~$3,951,550 during the nine months ended May 31, 2022, which is included~~a former joint venture in ~~“Remeasurement gain on acquisition of equity method investee” on NTIC’s consolidated statements of operations.~~Taiwan, partially offset by payroll tax credits.

●
NTIC incurred net income attributable to NTIC of $1,525,596, or $0.16 per diluted common share, for the three months ended May 31, 2023, compared to $1,000,167, or $0.11 per diluted common share, for the three months ended May 31, ~~2022, compared to $2,053,916, or $0.21 per diluted common share, for the three months ended May 31, 2021.~~2022. NTIC incurred net income attributable to NTIC of $2,913,086, or $0.30 per diluted common share, for the nine months ended May 31, 2023, compared to $5,676,773, or $0.59 per diluted common share, for the nine months ended May 31, ~~2022, compared~~2022. Of the net income attributable to ~~$4,628,890, or $0.47 per diluted common share, for~~NTIC incurred in the nine months ended May 31, ~~2021. Of the increase for the nine-month comparison,~~2022, $3,951,550 or $$0.41 per diluted common share was due to the gain from the Zerust India acquisition.

Results of Operations

The following table sets forth NTIC’s results of operations for the three and nine months ended May 31, ~~2022~~2023 and ~~2021.~~2022.

Three Months Ended May 31,

Three Months Ended May 31,

2022

% of
Net Sales

2021

% of
Net Sales

$
Change

%
Change

2023

% of
Net Sales

2022

% of
Net Sales

$
Change

%
Change

Net sales, excluding joint ventures
$ 18,436,253 97.2 % $ 14,164,604 91.9 % $ 4,271,649 30.2 %
Net sales, to joint ventures
528,668 2.8 % 1,253,920 8.1 % (725,252 ) -57.8 %
Net sales
$ 20,969,726 100.0 % $ 18,964,921 100.0 % $ 2,004,805 10.6 %
Cost of goods sold
12,722,832 67.1 % 10,152,582 65.8 % 2,570,250 25.3 % 13,280,584 63.3 % 12,722,833 67.1 % 557,751 4.4 %
Equity in income from joint ventures
1,364,597 7.2 % 2,033,536 13.2 % (688,939 ) -32.9 % 1,346,658 6.4 % 1,364,597 7.2 % (17,939 ) -1.3 %
Fees for services provided to joint ventures
1,329,988 7.0 % 1,589,621 10.3 % (259,633 ) -16.3 % 1,361,311 6.5 % 1,329,988 7.0 % 31,323 2.4 %
Selling expenses
3,450,308 18.2 % 3,171,657 20.6 % 278,651 8.8 % 3,723,165 17.8 % 3,450,308 18.2 % 272,857 7.9 %
General and administrative expenses
2,560,487 13.5 % 2,072,195 13.4 % 488,292 23.6 % 3,150,643 15.0 % 2,560,487 13.5 % 590,156 23.0 %
Research and development expenses
1,102,942 5.8 % 1,066,493 6.9 % 36,449 3.4 % 1,150,711 5.5 % 1,102,942 5.8 % 47,769 4.3 %

Nine Months Ended May 31,

2022

% of
Net Sales

2021

% of
Net Sales

$
Change

%
Change

Net sales, excluding joint ventures
$ 51,654,355 95.8 % $ 38,619,353 94.2 % $ 13,035,002 33.8 %
Net sales, to joint ventures
2,252,618 4.2 % 2,361,165 5.8 % (108,547 ) -4.6 %
Cost of goods sold
36,977,619 68.6 % 26,997,582 65.9 % 9,980,037 37.0 %
Equity in income from joint ventures
3,662,178 6.8 % 5,779,260 14.1 % (2,117,082 ) -36.6 %
Fees for services provided to joint ventures
3,835,755 7.1 % 4,388,866 10.7 % (553,111 ) -12.6 %
Selling expenses
9,659,457 17.9 % 8,745,433 21.3 % 914,024 10.5 %
General and administrative expenses
7,675,622 14.2 % 6,125,151 14.9 % 1,550,471 25.3 %
Research and development expenses
3,557,437 6.6 % 3,217,410 7.9 % 340,027 10.6 %
21

Nine Months Ended May 31,

2023

% of
Net Sales

2022

% of
Net Sales

$
Change

%
Change

Net sales
$ 59,193,317 100.0 % $ 53,906,973 95.8 % $ 5,286,344 9.8 %
Cost of goods sold
38,747,865 65.5 % 36,977,620 68.6 % 1,770,245 4.8 %
Equity in income from joint ventures
3,664,793 6.2 % 3,662,178 6.8 % 2,615 0.1 %
Fees for services provided to joint ventures
3,795,862 6.4 % 3,835,755 7.1 % (39,893 ) -1.0 %
Selling expenses
10,649,316 18.0 % 9,659,457 17.9 % 989,859 10.2 %
General and administrative expenses
9,365,431 15.8 % 7,675,622 14.2 % 1,689,809 22.0 %
Research and development expenses
3,401,885 5.7 % 3,557,437 6.6 % (155,552 ) -4.4 %

Net Sales. NTIC’s consolidated net sales increased ~~23.0%~~10.6% and ~~31.5%~~9.8% to ~~$18,964,921~~$20,969,726 and ~~$53,906,973~~$59,193,317 during the three and nine months ended May 31, ~~2022,~~2023, respectively, compared to the three and nine months ended May 31, 2021. NTIC’s consolidated net sales to unaffiliated customers excluding NTIC’s joint ventures increased 30.2% and 33.8% to $18,463,253 and $51,654,355 during the three and nine months ended May 31, 2022, respectively, compared to the same respective periods in fiscal 2021.2022. These increases were primarily a result of ~~$2,580,861 and $7,290,964, respectively, in incremental sales as a result of the Zerust India acquisition during the three and nine months ended May 31, 2022, and~~ increased demand across all market ~~segments.~~segments, including oil and gas, as well as targeted price increases on certain products.

The following table sets forth NTIC’s net sales by product segment for the three and nine months ended May 31, ~~2022~~2023 and ~~2021 by segment:~~2022:

Three Months Ended May 31,

Nine Months Ended May 31,

2022

2021

2022

2021

Total ZERUST® sales
14,446,832 $ 12,378,215 41,988,394 $ 32,882,882
Total Natur-Tec® sales
4,518,089 3,040,309 11,918,579 8,097,636
Total net sales
$ 18,964,921 $ 15,418,524 $ 53,906,973 $ 40,980,518
25

Three Months Ended May 31,

Nine Months Ended May 31,

2023

2022

2023

2022

Total ZERUST® sales
16,100,674 14,446,832 45,929,422 41,988,394
Total Natur-Tec® sales
4,869,052 4,518,089 13,263,895 11,918,579
Total net sales
$ 20,969,726 $ 18,964,921 $ 59,193,317 $ 53,906,973

During the three and nine months ended May 31, ~~2022, 76.2%~~2023, 76.8% and ~~77.9%~~77.6% of NTIC’s consolidated net sales, respectively, were derived from sales of ZERUST® products and services, which increased ~~16.7%~~11.4% and ~~27.7%~~9.4% to $16,100,674 and $45,929,422, respectively, compared to $14,446,832 and $41,988,394 ~~respectively, compared to $12,378,215 and $32,882,882~~ during the three and nine months ended May 31, ~~2021,~~2022, respectively. These increases were ~~due to incremental sales as~~primarily a result of ~~the Zerust India acquisition and~~ increased ~~sales to new and existing customers due to increased global demand.~~demand in North America, as well as targeted price increases on certain products.

The following table sets forth NTIC’s net sales of ZERUST® products for the three and nine months ended May 31, ~~2022~~2023 and ~~2021:~~2022:

Three Months Ended May 31,

Three Months Ended May 31,

2022

2021

$
Change

%
Change

2023

2022

$
Change

%
Change

ZERUST® industrial net sales
$ 12,412,981 $ 10,100,638 $ 2,312,343 22.9 % $ 14,103,292 $ 12,941,651 $ 1,161,641 9.0 %
ZERUST® joint venture net sales
528,670 1,253,920 (725,250 ) -57.8 %
ZERUST® oil & gas net sales
1,505,181 1,023,657 481,524 47.0 % 1,997,382 1,505,181 492,201 32.7 %
Total ZERUST® net sales
$ 14,446,832 $ 12,378,215 $ 2,068,617 12.1 % $ 16,100,674 $ 14,446,832 $ 1,653,842 11.4 %

Nine Months Ended May 31,

Nine Months Ended May 31,

2022

2021

$
Change

%
Change

2023

2022

$
Change

%
Change

ZERUST® industrial net sales
$ 36,680,856 $ 28,574,297 $ 8,106,559 28.4 % $ 40,504,908 $ 38,933,476 $ 1,571,432 4.0 %
ZERUST® joint venture net sales
2,252,620 2,361,165 (108,545 ) -4.6 %
ZERUST® oil & gas net sales
3,054,918 1,947,420 1,107,498 56.9 % 5,424,514 3,054,918 2,369,596 77.6 %
Total ZERUST® net sales
$ 41,988,394 $ 32,882,882 $ 9,105,512 80.6 % $ 45,929,422 $ 41,988,394 $ 3,941,028 9.4 %

NTIC’s total ZERUST® net sales increased during the three and nine months ended May 31, ~~2022,~~2023, compared to the prior fiscal year periods, primarily due to ~~$2,580,861 and $7,290,964, respectively, in incremental sales as a result of the Zerust India acquisition during the three and nine months ended May 31, 2022. Additionally, there was~~ increased demand ~~for ZERUST®~~in North American ZERUST industrial ~~products~~business and ~~services.~~sales to new and existing oil and gas customers. 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.

22
ZERUST® oil and gas net sales increased ~~47.0%~~32.7% and ~~56.9%~~77.6% during the three and nine months ended May 31, ~~2022~~2023 compared to the prior fiscal year periods primarily as a result of new opportunities with new ~~customers compared to the prior fiscal year periods.~~and existing customers. 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. 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.

During the three and nine months ended May 31, ~~2022, 23.8%~~2023, 23.2% and ~~22.1%~~22.4% of NTIC’s consolidated net sales, respectively, were derived from sales of Natur-Tec® products, ~~which~~compared to 23.8% and 22.1% during the three and nine months ended May 31, 2022, respectively. Sales of Natur-Tec® products increased ~~48.6%~~7.8% and ~~47.2%~~11.3% to $4,869,052 and $13,263,895 during the three and nine months ended May 31, 2023, respectively, compared to $4,518,089 and $11,918,579 during the three and nine months ended May 31, 2022, respectively, ~~compared to the three and nine months ended May 31, 2021~~ as a result of increased global demand. The ~~COVID-19 pandemic has adversely impacted~~ demand for Natur-Tec® products ~~from across~~in most markets have returned to pre-pandemic levels, however, there are lingering effects in the apparel industry as well as ~~many large users of bioplastics, including college campuses, stadiums, arenas, restaurants, and~~ corporate office complexes. NTIC has experienced a recovery in many of these areas to pre-pandemic levels, but still expects some of these customers will be the last businesses to fully re-open and operate at full pre-pandemic capacities, and accordingly, anticipates that the COVID-19 pandemic will continue to adversely affect sales of Natur-Tec® products during the remainder of fiscal 2022 and into fiscal 2023.

26

Cost of Goods Sold. Cost of goods sold increased ~~25.3%~~4.4% and ~~37.0%~~4.8% for the three and nine months ended May 31, ~~2022,~~2023, respectively, compared to the three and nine months ended May 31, ~~2021~~2022 primarily as a result of the increase in net sales, as described ~~above, and price increases on raw materials used in NTIC’s products, as well as increased labor and shipping costs.~~above. Cost of goods sold as a percentage of net sales ~~increased~~decreased to 63.3% and 65.5% during the three and nine months ended May 31, 2023, compared to 67.1% and 68.6% during the three and nine months ended May 31, 2022 ~~compared~~primarily as a result of lower raw material prices and increased sales made to ~~65.8%~~customers in the oil and ~~65.9% during the three and nine months ended May 31, 2021 primarily due to price increases on raw materials used in NTIC’s~~gas industry, which products ~~as well as increased labor and shipping costs, partially offset by the increase in net sales. Although~~carry higher margins than our ZERUST® industrial products. NTIC has taken certain actions to address inflationary pressures and pass on ~~as much of the~~ related cost increases on to its customers and some improvements from these actions, as ~~possible, it expects~~well as some these inflationary pressures to persist into the fourth quarter of fiscal 2022 and into fiscal 2023 and does not expect to fully realize all the benefits from its actions until the fourth quarter of fiscal 2022. Some improvements in gross margin, ~~however,~~ were realized during the ~~three~~nine months ended May 31, ~~2022.~~2023.

Equity in Income from Joint Ventures. NTIC’s equity in income from joint ventures decreased ~~32.9%~~1.3% and ~~36.6%~~increased 0.1% during the three and nine months ended May 31, 2023, respectively, to $1,346,658 and $3,664,793, respectively, compared to $1,364,597 and $3,662,178 during the three and nine months ended May 31, 2022, ~~respectively, compared to $2,033,536 and $5,779,260 during the three and nine months ended May 31, 2021,~~ respectively. These ~~decreases~~immaterial changes were ~~primarily due to~~reflective of the ~~fact that Zerust India is now a consolidated subsidiary within NTIC’s financial statements and an increase~~immaterial changes in ~~operating expenses and a decrease in gross margins~~sales at the joint ~~ventures.~~ventures for the same comparison periods. NTIC’s equity in income from joint ventures fluctuates based on net sales and profitability of the joint ventures during the respective periods. Of the total equity in income from joint ventures, NTIC had equity in income from joint ventures of $2,376,575 attributable to EXCOR during the nine months ended May 31, 2023, compared to $2,324,605 attributable to EXCOR during the nine months ended May 31, ~~2022, compared to $3,182,691 during the nine months ended May 31, 2021.~~2022. NTIC had equity in income from all other joint ventures of $1,288,218 during the nine months ended May 31, 2023, compared to $1,337,572 during the nine months ended May 31, ~~2022, compared to $2,596,569 during the nine months ended May 31, 2021.~~2022.

Fees for Services Provided to Joint Ventures. NTIC recognized fee income for services provided to joint ventures of $1,361,311 and $3,795,862 during the three and nine months ended May 31, 2023, respectively, compared to $1,329,988 and $3,835,755 during the three and nine months ended May 31, 2022, respectively, ~~compared to $1,589,621~~representing an increase of 2.4% and ~~$4,388,866 during the three and nine months ended May 31, 2021, respectively, representing decreases~~a decrease of ~~16.3% and 12.6%~~1.0%, 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 ~~amount of~~change in sales experienced by certain joint ventures. ~~Total net~~Net sales ~~of NTIC’s~~at the joint ventures decreased 1.1% and 2.2% to $26,312,548 and $76,525,427 during the three and nine months ended May 31, 2023, respectively, compared to $26,594,077 and $78,218,839 during the three and nine months ended May 31, 2022, ~~respectively, compared to $31,959,539 and $87,795,284 during the three and nine months ended May 31, 2021, respectively, representing decreases of 16.8% and 10.9%,~~ respectively. These decreases were primarily a result of decreased demand during the current fiscal year periods and the Zerust India acquisition since its sales were included in NTIC’s net sales in the prior fiscal year periods. 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 ~~$639,738~~$606,189 were attributable to EXCOR during the nine months ended May 31, ~~2022,~~2023, compared to ~~$692,770~~$639,738 attributable to EXCOR during the nine months ended May 31, ~~2021.~~2022.
23

Selling Expenses. NTIC’s selling expenses increased ~~8.8%~~7.9% and ~~10.5%~~10.2% for the three and nine months ended May 31, ~~2022,~~2023, respectively, compared to the same respective periods in fiscal ~~2021~~2022 primarily due ~~primarily~~ to ~~incremental expenses due to the Zerust India acquisition, as well as~~ an increase in ~~travel and~~ personnel ~~expenses~~expense during the current fiscal year period compared to the prior fiscal year period, and expenses incurred during the ~~three and nine months ended May 31, 2021.~~current fiscal year periods in connection with the startup of a new indirect, majority owned subsidiary formed to assume the operations of a former joint venture in Taiwan, partially offset by payroll tax credits. Selling expenses as a percentage of net sales decreased to 17.8% and increased to 18.0% for the three and nine months ended May 31, 2023, respectively, from 18.2% and 17.9% for the three and nine months ended May 31, 2022, respectively, ~~from 20.6% and 21.3% for the three and nine months ended May 31, 2021, respectively,~~ primarily due to ~~the net sales increases, and partially offset by~~ the increased selling expenses, as ~~previously described.~~noted above.
27

General and Administrative Expenses. NTIC’s general and administrative expenses increased ~~23.6%~~23.0% and ~~25.3%~~22.0% for the three and nine months ended May 31, ~~2022,~~2023, respectively, compared to the same respective periods in fiscal ~~2021~~2022 primarily due to ~~incremental expenses due to the Zerust India acquisition~~increased professional services and ~~transaction expenses incurred to complete the acquisition, as well as increased~~ travel and personnel expenses during the current fiscal year periods compared to the prior fiscal year periods, as well as expenses incurred during the ~~three and nine months ended May 31, 2021.~~current fiscal year periods in connection with the startup of a new indirect, majority owned subsidiary formed to assume the operations of a former joint venture in Taiwan, partially offset by payroll tax credits. As a percentage of net sales, general and administrative expenses increased to ~~13.5%~~15.0% and ~~decreased to 14.2%~~15.8% for the three and nine months ended May 31, ~~2022,~~2023, respectively, ~~compared to 13.4%~~from 13.5% and ~~14.9%~~14.2% for the same respective periods in fiscal ~~2021. The increase for the three-month comparison is~~2022 primarily due to the increase in general and administrative expenses, ~~partially offset by the increase in net sales. The decrease for the six-month comparison is due to the increase in net sales, partially offset by the increase in general and administrative expenses.~~as noted above.

Research and Development Expenses. NTIC’s research and development expenses increased ~~3.4%~~4.3% and ~~10.6%~~decreased 4.4% for the three and nine months ended May 31, ~~2022,~~2023, respectively, compared to the same respective periods in fiscal ~~2021~~2022 primarily due to ~~increased personnel~~the timing of expenses incurred for both comparisons and a decrease in expenses associated with development ~~efforts.~~efforts for the nine-month comparison.

Interest Income. NTIC’s interest income ~~increased~~decreased to $8,876 and $18,495 during the three and nine months ended May 31, 2023, respectively, compared to $15,925 and ~~decreased to~~ $36,777 during the three and nine months ended May 31, 2022, ~~respectively, compared to $10,676 and $95,852 during the three and nine months ended May 31, 2021,~~ respectively, primarily due to changes in the invested cash balances.

Interest Expense. NTIC’s interest expense increased to $136,168 and $342,643 during the three and nine months ended May 31, 2023, respectively compared $23,784 and $34,079 during the three and nine months ended May 31, 2022 ~~respectively compared $3,044 and $10,661 during the three and nine months ended May 31, 2021~~primarily due ~~primarily~~ to increased outstanding borrowings under the line of credit, new term loans incurred by NTIC’s subsidiary in China and increased interest rates, in each case during the current fiscal year ~~period.~~periods compared to the prior fiscal year periods.

Remeasurement Gain on Acquisition of Equity Method Investee. Authoritative guidance on accounting for business combinations requires that an acquirer re-measure its previously held equity interest in the acquisition at its acquisition date fair value and recognize the resulting gain or loss in earnings. As such, since NTIC acquired the remaining 50% ownership interest of Zerust India effective September 1, 2021, NTIC recognized a gain of $3,951,550 during the nine months ended May 31, 2022. This gain is included in “Remeasurement gain on acquisition of equity method investee” on NTIC’s consolidated statements of ~~operations.~~operations for the nine months ended May 31, 2022. There was no comparable gain during the current fiscal year period.

Income Before Income Tax Expense. NTIC had income before income tax expense of $2,245,300 and $4,165,327 for the three and nine months ended May 31, 2023, respectively, compared to $1,815,077 and $7,489,018 for the three and nine months ended May 31, 2022, ~~respectively, compared to $2,586,386 and $6,148,259 for the three and nine months ended May 31, 2021,~~ respectively.

Income Tax Expense. Income tax expense was ~~$604,314~~$542,295 and ~~$1,260,437~~$834,823 for the three and nine months ended May 31, ~~2022,~~2023, respectively, compared to ~~income tax expense of $276,338~~$604,314 and ~~$929,588~~$1,260,437 during the three and nine months ended May 31, ~~2021,~~2022, respectively. Income tax expense was calculated based on management’s estimate of NTIC’s annual effective income tax rate.

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 ~~$20,844,284~~$20,493,861 and ~~$24,702,778~~$21,256,923 as of May 31, ~~2022~~2023 and August 31, ~~2021,~~2022, 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.

24
Net Income Attributable to NTIC. Net income attributable to NTIC ~~decreased~~increased to $1,525,596, or $0.16 per diluted common share, for the three months ended May 31, 2023, compared to $1,000,167, or $0.11 per diluted common share, for the three months ended May 31, ~~2022, compared~~2022. This increase was a result of the increase in gross profit and joint venture income contribution, partially offset by the increase in operating expenses and interest expense. Net income attributable to ~~$2,053,916,~~NTIC decreased to $2,913,086, or ~~$0.21~~$0.30 per diluted common share, for the ~~three~~nine months ended May 31, ~~2021. Net income attributable to NTIC increased~~2023, compared to $5,676,773, or $0.59 per diluted common share, for the nine months ended May 31, ~~2022, compared to $4,628,890, or $0.47 per diluted common share, for the nine months ended May 31, 2021. The~~2022. This decrease for the three-month comparison was primarily due to a significant increase in cost of goods sold, a decrease in joint venture operations and an increase in operating expenses in the current fiscal year period. The increase for the nine-month comparison was primarily due to the ~~remeasurement gain related to the acquisition of Zerust India of~~ $3,951,550 ~~included in “Remeasurement~~remeasurement gain on acquisition of equity method ~~investee” on NTIC’s consolidated statements of operations,~~investee recognized during the prior fiscal year periods, which ~~was partially offset by~~did not repeat this fiscal year, and to a ~~significant increase in cost of goods sold, a decrease in joint venture operations and an~~lesser extent, the increase in operating expenses, partially offset by the increase in ~~the current fiscal year period.~~gross profit.
28

NTIC anticipates that its earnings ~~for the remainder of fiscal 2022~~ will continue to be adversely affected to some extent by ~~both the~~ COVID-19, ~~pandemic~~inflation and worldwide supply chain disruptions, among other factors. Additionally, NTIC anticipates that its quarterly net income will continue to remain subject to significant volatility primarily due to the financial performance of its subsidiaries and joint ventures, sales of its ZERUST® products and services into the oil and gas industry, and sales of its Natur-Tec® bioplastics products, which sales fluctuate more on a quarterly basis than the traditional ZERUST® business.

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, ~~2022~~2023 compared to the same periods in fiscal ~~2021.~~2022.

Liquidity and Capital Resources

Sources of Cash and Working Capital. NTIC’s working capital, defined as current assets less current liabilities, was ~~$24,726,778~~$23,739,346 as of May 31, 2023, including $6,195,194 in cash and cash equivalents, compared to $23,169,480 as of August 31, 2022, including ~~$6,123,269~~$5,333,890 in cash and cash equivalents and ~~$5,574 in available for sale securities, compared to $25,230,893 as of August 31, 2021, including $7,680,641 in cash and cash equivalents and $4,634~~$5,590 in available for sale securities.

On January 6, 2023, NTIC ~~has~~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 ~~with PNC Bank~~(the “Credit Facility”) of ~~$7,000,000, which was increased from $5,000,000 effective~~up to $10.0 million. The Credit Facility includes a $5.0 million sublimit for standby letters of credit. Borrowings of $5,200,000 were outstanding under the Credit Facility as of May ~~20, 2022 to allow for financial flexibility,~~31, 2023.
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 ~~decreased back~~payable in full on such date. Borrowings under the Credit Agreement bear interest at a floating rate, at the option of NTIC, equal to ~~$5,000,000 effective as~~either the CB Floating Rate or the Adjusted SOFR Rate. The term “CB Floating Rate” means the greater of ~~August 16, 2022.~~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.
To secure the Credit Agreement, the Company assigned to JPM a continuing security interest in all of its right, title and interested in collateral made up for the assets of the Company.
25
The Credit Agreement contains customary affirmative and negative covenants, including, among other matters, limitations on NTIC’s ability to incur additional debt, grant liens, engage in certain business operations and transactions, make certain investments, modify its organizational documents or form any new subsidiaries, subject to certain exceptions. Further, the Credit Agreement contains a negative covenant that restricts the ability of NTIC to redeem or repurchase its common stock or pay dividends if the result of which would cause an event of default under the Credit Agreement. The Credit Agreement also requires the Company to maintain a Fixed Charge Coverage Ratio of at least 1.25 to 1.00. The term “Fixed Charge Coverage Ratio” means the ratio, computed for the NTIC on a consolidated basis, of net income plus income tax expense, plus amortization expense, plus depreciation expense, plus interest expense, and plus dividends received from joint ventures, minus unfinanced capital expenditures and equity in income from joint ventures, all computed for the twelve month period then ending, to scheduled principal payments made, plus scheduled finance lease payments made, plus interest expense paid, plus income tax expense paid, and plus cash distributions and dividends paid, all computed for the same twelve month period then ending.
The 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, 2022, $4,700,000 was outstanding under the revolving line of credit, compared to no borrowings outstanding as of August 31, 2021. Such outstanding borrowings were used primarily to fund the Company’s acquisition of the remaining ownership interest of Zerust India. Outstanding advances under the line of credit bear interest at the daily Bloomberg Short-Term Bank Yield Index rate plus 250 basis points (2.50%). The line of credit is scheduled to mature on January 7, 2023. The line of credit is governed under an Amended and Restated Loan Agreement dated August 31, 2021. The loan agreement contains standard covenants, including affirmative financial covenants, such as the maintenance of a minimum fixed charge coverage ratio, and negative covenants, which, among other things, limit the incurrence of additional indebtedness, loans and equity investments, disposition of assets, mergers and consolidations and other matters customarily restricted in such agreements. Under the loan agreement, NTIC is subject to a minimum fixed charge coverage ratio of 1.10:1.00. As of May 31, 2022,2023, NTIC was in compliance with all debt covenants under the Credit Agreement.
In connection with the execution of the Credit Agreement described above, on January 6, 2023, the Amended and Restated Loan ~~Agreement. As~~Agreement dated August 31, 2021 between Northern Technologies International Corporation and PNC Bank, National Association was terminated.
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. The Company was is in compliance with the covenants as of May 31, ~~2022, NTIC did not have any letters~~2023. The current outstanding balance as of ~~credit outstanding with respect to the letter of credit sub-facility available under the revolving line of credit with PNC Bank.~~May 31, 2023 for both term loans is USD $2,812,504.

NTIC believes that a combination of its existing cash and cash equivalents, available for sale securities, forecasted cash flows from future operations, anticipated distributions of earnings, anticipated fees to NTIC for services provided to its joint ventures, and funds available through existing or anticipated financing arrangements will be adequate to fund its existing operations, investments in new or existing joint ventures or subsidiaries, capital expenditures, debt repayments, cash dividends, and any stock repurchases for at least the next 12 months. During the remainder of ~~fiscal 2022 and in~~ fiscal 2023, NTIC expects to continue to invest directly and through its use of working capital in Zerust India, NTIC China, Zerust Mexico, NTI Europe, its joint ventures, research and development, marketing efforts, resources for the application of its corrosion prevention technology in the oil and gas industry, and its Natur-Tec® bio-plastics business, although the amounts of these various investments are not known at this time.

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, including in particular its~~ventures. Some of these joint venture ~~in Russia, which NTIC terminated in May 2022. The termination of its joint venture in Russia did not have a material adverse effect on~~transitions may materially impact NTIC’s results of operations ~~or financial condition or its joint venture operations given~~for a particular reporting period. For example, the ~~immateriality~~formation of a new indirect, majority owned subsidiary of NTIC to assume the operations of ~~this~~a former joint ~~venture.~~venture increased NTIC’s operating expenses during the nine months ended May 31, 2023.

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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. NTIC’s joint ventures traditionally have operated with little or no debt and have been self-financed with minimal initial capital investment and minimal additional capital investment from their respective owners. Therefore, NTIC believes there is limited exposure by NTIC’s joint ventures that could materially impact their respective operations and/or liquidity.

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~~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.

Uses of Cash and Cash Flows. 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. Net cash provided by operating activities during the nine months ended May 31, 2022 was $1,778,094, which resulted principally from NTIC’s net income, dividends received from joint ventures, depreciation and amortization expense, stock-based compensation and deferred income tax, partially offset by the remeasurement gain on acquisition of equity method investee and equity in income from joint ventures. Net cash provided by operating activities during the nine months ended May 31, 2021 was $1,053,695, which resulted principally from NTIC’s net income, dividends received from joint ventures, stock-based compensation, depreciation, amortization and decreases in accounts payable and accrued liabilities, partially offset by NTIC’s equity in income from joint ventures and an increase in inventory, accounts receivable and prepaid expenses and other.

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. 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. 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. Accounts receivable over 30 days are considered past due for most customers. NTIC does not accrue interest on past due accounts receivable. 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. NTIC records receivables for services provided to its joint ventures on an accrual basis, unless circumstances exist that make the collection of the balance uncertain, in which case the fee income will be recorded on a cash basis until there is consistency in payments. This determination is handled on a case-by-case basis.

NTIC experienced an increase in trade receivables and a decrease in inventory as of May 31, ~~2022,~~2023, compared to August 31, ~~2021.~~2022. Trade receivables, excluding joint ventures, as of May 31, ~~2022,~~2023, increased ~~$2,705,775,~~$1,174,720, compared to August 31, ~~2021,~~2022, primarily related to ~~an increase in~~correlating increases to sales.

Outstanding trade receivables, excluding joint ventures balances, asincreased an average of ~~May 31, 2022 remained the same at 69~~3 days to an average of 70 days from balances outstanding from these customers as of May 31, 2023 from an average of 67 days as of August 31, ~~2021.~~2022.
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Outstanding trade receivables from joint ventures as of May 31, ~~2022 increased $232,364,~~2023 decreased $29,014, compared to August 31, ~~2021,~~2022, primarily due to the timing of payments. Outstanding balances from trade receivables from joint ventures ~~increased~~decreased an average of 626 days to an average of 8684 days from balances outstanding from these customers ~~compared to~~as of May 31, 2023 from an average of 90 days as of August 31, ~~2021.~~2022. The average days outstanding of trade receivables from joint ventures as of May 31, ~~2022~~2023 were primarily due to the receivables balances at ~~various~~ NTIC’s joint ~~ventures.~~ventures in South Korea and Thailand.
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Outstanding receivables for services provided to joint ventures as of May 31, ~~2022~~2023 decreased ~~$261,913,~~$539,107, compared to August 31, ~~2021,~~2022, and the average days to pay decreased an average of ~~2 days~~1 day to an average of 8683 days ~~compared to~~from an average of 84 days as of August 31, ~~2021.~~2022.

Net cash used in investing activities for the nine months ended May 31, 2023 and 2022 was $2,678,748 and $6,531,034, respectively, which was primarily the result of the purchase of the purchase of property and equipment, and investments in patents, and in the case of the prior year period, the purchase of the remaining 50% ownership interest in Zerust ~~India, purchases of property and equipment, investment in joint venture and investments in patents.~~ India.
Net cash ~~used in investing~~provided by financing activities for the nine months ended May 31, ~~2021~~2023 was ~~$399,780,~~$81,773, which ~~was primarily~~resulted from borrowings under the ~~result~~line of credit and term loan and proceeds from the exercise of stock options and NTIC’s employee stock purchase ~~of available for sale securities, purchases of property and equipment, and investments in patents,~~plan, partially offset by ~~the proceeds from the sale of available for sale securities.~~
dividends paid on NTIC common stock and dividends received by non-controlling interest. Net cash provided by financing activities for the nine months ended May 31, 2022 was $2,634,650, 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 the nine months ended May 31, 2021 was $1,309,609, which resulted from dividends paid on NTIC common stock and dividends received by non-controlling interest, partially offset by proceeds from NTIC’s employee stock purchase plan.

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, ~~2022.~~2023. As of May 31, ~~2022,~~2023, up to $2,640,548 in shares of NTIC common stock remained available for repurchase under NTIC’s stock repurchase program.

Cash Dividends. During the nine months ended May 31, ~~2022, NTIC’s~~2023, the Company’s Board of Directors declared cash dividends on the following dates in the following amounts to holders of record of ~~NTIC~~the Company’s common stock as of the following record dates:

Declaration Date

Amount

Record Date

Payable Date
October 20, 2021
$ 0.07
November 3, 2021

November 17, 2021
January 21, 2022
$ 0.07
February 2, 2022

February 16, 2022
April 22, 2022
$ 0.07
May 4, 2022

May 18, 2022
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

On April 23, 2020, NTIC announced the temporary suspension of its quarterly cash dividend pending clarity on the financial impact of COVID-19 on NTIC. On January 15, 2021, NTIC announced the reinstatement of its quarterly cash dividend. During the nine months ended May 31, ~~2021, NTIC’s~~2022, the Company’s Board of Directors declared cash dividends on the following dates in the following amounts to holders of record of ~~NTIC~~the Company’s common stock as of the following record dates:

Declaration Date

Amount

Record Date

Payable Date
January 15, 2021
$ 0.065
February 3, 2021

February 17, 2021
April 23, 2021
$ 0.065
May 5, 2021

May 19, 2021
Declaration Date
Amount
Record Date
Payable Date
October 20, 2021
$0.07
November 3, 2021
November 17, 2021
January 21, 2022
$0.07
February 2, 2022
February 16, 2022
April 22, 2022
$0.07
May 4, 2022
May 18, 2022

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.

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Capital Expenditures and Commitments. NTIC spent ~~$961,704~~$2,607,988 on capital expenditures during the nine months ended May 31, ~~2022,~~2023, which related primarily to a new warehouse facility, equipment and facility improvements, including the purchase of ~~new equipment~~the property immediately adjacent to NTIC’s headquarters in Circle Pines, Minnesota, which includes a 26,000 square foot industrial building, and ~~facility improvements.~~related renovations. The building will be used primarily for warehousing space and light industrial production. NTIC expects to spend an aggregate of approximately ~~$2,200,000~~$2,600,000 to ~~$2,500,000~~$3,100,000 on capital expenditures during fiscal ~~2022,~~2023, which it expects will relate primarily to ~~anticipated renovation and equipment costs in connection with~~the purchase of the new ~~corporate headquarters of NTIC China.~~warehouse facility, equipment and facility improvements, including approximately $1,000,000 in renovations on the property and building described above.

~~Contractual Obligations~~
~~There has been no material change to NTIC’s contractual obligations as provided in “~~~~Part II. Item 7, Management~~’~~s Discussion and Analysis of Financial Condition and Results of Operations~~—~~Contractual Obligations~~~~,” included in NTIC’s annual report on Form 10-K for the fiscal year ended August 31, 2021.~~
~~Off-Balance Sheet Arrangements~~
NTIC does not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which are established for the purpose of facilitating off-balance sheet financial arrangements. As such, NTIC is not materially exposed to any financing, liquidity, market or credit risk that could arise if NTIC had engaged in such arrangements.
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Inflation and Seasonality

Although inflation in the United States and abroad historically has had little effect on NTIC, inflationary pressures adversely affected NTIC’s gross margins during the first nine months of fiscal ~~2022~~2023 and are expected to persist into at least the fourth quarter of ~~fiscal 2022 and into~~ fiscal 2023. 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.

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’s principal exchange rate exposure is with the Euro, the Japanese Yen, the Indian Rupee, the Chinese Renminbi, the South Korean Won, and the English Pound against the U.S. Dollar. NTIC’s fees for services provided to joint ventures and dividend distributions from these foreign entities are paid in foreign currencies and, thus, fluctuations in foreign currency exchange rates could result in declines in NTIC’s reported net income. Since NTIC’s investments in its joint ventures are accounted for using the equity method, any changes in foreign currency exchange rates would be reflected as a foreign currency translation adjustment and would not change NTIC’s equity in income from joint ventures reflected in its consolidated statements of operations. NTIC does not hedge against its foreign currency exchange rate risk.

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.

Any outstanding advances under NTIC’s ~~revolving line of credit~~Credit Facility with ~~PNC Bank~~JPM bear interest at ~~an annual~~a floating rate, ~~based on daily LIBOR plus 2.50%. As~~at the option of NTIC, equal to either the CB Floating Rate or the Adjusted SOFR Rate, as defined above. Borrowings of $5,200,000 were outstanding under the Credit Facility as of May 31, ~~2022,~~2023.
Both term loans undertaken by NTIC ~~had borrowings~~China with China Construction Bank Corporation have an annual interest rate of ~~$4,700,000 under the line of credit that existed~~3.25% with interest due monthly. The current outstanding balance as of ~~that date.~~May 31, 2023 for both term loans is USD $2,812,504.

Critical Accounting Policies and Estimates

There have been no material changes to NTIC’s critical accounting policies and estimates from the information provided in “Part II. Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” included in NTIC’s annual report on Form 10-K for the fiscal year ended August 31, ~~2021, other than the new critical accounting policy below in light of NTIC’s Zerust India acquisition.~~2022.

~~Business Combinations~~
When applicable, NTIC accounts for the acquisition of a business in accordance with the accounting standards codification guidance for business combinations, whereby the total consideration transferred is allocated to the assets acquired and liabilities assumed, including amounts attributable to non-controlling interests, when applicable, based on their respective estimated fair values as of the date of acquisition. Goodwill represents the excess of consideration transferred over the estimated fair value of the net assets acquired in a business combination.
Assigning estimated fair values to the net assets acquired requires the use of significant estimates, judgments, inputs, and assumptions regarding the fair value of intangible assets that are separately identifiable from goodwill, inventory, and property, plant, and equipment. While the ultimate responsibility for determining estimated fair values of the acquired net assets resides with management, for material acquisitions, NTIC may retain the services of certified valuation specialists to assist with assigning estimated fair values to certain acquired assets and assumed liabilities, including intangible assets that are separately identifiable from goodwill, inventory, and property, plant, and equipment. Estimated fair values of acquired intangible assets that are separately identifiable from goodwill, inventory, and property, plant, and equipment are generally based on available historical information, future expectations, available market data, and assumptions determined to be reasonable but are inherently uncertain with respect to future events, including economic conditions, competition, technological obsolescence, the useful life of the acquired assets, and other factors. These significant estimates, judgments, inputs, and assumptions include, when applicable, the selection of an appropriate valuation method depending on the nature of the respective asset, such as the income approach, the market or sales comparison approach, or the cost approach; estimating future cash flows based on projected revenues and/or margins that NTIC expects to generate subsequent to the acquisition; applying an appropriate discount rate to estimate the present value of those projected cash flows NTIC expects to generate; selecting an appropriate terminal growth rate and/or royalty rate or estimating a customer attrition or technological obsolescence factor where necessary and appropriate given the nature of the respective asset; assigning an appropriate contributory asset charge where needed; determining an appropriate useful life and the related depreciation or amortization method for the respective asset; and assessing the accuracy and completeness of other historical financial metrics of the acquiree used as standalone inputs or as the basis for determining estimated projected inputs such as margins, customer attrition, and costs to hold and sell product.
In determining the estimated fair value of intangible assets that are separately identifiable from goodwill, NTIC typically utilizes the income approach, which discounts the projected future cash flows using a discount rate that appropriately reflects the risks associated with the projected cash flows. Generally, NTIC estimates the fair value of acquired customer relationships using the relief from royalty method under the income approach, which is based on the hypothetical royalty stream that would be received if NTIC were to license the acquired trade name. For most other acquired intangible assets, NTIC estimates fair value using the excess earnings method under the income approach, which is typically applied when cash flows are not directly generated by the asset, but rather, by an operating group that includes the particular asset. In certain instances, particularly in relation to developed technology or patents, NTIC may utilize the cost approach depending on the nature of the respective intangible asset and the recency of the development or procurement of such technology. The useful lives and amortization methods for the acquired intangible assets that are separately identifiable from goodwill are generally determined based on the period of expected cash flows used to measure the fair value of the acquired intangible assets and the nature of the use of the respective acquired intangible asset, adjusted as appropriate for entity-specific factors including legal, regulatory, contractual, competitive, economic, and/or other factors such as customer attrition rates and product or order lifecycles that may limit the useful life of the respective acquired intangible asset. In determining the estimated fair value of acquired inventory, NTIC typically utilizes the cost approach for raw materials and the sales comparison approach for work in process, finished goods, and service parts. In determining the estimated fair value of acquired property, plant, and equipment, NTIC typically utilizes the sales comparison approach or the cost approach depending on the nature of the respective asset and the recency of the construction or procurement of such asset.
33

NTIC may refine the estimated fair values of assets acquired and liabilities assumed, if necessary, over a period not to exceed one year from the date of acquisition by taking into consideration new information that, if known as of the date of acquisition, would have affected the estimated fair values ascribed to the assets acquired and liabilities assumed. The judgments made in determining the estimated fair value assigned to assets acquired and liabilities assumed, as well as the estimated useful life and depreciation or amortization method of each asset, can materially impact the net earnings of the periods subsequent to an acquisition through depreciation and amortization, and in certain instances through impairment charges, if the asset becomes impaired in the future. During the measurement period, any purchase price allocation changes that impact the carrying value of goodwill will affect any measurement of goodwill impairment taken during the measurement period, if applicable. If necessary, purchase price allocation revisions that occur outside of the measurement period are recorded within cost of sales, selling expenses or general and administrative expenses within NTIC’s consolidated statements of operations depending on the nature of the adjustment.
~~Recent~~ Accounting Pronouncements

See Note 2 to NTIC’s consolidated financial statements for a discussion of ~~recent~~ accounting pronouncements.

29
Forward-Looking Statements

This quarterly report on Form 10-Q contains not only historical information, but also forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are subject to the safe harbor created by those sections. In addition, NTIC or others on NTIC’s behalf may make forward-looking statements from time to time in oral presentations, including telephone conferences and/or web casts open to the public, in press releases or reports, on NTIC’s Internet web site, or otherwise. 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 ~~recent~~ acquisition of Zerust India on NTIC’s business, operating results and financial condition, and the outcome of contingencies, such as legal proceedings. NTIC has identified some of these forward-looking statements in this report with words like “believe,” “can,” “may,” “could,” “would,” “might,” “forecast,” “possible,” “potential,” “project,” “will,” “should,” “expect,” “intend,” “plan,” “predict,” “anticipate,” “estimate,” “approximate,” or “continue” or the negative of these words or other words and terms of similar meaning. The use of future dates is also an indication of a forward-looking statement. Forward-looking statements may be contained in the notes to NTIC’s consolidated financial statements and elsewhere in this report, including under the heading “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. These uncertainties and factors are difficult to predict, and many of them are beyond NTIC’s control. The following are some of the uncertainties and factors known to us that could cause NTIC’s actual results to differ materially from what NTIC has anticipated in its forward-looking statements:

34

●
The effect of worldwide disruption in supply issues on NTIC’s business, operating results and financial condition, which will likely continue through the end of fiscal 2023, regardless of the status of COVID-19;

●
The effect of COVID-19 on NTIC’s business, operating results and financial condition, including in particular in China, and disruption to our customers, suppliers and subcontractors, as well as the global economy and financial markets;

●
The effect of current worldwide economic conditions, inflation, recessionary indicators and any turmoil and disruption in ~~supply issues~~the global credit, financial and banking markets or the perception of adverse conditions on NTIC’s business ~~operating results~~ and ~~financial condition, which will likely continue through~~ the ~~remainder~~business of ~~fiscal 2022~~NTIC’s customers, suppliers, vendors and ~~into fiscal 2023, regardless of the status of the COVID-19 pandemic;~~other third parties with whom NTIC conducts business;

●
The effect of ~~current worldwide economic conditions and any turmoil and disruption in the global credit and financial markets on NTIC’s business, including in particular as a result of~~ the ongoing ~~conflict~~war between Russia and ~~Ukraine;~~Ukraine, and the effect of the war and the resulting sanctions by U.S. and European governments on commodity price fluctuations, which have decreased our margins and the margins of our joint ventures and resulted in decreased joint venture profitability, which will likely continue through the end of fiscal 2023;
●
NTIC’s operations in China and the risks associated therewith, including trade or other issues that may result from increasing tensions between the U.S. and China;

●
Variability in NTIC’s sales of ZERUST® products and services to the oil and gas industry and Natur-Tec® products and NTIC’s equity income of joint ventures, which variability in sales and equity in income from joint ventures, in turn, subject NTIC’s earnings to quarterly fluctuations;

●
Risks associated with NTIC’s international operations and exposure to fluctuations in foreign currency exchange rates, import duties, taxes, and tariffs;

30

●
The effect of the United Kingdom’s process to exit the European Union on NTIC’s operating results, including, in particular, future net sales of NTIC’s European and other joint ventures;

●
The effect of the health of the U.S. automotive industry on NTIC’s ~~business;~~business and the evolution of the automotive industry towards electric vehicles;

●
NTIC’s dependence on the success of its joint ventures and fees and dividend distributions that NTIC receives from them;

●
Risks associated with NTIC’s acquisition of the remaining 50% ownership interest in its Indian joint venture, Zerust India;

●
NTIC’s relationships with its joint ventures and its ability to maintain those relationships, especially in light of anticipated succession planning issues, and risks associated with possible future acquisitions of the remaining ownership interests of certain joint ventures;

●
Fluctuations in the cost and availability of raw materials, including resins and other commodities, including supply chain disruptions and weather related impacts;

●
The success of and risks associated with NTIC’s emerging new businesses and products and services, including in particular NTIC’s ability and the ability of NTIC’s joint ventures to sell ZERUST® products and services to the oil and gas industry and Natur-Tec® products and the often lengthy and extensive sales process involved in selling such products and services;

●
NTIC’s ability to introduce new products and services that respond to changing market conditions and customer demand;

●
Market acceptance of NTIC’s existing and new products, especially in light of existing and new competitive products;

●
Maturation of certain existing markets for NTIC’s ZERUST® products and services and NTIC’s ability to grow market share and succeed in penetrating other existing and new markets;

35

●
Increased competition, especially with respect to NTIC’s ZERUST® products and services, and the effect of such competition on NTIC’s and its joint ventures’ pricing, net sales, and margins;

●
NTIC’s reliance upon and its relationships with its distributors, independent sales representatives, and joint ventures;

●
NTIC’s reliance upon suppliers;

●
Oil prices, which may affect sales of NTIC’s ZERUST® products and services to the oil and gas industry, and which may be impacted by the ~~action of Russian military forces in~~ongoing war between Russia and Ukraine;
●
~~NTIC’s operations in China, and the risks associated therewith;~~

●
The costs and effects of complying with laws and regulations and changes in tax, fiscal, government, and other regulatory policies, including rules relating to environmental, health, and safety matters;

●
Unforeseen product quality or other problems in the development, production, and usage of new and existing products;

●
Unforeseen production expenses incurred in connection with new customers and new products;

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●
Loss of or changes in executive management or key ~~employees;~~employees and the need to hire and train local support in a timely manner in order to support customer needs;

●
Ability of management to manage around unplanned events;

●
Pending and future litigation;

●
NTIC’s reliance on its intellectual property rights and the absence of infringement of the intellectual property rights of others;

●
NTIC’s ability to maintain effective internal control over financial reporting, especially in light of its joint venture arrangements;

●
Changes in applicable laws or regulations and NTIC’s failure to comply with applicable laws, rules, and regulations;

●
Changes in generally accepted accounting principles and the effect of new accounting pronouncements;

●
Fluctuations in NTIC’s effective tax rate;

●
The effect of extreme weather conditions on NTIC’s operating results; and

●
NTIC’s reliance upon its management information systems.

For more information regarding these and other uncertainties and factors that could cause NTIC’s actual results to differ materially from what NTIC has anticipated in its forward-looking statements or otherwise could materially adversely affect its business, financial condition or operating results, see NTIC’s annual report on Form 10-K for the fiscal year ended August 31, ~~2021~~2022 under the heading “Part I. Item 1A. Risk Factors.”
36

All forward-looking statements included in this report are expressly qualified in their entirety by the foregoing cautionary statements. NTIC wishes to caution readers not to place undue reliance on any forward-looking statement that speaks only as of the date made and to recognize that forward-looking statements are predictions of future results, which may not occur as anticipated. Actual results could differ materially from those anticipated in the forward-looking statements and from historical results due to the uncertainties and factors described above and others that NTIC may consider immaterial or does not anticipate at this time. Although NTIC believes that the expectations reflected in its forward-looking statements are reasonable, NTIC does not know whether its expectations will prove correct. NTIC’s expectations reflected in its forward-looking statements can be affected by inaccurate assumptions NTIC might make or by known or unknown uncertainties and factors, including those described above. The risks and uncertainties described above are not exclusive, and further information concerning NTIC and its business, including factors that potentially could materially affect its financial results or condition, may emerge from time to time. NTIC assumes no obligation to update, amend, or clarify forward-looking statements to reflect actual results or changes in factors or assumptions affecting such forward-looking statements. 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 Securities and Exchange Commission.

ITEM 3.
~~ITEM 3.~~ QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT 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’s principal exchange rate exposure is with the Euro, the Japanese Yen, the Indian Rupee, the Chinese Renminbi, the South Korean Won, and the English Pound against the U.S. Dollar. NTIC’s fees for services provided to joint ventures and dividend distributions from these foreign entities are paid in foreign currencies, and, thus, fluctuations in foreign currency exchange rates could result in declines in NTIC’s reported net income. Since NTIC’s investments in its joint ventures are accounted for using the equity method, any changes in foreign currency exchange rates would be reflected as a foreign currency translation adjustment and would not change NTIC’s equity in income from joint ventures reflected in its consolidated statements of operations. NTIC does not hedge against its foreign currency exchange rate risk.

32
Some raw materials used in NTIC’s products are exposed to commodity price changes. The primary commodity price exposures are with a variety of plastic resins.

Any outstanding advances under NTIC’s ~~revolving line of credit~~Credit Facility with ~~PNC Bank~~JPM bear interest at ~~an annual~~a floating rate, ~~based on daily LIBOR plus 2.50%. As~~at the option of NTIC, equal to either the CB Floating Rate or the Adjusted SOFR Rate, as defined above. Borrowings of $5,200,000 were outstanding under the Credit Facility as of May 31, ~~2022,~~2023.
Both term loans undertaken by NTIC ~~had borrowings~~China with China Construction Bank Corporation have an annual interest rate of ~~$4,700,000 under the line of credit that existed~~3.25% with interest due monthly. The current outstanding balance as of ~~that date.~~May 31, 2023 for both term loans is USD $2,812,504.

ITEM 4.
~~ITEM 4.~~ CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

NTIC maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) that are designed to provide reasonable assurance that information required to be disclosed by NTIC in the reports it files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to NTIC’s management, including NTIC’s principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. NTIC’s management evaluated, with the participation of its Chief Executive Officer and its Chief Financial Officer, the effectiveness of the design and operation of NTIC’s disclosure controls and procedures as of the end of the period covered in this report. Based on that evaluation, NTIC’s Chief Executive Officer and Chief Financial Officer concluded that NTIC’s disclosure controls and procedures were effective as of the end of such period to provide reasonable assurance that information required to be disclosed in the reports that NTIC files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to NTIC’s management, including NTIC’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

37

Changes in Internal Control over Financial Reporting

There was no change in NTIC’s internal control over financial reporting that occurred during the quarter ended May 31, ~~2022~~2023 that has materially affected or is reasonably likely to materially affect NTIC’s internal control over financial reporting, other than changes implemented to continue integrating Zerust India’s internal controls with NTIC’s internal controls.

33
PART II - OTHER INFORMATION

ITEM 1.
~~ITEM 1.~~LEGAL PROCEEDINGS

See Note 1412 to NTIC’s consolidated financial statements in Part I. Item 1. Financial Statements of this report.

ITEM 1A.
~~ITEM 1A.~~RISK FACTORS

Although Item 1A. is inapplicable to NTIC as a smaller reporting company, NTIC hereby discloses the following ~~additional risks to NTIC’s~~revised risk ~~factors~~factor described in its annual report on Form 10-K for the fiscal year ended August 31, ~~2021:~~2022:

The ~~ongoing conflict between Russia and Ukraine~~operations of NTIC China may ~~adversely affect our business and results of operations.~~

Given the nature of our business and our global operations, political, economic, and other conditions in foreign countries and regions, including geopolitical risks such as the current conflict between Russia and Ukraine, may adversely affect our business and results of operations. We have limited operations in Russia and Ukraine, which have beenbe adversely affected by ~~the ongoing conflict between Russia~~China’s evolving economic, political, and Ukraine, though these losses are not expected to have a material impact on our operating results. We terminated our joint venture in Russia in May 2022, which we believe will not have an adverse effect on our results of operations or financial condition given the immateriality of the joint venture. The broader consequences of this conflict, which may include additional international sanctions, embargoes, regional instability, and geopolitical shifts; increasedsocial conditions as well as increasing tensions between the United States and ~~countries in which we operate; and the extent of the conflict’s effect on our business and~~China.

The results of operations ~~as well as the global economy, cannot~~and future prospects of NTIC China may be ~~predicted.~~

To the extent the current conflict between Russia and Ukraine adversely affects our business, it may also have the effect of heightening many other risks disclosed in our annual report on Form 10-K for the fiscal year ended August 31, 2021, any of which could materially and adversely affect our business and results of operations. Such risks include, but are not limited to, adverse effects on macroeconomic conditions, including inflation, demand for our products and potential recessionary economic conditions; increased cyber security threats; adverse changes in trade policies, taxes, government regulations, and tariffs; our ability to maintain or increase our prices in response to rising shipping costs; our ability to implement and execute our business strategy, particularly with regard to our joint ventures; disruptions in global supply chains; our exposure to foreign currency fluctuations; and constraints, volatility, or disruption in the capital markets.

~~The sale of ZERUST~~® ~~rust and corrosion inhibiting products into the oil and gas industry is somewhat seasonal and dependent upon oil prices.~~

In the past, NTIC has experienced some seasonality with respect to the sale of its ZERUST® rust and corrosion inhibiting products into the oil and gas industry, with sales during parts of the second and third fiscal quarters being adversely affected by, ~~winter~~among other things, changes in China’s political, economic, and social conditions, changes in the relationship between China and its western trade partners, changes in policies of the Chinese government, changes in laws and regulations or in the interpretation of existing laws and regulations, changes in foreign exchange regulations, measures that may be introduced to control inflation, such as interest rate increases, changes in the rates or methods of taxation, and increasing tensions between the United ~~States. Although~~States and China. In addition, changes in demand could result from increased competition with local Chinese manufacturers who have cost advantages or who may be preferred suppliers for Chinese end users. Also, Chinese commercial laws, regulations, and interpretations applicable to non-Chinese owned market participants, such as NTIC China, are continually changing, and such changes may require NTIC China to change how it conducts its business. These laws, regulations, and interpretations could impose restrictions on NTIC’s and NTIC China’s ownership or operations or NTIC’s interests in China and could adversely affect NTIC’s business, results of operations, and financial condition.

Local regulations in China related to the electric power shortage that began in 2021 may adversely affect NTIC China’s operations or the operations of our suppliers with facilities in China. For example, these regulations could result in partial or complete factory shutdowns due to a lack of continuous supply of electrical power. Additionally, the price of ~~crude oil is close~~electric power may be increased, and peak-demand periods during which prices are higher may be extended by local governments. Certain of our resin suppliers with facilities in China were adversely impacted by these regulations, which contributed to ~~an all-time high, the sale of NTIC’s ZERUST® rust and corrosion inhibiting products into the oil and gas industry, particularly~~constrained supply. Although NTIC China’s operations have not been significantly impacted by regulations related to electric power shortages to date, such regulations may in the United States, has historically been hampered by low global crude oil prices. Low global crude oil prices have been and may continue to be caused by oversupply, price wars between Saudi Arabia and Russia, and the impact of the COVID-19 pandemic. 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 customersfuture decrease or prospects. The ongoing conflict between Russia and Ukraine has escalated tensions between Russia and other countries, some of which have imposed sanctions and taken other economic actions that have contributed to, and are expected to continue to contribute to, rising global crude oil prices, which prices had already risen substantially due to ongoing inflationary pressures. Additional international sanctions against Russia may be imposed,shut down production or increase product costs, which could ~~further increase these costs. NTIC believes the ongoing conflict between Russia~~adversely affect NTIC’s business, results of operations, and Ukraine and the continued impact of high rates of inflation may create uncertainty among its existing and prospective customers, which may cause them to halt oil and gas projects or elect to decrease capital improvement budgets, either of which could harm NTIC’s ability to sell its products into the oil and gas industry.financial condition.

ITEM 2.

~~ITEM 2.~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Recent Sales of Unregistered Equity Securities

During the three months ended May 31, ~~2022,~~2023, NTIC did not issue any shares of its common stock or other equity securities of NTIC that were not registered under the Securities Act of 1933, as amended.

Issuer Purchases of Equity Securities

The following table shows NTIC’s third quarter of fiscal ~~2022~~2023 stock repurchase activity.

Period

Total Number of Shares
(or Units) Purchased

Average Price Paid Per Share (or Unit)

Total Number of Shares (or Units) Purchased As Part of Publicly Announced Plans or Programs

Maximum Number of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs

March 1, 2022 through March 31, 2022
0 $ 0 0 (1 )
April 1, 2022 through April 30, 2022
0 $ 0 0 (1 )
May 1, 2022 through May 31, 2022
0 $ 0 0 (1 )
Total
0 $ 0 0 (1 )(2)

Period	Total Number of Shares (or Units) Purchased		Average Price Paid Per Share (or Unit)		Total Number of Shares (or Units) Purchased As Part of Publicly Announced Plans or Programs		Maximum Number of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
March 1, 2023 through March 31, 2023		0		$0		0		(1)
April 1, 2023 through April 30, 2023		0		$0		0		(1)
May 1, 2023 through May 31, 2023		0		$0		0		(1)
Total		0		$0		0		(1)(2)

______________________

(1)

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.

(2)	As of May 31, ~~2022,~~2023, up to $2,640,548 in shares of NTIC common stock remained available for repurchase under NTIC’s stock repurchase program.

~~ITEM 3.~~~~DEFAULTS UPON SENIOR SECURITIES~~

~~Not applicable.~~

3934

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES~~ITEM 4.~~~~MINE SAFETY DISCLOSURES~~

Not applicable.

ITEM 4.

MINE SAFETY DISCLOSURES

~~ITEM 5.~~~~OTHER INFORMATION~~

Not applicable.

ITEM 5.

OTHER INFORMATION

On May 20, 2022, to maintain financial flexibility, the Company issued an Amended and Restated Revolving Line of Credit Note to PNC Bank, National Association, which increased the Company’s line of credit from $5,000,000 to $7,000,000 until August 16, 2022, at which time the line of credit will go back to $5,000,000 until its expiration date on January 7, 2023.

Not applicable.

The foregoing description of the Amended and Restated Revolving Line of Credit Note is qualified in its entirety by reference to the Amended and Restated Revolving Line of Credit Note, which is filed as Exhibit 10.2 to this Quarterly Report on Form 10-Q and incorporated by reference herein.

ITEM 6.
EXHIBITS~~ITEM 6.~~~~EXHIBITS~~

The following exhibits are being filed or furnished with this quarterly report on Form 10-Q:

Exhibit No.	Description	~~Method of Filing~~

~~10.1~~	~~Amended and Restated Revolving Line of Credit Note dated as of March 1, 2022 issued by Northern Technologies International Corporation to PNC Bank, National Association~~	~~Incorporated by reference to Exhibit 10.1 to NTIC’s Quarterly Report on Form 10-Q for the fiscal quarter ended February 28, 2022 (File No. 001-11038).~~

~~10.2~~	~~Amended and Restated Revolving Line of Credit Note dated as of May 20, 2022 issued by Northern Technologies International Corporation to PNC Bank, National Association~~	~~Filed herewith~~

31.1	Certification of President and Chief Executive Officer pursuant to SEC Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)	~~Filed herewith~~

31.2	Certification of Chief Financial Officer pursuant to SEC Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)	~~Filed herewith~~

32.1	Certification of President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)	~~Furnished herewith~~

32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)	~~Furnished herewith~~

~~Exhibit No.~~	~~Description~~	~~Method of Filing~~

101	The following materials from NTIC’s Quarterly Report on Form 10-Q for the fiscal quarter ended May 31, ~~2022,~~2023, formatted in Inline XBRL (Extensible Business Reporting Language): (i) the unaudited Consolidated Balance Sheets, (ii) the unaudited Consolidated Statements of Operations, (iii) the unaudited Consolidated Statements of Comprehensive Income, (iv) the unaudited Consolidated Statements of Equity, (v) the unaudited Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements	~~Filed herewith~~ (filed herewith)

104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)	~~Filed herewith~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION


	/s/ Matthew C. Wolsfeld
Date: July ~~8, 2022~~13, 2023	Matthew C. Wolsfeld, CPA
	Chief Financial Officer
	(Principal Financial and Accounting Officer and
	Duly Authorized to Sign on Behalf of the Registrant)

	As of May 31, 2022
	Total		EXCOR		All Other
Current assets	$	55,305,950	$	25,677,287	$	29,628,663
Total assets		59,037,744		27,727,623		31,310,121
Current liabilities		13,289,392		2,978,114		10,311,279
Noncurrent liabilities		1,223,185		0		1,223,185
Joint ventures’ equity		44,601,335		24,749,509		19,851,826
Northern Technologies International Corporation’s share of joint ventures’ equity		22,194,433		12,374,756		9,819,677
Northern Technologies International Corporation’s share of joint ventures’ undistributed earnings		20,844,284		12,343,851		8,500,433

	Three Months Ended May 31, 2021
	Total		EXCOR		All Other⁽¹⁾
Net sales	$	31,959,539	$	12,103,263	$	19,856,276
Gross profit		14,280,775		6,863,786		7,416,989
Net income		4,051,518		2,068,326		1,983,192
Northern Technologies International Corporation’s share of equity in income from joint ventures		2,033,536		1,039,576		993,960
Northern Technologies International Corporation’s dividends received from joint ventures		181,952		0		181,952

	Three and Nine Months Ended May 31,
	2022			2021
Dividend yield		1.65	%		2.37	%
Expected volatility		45.4	%		45.6	%
Expected life of option (in years)		10			10
Average risk-free interest rate		0.77	%		0.28	%

	Nine Months Ended May 31,
	2022		% of Net Sales			2021		% of Net Sales			$ Change			% Change
Net sales, excluding joint ventures	$	51,654,355		95.8	%	$	38,619,353		94.2	%	$	13,035,002			33.8	%
Net sales, to joint ventures		2,252,618		4.2	%		2,361,165		5.8	%		(108,547	)		-4.6	%
Cost of goods sold		36,977,619		68.6	%		26,997,582		65.9	%		9,980,037			37.0	%
Equity in income from joint ventures		3,662,178		6.8	%		5,779,260		14.1	%		(2,117,082	)		-36.6	%
Fees for services provided to joint ventures		3,835,755		7.1	%		4,388,866		10.7	%		(553,111	)		-12.6	%
Selling expenses		9,659,457		17.9	%		8,745,433		21.3	%		914,024			10.5	%
General and administrative expenses		7,675,622		14.2	%		6,125,151		14.9	%		1,550,471			25.3	%
Research and development expenses		3,557,437		6.6	%		3,217,410		7.9	%		340,027			10.6	%

Period	Total Number of Shares (or Units) Purchased		Average Price Paid Per Share (or Unit)		Total Number of Shares (or Units) Purchased As Part of Publicly Announced Plans or Programs		Maximum Number of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
March 1, 2022 through March 31, 2022		0	$	0		0		(1	)
April 1, 2022 through April 30, 2022		0	$	0		0		(1	)
May 1, 2022 through May 31, 2022		0	$	0		0		(1	)
Total		0	$	0		0		(1	)(2)