Quarterly Report for Quarter Ending May 31, 2025 (Form 10-Q)

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, 2024. 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 50 years and, more recently, has also expanded into the oil and gas industry. Additionally, NTIC markets and sells a portfolio of proprietary bio-based and certified compostable (fully biodegradable) polymer resin compounds and finished products under the Natur-Tec® brand. These sustainable packaging products are intended to reduce NTIC's customers' carbon footprint and provide environmentally sound waste disposal options.

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. 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), its wholly owned subsidiary in India, HNTI Limited (Zerust India), its majority-owned joint venture holding company for NTIC's joint venture investments in the Association of Southeast Asian Nations (ASEAN) region, NTI Asean LLC (NTI Asean), and certain majority-owned and wholly owned subsidiaries, and joint venture arrangements in North America, Europe, and Asia. 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 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.

Natur-Tec® bio-based and compostable plastics are manufactured using NTIC's patented and/or proprietary technologies and are intended to replace conventional petroleum-based plastics. The Natur-Tec® biopolymer resin compound portfolio includes formulations that have been optimized for a variety of applications, including blown-film extrusion, coatings, injection molding, thermoforming, profile extrusion and engineered plastics. These resin compounds are certified to be fully biodegradable in a commercial composting environment and are currently being used to produce finished products, including can liners, shopping and grocery bags, lawn and leaf bags, branded apparel packaging bags and accessories, and various foodservice items, such as disposable cutlery, drinking straws, food-handling gloves, and coated paper products. In North America, NTIC markets its Natur-Tec® resin compounds and finished products primarily through a network of regional and national distributors as well as independent agents. NTIC continues to see significant opportunities for finished bioplastic products and, therefore, continues to strengthen and expand its North American distribution network for finished Natur-Tec® bioplastic products.

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.

Tariffs

The tariff environment is complex and evolving. NTIC's business has incurred, and expects to continue to incur, additional costs as it relates to tariffs for the remainder of fiscal 2025. NTIC has taken and will continue to take action to mitigate inflationary pressures caused by tariffs through a combination of targeted price increases, supplier diversification and other strategic sourcing adjustments, cost reductions, and manufacturing optimization. With respect to NTIC China, specifically, the majority of NTIC China's production and sales are for local consumption; and therefore, we believe, NTIC China's exposure to tariffs, included those imposed by the United States is limited.

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® products and services and Natur-Tec® products.

Highlights of NTIC's financial results for the three and nine months ended May 31, 2025 include the following, with increases or decreases in each case as compared to the respective prior fiscal year period:

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NTIC's consolidated net sales increased 4.0% and 0.3% during the three and nine months ended May 31, 2025, respectively, compared to the three and nine months ended May 31, 2024. The increase for the three-month comparison was primarily due to increased sales and demand for ZERUST® products. The increase for the nine-month comparison was primarily due to increased sales and demand for Natur-Tec® products, partially offset by decreased sales of ZERUST® products. During the nine months ended May 31, 2025, 73.2% of NTIC's consolidated net sales were derived from sales of ZERUST® products and services, and 26.8% of NTIC's consolidated net sales were derived from sales of Natur-Tec® products.

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Cost of goods sold as a percentage of net sales was 61.6% and 62.5% during the three and nine months ended May 31, 2025, respectively, compared to 61.8% during each of the three and nine months ended May 31, 2024, respectively. The slight decrease for the three-month comparison was primarily due to the corresponding change in sales. The increase for the nine-month comparison was primarily due to slightly higher raw material prices and discounts on selling prices during the nine months ended May 31, 2025.

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NTIC's total joint venture operations decreased 12.9% and 14.3% to $2,272,912 and $6,377,617 during the three and nine months ended May 31, 2025, respectively, compared to $2,609,228 and $7,441,476 during the three and nine months ended May 31, 2024, respectively. These decreases were primarily due to decreases in equity in income from joint ventures, which were driven primarily by decreased sales at most joint ventures. Net sales at the joint ventures, which are not consolidated with NTIC's net sales, decreased 9.3% and 8.0% to $23,211,613 and $66,848,498 during the three and nine months ended May 31, 2025, respectively, compared to $25,602,072 and $72,642,714 during the three and nine months ended May 31, 2024, respectively.

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NTIC's total operating expenses increased 7.6% and 7.9% to $9,665,165 and $27,954,669 during the three and nine months ended May 31, 2025, respectively, compared to $8,978,405 and $25,901,387 for the three and nine months ended May 31, 2024, respectively. These increases were primarily due to strategic investments in ZERUST® oil and gas marketing and sales efforts, including personnel expenses and the corresponding benefits, as well as increased travel and professional fees.

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NTIC earned net income attributable to NTIC of $121,775, or $0.01 per diluted common share, for the three months ended May 31, 2025, compared to $976,604, or $0.10 per diluted common share, for the three months ended May 31, 2024. NTIC earned net income attributable to NTIC of $1,117,185, or $0.12 per diluted common share, for the nine months ended May 31, 2025, compared to $3,573,294, or $0.36 per diluted common share, for the nine months ended May 31, 2024.

Results of Operations

The following table sets forth NTIC's results of operations for the three and nine months ended May 31, 2025 and 2024.

		Three Months Ended May 31,
		2025				% of Net Sales				2024				% of Net Sales				$ Change				% Change
Net sales		$	21,508,563				n/a			$	20,686,197				n/a			$	822,366				4.0	%
Cost of goods sold			13,249,123				61.6	%			12,793,103				61.8	%			456,020				3.6	%
Equity in income from joint ventures			970,314				n/a				1,396,731				n/a				(426,417	)			(30.5%	)
Fees for services provided to joint ventures			1,302,598				n/a				1,212,497				n/a				90,101				7.4	%
Selling expenses			4,375,956				20.3	%			4,232,887				20.5	%			143,069				3.4	%
General and administrative expenses			4,150,966				19.3	%			3,500,113				16.9	%			650,853				18.6	%
Research and development expenses			1,138,243				5.3	%			1,245,405				6.0	%			(107,162	)			(8.6%	)

		Nine Months Ended May 31,
		2025				% of Net Sales				2024				% of Net Sales				$ Change				% Change
Net sales		$	61,919,022				n/a			$	61,710,410				100.0	%		$	208,612				0.3	%
Cost of goods sold			38,701,045				62.5	%			38,143,878				61.8	%			557,167				1.5	%
Equity in income from joint ventures			2,720,637				n/a				3,676,962				n/a				(956,325	)			(26.0%	)
Fees for services provided to joint ventures			3,656,980				n/a				3,764,514				n/a				(107,534	)			(2.9%	)
Selling expenses			12,515,638				20.2	%			12,053,839				19.5	%			461,799				3.8	%
General and administrative expenses			11,668,492				18.8	%			10,253,966				16.6	%			1,414,526				13.8	%
Research and development expenses			3,770,539				6.1	%			3,593,582				5.8	%			176,957				4.9	%

Net Sales. NTIC's consolidated net sales increased 4.0% and 0.3% to $21,508,563 and $61,919,022 during the three and nine months ended May 31, 2025, respectively, compared to the three and nine months ended May 31, 2024. The increase for the three-month comparison was primarily due to increased sales and demand for ZERUST® products. The increase for the nine-month comparison was primarily due to increased sales and demand for Natur-Tec® products, partially offset by decreased sales of ZERUST® products.

The following table sets forth NTIC's net sales by product segment for the three and nine months ended May 31, 2025 and 2024:

		Three Months Ended May 31,								Nine Months Ended May 31,
		2025				2024				2025				2024
Total ZERUST® sales		$	15,728,637			$	14,837,235			$	45,316,457			$	45,461,075
Total Natur-Tec® sales			5,779,926				5,848,962				16,602,565				16,249,335
Total net sales		$	21,508,563			$	20,686,197			$	61,919,022			$	61,710,410

During the three and nine months ended May 31, 2025, 73.1% and 73.2% of NTIC's consolidated net sales, respectively, were derived from sales of ZERUST® products and services. Sales of ZERUST® products and services increased 6.0% to $15,728,637 compared to $14,837,235 during the three months ended May 31, 2024 and decreased slightly to $45,361,457, compared to $45,461,075 during the nine months ended May 31, 2024. The increase for the three-month comparison was primarily due to increased demand for ZERUST® industrial products, and was partially offset by decreased demand for ZERUST® oil and gas products.

The following table sets forth NTIC's net sales of ZERUST® products for the three and nine months ended May 31, 2025 and 2024:

		Three Months Ended May 31,
		2025				2024				$ Change				% Change
ZERUST® industrial net sales		$	14,440,591			$	13,477,181			$	963,410				7.1	%
ZERUST® oil & gas net sales			1,288,046				1,360,054				(72,008	)			(5.3%	)
Total ZERUST® net sales		$	15,728,637			$	14,837,235			$	891,402				6.0	%

		Nine Months Ended May 31,
		2025				2024				$ Change				% Change
ZERUST® industrial net sales		$	40,965,696			$	40,431,379			$	534,317				1.3	%
ZERUST® oil & gas net sales			4,350,761				5,029,696				(678,935	)			(13.5%	)
Total ZERUST® net sales		$	45,316,457			$	45,461,075			$	(144,618	)			(0.3%	)

ZERUST® industrial net sales increased 7.1% and 1.3% during the three and nine months ended May 31, 2025, respectively, compared to the respective prior fiscal year periods, primarily due to increased demand for North American ZERUST® industrial products. Overall, demand for ZERUST® products and services depends heavily on the overall health of the markets in which NTIC sells its products, including the automotive, construction, agriculture, and mining markets, in particular.

ZERUST® oil and gas net sales decreased 5.3% and 13.5% during the three and nine months ended May 31, 2025, respectively, compared to the respective prior fiscal year periods primarily due to decreased demand. NTIC anticipates that its sales of ZERUST® products and services into the oil and gas industry will continue to remain subject to significant volatility from quarter to quarter as sales are recognized. Demand for oil and gas products around the world depends primarily on market acceptance and the reach of NTIC's distribution network. Because of the typical size of individual orders and overall size of NTIC's net sales derived from sales of oil and gas products, the timing of one or more orders can materially affect NTIC's quarterly sales compared to prior fiscal year quarters.

During the three and nine months ended May 31, 2025, 26.9% and 26.8% of NTIC's consolidated net sales, respectively, were derived from sales of Natur-Tec® products, compared to 28.3% and 26.3% during the three and nine months ended May 31, 2024, respectively. Sales of Natur-Tec® products decreased 1.2% to $5,779,926 during the three months ended May 31, 2025 compared to $5,848,962 during the three months ended May 31, 2024. Sales of Natur-Tec® products increased 2.2% to $16,602,565 during the nine months ended May 31, 2025 compared to $16,249,335 during the nine months ended May 31, 2024. The decrease for the three-month comparison was primarily due to a combination of timing and seasonal variations in demand in Asia, and a temporary reduction in shipments to a major resin customer due to one-time tooling changes. The increase for the nine-month comparison was primarily due to higher demand for apparel packaging from major brands in India, and the launch of new customer applications. The market for biodegradable plastics is expanding worldwide, driven by increasing environmental awareness, regulatory support for sustainable materials, and growing demand for eco-friendly alternatives. As consumers and industries seek to reduce plastic waste, biodegradable plastics offer a viable solution, particularly in sectors like packaging, agriculture, and consumer goods. This trend is further supported by government policies promoting sustainable practices and by advances in biodegradable technology, which make these materials more accessible and cost-effective.

Cost of Goods Sold. Cost of goods sold increased 3.6% and 1.5% for the three and nine months ended May 31, 2025, respectively, compared to the three and nine months ended May 31, 2024 primarily due to the fluctuations in corresponding sales. Cost of goods sold as a percentage of net sales was 61.6% and 62.5% for the three and nine months ended May 31, 2025, respectively, compared to 61.8% during each of the three and nine months ended May 31, 2024, respectively. The slight decrease for the three-month comparison was primarily due to the corresponding change in sales. The increase for the nine-month comparison was primarily due to slightly higher raw material prices and discounts on selling prices during the nine months ended May 31, 2025.

Equity in Income from Joint Ventures. NTIC's equity in income from joint ventures decreased 30.5% and 26.0% to $970,314 and $2,720,637 during the three and nine months ended May 31, 2025, respectively, compared to $1,396,731 and $3,676,962 during the three and nine months ended May 31, 2024, respectively. NTIC's equity in income from joint ventures fluctuates based on the net sales and profitability of its joint ventures during the respective periods. Of the total equity in income from joint ventures, NTIC had equity in income from joint ventures of $1,340,674 attributable to EXCOR during the nine months ended May 31, 2025, compared to $2,015,734 attributable to EXCOR during the nine months ended May 31, 2024. This decrease was primarily due to a decrease in net sales by EXCOR compared to the same prior year fiscal period. NTIC had equity in income from all other joint ventures of $1,379,963 during the nine months ended May 31, 2025, compared to $1,661,227 during the nine months ended May 31, 2024.

Fees for Services Provided to Joint Ventures. NTIC recognized fee income for services provided to joint ventures of $1,302,598 and $3,656,980 during the three and nine months ended May 31, 2025, respectively, compared to $1,212,497 and $3,764,514 during the three and nine months ended May 31, 2024, respectively, representing an increase of 7.4% and a decrease of 2.9%, respectively. Fee income for services provided to joint ventures is traditionally a function of the sales made by NTIC's joint ventures; however, at various joint ventures, the fee income for services is a fixed amount that does not fluctuate with the change in sales experienced by certain joint ventures during the three and nine months ended May 31, 2025, specifically EXCOR. Net sales at the joint ventures decreased 9.3% and 8.0% to $23,211,613 and $66,848,498 during the three and nine months ended May 31, 2025, respectively, compared to $25,602,072 and $72,642,714 during the three and nine months ended May 31, 2024, respectively. These decreases were primarily due to decreased demand during the current fiscal year periods at NTIC's joint venture in Germany. 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 $626,999 were attributable to EXCOR during the nine months ended May 31, 2025, compared to fees of $618,236 attributable to EXCOR during the nine months ended May 31, 2024.

Selling Expenses. NTIC's selling expenses increased 3.4% and 3.8% during the three and nine months ended May 31, 2025 compared to the respective prior fiscal year periods. The increases were primarily due to increased personnel expense in the current fiscal year periods as a result of an expansion in the ZERUST® oil and gas sales team. As a percentage of net sales, selling expenses were 20.3% and 20.2% for the three and nine months ended May 31, 2025, respectively, compared to 20.5% and 19.5% for the three and nine months ended May 31, 2024, respectively.

General and Administrative Expenses. NTIC's general and administrative expenses increased 18.6% and 13.8% for the three and nine months ended May 31, 2025, respectively, compared to the same respective periods in fiscal 2024 primarily due to increased professional services and travel and personnel expenses, which relate in part to increased information technology infrastructure, during the current fiscal year periods compared to the respective prior fiscal year periods. As a percentage of net sales, general and administrative expenses increased to 19.3% and 18.8% for the three and nine months ended May 31, 2025, respectively, from 16.9% and 16.6% for the same respective periods in fiscal 2024 primarily due to increased general and administrative expenses as described above.

Research and Development Expenses. NTIC's research and development expenses decreased 8.6% and increased 4.9% for the three and nine months ended May 31, 2025, respectively, compared to the same respective periods in fiscal 2024. These changes were primarily due to continued investment in new product development in the first and second quarters of fiscal 2025, which did not continue into the third quarter of fiscal 2025 since the new product initiatives transitioned into commercialization in the third quarter of fiscal 2025 and the costs began to shift from research and development expenses to selling expenses, reflecting our advancement toward bringing these innovations to market.

Interest Income. NTIC's interest income increased to $37,821 and $273,544 during the three and nine months ended May 31, 2025, respectively, compared to $23,744 and $99,396 during the three and nine months ended May 31, 2024, respectively. These increases were primarily due to $181,529 in interest income earned on a delayed IRS payment related to Employee Retention Credit (ERC) claims recognized in the second quarter of fiscal 2025, as described in Note 16 to NTIC's consolidated financial statements, and changes in the invested cash balances and rate of return at various subsidiaries.

Interest Expense. NTIC's interest expense increased to $162,096 and $421,471 during the three and nine months ended May 31, 2025, respectively, compared to $59,939 and $248,835 during the three and nine months ended May 31, 2024, respectively, primarily due to increased average outstanding borrowings during the current fiscal year periods.

Other Income. NTIC recognized $1,139,756 in other income during the nine months ended May 31, 2025 due to the receipt of an ERC payment. No other income was recognized during the three months ended May 31, 2025 or during the prior year periods. The ERC income was recognized upon receipt of a cash payment in accordance with applicable accounting guidance and was claimed under the suspension test criteria, as described in Note 16 to NTIC's consolidated financial statements. The ERC payment is a one-time event and does not represent recurring operational revenue.

Income Before Income Tax Expense. NTIC had income before income tax expense of $742,912 and $2,632,754 for the three and nine months ended May 31, 2025, respectively, compared to $1,487,722 and $4,957,182 for the three and nine months ended May 31, 2024, respectively.

Income Tax Expense. Income tax expense was $410,461 and $903,529 for the three and nine months ended May 31, 2025, respectively, compared to $332,400 and $848,391 during the three and nine months ended May 31, 2024, 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 $24,096,958 and $23,465,685 as of May 31, 2025 and August 31, 2024, respectively. To the extent undistributed earnings of NTIC's joint ventures are distributed in the future, they are not expected to result in any material additional income tax liability after the application of foreign tax credits.

Net Income Attributable to NTIC. Net income attributable to NTIC decreased to $121,775, or $0.01 per diluted common share, for the three months ended May 31, 2025, compared to $976,604, or $0.10 per diluted common share, for the three months ended May 31, 2024. Net income attributable to NTIC decreased to $1,117,185, or $0.12 per diluted common share, for the nine months ended May 31, 2025, compared to 3,573,294, or $0.36 per diluted common share, for the nine months ended May 31, 2024. These decreases were primarily due to the increases in operating expenses and decreases in income from our joint venture operations, and were partially offset by the one-time ERC payment.

NTIC anticipates that its earnings will continue to be adversely affected to some extent by 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, 2025 compared to the same respective periods in fiscal 2024.

Liquidity and Capital Resources

Sources of Cash and Working Capital. NTIC's working capital, defined as current assets less current liabilities, was $21,661,715 as of May 31, 2025, including $6,773,401 in cash and cash equivalents, $7,369,949 outstanding under NTIC's line of credit, and $2,778,125 outstanding under NTIC China's term loans, compared to $23,682,276 as of August 31, 2024, including $4,952,184 in cash and cash equivalents, $4,291,608 outstanding under NTIC's line of credit, and $2,820,835 outstanding under NTIC China's term loans.

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 2025, NTIC expects to continue to invest through its use of working capital in Zerust India, NTIC China, NTI Europe, its joint ventures, research and development, marketing efforts, resources for the application of its corrosion prevention technology in the oil and gas industry, and its Natur-Tec® bio-plastics business, although the amounts of these various investments are not known at this time.

NTIC also expects to use some of its capital resources to acquire the remaining ownership interests of joint ventures not owned by NTIC as they become available or appropriate and for the formation of one or more new subsidiaries to assume the operations of a joint venture. Some of these joint venture transitions may materially impact NTIC's results of operations for a particular reporting period.

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 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.

Credit Agreement with JPMorgan Chase Bank, N.A. On January 6, 2023, NTIC entered into a Credit Agreement (the Credit Agreement) with JPMorgan Chase Bank, N.A. (JPM), which provided NTIC with a senior secured revolving line of credit (the Credit Facility) of up to $10.0 million, and replaced NTIC's prior loan agreement. The Credit Facility included a $5.0 million sublimit for standby letters of credit.

On January 6, 2025, NTIC and JPM entered into an amendment to the Credit Agreement to extend the maturity date of the Credit Facility from January 6, 2025 to January 5, 2026, reduce the availability under the Credit Facility from $10.0 million to $8.0 million, and increase the applicable margin for Adjusted SOFR Rate (as defined below) advances from 2.15% to 2.35%. On July 8, 2025, NTIC and JPM entered into an amendment to the Credit Agreement to increase the availability under the Credit Facility from $8.0 million to $10.0 million. All other material terms of the Credit Facility and the Credit Agreement remain the same.

Borrowings of $7,369,949 were outstanding under the Credit Facility as of May 31, 2025. NTIC was in compliance with all covenants under the Credit Agreement as of May 31, 2025.

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

Borrowings under the Credit Agreement bear interest at a floating rate, at the option of NTIC, equal to either the CB Floating Rate or the Adjusted SOFR Rate. The term "CB Floating Rate" means the greater of the Prime Rate in the United States or 2.50%. The term "Adjusted SOFR Rate" means the term secured overnight financing rate for either one, three or six months (depending on the interest period selected by NTIC) plus 0.10% per annum. With respect to any borrowings using an Adjusted SOFR Rate, there is an applicable margin of 2.15% applied per annum. There is no applicable margin with respect to borrowings using a CB Floating Rate. The weighted average interest rate was 6.65% and 7.44% for the nine months ended May 31, 2025 and 2024, respectively.

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

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 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.

Other Credit Arrangements. On each of April 22, 2025 and May 29, 2025, NTIC'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 $1.39 million). The term loans mature in April 2026 and May 2026, respectively, unless extended. The term loan that matures in April 2026 has an annual interest rate of 2.75% with interest due monthly, and the term loan that matures in May 2026 has an annual interest rate of 2.96% with interest due monthly. Both term loans are secured by an office building owned by NTIC China and the loan agreements contain certain financial and other covenants. NTIC was in compliance with the covenants as of May 31, 2025. The outstanding balance for both term loans was USD $2,778,125 as of May 31, 2025 and USD $2,820,835 as of August 31, 2024.

Uses of Cash and Cash Flow. Net cash provided by operating activities during the nine months ended May 31, 2025 was $3,808,450, which resulted principally from NTIC's net income, trade receivables, dividends received from joint ventures, and stock-based compensation, and was partially offset by equity in income from joint ventures. Net cash provided by operating activities during the nine months ended May 31, 2024 was $7,583,905, which resulted principally from NTIC's net income, dividends received from joint ventures, dividend receivables from joint ventures, depreciation and amortization expense, and stock-based compensation, and was partially offset by equity in income from joint ventures.

NTIC's cash flows from operations are impacted by significant changes in certain components of NTIC's working capital, including inventory turnover and changes in receivables and payables. 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 a decrease in trade receivables as of May 31, 2025, compared to August 31, 2024. Trade receivables, excluding joint ventures as of May 31, 2025 decreased $2,575,562, compared to August 31, 2024, primarily related to timing differences of sales.

Outstanding trade receivables decreased an average of 4 days to an average of 71 days from balances outstanding from these customers as of May 31, 2025 from an average of 75 days as of August 31, 2024.

Outstanding receivables for services provided to joint ventures as of May 31, 2025 decreased $121,670 compared to August 31, 2024, and the average days to pay increased an average of 3 days to an average of 79 days from an average of 76 days as of August 31, 2024.

Net cash used in investing activities for the nine months ended May 31, 2025 was $3,378,123, which was primarily the result of the investments in intangible assets and purchases of property and equipment. Net cash used in investing activities for the nine months ended May 31, 2024 was $2,601,176, which was primarily the result of the purchases of property and equipment and investments in patents.

Net cash provided by financing activities for the nine months ended May 31, 2025 was $1,459,221, which resulted from net payments under the line of credit and proceeds from NTIC's employee stock purchase plan, and was partially offset by dividends paid to shareholders and dividends received by non-controlling interest. Net cash used in financing activities for the nine months ended May 31, 2024 was $4,587,474, which resulted from dividends paid to shareholders, the repayment of borrowings under the line of credit, and dividends received by non-controlling interest, and was 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. As of May 31, 2025, up to $2,640,548 in shares of NTIC common stock remained available for repurchase under NTIC's stock repurchase program. No repurchases occurred during the nine months ended May 31, 2025.

Cash Dividends. During the nine months ended May 31, 2025, NTIC's Board of Directors declared cash dividends on the following dates in the following amounts to the following holders of NTIC's common stock:

Declaration Date		Amount			Record Date		Payable Date
October 16, 2024		$	0.07		October 30, 2024		November 13, 2024
January 15, 2025		$	0.07		January 29, 2025		February 12, 2025
April 16, 2025		$	0.01		April 30, 2025		May 14, 2025

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

Declaration Date		Amount			Record Date		Payable Date
October 18, 2023		$	0.07		November 1, 2023		November 15, 2023
January 17, 2024		$	0.07		January 31, 2024		February 14, 2024
April 17, 2024		$	0.07		May 1, 2024		May 15, 2024

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. On April 10, 2025, NTIC announced that it had determined to temporarily adjust its quarterly dividend to $0.01 per share effective with its fiscal 2025 third quarter dividend in light of the current global environment.

Capital Expenditures and Commitments. NTIC spent $3,398,123 on capital expenditures during the nine months ended May 31, 2025, which related primarily to facility improvements to the warehouse facility NTIC purchased during fiscal 2023 and the installation of a new Enterprise Resource Planning (ERP) software system and associated equipment. NTIC expects to spend an aggregate of approximately $200,000 to $300,000 on capital expenditures during the remainder of fiscal 2025, which it expects will relate primarily to final implementation of the ERP software and the purchase of new equipment and facility improvements.

Inflation and Seasonality

Inflation in the United States and abroad historically has had minimal effect on NTIC and did not adversely affect NTIC's gross margins during the first nine months of fiscal 2025.

NTIC believes there is some seasonality in its business. NTIC's net sales in the second fiscal quarter are typically adversely affected by the long Chinese New Year, the North American holiday season and overall less corrosion taking place at lower winter temperatures worldwide.

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 Credit Facility with JPM bear interest at a floating rate, at the option of NTIC, equal to either the CB Floating Rate or the Adjusted SOFR Rate, as defined above. Borrowings of $7,369,949 were outstanding under the Credit Facility as of May 31, 2025.

The two term loans undertaken by NTIC China with China Construction Bank Corporation have annual interest rates of 2.75% and 2.96%, respectively, with interest due monthly. The outstanding balance as of May 31, 2025 for both term loans is a total of USD $2,778,125.

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, 2024.

NTIC adopted ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, during the quarterly period ended May 31, 2025. This adoption resulted in enhanced segment disclosures, but did not impact NTIC's accounting estimates or the identification of critical accounting policies.

Recent Accounting Pronouncements

See Note 3 to NTIC's consolidated financial statements for a discussion of recent accounting pronouncements.

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, 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," "outlook," 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:

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The effect of changes to trade regulation, quotas, duties, or tariffs, caused by the changing U.S. and geopolitical environments or otherwise;

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The effect of current worldwide economic conditions, including in particular in the United States, Europe, India and China, and in the automotive industry, and the effect of inflation, recessionary indicators and any turmoil and disruption in the global credit, financial and banking markets or the perception of adverse conditions on NTIC's business and the business of NTIC's customers, suppliers, vendors and other third parties with whom NTIC conducts business;

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The effect of slowdowns within the automotive industry on NTIC's business and the evolution of the automotive industry towards electric vehicles;

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The effect of worldwide disruption in supply chains on NTIC's business, operating results and financial condition;

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The effect of disruptions to distribution channels for NTIC's products and disruptions to our customers, suppliers and subcontractors, as well as the global economy and financial markets;

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The effects of ongoing wars and sanctions against Russia by U.S. and European governments on energy prices, which have adversely affected our joint venture sales, and 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 2025;

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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, including the implementation of higher tariffs;

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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;

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

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

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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;

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Fluctuations in the cost and availability of raw materials, including resins and other commodities, due to supply chain disruptions and the impact of government sanctions;

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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;

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

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

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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;

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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;

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The enforcement or lack thereof of rules and regulations favorable to the market for biodegradable plastics;

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

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NTIC's reliance upon suppliers;

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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 ongoing wars, including the war between Russia and Ukraine, or conflicts in the Middle East;

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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;

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

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

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Rapid advancements in artificial intelligence (AI) technologies, which may disrupt our industry at an accelerated pace and adversely affect our competitive position, customer expectations, and operational performance if we fail to adapt or implement AI innovations effectively or if competitors leverage AI more effectively or quickly;

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

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Ability of management to manage around unplanned events;

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Pending and future litigation;

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

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

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

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Fluctuations in NTIC's effective tax rate;

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

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NTIC's reliance upon its management information systems and risks associated with its recent implementation of a new Enterprise Resource Planning system.

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, 2024 under the heading "Part I. Item 1A. Risk Factors."

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.