NORTHERN TECHNOLOGIES INTERNATIONAL CORP MANAGEMENT REPORT OF FINANCIAL POSITION AND RESULTS OF OPERATIONS (Form 10-Q)

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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. 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 years and, in recent years, has targeted and expanded into the oil and
gas industry. NTIC also markets and sells a portfolio of 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 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 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.



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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 of Zerust India


On September 21, 2021NTIC announced that it has acquired the remaining 50% stake in its Indian joint venture, Zerust India, for $6,250,000 in cash, from September 1, 2021.



As a result of the acquisition of Zerust India, NTIC's revenues and operating
expenses increased and its equity in income from joint ventures decreased during
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 effects on NTIC's financial results during the remainder
of fiscal 2022.


See note 3 of 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's customers and suppliers to operate at a fraction of their
capacities or wholly lock down, which disrupted and may continue to disrupt
NTIC's sales 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 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.



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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 businesses and
services, including certain manufacturing. With the exception of the temporary
closures of NTIC's facilities in China and India 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 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. 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 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 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 delays as a result of freight
container shortages. These issues have persisted into the fourth quarter 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.


Any of these events could have a material adverse effect on NTIC’s business, results of operations and financial condition.

Global 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 and are expected to continue 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 are expected to continue
through 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.



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Financial Overview


The management of NTIC, including its managing director, 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, 2022 include the following with increases or decreases in each case from the respective prior year period:

? NTIC’s consolidated turnover increased by 23.0% and 31.5% over the three and

nine months ended May 31, 2022respectively, compared to the three and nine

months ended May 31, 2021. The consolidated turnover of NTIC for the three and

nine months ended May 31, 2022 were positively affected by additional sales

    as a result of the Zerust India acquisition and increased demand.



? In the three and nine months ended May 31, 202276.2% and 77.9% of NTIC

consolidated net sales, respectively, came from the sales of

ZERUST® products and services, which grew by 16.7% and 27.7% to reach $14,446,832

and $41,988,394respectively, 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 additional sales following the acquisition of Zerust India and

increased sales to new and existing customers due to increased global demand

compared to the periods of the previous year. The consolidated turnover of NTIC for

the nine months have ended May 31, 2022 included $3,054,918 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 by 48.6% and 47.2% over the three

and nine months ended May 31, 2022respectively, compared to the three and

nine months ended May 31, 2022 mainly due to an increase in finished goods

product sales in North America and in the majority subsidiary of NTIC in

    India, Natur-Tec India Private Limited.



? Cost of goods sold as a percentage of net sales increased to 67.1% and 68.6%

in the three and nine months ended May 31, 2022respectively, compared to

65.8% and 65.9% during the three months ended May 31, 2021respectively,

mainly due to the rise in the prices of raw materials used in NTIC

products, as well as increased labor and shipping costs, partially offset by

    increased net sales.



? The share of NICTs in joint venture revenues fell by 32.9% and 36.6% during

the three and nine months ended May 31, 2022respectively, to $1,364,597 and

$3,662,178respectively, compared to $2,033,536 and $5,779,260 during the

three and nine months ended May 31, 2021, respectively. These decreases were

mainly due to the fact that Zerust India is now a consolidated subsidiary

in the financial statements of NTIC and an increase in operating expenses and a

    decrease in gross margins at the joint ventures.



? Net sales of joint ventures decreased by 16.8% and by 10.9% for $26,594,077 and

$78,218,839 in the three and nine months ended May 31, 2022respectively,

compared to $31,959,539 and $87,795,284 in the three and nine months ended

May 31, 2021, respectively. These decreases are mainly due to

decline in demand during periods of the current year and the Zerust India

acquisition since its sales were included in the net sales of NTIC

    fiscal year periods.



? Total ICT operating expenses increased by 12.7% and 15.5% to reach $7,113,737 and

$20,892,516 in the three and nine months ended May 31, 2022respectively,

compared to $6,310,345 and $18,087,994 for the three and nine months ended May

31 2021, respectively. These increases are mainly due to $630,874 and

$1,710,075 additional expenses due to the acquisition of Zerust India during

the three and nine months ended May 31, 2022respectively, and increased

    personnel, travel, and research and development expenses.




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? Since NTIC acquired the remaining 50% stake in Zerust India

efficient September 1, 2021NTIC recorded a gain of $3,951,550 during the

nine months ended May 31, 2022which is included in “Revaluation gain on

acquisition of a company accounted for using the equity method” on the consolidated financial statements of NTIC

    operations.



? NICT achieved a net result attributable to NTIC of $1,000 $167Where $0.11 by

diluted common share, for the three months ended May 31, 2022compared to

$2,053,916Where $0.21 per diluted common share, for the three months ended May

December 31, 2021. NTIC generated net income attributable to NTIC of $5,676,773Where

$0.59 per diluted common share, for the nine months ended May 31, 2022,

compared to $4,628,890Where $0.47 per diluted common share, for the nine months

ended May 31, 2021. Of the increase for the nine-month comparison, $3,951,550

    was due to the gain from the Zerust India acquisition.




Results of Operations



The following table presents NTIC’s operating results for the three and nine months ended May 31, 2022 and 2021.


                                                        Three Months Ended May 31,
                                            % of                             % of              $              %
                            2022          Net Sales          2021          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 %
Cost of goods sold        12,722,832            67.1 %     10,152,582            65.8 %     2,570,250          25.3 %
Equity in income from
joint ventures             1,364,597             7.2 %      2,033,536            13.2 %      (688,939 )       -32.9 %
Fees for services
provided to joint
ventures                   1,329,988             7.0 %      1,589,621            10.3 %      (259,633 )       -16.3 %
Selling expenses           3,450,308            18.2 %      3,171,657            20.6 %       278,651           8.8 %
General and
administrative
expenses                   2,560,487            13.5 %      2,072,195            13.4 %       488,292          23.6 %
Research and
development expenses       1,102,942             5.8 %      1,066,493             6.9 %        36,449           3.4 %




                                                         Nine Months Ended May 31,
                                            % of                             % of              $               %
                            2022          Net Sales          2021          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 %




Net Sales. NTIC's consolidated net sales increased 23.0% and 31.5% to
$18,964,921 and $53,906,973 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 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. 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.



The following table shows NTIC net sales by product segment for the three and nine months ended May 31, 2022 and 2021 by segment:


                           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




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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.



The following table presents the net sales of ZERUST® products by NTIC for the three and nine months ended May 31, 2022 and 2021:


                                                 Three Months Ended May 31,
                                                                         $             %
                                      2022             2021           Change        Change
ZERUST® industrial net sales      $ 12,412,981     $ 10,100,638     $ 2,312,343        22.9 %
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 %
Total ZERUST® net sales           $ 14,446,832     $ 12,378,215     $ 2,068,617        12.1 %




                                                  Nine Months Ended May 31,
                                                                         $             %
                                      2022             2021           Change        Change
ZERUST® industrial net sales      $ 36,680,856     $ 28,574,297     $ 8,106,559        28.4 %
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 %
Total ZERUST® net sales           $ 41,988,394     $ 32,882,882     $ 9,105,512        80.6 %




NTIC's total ZERUST® net sales increased during the three and nine months ended
May 31, 2022, 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® industrial products and
services. 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.



ZERUST® oil and gas net sales increased 47.0% and 56.9% during the three and
nine months ended May 31, 2022 compared to the prior fiscal year periods
primarily as a result of new opportunities with new customers compared to the
prior fiscal year periods. 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% and 22.1% of NTIC's
consolidated net sales, respectively, were derived from sales of Natur-Tec®
products, which increased 48.6% and 47.2% 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 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.



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Cost of Goods Sold. Cost of goods sold increased 25.3% and 37.0% for the three
and nine months ended May 31, 2022, respectively, compared to the three and nine
months ended May 31, 2021 primarily as a result of the increase in net sales, as
described above, and price increases on raw materials used in NTIC's products,
as well as increased labor and shipping costs. Cost of goods sold as a
percentage of net sales increased to 67.1% and 68.6% during the three and nine
months ended May 31, 2022, compared to 65.8% 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 products, as well as increased labor and shipping costs, partially
offset by the increase in net sales. Although NTIC has taken certain actions to
address inflationary pressures and pass on as much of the related cost increases
on to its customers as possible, it expects 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 months ended May 31, 2022.



Equity in Income from Joint Ventures. NTIC's equity in income from joint
ventures decreased 32.9% and 36.6% 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 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. 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 $2,324,605 attributable to EXCOR during the nine months ended May
31, 2022, compared to $3,182,691 during the nine months ended May 31, 2021. NTIC
had equity in income from all other joint ventures of $1,337,572 during the nine
months ended May 31, 2022, compared to $2,596,569 during the nine months ended
May 31, 2021.



Fees for Services Provided to Joint Ventures. NTIC recognized fee income for
services provided to joint ventures of $1,329,988 and $3,835,755 during the
three and nine months ended May 31, 2022, respectively, compared to $1,589,621
and $4,388,866 during the three and nine months ended May 31, 2021,
respectively, representing decreases of 16.3% and 12.6%, 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 sales experienced by certain joint ventures. Total net sales of NTIC's
joint ventures decreased 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 were attributable to EXCOR during the nine months
ended May 31, 2022, compared to $692,770 attributable to EXCOR during the nine
months ended May 31, 2021.



Selling Expenses. NTIC's selling expenses increased 8.8% and 10.5% for the three
and nine months ended May 31, 2022, respectively, compared to the same
respective periods in fiscal 2021 due primarily to incremental expenses due to
the Zerust India acquisition, as well as an increase in travel and personnel
expenses compared to the expenses incurred during the three and nine months
ended May 31, 2021. Selling expenses as a percentage of net sales decreased to
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.



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General and Administrative Expenses. NTIC's general and administrative expenses
increased 23.6% and 25.3% for the three and nine months ended May 31, 2022,
respectively, compared to the same respective periods in fiscal 2021 primarily
due to incremental expenses due to the Zerust India acquisition and transaction
expenses incurred to complete the acquisition, as well as increased travel and
personnel expenses compared to the expenses incurred during the three and nine
months ended May 31, 2021. As a percentage of net sales, general and
administrative expenses increased to 13.5% and decreased to 14.2% for the three
and nine months ended May 31, 2022, respectively, compared to 13.4% and 14.9%
for the same respective periods in fiscal 2021. The increase for the three-month
comparison is 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.



Research and development expenses. NICT research and development expenditure increased by 3.4% and 10.6% for the three and nine months ended May 31, 2022respectively, compared to the same respective periods of fiscal 2021, mainly due to the increase in personnel and development efforts.



Interest Income. NTIC's interest income increased 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 charges. NTIC’s interest charges increased to $23,784 and $34,079
in the three and nine months ended May 31, 2022respectively compared
$3,044 and $10,661 in the three and nine months ended May 31, 2021 primarily due to the increase in borrowings outstanding under the line of credit during the current year period.



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.



Income before income tax expense. NTIC had earnings before income tax expense of
$1,815,077 and $7,489,018 for the three and nine months ended May 31, 2022respectively, compared to $2,586,386 and $6,148,259 for the three and nine months ended May 31, 2021respectively.



Income Tax Expense. Income tax expense was $604,314 and $1,260,437 for the three
and nine months ended May 31, 2022, respectively, compared to income tax expense
of $276,338 and $929,588 during the three and nine months ended May 31, 2021,
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 and $24,702,778 as of
May 31, 2022 and August 31, 2021, 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
$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. Net income attributable to NTIC increased 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 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 gain on acquisition of equity method
investee" on NTIC's consolidated statements of operations, which was partially
offset by 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.



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NTIC anticipates that its earnings for the remainder of fiscal 2022 will
continue to be adversely affected by both the COVID-19 pandemic and worldwide
supply 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 compared to the same periods
in fiscal 2021.


Cash and capital resources



Sources of Cash and Working Capital. NTIC's working capital, defined as current
assets less current liabilities, was $24,726,778 as of May 31, 2022, including
$6,123,269 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 in available for sale securities.



NTIC has a revolving line of credit with PNC Bank of $7,000,000, which was
increased from $5,000,000 effective as of May 20, 2022 to allow for financial
flexibility, and will be decreased back to $5,000,000 effective as of August 16,
2022. 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, NTIC was in compliance with all debt covenants under the Amended and
Restated Loan Agreement. As of May 31, 2022, NTIC did not have any letters of
credit outstanding with respect to the letter of credit sub-facility available
under the revolving line of credit with PNC Bank.



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 or dissolutions or liquidations of one or more of its
joint ventures, including in particular its 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 NTIC's results of operations or financial
condition or its joint venture operations given the immateriality of the
operations of this joint venture.



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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 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, 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 inventory as of May 31,
2022, compared to August 31, 2021. Trade receivables, excluding joint ventures,
as of May 31, 2022, increased $2,705,775, compared to August 31, 2021, primarily
related to an increase in sales.



Outstanding trade receivables, excluding joint ventures balances, as of May 31,
2022 remained the same at 69 days from balances outstanding from these customers
as of August 31, 2021.



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Outstanding trade receivables from joint ventures as of May 31, 2022 increased
$232,364, compared to August 31, 2021, primarily due to the timing of payments.
Outstanding balances from trade receivables from joint ventures increased an
average of 62 days to an average of 86 days from balances outstanding from these
customers compared to August 31, 2021. The average days outstanding of trade
receivables from joint ventures as of May 31, 2022 were primarily due to the
receivables balances at various NTIC's joint ventures.



Outstanding receivables for services provided to joint ventures as of May 31,
2022 decreased $261,913, compared to August 31, 2021, and the average days to
pay decreased an average of 2 days to an average of 86 days compared to August
31, 2021.



Net cash used in investing activities for the nine months ended May 31, 2022 was
$6,531,034, which was primarily the result of the purchase of the remaining 50%
ownership interest in Zerust India, purchases of property and equipment,
investment in joint venture and investments in patents. Net cash used in
investing activities for the nine months ended May 31, 2021 was $399,780, which
was primarily the result of purchase of available for sale securities, purchases
of property and equipment, and investments in patents, partially offset by the
proceeds from the sale of available for sale securities.



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



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



Declaration Date   Amount      Record Date        Payable Date
October 20, 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




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 Board of Directors declared
cash dividends on the following dates in the following amounts to holders of
record of NTIC common stock as of the following record dates:



Declaration Date   Amount      Record Date        Payable Date
January 15, 2021   $ 0.065   February 3, 2021   February 17, 2021
 April 23, 2021    $ 0.065     May 5, 2021        May 19, 2021




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.



                                       31
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Capital Expenditures and Commitments. NTIC spent $961,704 on capital
expenditures during the nine months ended May 31, 2022, which related primarily
to the purchase of new equipment and facility improvements. NTIC expects to
spend an aggregate of approximately $2,200,000 to $2,500,000 on capital
expenditures during fiscal 2022, which it expects will relate primarily to
anticipated renovation and equipment costs in connection with the new corporate
headquarters of NTIC China.



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.



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 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


NICTs are exposed to certain market risks resulting from variations in 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.



Certain raw materials used in NTIC products are exposed to variations in the price of raw materials. The main commodity price exposures are to a variety of plastic resins.



Any outstanding advances under NTIC's revolving line of credit with PNC Bank
bear interest at an annual rate based on daily LIBOR plus 2.50%. As of May 31,
2022, NTIC had borrowings of $4,700,000 under the line of credit that existed as
of that date.



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Significant 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" 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.



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
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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.


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
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? The effect of COVID-19 on NTIC’s business, results of operations and financial condition

    condition, including disruption to our customers, suppliers and
    subcontractors, as well as the global economy and financial markets;




  ? The effect of worldwide disruption in supply issues on NTIC's business,

results of operations and financial condition, which will likely continue

the rest of fiscal year 2022 and until fiscal year 2023, regardless of status

    the COVID-19 pandemic;




  ? The effect of current worldwide economic conditions and any turmoil and

disruption of global credit and financial markets on NICT activity,

in particular because of the ongoing conflict between Russia and

    Ukraine;



? The variability of NTIC sales of ZERUST® products and services to the oil and gas sectors

the gas industry and Natur-Tec® products and ICT equity income

joint ventures, including the variability of revenue and joint venture earnings equity,

    in turn, subject NTIC's earnings to quarterly fluctuations;




  ? Risks associated with NTIC's international operations and exposure to

fluctuations in exchange rates, import duties, taxes and

    tariffs;



? The effect of from the United Kingdom process to leave the European Union on

NTIC’s operating results, including in particular future net sales of NTIC

    European and other joint ventures;



? The health effect of WE the automobile industry on NTIC activity;

? NTIC’s dependence on the success of its joint ventures and fees and dividends

    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 them

relationships, particularly 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 products, including supply chain disruptions and weather conditions

    impacts;



? The success and risks associated with the new emerging activities of NTIC and

products and services, including in particular the capacity of NTIC and the capacity

NTIC joint ventures to sell ZERUST® products and services to oil companies and

the gas industry and Natur-Tec® products and the often long and large sales

    process involved in selling such products and services;



? The ability of NICTs to introduce new products and services that respond to the evolution

    market conditions and customer demand;



? Market acceptance of existing and new ICT products, particularly in light of

    existing and new competitive products;




  ? Maturation of certain existing markets for NTIC's ZERUST® products and

services and the ability of NICTs to gain market share and succeed in penetrating

    other existing and new markets;




                                       35
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? Increased competition, particularly vis-à-vis ZERUST® products from NTIC and

    services, and the effect of such competition on NTIC's and its joint
    ventures' pricing, net sales, and margins;



? The dependence of NTIC and its relations with its independent distributors

    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 could be impacted by Russian action

    military forces in Ukraine;




  ? NTIC's operations in China, and the risks associated therewith;



? The costs and effects of compliance 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 development, production,

    and usage of new and existing products;



? Unforeseen production expenses incurred in connection with new clients and

    new products;




  ? Loss of or changes in executive management or key employees;




  ? 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 non-compliance by NTIC

    applicable laws, rules, and regulations;



? Changes in Generally Accepted Accounting Principles and Effect of New

    accounting pronouncements;




  ? Fluctuations in NTIC's effective tax rate;



? The effect of extreme climatic 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
under the heading "Part I. Item 1A. Risk Factors."



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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.

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