Northern Technologies International Corporation Annual Report 2015

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FY2015 Annual Report · Northern Technologies International Corporation

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Fiscal 2015 Annual Report

Northern Technologies International Corporation

• Notice of 2016 Annual Meeting
• Proxy Statement
• Annual Report on Form 10-K - August 31, 2015

For information on how NTIC products benefit the environment visit, www.ntic.com/technology

Our Mission:

Our Environment:

Our business model of commercializing clean and green
technologies depends heavily on the talents, perseverance and
integrity of both our employees and our worldwide federation of
joint venture partners. We believe that our responsibilities are
first to our worldwide customers, then to our people, next to our
communities and finally to our shareholders. Therefore we must:

• Exercise honor, humanity and disciplined management

in our actions.

• See a unified world through the global perspectives

of our people.

• Ensure that the environment becomes a better place because

of what we do.

• Invest continuously in our future.

It is our mission at NTIC to use our advanced technologies to care
for the world we live in, give back to society and strive to set an
example for environmental leadership and responsibility.

At NTIC, we believe that there are no responsible alternatives to
doing business other than through environmental sustainability.
We also believe that environmental responsibility and corporate
business will increasingly work together to grow both sustainability
and the bottom line.

We encourage our employees, joint venture partners, distributors,
affiliates and suppliers to carry out our environmental
commitments at the individual level through:

Our Technology Platforms:

• Daily environmentally responsible business practices.
• Advanced R&D processes that promote the use of

environmentally responsible raw materials, components and
other biobased inputs.

• Education and programs to raise awareness about

our technologies and how they can help solve current
environmental challenges.

• Each NTIC employee is expected to practice an individual

commitment to sustainability and environmental responsibility
in the workplace.

Through our individual commitments to lessen our environmental
footprint and our advanced technologies which allow others to
practice sustainability, we have the power to benefit ourselves
as individuals, our federation of NTIC joint ventures and our
environment for many generations to come.

Zerust®/EXCOR® business unit manufactures and markets corrosion inhibiting technologies
that provide customers with advanced solutions for corrosion issues across their production
facilities and supply chains. The technology uses proprietary chemical systems to create
invisible molecular corrosion shields on metal surfaces. The Zerust®/EXCOR® teams
support clients globally in a broad range of industries including automotive, electrical,
electronic, medical, machine fabrications, steel production, military and marine. Zerust®/
EXCOR® products and services allow customers to achieve substantial cost savings as well
as reduce the negative environmental impact caused by traditional corrosion prevention
methods and the waste caused by the corrosion of metal assets..

Zerust® Oil and Gas business unit provides advanced corrosion control technologies and
services to the petrochemical industry. Zerust® Oil and Gas products and services utilize
Zerust® proprietary corrosion inhibitors in combination with advanced cathodic protection
systems to dramatically enhance corrosion protection of capital assets. These assets
include above-ground storage tanks, various pieces of process equipment, buried and
submerged pipelines, mothballed large capital equipment, pipeline flanges, valves, and
welded joints. Zerust®Oil & Gas technologies are successfully implemented in refineries,
offshore oil rigs, tank farms and retail gas stations in several countries.

Natur-Tec® business unit engineers and manufactures biobased and biodegradable
plastic resins intended to replace conventional, petroleum-based plastics. Natur-Tec®
has a broad bioplastics portfolio which spans flexible film, foam, rigid injection molded
materials and engineered plastics. These applications allow for the production of 100%
certified compostable finished products, such as bags, food service products, and product
packaging. Natur-Tec® products are renewable resource based and do not contain
conventional plastic materials. Natur-Tec® products provide sustainable alternatives to
conventional plastics and enable industry and consumers to move closer to a carbon
neutral footprint.

To the Shareholders of Northern Technologies International Corporation (NTIC),

Fiscal 2015 was, by many measures, a good year for the company. NTIC’s consolidated net sales increased 13.0% to
$30,322,693. Sales of ZERUST® industrial products increased 12.7% to $21,324,793, while sales of ZERUST® Oil & Gas
products and services increased 10.9% to $1,886,814 and sales of Natur-Tec® products increased 43.6% to $4,279,784.

Naturally, fiscal 2015 also presented a number of challenges. During the course of the fiscal year, the exchange rates of
various foreign currencies vis-à-vis the U.S. dollar shifted by as much as 28%, an audit of our former Chinese joint venture,
Tianjin Zerust, turned out to be far from routine, and the global price of crude fell by more than 50%. As explained in
greater detail below, these factors, in combination, contributed to a 56.4% decrease in net income attributable to NTIC to
$1,789,571, or $0.38 per diluted common share, for fiscal 2015 compared to $4,106,372, or $0.90 per diluted common
share, for fiscal 2014.

ZERUST® Industrial Corrosion Prevention
While the sales of ZERUST® Industrial products by our international joint ventures were generally quite good in fiscal
2015, the termination of the Company’s joint venture arrangement in China, which experienced a decrease in sales of
$12,185,229 to $3,735,457 for fiscal 2015, coupled with the significant negative shift in various foreign currency exchange
rates, resulted in an overall decrease in joint venture sales for fiscal 2015 compared to fiscal 2014. NTIC estimates that
the pre-tax impact of the weakening Euro and other currencies compared to the U.S. dollar on its joint venture operating
income was approximately $1,321,000, or $0.29 per share, in fiscal 2015.

Doing business in China also provided NTIC with some of the same frustrations previously experienced by some of the
most respected multi-national companies. In the case of NTIC, the results of sequential audits followed by further private
investigations left us no choice but to part ways from our former joint venture partner in China, as of December 31, 2014.
In its place, NTIC commenced operations through NTIC Shanghai Co., Ltd. (“NTIC China”) as a new wholly owned subsidiary,
on January 1, 2015.

While unavoidable, this transition in our sales channel for the Chinese market has come with a significant short-term cost.
We estimate that the decrease in revenues received from Tianjin Zerust in fiscal 2015, together with our outlays for NTIC
China start-up expenses, negatively impacted our net income attributable to NTIC for fiscal 2015 by over $2.9 million, or
approximately $0.63 per share.

To date, certain idiosyncrasies of Chinese corporate law continue to impede the orderly liquidation of Tianjin Zerust. This,
in turn, has not only led to protracted litigation, but also has impacted the rate at which we have been able to grow
sales through our new NTIC China subsidiary. Consequently, as we continue to prosecute our claims in court, we are also
aggressively accelerating our plans to pursue new Chinese customers in new markets.

As we move into fiscal 2016, we anticipate continued growth - especially from China. At the same time, we are also
cautiously following recent news reports of a potential industrial slowdown in a number of regions around the world,
including Europe, China and the United States.

ZERUST® in the Oil & Gas Industry
Crude prices started plunging in September 2014, and caused oil companies worldwide to slash their short-term plans for
infrastructure expansion and maintenance. Naturally, this also forced NTIC to rethink our fiscal 2015 Oil & Gas goals as
sales and implementations remained below expectations through May 2015. Starting in June 2015, however, new orders
started coming in at a pace almost faster than our implementation staff could handle. Now, as we enter fiscal 2016, we
have a healthy order backlog for both new and repeat customers. Having seen this surge in demand for our proprietary
technologies for protecting the bottom plates of oil storage tanks despite the continuing malaise of the oil industry as a
whole, we expect this market segment to be a strong growth opportunity for us well into the future.

In addition to North America, our global expansion into the Oil & Gas market continued during the last twelve months
as we also fulfilled orders for Africa, the Middle East, India and parts of South East Asia. However, with so many market
variables in flux, we expect our financial results from this market segment to continue to be choppy with spikes in sales for
the next few years.

Natur-Tec® Bio-plastics
Sales of our Natur-Tec® products grew to $4,279,784 during fiscal 2015, representing a 43.6% increase over fiscal 2014.
With this increase, Natur-Tec® represented 14% of NTIC’s consolidated net sales for fiscal 2015.

North American demand for finished bio-plastic products has continued to flourish, driven primarily by organic waste
diversion initiatives expanding across municipalities nationwide. Natur-Tec® finished bio-plastic products, such as
compostable bags and cutlery, facilitate the efficient collection and segregation of the food and yard waste generated by
large corporations, as well as institutions such as universities and school districts.

During fiscal 2015, NTIC’s Natur-Tec India subsidiary also increased sales of Natur-Tec® products in India and the surrounding
region by 66%. This new entity has continued to aggressively expand its sales to manufacturers seeking to implement
compostable packaging across their supply chain. We expect this region to be an area of strong growth in fiscal 2016 and
beyond, as we continue to target and convert additional manufacturers to the use of Natur-Tec® sustainable packaging
solutions.

Closing
In closing, I want to thank all the members of NTIC’s global family of employees, joint venture partners, friends and
colleagues from across our worldwide joint venture network for their hard work and dedication in making the achievements
of fiscal 2015 possible. We believe our strong international presence will continue to serve as a key competitive advantage
to us in an increasingly interconnected marketplace. While we believe the economy in certain regions will remain
challenging during fiscal 2016, we believe that with our technical strength and market reach, we are well positioned to
pursue continued profitable growth.

Sincerely,

G. Patrick Lynch
President & CEO, NTIC

G. Patrick Lynch

NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

January 15, 2016

The Annual Meeting of Stockholders of Northern Technologies International Corporation, a Delaware corporation,
will be held at NTIC’s corporate executive offices located at 4201 Woodland Road, Circle Pines, Minnesota 55014,
beginning at 2:00 p.m., Central Standard Time, on Friday, January 15, 2016, for the following purposes:

1. To elect seven persons to serve as directors until our next annual meeting of stockholders or until their

respective successors are elected and qualified.

2. To approve, on an advisory basis, the compensation of our named executive officers, as disclosed in

the accompanying proxy statement.

3. To ratify the selection of Baker Tilly Virchow Krause, LLP as our independent registered public

accounting firm for the fiscal year ending August 31, 2016.

4. To transact such other business as may properly come before the meeting or any adjournment of the

meeting.

Only stockholders of record at the close of business on November 17, 2015 will be entitled to notice of, and to vote
at, the meeting and any adjournments thereof. A stockholder list will be available at our corporate offices
beginning January 5, 2016 during normal business hours for examination by any stockholder registered on NTIC’s
stock ledger as of the record date, November 17, 2015, for any purpose germane to the Annual Meeting.

We are pleased again this year to use the “Notice and Access” method of providing proxy materials to our
stockholders via the Internet. We believe that this process expedites your receipt of our proxy materials, lowers the
costs of our Annual Meeting and reduces the environmental impact of our meeting.

By Order of the Board of Directors,

Matthew C. Wolsfeld
Corporate Secretary

December 3, 2015
Circle Pines, Minnesota

Important: Whether or not you expect to attend the meeting in person, please vote by the Internet or
telephone, or request a paper proxy card to sign, date and return by mail so that your shares may be
voted. A prompt response is helpful and your cooperation is appreciated.

TABLE OF CONTENTS

________________

Page

INTERNET AVAILABILITY OF PROXY MATERIALS ......................................................................... ii
GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING ................................. 1
Date, Time, Place and Purposes of Meeting ............................................................................................. 1
Who Can Vote .......................................................................................................................................... 1
How You Can Vote .................................................................................................................................. 1
How Does the Board Recommend that You Vote .................................................................................... 3
How You May Change Your Vote or Revoke Your Proxy ...................................................................... 3
Quorum Requirement ............................................................................................................................... 3
Vote Required ........................................................................................................................................... 3
Other Business .......................................................................................................................................... 4
Procedures at the Annual Meeting ............................................................................................................ 4
Householding of Annual Meeting Materials ............................................................................................ 4
Proxy Solicitation Costs ........................................................................................................................... 5
PROPOSAL ONE—ELECTION OF DIRECTORS .................................................................................... 6
Number of Directors ................................................................................................................................. 6
Nominees for Director .............................................................................................................................. 6
Information about Current Directors and Board Nominees ...................................................................... 6
Additional Information about Current Directors and Board Nominees.................................................... 7
Board Recommendation ........................................................................................................................... 9
PROPOSAL TWO—ADVISORY VOTE ON EXECUTIVE COMPENSATION ................................... 10
Introduction ............................................................................................................................................ 10
Board Recommendation ......................................................................................................................... 11

PROPOSAL THREE—RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM ............................................................................................................ 12
Selection of Independent Registered Public Accounting Firm ............................................................... 12
Audit, Audit-Related, Tax and Other Fees ............................................................................................. 12
Audit Committee Pre-Approval Policies and Procedures....................................................................... 12
Board Recommendation ......................................................................................................................... 12
STOCK OWNERSHIP ............................................................................................................................... 13
Beneficial Ownership of Significant Stockholders and Management .................................................... 13
Section 16(a) Beneficial Ownership Reporting Compliance .................................................................. 15
CORPORATE GOVERNANCE ................................................................................................................ 16
Corporate Governance Guidelines .......................................................................................................... 16
Board Leadership Structure .................................................................................................................... 16
Director Independence ............................................................................................................................ 17
Board Meetings and Attendance ............................................................................................................. 17
Board Committees .................................................................................................................................. 17
Audit Committee .................................................................................................................................... 18
Compensation Committee ...................................................................................................................... 20
Nominating and Corporate Governance Committee .............................................................................. 21
Director Nominations Process ................................................................................................................ 22
Board Oversight of Risk ......................................................................................................................... 24
Code of Ethics ........................................................................................................................................ 24
Policy Regarding Director Attendance at Annual Meetings of Stockholders ........................................ 25
Complaint Procedures ............................................................................................................................. 25

TABLE OF CONTENTS

________________

Page

Process Regarding Stockholder Communications with Board of Directors ........................................... 25
DIRECTOR COMPENSATION ................................................................................................................ 26
Summary of Cash and Other Compensation .......................................................................................... 26
Non-Employee Director Compensation Program ................................................................................... 27
Consulting Arrangement ......................................................................................................................... 28
Indemnification Agreements .................................................................................................................. 28
EXECUTIVE COMPENSATION .............................................................................................................. 29
Compensation Discussion and Analysis ................................................................................................. 29
Summary of Cash and Other Compensation .......................................................................................... 38
Grants of Plan-Based Awards ................................................................................................................. 39
Outstanding Equity Awards at Fiscal Year End ..................................................................................... 40
Stock Incentive Plan ............................................................................................................................... 40
Post-Termination Severance and Change in Control Arrangements ...................................................... 42
Indemnification Agreements .................................................................................................................. 44
RELATED PERSON RELATIONSHIPS AND TRANSACTIONS ......................................................... 46
STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS FOR ........................................... 48
2017 ANNUAL MEETING OF STOCKHOLDERS ................................................................................. 48
Stockholder Proposals for 2017 Annual Meeting ................................................................................... 48
Director Nominations for 2017 Annual Meeting .................................................................................... 48
COPIES OF FISCAL 2015 ANNUAL REPORT ....................................................................................... 49

________________

INTERNET AVAILABILITY OF PROXY MATERIALS
________________

Instead of mailing a printed copy of our proxy materials, including our Annual Report to Stockholders, to
each stockholder of record, we have decided again this year to provide access to these materials in a fast
and efficient manner via the Internet. We believe that this process expedites your receipt of our proxy
materials, lowers the costs of our Annual Meeting and reduces the environmental impact of our meeting.
On December 3, 2015, we began mailing a Notice of Internet Availability of Proxy Materials to
stockholders of record as of November 17, 2015, and we posted our proxy materials on the website
referenced in the Notice of Internet Availability of Proxy Materials (www.proxyvote.com). As more fully
described in the Notice of Internet Availability of Proxy Materials, stockholders may choose to access our
proxy materials at www.proxyvote.com or may request proxy materials in printed or electronic form. In
addition, the Notice of Internet Availability of Proxy Materials and website provide information regarding
how you may request to receive proxy materials in printed form by mail or electronically by email on an
ongoing basis. For those who previously requested printed proxy materials or electronic materials on an
ongoing basis, you will receive those materials as you requested.

Annual Meeting of Stockholders to be Held on January 15, 2016:

Important Notice Regarding the Availability of Proxy Materials for the

The Notice of Annual Meeting of Stockholders and Proxy Statement and
Annual Report to Stockholders, including our Annual Report on Form 10-K
for the fiscal year ended August 31, 2015, are available at www.proxyvote.com.

4201 Woodland Road, Circle Pines, Minnesota 55014

PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS
January 15, 2016

The Board of Directors of Northern Technologies International Corporation is soliciting your proxy for
use at the 2016 Annual Meeting of Stockholders to be held on Friday, January 15, 2016. The Board of
Directors expects to make available to our stockholders beginning on or about December 3, 2015 the
Notice of Annual Meeting of Stockholders, this proxy statement and a form of proxy on the Internet or
has sent these materials to stockholders of NTIC upon their request.

GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
________________

Date, Time, Place and Purposes of Meeting

The Annual Meeting of Stockholders of Northern Technologies International Corporation (sometimes
referred to as “NTIC,” “we,” “our” or “us” in this proxy statement) will be held on Friday, January 15,
2016, at 2:00 p.m., Central Standard Time, at the principal executive offices of Northern Technologies
International Corporation located at 4201 Woodland Road, Circle Pines, Minnesota 55014, for the
purposes set forth in the Notice of Annual Meeting of Stockholders.

Who Can Vote

Stockholders of record at the close of business on November 17, 2015 will be entitled to notice of and to
vote at the meeting or any adjournment of the meeting. As of that date, there were 4,538,317 shares of
our common stock outstanding. Each share of our common stock is entitled to one vote on each matter to
be voted on at the Annual Meeting. Stockholders are not entitled to cumulate voting rights.

How You Can Vote

Your vote is important. Whether you hold shares directly as a stockholder of record or beneficially in
“street name” (through a broker, bank or other nominee), you may vote your shares without attending the
Annual Meeting. You may vote by granting a proxy or, for shares held in street name, by submitting
voting instructions to your broker, bank or other nominee.

If you are a registered stockholder whose shares are registered in your name, you may vote your shares in
person at the meeting or by one of the three following methods:

 Vote by Internet, by going to the website address http://www.proxyvote.com and following the

instructions for Internet voting shown on the Notice of Internet Availability of Proxy Materials or
on your proxy card.

 Vote by Telephone, by dialing 1-800-690-6903 and following the instructions for telephone
voting shown on the Notice of Internet Availability of Proxy Materials or on your proxy card.

 Vote by Proxy Card, by completing, signing, dating and mailing the enclosed proxy card in the

envelope provided if you received a paper copy of these proxy materials.

If you vote by Internet or telephone, please do not mail your proxy card.

If your shares are held in “street name” (through a broker, bank or other nominee), you may receive a
separate voting instruction form with this proxy statement or you may need to contact your broker, bank
or other nominee to determine whether you will be able to vote electronically using the Internet or
telephone.

The deadline for voting by telephone or by using the Internet is 11:59 p.m., Eastern Standard Time (10:59
p.m., Central Standard Time), on the day before the date of the Annual Meeting or any adjournments
thereof. Please see the Notice of Internet Availability of Proxy Materials, your proxy card or the
information your bank, broker, or other holder of record provided to you for more information on your
options for voting.

If you return your signed proxy card or use Internet or telephone voting before the Annual Meeting, the
named proxies will vote your shares as you direct. You have three choices on each matter to be voted on.

For Proposal One—Election of Directors, you may:

 Vote FOR all seven nominees for director,

 WITHHOLD your vote from all seven nominees for director or

 WITHHOLD your vote from one or more of the seven nominees for director.

For Proposal Two—Advisory Vote on Executive Compensation and Proposal Three—Ratification of
Selection of Independent Registered Public Accounting Firm, you may:

 Vote FOR the proposal,

 Vote AGAINST the proposal or

 ABSTAIN from voting on the proposal.

If you send in your proxy card or use Internet or telephone voting, but do not specify how you want to
vote your shares, the proxies will vote your shares FOR all seven of the nominees for election to the
Board of Directors in Proposal One—Election of Directors, FOR Proposal Two—Advisory Vote on
Executive Compensation and FOR Proposal Three—Ratification of Selection of Independent Registered
Public Accounting Firm.

How Does the Board Recommend that You Vote

The Board of Directors unanimously recommends that you vote:

• FOR all seven of the nominees for election to the Board of Directors in Proposal One—Election

of Directors;

• FOR Proposal Two—Advisory Vote on Executive Compensation; and

• FOR Proposal Three—Ratification of Selection of Independent Registered Public Accounting

Firm.

How You May Change Your Vote or Revoke Your Proxy

If you are a stockholder whose shares are registered in your name, you may revoke your proxy at any time
before it is voted by one of the following methods:

 Submitting another proper proxy with a more recent date than that of the proxy first given by
following the Internet or telephone voting instructions or completing, signing, dating and
returning a proxy card to us;

 Sending written notice of your revocation to our Corporate Secretary; or

 Attending the Annual Meeting and voting by ballot.

Quorum Requirement

The presence at the Annual Meeting, in person or by proxy, of the holders of a majority (2,269,159
shares) of the outstanding shares of our common stock as of the record date will constitute a quorum for
the transaction of business at the Annual Meeting. In general, shares of our common stock represented by
proxies marked “For,” “Against,” “Abstain” or “Withheld” are counted in determining whether a quorum
is present. In addition, a “broker non-vote” is counted in determining whether a quorum is present. A
“broker non-vote” is a proxy returned by a broker on behalf of its beneficial owner customer that is not
voted on a particular matter because voting instructions have not been received by the broker from the
customer, and the broker has no discretionary authority to vote on behalf of such customer on such
matter.

Vote Required

Proposal One—Election of Directors will be decided by the affirmative vote of a plurality of shares of our
common stock present in person or represented by proxy and entitled to vote at the Annual Meeting. A
“plurality” for Proposal One means the individuals who receive the greatest number of votes cast “For”
are elected as directors.

Proposal Two—Advisory Vote on Executive Compensation will be decided by the affirmative vote of a
majority of shares of our common stock present in person or represented by proxy and entitled to vote at
the Annual Meeting. Although this is a non-binding, advisory vote, the Compensation Committee and
Board of Directors expect to take into account the outcome of the vote when considering future executive
compensation decisions.

Proposal Three—Ratification of Selection of Independent Registered Public Accounting Firm will be
decided by the affirmative vote of a majority of shares of our common stock present in person or
represented by proxy and entitled to vote at the Annual Meeting.

If your shares are held in “street name” and you do not indicate how you wish to vote, your broker is
permitted to exercise its discretion to vote your shares only on certain “routine” matters. Proposal One—
Election of Directors and Proposal Two—Advisory Vote on Executive Compensation are not “routine”
matters. Accordingly, if you do not direct your broker how to vote, your broker may not exercise
discretion and may not vote your shares on either of these two proposals. This is called a “broker non-
vote” and although your shares will be considered to be represented by proxy at the meeting, they will not
be considered to be shares “entitled to vote” at the meeting and will not be counted as having been voted
on the applicable proposal. Proposal Three—Ratification of Selection of Independent Registered Public
Accounting Firm is a “routine” matter and, as such, your broker is permitted to exercise its discretion to
vote your shares for or against the proposal in the absence of your instruction. Proxies marked “Withheld”
on Proposal One—Election of Directors or “Abstain” on Proposal Two—Advisory Vote on Executive
Compensation or Proposal Three—Ratification of Section of Independent Registered Public Accounting
Firm will be counted in determining the total number of shares “entitled to vote” on such proposal and
will have the effect of a vote “Against” a director or a proposal.

Other Business

Our management does not intend to present other items of business and knows of no items of business
that are likely to be brought before the Annual Meeting, except those described in this proxy statement.
However, if any other matters should properly come before the Annual Meeting, the persons named in the
enclosed proxy will have discretionary authority to vote such proxy in accordance with their best
judgment on the matters.

Procedures at the Annual Meeting

The presiding officer at the Annual Meeting will determine how business at the meeting will be
conducted. Only matters brought before the Annual Meeting in accordance with our Bylaws will be
considered.

Only a natural person present at the Annual Meeting who is either one of our stockholders, or is acting on
behalf of one of our stockholders, may make a motion or second a motion. A person acting on behalf of a
stockholder must present a written statement executed by the stockholder or the duly-authorized
representative of the stockholder on whose behalf the person purports to act.

Householding of Annual Meeting Materials

Some banks, brokers and other nominee record holders may be participating in the practice of
“householding” proxy statements, annual reports and the Notice of Internet Availability of Proxy
Materials. This means that only one copy of this proxy statement, our Annual Report to Stockholders or
the Notice of Internet Availability of Proxy Materials may have been sent to multiple stockholders in each
household. We will promptly deliver a separate copy of any of these documents to any stockholder upon
written or oral request to our Stockholder Information Department, Northern Technologies International
Corporation, 4201 Woodland Road, Circle Pines, Minnesota 55014, telephone: (763) 225-6637. Any
stockholder who wants to receive separate copies of this proxy statement, our Annual Report to
Stockholders or the Notice of Internet Availability of Proxy Materials in the future, or any stockholder
who is receiving multiple copies and would like to receive only one copy per household, should contact

the stockholder’s bank, broker or other nominee record holder, or the stockholder may contact us at the
above address and phone number.

Proxy Solicitation Costs

The cost of soliciting proxies, including the preparation, assembly, electronic availability and mailing of
proxies and soliciting material, as well as the cost of making available or forwarding this material to the
beneficial owners of our common stock will be borne by NTIC. Our directors, officers and regular
employees may, without compensation other than their regular compensation, solicit proxies by
telephone, e-mail, facsimile or personal conversation. We may reimburse brokerage firms and others for
expenses in making available or forwarding solicitation materials to the beneficial owners of our common
stock.

PROPOSAL ONE—ELECTION OF DIRECTORS
________________

Number of Directors

Our Bylaws provide that the Board of Directors will consist of at least one member or such other number
as may be determined by the Board of Directors from time to time or by the stockholders at an annual
meeting. The Board of Directors has fixed the number of directors at seven.

Nominees for Director

The Board of Directors has nominated the following seven individuals to serve as our directors until the
next annual meeting of stockholders or until their successors are elected and qualified. All of the
nominees named below are current members of the Board of Directors.

 Barbara D. Colwell
 Soo-Keong Koh
 Sunggyu Lee, Ph.D.
 G. Patrick Lynch

 Ramani Narayan, Ph.D.
 Richard J. Nigon
 Konstantin von Falkenhausen

Proxies can only be voted for the number of persons named as nominees in this proxy statement, which is
seven.

Information about Current Directors and Board Nominees

The following table sets forth as of November 25, 2015 the name, age and principal occupation of each
current director and each individual who has been nominated by the Board of Directors to serve as a
director of our company, as well as how long each individual has served as a director of NTIC.

Name
Barbara D. Colwell(1)(2)

Soo-Keong Koh(2)
Sunggyu Lee, Ph.D.(3)

G. Patrick Lynch
Ramani Narayan, Ph.D.

Age Principal Occupation
70 Director of NTIC and Certain Other Companies and

Organizations

64 Managing Director of EcoSave Pte Ltd.
63 Russ Ohio Research Scholar in Syngas Utilization
and Professor of Chemical and Biomolecular
Engineering at Ohio University
President and Chief Executive Officer of NTIC

48
66 Distinguished Professor in the Department of
Chemical Engineering & Materials Science at
Michigan State University
Senior Vice President of Cedar Point Capital, Inc.
Partner of B Capital Partners AG

67
48

Director
Since
2013

2008
2004

2004
2004

2010
2012

Richard J. Nigon(1)(2)(3)
Konstantin von Falkenhausen(1)(3)
_________________________
(1) Member of the Audit Committee
(2) Member of the Nominating and Corporate Governance Committee
(3) Member of the Compensation Committee

Additional Information about Current Directors and Board Nominees

The following paragraphs provide information about each current director and nominee for director,
including all positions he or she holds, his or her principal occupation and business experience for the past
five years, and the names of other publicly-held companies of which the director or nominee currently
serves as a director or has served as a director during the past five years. We believe that all of our
directors and nominees display personal and professional integrity; satisfactory levels of education and/or
business experience; broad-based business acumen; an appropriate level of understanding of our business
and its industry and other industries relevant to our business; the ability and willingness to devote
adequate time to the work of the Board of Directors and its committees; a fit of skills and personality with
those of our other directors that helps build a board that is effective, collegial and responsive to the needs
of our company; strategic thinking and a willingness to share ideas; a diversity of experiences, expertise
and background; and the ability to represent the interests of all of our stockholders. The information
presented below regarding each director and nominee also sets forth specific experience, qualifications,
attributes and skills that led the Board of Directors to the conclusion that such individual should serve as a
director in light of our business and structure.

Barbara D. Colwell has been a director of NTIC since November 2013. Ms. Colwell is a member of the
board of directors or advisory board of several non-profit organizations and private and mutual
companies, including most notably, the Publishers Clearing House, LLC, Mutual Trust Financial Group,
WomenCorporateDirectors, IPTAR (Institute for Psychoanalytic Training and Research), the Belizean
Grove and POBA: where the arts live. We believe Ms. Colwell’s qualifications to sit on the Board of
Directors include her current and prior experience on the boards of directors of other organizations and
companies and, in particular, her experience serving on the audit committee, governance committee and
compensation committee of Publishers Clearing House, LLC, as well as her experience serving on the
audit committee and compensation committee of Mutual Trust Financial Group.

Soo-Keong Koh has been a director of NTIC since May 2008. Mr. Koh is the Managing Director of
Ecosave Pte Ltd., a company whose business is focused on environmental biotech and energy
conservation technologies, a position he has held since April 2007. From January 1986 to April 2007,
Mr. Koh served as Chief Executive Officer and President of Toll Asia Pte Ltd formerly SembCorp
Logistics Ltd (SembLog), a Singapore public listed company, which was acquired by Toll in May 2006.
Mr. Koh has over 20 years of experience in the logistics industry. Mr. Koh holds a Bachelor of
Engineering, a Master of Business Administration and a Postgraduate Diploma in Business Law from the
University of Singapore (now known as the National University of Singapore). We believe Mr. Koh’s
qualifications to sit on the Board of Directors include his experience on other public company boards of
directors and his significant executive experience with companies including those focused on
environmental awareness, which has become a focus of NTIC during the past several years, especially in
light of NTIC’s Natur-Tec® bioplastics business. Mr. Koh’s previous board of director experience is
helpful in guiding NTIC with respect to corporate governance matters, particularly in his role as Chair of
the Nominating and Corporate Governance Committee. Additionally, Mr. Koh has specific executive
experience with companies located in Asia, which is where several of NTIC’s joint ventures are located.

Sunggyu Lee, Ph.D. was elected a director of NTIC in January 2004. Dr. Lee is Russ Ohio Research
Scholar in Syngas Utilization and Professor of Chemical and Biomolecular Engineering, Ohio University,
Athens, Ohio. Previously, he held positions of Professor of Chemical and Biologic Engineering, Missouri
University of Science and Technology, Rolla, Missouri from 2005 to 2010, C.W. LaPierre Professor and
Chairman of Chemical Engineering at University of Missouri-Columbia from 1997 to 2005, and Robert
Iredell Professor and Head of Chemical Engineering Department at the University of Akron, Akron, Ohio
from 1988 to1996. He has authored 12 books and over 550 archival publications and received 35 U.S.
patents in a variety of chemical and polymer processes and products. He is currently serving as Editor of

Encyclopedia of Chemical Processing, Taylor & Francis, New York, New York and also as Book Series
Editor of Green Chemistry and Chemical Engineering, CRC Press, Boca Raton, Florida. Throughout his
career, he has served as consultant and technical advisor to a number of national and international
companies in the fields of polymers, petrochemicals and energy. He received his Ph.D. from Case
Western Reserve University, Cleveland, Ohio in 1980. We believe Dr. Lee’s qualifications to sit on the
Board of Directors include his significant technical and industrial expertise with chemical and polymer
processes and products. Such expertise is particularly helpful with respect to assessing and operating
NTIC’s Natur-Tec® bioplastics business.

G. Patrick Lynch, an employee of NTIC since 1995, has been President since July 2005 and Chief
Executive Officer since January 2006 and was appointed a director of NTIC in February 2004.
Mr. Lynch served as President of North American Operations of NTIC from May 2004 to July 2005.
Prior to May 2004, Mr. Lynch held various positions with NTIC, including Vice President of Strategic
Planning, Corporate Secretary and Project Manager. Mr. Lynch is also an officer and director of Inter
Alia Holding Company, which is a significant stockholder of NTIC. Prior to joining NTIC, Mr. Lynch
held positions in sales management for Fuji Electric Co., Ltd. in Tokyo, Japan, and programming project
management for BMW AG in Munich, Germany. Mr. Lynch received a Master of Business
Administration degree from the University of Michigan Ross School of Business. We believe Mr.
Lynch’s qualifications to sit on the Board of Directors include his depth of knowledge of our company
and its day-to-day operations in light of his position as Chief Executive Officer of NTIC, as well as his
affiliation with a significant stockholder of NTIC, which the Board of Directors believes generally helps
align management’s interests with those of our stockholders.

Ramani Narayan, Ph.D. has been a director of NTIC since November 2004. He is a Distinguished
Professor at Michigan State University in the Department of Chemical Engineering & Materials Science,
where he has 105 refereed publications in leading journals to his credit, 18 patents, edited three books and
one expert dossier in the area of bio-based polymeric materials. His research encompasses design and
engineering of sustainable, biobased products, biodegradable plastics and polymers, biofiber reinforced
composites, reactive extrusion polymerization and processing, studies in plastic end-of-life options like
biodegradation and composting. He conducts carbon footprint calculations for plastics and products. He
also performs LCA (Life Cycle Assessment) for reporting a product’s environmental footprint. He serves
as Scientific Chair and board member of the Biodegradable Products Institute (BPI), North America. He
serves on the Technical Advisory Board of Tate & Lyle. He served on the Board of Directors of ASTM
International, an international standards setting organization and currently chairs the committee on
Environmentally Degradable Plastics and Biobased Products (D20.96) and the Plastics Terminology
Committee (D20.92). Dr. Narayan is also the technical expert for the United States on ISO (International
Standards Organization) TC 61 on Plastics—specifically for Terminology, and Biodegradable Plastics.
He has won numerous awards, including the Named MSU University Distinguished Professor in 2007;
the Governors University Award for commercialization excellence; Michigan State University
Distinguished Faculty Award, 2006, 2005 Withrow Distinguished Scholar award, Fulbright
Distinguished Lectureship Chair in Science & Technology Management & Commercialization
(University of Lisbon; Portugal); First recipient of the William N. Findley Award, The James Hammer
Memorial Lifetime Achievement Award, and Research and Commercialization Award sponsored by ICI
Americas, Inc. & the National Corn Growers Association. We believe Dr. Narayan’s qualifications to sit
on the Board of Directors include his significant technical expertise in the bioplastics area which has been
helpful to NTIC’s management in assessing and operating NTIC’s Natur-Tec® bioplastics business.

Richard J. Nigon has been a director of NTIC since February 2010 and non-executive Chairman of the
Board since November 2012. Mr. Nigon is the Senior Vice President of Cedar Point Capital, Inc., a
private company that raises capital for early stage companies. From February 2001 until May 2007, Mr.
Nigon was a Director of Equity Corporate Finance for Miller Johnson Steichen Kinnard (MJSK), a

privately held investment firm. In December 2006, MJSK was acquired by Stifel Nicolaus, and Mr.
Nigon was a Managing Director of Private Placements at Stifel Nicolaus. From February 2000 to
February 2001, Mr. Nigon served as the Chief Financial Officer of Dantis, Inc., a web hosting company.
Prior to joining Dantis, Mr. Nigon was employed by Ernst & Young, LLP from 1970 to 2000, where he
served as a partner from 1981 to 2000. While at Ernst & Young, Mr. Nigon served as the Director of
Ernst & Young’s Twin Cities Entrepreneurial Services Group and was the coordinating partner on several
publicly-traded companies in the consumer retailing and manufacturing sectors. Mr. Nigon also currently
serves as President of NorthStar Education Finance, Inc., a non-profit organization formed to foster, aid,
encourage and assist the pursuit of higher education. In addition to NTIC, Mr. Nigon also serves on the
board of directors of Vascular Solutions, Inc. and a number of privately-held companies and previously
served on the board of directors of Virtual Radiologic Corporation. Through his 30 years of service at
Ernst & Young, LLP, Mr. Nigon brings to the Board of Directors, and in particular the Audit Committee,
extensive public accounting and auditing experience. The Board of Directors believes Mr. Nigon’s strong
background in financial controls and reporting, financial management, financial analysis and Securities
and Exchange Commission reporting requirements is critical to the Board’s oversight responsibilities. In
addition, Mr. Nigon’s strategic planning expertise and other experiences gained through his management
and leadership roles at private investment firms that have invested in early stage companies, is helpful to
the Board of Directors in assessing and operating NTIC’s newer businesses.

Konstantin von Falkenhausen has been a director of NTIC since November 2012. Mr. von Falkenhausen
is currently a Partner of B Capital Partners AG, an independent investment advisory boutique focused on
infrastructure, public private partnerships and clean energy. From February 2004 to March 2008, Mr. von
Falkenhausen served as a Partner of capiton AG, a private equity firm. From March 2003 to February
2004, he served as interim Chief Financial Officer of Neon Products GmbH, a privately held neon
lighting company. From May 1999 to February 2003, Mr. von Falkenhausen served as an investment
manager of West Private Equity Ltd. and an investment director of its German affiliate West Private
Capital GmbH. Prior to May 1999, Mr. von Falkenhausen served in several positions with BankBoston
Robertson Stephens International Ltd., an investment banking firm. Mr. von Falkenhausen is a citizen of
Germany. He has a Master’s degree in economics (lic. oec) from the University of Fribourg
(Switzerland) and a Masters of Business Administration from the University of Chicago. We believe Mr.
von Falkenhausen’s qualifications to sit on the Board of Directors include his experience with several
private investment and equity firms that have invested in early stage companies, which the Board of
Directors believes is helpful in assessing and operating NTIC’s newer businesses, and his financial
expertise, which the Board of Directors believes is helpful in analyzing NTIC’s financial performance.

Board Recommendation

The Board of Directors unanimously recommends a vote FOR the election of all of the seven nominees
named above.

If prior to the Annual Meeting, the Board of Directors should learn that any nominee will be unable to
serve for any reason, the proxies that otherwise would have been voted for this nominee will be voted for
a substitute nominee as selected by the Board. Alternatively, the proxies, at the Board’s discretion, may
be voted for that fewer number of nominees as results from the inability of any nominee to serve. The
Board of Directors has no reason to believe that any of the nominees will be unable to serve.

PROPOSAL TWO—ADVISORY VOTE ON EXECUTIVE COMPENSATION
________________

Introduction

The Board of Directors is providing stockholders with an advisory vote on executive compensation
pursuant to the Dodd-Frank Wall Street Consumer Protection Act and Section 14A of the Securities
Exchange Act of 1934. This advisory vote, commonly known as a “say-on-pay” vote, is a non-binding
vote on the compensation paid to our named executive officers as set forth in the “Executive
Compensation” section of this proxy statement beginning on page 29. At the 2015 Annual Meeting of
Stockholders held on January 15, 2015, 98 percent of the votes cast by our stockholders were in favor of
our say-on-pay vote. The Compensation Committee generally believes that such results affirmed
stockholder support of our approach to executive compensation.

Our executive compensation program is generally designed to attract, retain, motivate and reward highly
qualified and talented executive officers. The underlying core principle of our executive compensation
program is to link pay to performance and align the interests of our executives with those of our
stockholders by providing compensation opportunities that are tied directly to the achievement of
financial and other performance goals and long-term stock price performance. The “Executive
Compensation” section of this proxy statement, which begins on page 29, describes our executive
compensation program and the executive compensation decisions made by the Compensation Committee
and Board of Directors in fiscal 2015 in more detail. Important considerations include:

 A significant portion of the compensation paid or awarded to our named executive officers in
fiscal 2015 was “performance-based” or “at-risk” compensation that is tied directly to the
achievement of financial and other performance goals or long-term stock price performance.

 Equity-based compensation granted to our named executive officers is in the form of stock

options that are subject to three-year vesting and aligns the long-term interests of our executives
with the long-term interests of our stockholders.

 Our executive officers receive only modest perquisites and have modest severance and change-in-

control arrangements.

 We do not provide any tax “gross-up” payments.

We believe that our executive compensation program and related decisions link pay to performance. For
example, although our fiscal 2015 total net sales increased 13.0% to $30,322,694 during fiscal 2015
compared to fiscal 2014, our net income attributable to NTIC decreased 56.8%, to $1,789,571 or $0.39
per diluted common share, for fiscal 2015 compared to $4,106,374, or $0.90 per diluted common share,
for fiscal 2014. Accordingly, total compensation for our named executive officers for fiscal 2015
decreased over 25% compared to fiscal 2014.

Accordingly, the Board of Directors recommends that our stockholders vote in favor of the say-on-pay
vote as set forth in the following resolution:

RESOLVED, that our stockholders approve, on an advisory basis, the compensation paid to our

named executive officers, as disclosed in this proxy statement.

Stockholders are not ultimately voting to approve or disapprove the recommendation of the Board of
Directors. As this is an advisory vote, the outcome of the vote is not binding on us with respect to future
executive compensation decisions, including those relating to our named executive officers, or otherwise.
The Compensation Committee and Board of Directors expect to take into account the outcome of this
advisory vote when considering future executive compensation decisions.

In accordance with the result of the advisory vote on the frequency of the say-on-pay vote, which was
conducted at our 2015 Annual Meeting of Stockholders, the Board of Directors has determined that we
will conduct an executive compensation advisory vote on an annual basis. Accordingly, the next say-on-
pay vote will occur in 2017 in connection with our 2017 Annual Meeting of Stockholders. We anticipate
that the next say-on-frequency vote will occur at our 2020 Annual Meeting of Stockholders.

Board Recommendation

The Board of Directors unanimously recommends a vote FOR approval, on an advisory basis, of the
compensation paid to our named executive officers, as disclosed in this proxy statement.

PROPOSAL THREE—RATIFICATION OF SELECTION OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
_________________

Selection of Independent Registered Public Accounting Firm

The Audit Committee of the Board of Directors has selected Baker Tilly Virchow Krause, LLP to serve as
our independent registered public accounting firm for the fiscal year ending August 31, 2016. Although it
is not required to do so, the Board of Directors is asking our stockholders to ratify the Audit Committee’s
selection of Baker Tilly Virchow Krause, LLP. If our stockholders do not ratify the selection of Baker
Tilly Virchow Krause, LLP, another independent registered public accounting firm will be considered by
the Audit Committee. Even if the selection is ratified by our stockholders, the Audit Committee in its
discretion may change the appointment at any time during the year, if it determines that such a change
would be in the best interests of NTIC and our stockholders. Representatives of Baker Tilly Virchow
Krause, LLP will be present at the Annual Meeting to respond to appropriate questions. They also will
have the opportunity to make a statement if they wish to do so.

Audit, Audit-Related, Tax and Other Fees

The following table presents the aggregate fees billed to us by Baker Tilly Virchow Krause, LLP for the
fiscal years ended August 31, 2015 and August 31, 2014.

Audit Fees(1) .........................................................
Audit-Related Fees(2) ............................................
Tax Fees ...............................................................
All Other Fees ......................................................
__________________________

Aggregate Amount Billed by
Baker Tilly Virchow Krause, LLP ($)
Fiscal 2014

Fiscal 2015

$ 341,070
4,990
—
—

$ 313,543
—
—
—

(1) These fees consisted of the audit of our annual financial statements by year, review of financial statements
included in our quarterly reports on Form 10-Q and other services normally provided in connection with
statutory and regulatory filings or engagements.

(2) These fees were incurred in support of the SEC comment letter.

Audit Committee Pre-Approval Policies and Procedures

All services rendered by Baker Tilly Virchow Krause, LLP to NTIC were permissible under applicable
laws and regulations and all services provided to NTIC, other than de minimis non-audit services allowed
under applicable law, were approved in advance by the Audit Committee. The Audit Committee has not
adopted any formal pre-approval policies and procedures.

Board Recommendation

The Board of Directors unanimously recommends that stockholders vote FOR ratification of the selection
of Baker Tilly Virchow Krause, LLP, as our independent registered public accounting firm for the fiscal
year ending August 31, 2016.

STOCK OWNERSHIP
________________

Beneficial Ownership of Significant Stockholders and Management

The following table sets forth information known to us with respect to the beneficial ownership of our
common stock as of November 17, 2015, the record date for the Annual Meeting, for:








each person known by us to beneficially own more than five percent of the outstanding shares of
our common stock;
each of our directors;
each of the executive officers named in the Summary Compensation Table included later in this
proxy statement under “Executive Compensation” and
all of our current directors and executive officers as a group.

The number of shares beneficially owned by a person includes shares subject to options held by that
person that are currently exercisable or that become exercisable within 60 days of November 17, 2015.
Percentage calculations assume, for each person and group, that all shares that may be acquired by such
person or group pursuant to options currently exercisable or that become exercisable within 60 days of
November 17, 2015 are outstanding for the purpose of computing the percentage of common stock owned
by such person or group. However, such unissued shares of common stock described above are not
deemed to be outstanding for calculating the percentage of common stock owned by any other person.

Except as otherwise indicated, the persons in the table below have sole voting and investment power with
respect to all shares of common stock shown as beneficially owned by them, subject to community
property laws where applicable and subject to the information contained in the notes to the table.

Amount and
Nature of
Beneficial
Ownership(2)

8,500
28,666
12,000
662,750
31,500
31,300
11,600
84,783

Percent of
Class

*
*
*

14.5%

*
*
*
1.9%

871,099

18.7%

601,668

13.3%

245,800

5.4%

Title of Class

Name and Address of Beneficial Owner(1)

Directors and Officers:
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock

Barbara D. Colwell
Soo-Keong Koh
Sunggyu Lee, Ph.D.
G. Patrick Lynch(3)
Ramani Narayan, Ph.D.
Richard J. Nigon
Konstantin von Falkenhausen
Matthew C. Wolsfeld
All current directors and executive officers as a
group (8 persons)(4)

Significant Beneficial Owners:
Common Stock

Common Stock

Inter Alia Holding Company(5)
23205 Mercantile Road
Beachwood, Ohio 44122
Perritt Capital Management, Inc. and
Perritt Funds, Inc.(6)
300 South Wacker Drive, Suite 2880
Chicago, Illinois 60606

Title of Class
Common Stock

Name and Address of Beneficial Owner(1)
Rutabaga Capital Management(7)
64 Broad Street, 3rd Floor
Boston, Massachusetts 02109

* Represents beneficial ownership of less than one percent.

Amount and
Nature of
Beneficial
Ownership(2)

235,030

Percent of
Class
5.2%

(1)

(2)

The business address for each of the directors and officers of NTIC is c/o Northern Technologies
International Corporation, 4201 Woodland Road, Circle Pines, Minnesota 55014.

Includes for the persons listed below the following shares of common stock subject to options held by such
persons that are currently exercisable or become exercisable within 60 days of November 17, 2015:

Shares of Common Stock
Underlying
Stock Options

Name
Directors
Barbara D. Colwell ......................................
Soo-Keong Koh ...........................................
Sunggyu Lee, Ph.D. .....................................
G. Patrick Lynch ..........................................
Ramani Narayan, Ph.D.................................
Richard J. Nigon ..........................................
Konstantin von Falkenhausen ......................
Named Executive Officers
G. Patrick Lynch ..............................................................................................
Matthew C. Wolsfeld .......................................................................................
All current directors and executive officers as a group (8 persons) ................

7,000
16,000
12,000
24,030
16,000
21,500
11,000

24,030
17,762
125,292

(3) Includes 601,668 shares held by Inter Alia Holding Company. See note (5) below.

(4) The amount beneficially owned by all current directors and executive officers as a group includes 601,668

shares held of record by Inter Alia Holding Company. See notes (3) above and (5) below.

(5) According to a Schedule 13D/A filed with the Securities and Exchange Commission on December 2, 2011, Inter
Alia Holding Company is an entity of which G. Patrick Lynch, our President and Chief Executive Officer, is a
25 percent stockholder. G. Patrick Lynch shares equal voting and dispositive power over such shares with three
other members of his family. Inter Alia Holding Company’s address is 23205 Mercantile Road, Beachwood,
Ohio 44122.

(6) According to a Schedule 13G/A filed with the Securities and Exchange Commission on February 13, 2015,

Perritt Capital Management, Inc., in its capacity as investment adviser, may be deemed the beneficial owner of
245,800 shares, which are owned by investment advisory client(s). Perritt Capital Management, Inc. has sole
voting power and sole dispositive power over 2,800 shares and has shared voting power and shared dispositive
power over 243,000 shares with Perritt Funds, Inc., an investment company.

(7) According to a Schedule 13G filed with the Securities and Exchange Commission on February 13, 2015,

Rutabaga Capital Management has sole voting power with respect to 199,130 shares, shared voting power with
respect to 35,900 shares and sole dispositive power with respect to 235,030 shares.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors, executive
officers and all persons who beneficially own more than 10 percent of the outstanding shares of our
common stock to file with the Securities and Exchange Commission initial reports of ownership and
reports of changes in ownership of our common stock. Executive officers, directors and greater than 10
percent beneficial owners are also required to furnish NTIC with copies of all Section 16(a) forms they
file. To our knowledge, based upon a review of the copies of such reports furnished to us and written
representations that no other reports were required, during the fiscal year ended August 31, 2015, none of
our directors or executive officers or beneficial owners of greater than 10 percent of our common stock
failed to file on a timely basis the forms required by Section 16 of the Exchange Act.

CORPORATE GOVERNANCE
________________

Corporate Governance Guidelines

The Board of Directors has adopted Corporate Governance Guidelines. A copy of these Corporate
Governance Guidelines can be found on the “Investor Relations—Corporate Governance” section of our
corporate website www.ntic.com. Among the topics addressed in our Corporate Governance Guidelines
are:

 Board size, composition and qualifications;
 Selection of directors;
 Board leadership;
 Board committees;
 Board and committee meetings;
 Executive sessions of independent directors;
 Meeting attendance by directors and non-directors;
 Appropriate information and access;
 Ability to retain advisors;
 Conflicts of interest and director independence;
 Board interaction with corporate constituencies;
 Change of principal occupation and board memberships;
 Retirement and term limits;
 Retirement and resignation policy;
 Board compensation;
 Stock ownership by directors and executive officers;
 Loans to directors and executive officers;
 CEO evaluation;
 Board and committee evaluation;
 Director continuing education;
 Succession planning;
 Related person transactions; and
 Communications with directors.

Board Leadership Structure

Under our Corporate Governance Guidelines, the office of Chairman of the Board and Chief Executive
Officer may or may not be held by one person. The Board of Directors believes it is best not to have a
fixed policy on this issue and that it should be free to make this determination based on what it believes is
best under the circumstances. However, the Board of Directors strongly endorses the concept of an
independent director being in a position of leadership. Under our Corporate Governance Guidelines, if at
any time the Chief Executive Officer and Chairman of the Board positions are held by the same person,
the Board of Directors will elect an independent director as a lead independent director.

G. Patrick Lynch currently serves as our President and Chief Executive Officer and Richard J. Nigon
serves as our non-executive Chairman of the Board. Because the Chief Executive Officer and Chairman
of the Board positions currently are not held by the same person, we do not have a lead independent
director. We currently believe this leadership structure is in the best interests of our company and our
stockholders and strikes the appropriate balance between the Chief Executive Officer’s responsibility for
the strategic direction, day-to-day-leadership and performance of our company and the Chairman’s

responsibility to provide oversight of our company’s corporate governance and guidance to our Chief
Executive Officer and to set the agenda for and preside over Board of Directors meetings.

At each regular Board of Directors meeting, our independent directors meet in executive session with no
company management or non-independent directors present during a portion of the meeting. After each
such executive session, our Chairman of the Board provides our Chief Executive Officer with any
actionable feedback from our independent directors.

Director Independence

The Board of Directors has affirmatively determined that five of NTIC’s current seven directors are
“independent directors” under the Listing Rules of the NASDAQ Stock Market: Barbara D. Colwell,
Soo-Keong Koh, Sunggyu Lee, Ph.D., Richard J. Nigon and Konstantin von Falkenhausen.

In making these affirmative determinations that such individuals are “independent directors,” the Board of
Directors reviewed and discussed information provided by the directors and by NTIC with regard to each
director’s business and personal activities as they may relate to NTIC and NTIC’s management.

Board Meetings and Attendance

The Board of Directors met four times during the fiscal year ended August 31, 2015. Each of the
directors attended at least 75 percent of the aggregate of the total number of meetings of the Board and
the total number of meetings held by all Board committees on which the director served.

Board Committees

The Board of Directors has a standing Audit Committee, Compensation Committee and Nominating and
Corporate Governance Committee, each of which has the composition and responsibilities described
below. The Board of Directors from time to time may establish other committees to facilitate the
management of our company and may change the composition and responsibilities of our existing
committees. Each of the Audit Committee, Compensation Committee and Nominating and Corporate
Governance Committee operates under a written charter adopted by the Board of Directors, which can be
found on the “Investor Relations—Corporate Governance” section of our corporate website
www.ntic.com.

The following table summarizes the current membership of each of our three Board committees.

Director
Barbara D. Colwell
Soo-Keong Koh
Sunggyu Lee, Ph.D.
G. Patrick Lynch
Ramani Narayan, Ph.D.
Richard J. Nigon
Konstantin von Falkenhausen

Audit
√
—
—
—
—
Chair
√

Compensation
—
—
√
—
—
Chair
√

Nominating and
Corporate Governance
√
Chair
—
—
—
√
—

Audit Committee

Responsibilities. The Audit Committee provides assistance to the Board of Directors in fulfilling its
responsibilities for oversight, for quality and integrity of the accounting, auditing, reporting practices,
systems of internal accounting and financial controls, the annual independent audit of our financial
statements, and the legal compliance and ethics programs of NTIC as established by management. The
Audit Committee’s primary responsibilities include:

 Overseeing our financial reporting process, internal control over financial reporting and

disclosure controls and procedures on behalf of the Board of Directors;

 Having sole authority to appoint, retain and oversee the work of our independent registered public

accounting firm and establish the compensation to be paid to the firm;

 Reviewing and pre-approving all audit services and permissible non-audit services to be provided

to NTIC by our independent registered public accounting firm;

 Establishing procedures for the receipt, retention and treatment of complaints regarding

accounting, internal accounting controls or auditing matters and for the confidential, anonymous
submission by our employees of concerns regarding questionable accounting or auditing matters;
and

 Overseeing the establishment and administration of (including the grant of any waiver from) a
written code of ethics applicable to our principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar functions.

The Audit Committee has the authority to engage the services of outside experts and advisors as it deems
necessary or appropriate to carry out its duties and responsibilities.

Composition. The current members of the Audit Committee are Ms. Colwell, Mr. Nigon and Mr. von
Falkenhausen. Mr. Nigon is the chair of the Audit Committee.

Each current member of the Audit Committee qualifies as “independent” for purposes of membership on
audit committees pursuant to the Listing Rules of the NASDAQ Stock Market and the rules and
regulations of the Securities and Exchange Commission and is “financially literate” as required by the
Listing Rules of the NASDAQ Stock Market. In addition, the Board of Directors has determined that Mr.
Nigon qualifies as an “audit committee financial expert” as defined by the rules and regulations of the
Securities and Exchange Commission and meets the qualifications of “financial sophistication” under the
Listing Rules of the NASDAQ Stock Market as a result of his extensive financial background and various
financial positions he has held throughout his career. Stockholders should understand that these
designations related to our Audit Committee members’ experience and understanding with respect to
certain accounting and auditing matters do not impose upon any of them any duties, obligations or
liabilities that are greater than those generally imposed on a member of the Audit Committee or of the
Board of Directors.

Meetings. The Audit Committee met five times during fiscal 2015, once outside the presence of
management and four times in executive session with Baker Tilly Virchow Krause, LLP, our independent
registered public accounting firm.

Audit Committee Report. This report is furnished by the Audit Committee of the Board of Directors with
respect to NTIC’s financial statements for the fiscal year ended August 31, 2015.

One of the purposes of the Audit Committee is to oversee NTIC’s accounting and financial reporting
processes and the audit of NTIC’s annual financial statements. NTIC’s management is responsible for the
preparation and presentation of complete and accurate financial statements. NTIC’s independent
registered public accounting firm, Baker Tilly Virchow Krause, LLP, is responsible for performing an
independent audit of NTIC’s financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States) and for issuing a report on their audit.

In performing its oversight role, the Audit Committee has reviewed and discussed NTIC’s audited
financial statements for the fiscal year ended August 31, 2015 with NTIC’s management. Management
represented to the Audit Committee that NTIC’s financial statements were prepared in accordance with
generally accepted accounting principles. The Audit Committee has discussed with Baker Tilly Virchow
Krause, LLP, NTIC’s independent registered public accounting firm, the matters required to be discussed
under Public Company Accounting Oversight Board standards. The Audit Committee has received the
written disclosures and the letter from Baker Tilly Virchow Krause, LLP required by applicable
requirements of the Public Company Accounting Oversight Board regarding Baker Tilly Virchow Krause,
LLP’s communications with the Audit Committee concerning independence. The Audit Committee has
discussed with Baker Tilly Virchow Krause, LLP its independence and concluded that the independent
registered public accounting firm is independent from NTIC and NTIC’s management.

Based on the review and discussions of the Audit Committee described above, in reliance on the
unqualified opinion of Baker Tilly Virchow Krause, LLP regarding NTIC’s audited financial statements,
and subject to the limitations on the role and responsibilities of the Audit Committee discussed above and
in the Audit Committee’s charter, the Audit Committee recommended to the Board of Directors that
NTIC’s audited financial statements for the fiscal year ended August 31, 2015 be included in its Annual
Report on Form 10-K for the fiscal year ended August 31, 2015 for filing with the Securities and
Exchange Commission.

This report is dated as of November 2, 2015.

Audit Committee

Richard J. Nigon, Chair
Barbara D. Colwell
Konstantin von Falkenhausen

Other Information. Additional information regarding the Audit Committee and our independent
registered public accounting firm is disclosed under the “Proposal Three—Ratification of Selection of
Independent Registered Public Accounting Firm” section of this proxy statement.

Compensation Committee

Responsibilities. The Compensation Committee provides assistance to the Board of Directors in fulfilling
its oversight responsibility relating to compensation of our Chief Executive Officer and other executive
officers and administers our equity compensation plans. The Compensation Committee’s primary
responsibilities include:



recommending to the Board of Directors for its determination, the annual salaries, incentive
compensation, long-term compensation and any and all other compensation applicable to our
executive officers;

establishing, and from time to time, reviewing and revising, corporate goals and objectives with
respect to compensation for our executive officers and establishing and leading a process for the
full Board of Directors to evaluate the performance of our executive officers in light of those
goals and objectives;

administering our equity compensation plans and recommending to the Board of Directors for its
determination grants of options or other equity-based awards for executive officers, employees
and independent consultants under our equity compensation plans;

reviewing our policies with respect to employee benefit plans; and

establishing, and from time to time, reviewing and revising processes and procedures for the
consideration and determination of executive compensation.

The Compensation Committee has the authority to engage the services of outside experts and advisors as
it deems necessary or appropriate to carry out its duties and responsibilities, and prior to doing so,
assesses the independence of such experts and advisors from management.

Composition. The current members of the Compensation Committee are Dr. Lee, Mr. Nigon and Mr. von
Falkenhausen. Mr. Nigon is the Chair of the Compensation Committee. The Board of Directors has
determined that each of the members of the Compensation Committee is considered an “independent
director” under the Listing Rules of the NASDAQ Stock Market, a “non-employee director” within the
meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended, an “outside director”
within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended, and otherwise
independent under the rules and regulations of the Securities and Exchange Commission.

Processes and Procedures for Consideration and Determination of Executive Compensation. As
described in more detail above under “—Responsibilities,” the Board of Directors has delegated to the
Compensation Committee the responsibility, among other things, to recommend to the Board of Directors
any and all compensation payable to our executive officers, including annual salaries, incentive
compensation and long-term incentive compensation, and to administer our equity and incentive
compensation plans applicable to our executive officers. Decisions regarding executive compensation
made by the Compensation Committee are not considered final and are subject to final review and
approval by the entire Board of Directors. Under the terms of its formal written charter, the
Compensation Committee has the power and authority, to the extent permitted by our Bylaws and
applicable law, to delegate all or a portion of its duties and responsibilities to a subcommittee of the
Compensation Committee. The Compensation Committee has not generally delegated any of its duties
and responsibilities to subcommittees, but rather has taken such actions as a committee, as a whole.

Our President and Chief Executive Officer and our Chief Financial Officer assist the Compensation
Committee in gathering compensation related data regarding our executive officers and making
recommendations to the Compensation Committee regarding the form and amount of compensation to be
paid to each executive officer. In making final recommendations to the Board of Directors regarding
compensation to be paid to our executive officers, the Compensation Committee considers the
recommendations of our President and Chief Executive Officer and our Chief Financial Officer, but also
considers other factors, such as its own views as to the form and amount of compensation to be paid, the
achievement by the company of pre-established performance objectives, the general performance of the
company and the individual officers, the performance of the company’s stock price and other factors that
may be relevant. Neither management nor the Compensation Committee engaged a compensation
consultant.

Final deliberations and decisions by the Compensation Committee regarding its recommendations to the
Board of Directors of the form and amount of compensation to be paid to our executive officers are made
by the Compensation Committee, without the presence of any executive officer of our company. In
making final decisions regarding compensation to be paid to our executive officers, the Board of
Directors considers the same factors and gives considerable weight to the recommendations of the
Compensation Committee.

Meetings. The Compensation Committee met three times during fiscal 2015.

Nominating and Corporate Governance Committee

Responsibilities. The primary responsibilities of the Nominating and Corporate Governance Committee
include:



identifying individuals qualified to become members of the Board of Directors;

recommending director nominees for each annual meeting of our stockholders and director
nominees to fill any vacancies that may occur between meetings of stockholders;

 being aware of best practices in corporate governance matters;

 developing and overseeing an annual Board of Directors and Board committee evaluation

process; and



establishing and leading a process for determination of the compensation applicable to the non-
employee directors on the Board.

The Nominating and Corporate Governance Committee has the authority to engage the services of outside
experts and advisors as it deems necessary or appropriate to carry out its duties and responsibilities.

Composition. The current members of the Nominating and Corporate Governance Committee are Mr.
Koh, Ms. Colwell and Mr. Nigon. Mr. Koh is the chair of the Nominating and Corporate Governance
Committee. The Board of Directors has determined that each of the members of the Nominating and
Corporate Governance Committee is considered an “independent director” under the Listing Rules of the
NASDAQ Stock Market.

Processes and Procedures for Consideration and Determination of Director Compensation. As
mentioned above under “—Responsibilities,” the Board of Directors has delegated to the Nominating and
Corporate Governance Committee the responsibility, among other things, to review and make
recommendations to the Board of Directors concerning compensation for non-employee members of the
Board of Directors, including but not limited to retainers, meeting fees, committee chair and member
retainers and equity compensation. Decisions regarding director compensation made by the Nominating
and Corporate Governance Committee are not considered final and are subject to final review and
approval by the entire Board of Directors. Under the terms of its formal written charter, the Nominating
and Corporate Governance Committee has the power and authority, to the extent permitted by our Bylaws
and applicable law, to delegate all or a portion of its duties and responsibilities to a subcommittee of the
Nominating and Corporate Governance Committee. The Nominating and Corporate Governance
Committee has not generally delegated any of its duties and responsibilities to subcommittees, but rather
has taken such actions as a committee, as a whole.

In making recommendations to the Board of Directors regarding compensation to be paid to our non-
employee directors, the Nominating and Corporate Governance Committee considers fees and other
compensation paid to directors of comparable public companies, the number of board and committee
meetings that our directors are expected to attend, and other factors that may be relevant. In making final
decisions regarding non-employee director compensation, the Board of Directors considers the same
factors and the recommendation of the Nominating and Corporate Governance Committee.

Meetings. The Nominating and Corporate Governance Committee met twice during fiscal 2015.

Director Nominations Process

Pursuant to a Director Nominations Process adopted by the Board of Directors, in selecting nominees for
the Board of Directors, the Nominating and Corporate Governance Committee first determines whether
the incumbent directors are qualified to serve, and wish to continue to serve, on the Board. The
Nominating and Corporate Governance Committee believes that NTIC and its stockholders benefit from
the continued service of qualified incumbent directors because those directors have familiarity with and
insight into NTIC’s affairs that they have accumulated during their tenure with the company. Appropriate
continuity of Board membership also contributes to the Board’s ability to work as a collective body.
Accordingly, it is the practice of the Nominating and Corporate Governance Committee, in general, to re-
nominate an incumbent director if the director wishes to continue his or her service with the Board, the
director continues to satisfy the criteria for membership on the Board that the Nominating and Corporate
Governance Committee generally views as relevant and considers in deciding whether to re-nominate an
incumbent director or nominate a new director, the Nominating and Corporate Governance Committee
believes the director continues to make important contributions to the Board, and there are no special,
countervailing considerations against re-nomination of the director.

Pursuant to a Director Nominations Process adopted by the Board of Directors, in identifying and
evaluating new candidates for election to the Board, the Nominating and Corporate Governance
Committee solicits recommendations for nominees from persons whom the Nominating and Corporate
Governance Committee believes are likely to be familiar with qualified candidates having the
qualifications, skills and characteristics required for Board nominees from time to time. Such persons
may include members of the Board of Directors and our senior management and advisors to our company.
In addition, from time to time, if appropriate, the Nominating and Corporate Governance Committee may
engage a search firm to assist it in identifying and evaluating qualified candidates.

The Nominating and Corporate Governance Committee reviews and evaluates each candidate whom it
believes merits serious consideration, taking into account available information concerning the candidate,
any qualifications or criteria for Board membership established by the Nominating and Corporate
Governance Committee, the existing composition of the Board, and other factors that it deems relevant.
In conducting its review and evaluation, the Nominating and Corporate Governance Committee solicits
the views of our management, other Board members, and other individuals it believes may have insight
into a candidate. The Nominating and Corporate Governance Committee may designate one or more of
its members and/or other Board members to interview any proposed candidate.

The Nominating and Corporate Governance Committee will consider recommendations for the
nomination of directors submitted by our stockholders. For more information, see the information set
forth under “Stockholder Proposals and Director Nominations for the 2016 Annual Meeting of
Stockholders ─ Director Nominations for 2016 Annual Meeting.” The Nominating and Corporate
Governance Committee will evaluate candidates recommended by stockholders in the same manner as
those recommended as stated above.

There are no formal requirements or minimum qualifications that a candidate must meet in order for the
Nominating and Corporate Governance Committee to recommend the candidate to the Board. The
Nominating and Corporate Governance Committee believes that each nominee should be evaluated based
on his or her merits as an individual, taking into account the needs of our company and the Board of
Directors. However, in evaluating candidates, there are a number of criteria that the Nominating and
Corporate Governance Committee generally views as relevant and is likely to consider. Some of these
factors include whether the candidate is an “independent director” under the Listing Rules of the
NASDAQ Stock Market and meets any other applicable independence tests under the federal securities
laws and rules and regulations of the Securities and Exchange Commission; whether the candidate is
“financially literate” and otherwise meets the requirements for serving as a member of an audit committee
under the Listing Rules of the NASDAQ Stock Market; whether the candidate is “financially
sophisticated” under the Listing Rules of the NASDAQ Stock Market and an “audit committee financial
expert” under the federal securities laws and the rules and regulations of the Securities and Exchange
Commission; the needs of our company with respect to the particular talents and experience of its
directors; the personal and professional integrity and reputation of the candidate; the candidate’s level of
education and business experience; the candidate’s broad-based business acumen; the candidate’s level of
understanding of our business and its industry; the candidate’s ability and willingness to devote adequate
time to work of the Board and its committees; the fit of the candidate’s skills and personality with those
of other directors and potential directors in building a board that is effective, collegial and responsive to
the needs of our company; whether the candidate possesses strategic thinking and a willingness to share
ideas; the candidate’s diversity of experiences, expertise and background; and the candidate’s ability to
represent the interests of all stockholders and not a particular interest group.

We do not have a formal stand-alone diversity policy in considering whether to recommend any director
nominee, including candidates recommended by stockholders. As discussed above, the Nominating and
Corporate Governance Committee will consider the factors described above, including the candidate’s
diversity of experiences, expertise and background. The Nominating and Corporate Governance
Committee seeks nominees with a broad diversity of experience, expertise and backgrounds. The
Nominating and Corporate Governance Committee does not assign specific weights to particular criteria
and no particular criterion is necessarily applicable to all prospective nominees. The Board of Directors
believes that the backgrounds and qualifications of directors, considered as a group, should provide a
significant mix of experience, knowledge and abilities that will allow the Board of Directors to fulfill its
responsibilities. While the Nominating and Corporate Governance Committee focuses on obtaining a
diversity of experiences, expertise and background on the Board of Directors rather than a diversity of
personal characteristics, it recognizes the desirability of racial, ethnic, gender, age and other personal

diversity and considers it an additional benefit when a new director can also increase the personal
diversity of the Board of Directors as a whole. The Nominating and Corporate Governance Committee
evaluates its effectiveness in achieving diversity in a broad sense on the Board of Directors through its
annual review of Board member composition prior to recommending nominees for election each year.

Board Oversight of Risk

The Board of Directors as a whole has responsibility for risk oversight, with more in-depth reviews of
certain areas of risk being conducted by the relevant Board committees that report on their deliberations
to the full Board of Directors. The oversight responsibility of the Board and its committees is enabled by
management reporting processes that are designed to provide information to the Board about the
identification, assessment and management of critical risks and management’s risk mitigation strategies.
The areas of risk that we focus on include operational, financial (accounting, credit, liquidity and tax),
legal, compensation, competitive, health, safety, environmental, economic, political and reputational
risks.

The standing committees of the Board of Directors oversee risks associated with their respective principal
areas of focus. The Audit Committee’s role includes a particular focus on the qualitative aspects of
financial reporting, on our processes for the management of business and financial risk, our financial
reporting obligations and for compliance with significant applicable legal, ethical and regulatory
requirements. The Audit Committee, along with management, is also responsible for developing and
participating in a process for review of important financial and operating topics that present potential
significant risk to our company. The Compensation Committee is responsible for overseeing risks and
exposures associated with our executive compensation programs and arrangements and management
succession planning. The Nominating and Corporate Governance Committee oversees risks relating to
our corporate governance matters, director compensation programs and director succession planning.

We recognize that a fundamental part of risk management is understanding not only the risks a company
faces and what steps management is taking to manage those risks, but also understanding what level of
risk is appropriate for the company. The involvement of the full Board of Directors each year in
establishing our key corporate business strategies and annual fiscal budget is a key part of the Board’s
assessment of management’s appetite for risk and also a determination of what constitutes an appropriate
level of risk for our company.

We believe our current Board leadership structure is appropriate and helps ensure proper risk oversight
for our company for a number of reasons, including: (1) general risk oversight by the full Board of
Directors in connection with its role in reviewing our key business strategies and monitoring on an on-
going basis the implementation of our key business strategies; (2) more detailed oversight by our standing
Board committees that are currently comprised of and chaired by our independent directors, and (3) the
focus of our Chairman of the Board on allocating appropriate Board agenda time for discussion regarding
the implementation of our key business strategies and specifically risk management.

Code of Ethics

The Board of Directors has adopted a Code of Ethics, which applies to all of our directors, executive
officers, including our Chief Executive Officer and Chief Financial Officer, and other employees, and
meets the requirements of the Securities and Exchange Commission and the NASDAQ Stock Market. A
copy of our Code of Ethics is available on the “Investor Relations—Corporate Governance” section of
our corporate website www.ntic.com.

Policy Regarding Director Attendance at Annual Meetings of Stockholders

Although a regular Board of Directors meeting is generally held on the day of each annual meeting of
stockholders, this meeting may be held by telephone. It is the policy of the Board of Directors that if a
regular Board of Directors meeting occurs on the day of the annual meeting of stockholders and if
directors standing for re-election attend this Board of Directors meeting in person, such directors should
attend our annual meeting of stockholders, if their schedules permit. The only directors that attended the
2015 Annual Meeting of Stockholders were Mr. Nigon and Mr. Lynch.

Complaint Procedures

The Audit Committee has established procedures for the receipt, retention and treatment of complaints
received by NTIC regarding accounting, internal accounting controls or auditing matters, and the
submission by our employees, on a confidential and anonymous basis, of concerns regarding questionable
accounting or auditing matters. Our personnel with such concerns are encouraged to discuss their
concerns with our outside legal counsel, who in turn will be responsible for informing the Audit
Committee.

Process Regarding Stockholder Communications with Board of Directors

Stockholders may communicate with the Board or any one particular director by sending correspondence,
addressed to NTIC’s Corporate Secretary, Northern Technologies International Corporation, 4201
Woodland Road, Circle Pines, MN 55014 with an instruction to forward the communication to the Board
or one or more particular directors. NTIC’s Corporate Secretary will promptly forward all such
stockholder communications to the Board or the one or more particular directors, with the exception of
any advertisements, solicitations for periodical or other subscriptions and other similar communications.

Compensation Committee Interlocks and Insider Participation

No member of our compensation committee has served as one of our officers or employees at any time.
Except as otherwise disclosed in this proxy statement, no member of our compensation committee has
had any relationship with NTIC requiring disclosure under Item 404 of Regulation S-K under the
Exchange Act. None of our executive officers has served as a director, or member of the compensation
committee (or other committee serving an equivalent function), of an organization that has an executive
officer also serving as a member of our board of directors or compensation committee.

Summary of Cash and Other Compensation

DIRECTOR COMPENSATION
________________

The table below provides summary information concerning the compensation of each individual who
served as a director of our company during the fiscal year ended August 31, 2015, other than G. Patrick
Lynch, our President and Chief Executive Officer, who was not compensated separately for serving on
the Board of Directors during fiscal 2015. His compensation during fiscal 2015 for serving as an
executive officer of our company is set forth under “Executive Compensation” included elsewhere in this
proxy statement.

DIRECTOR COMPENSATION – FISCAL 2015

Fees Earned or
Paid in Cash ($)

Name
Barbara D. Colwell .................
Soo-Keong Koh ......................
Sunggyu Lee, Ph.D. ................
Ramani Narayan, Ph.D. ..........
Richard J. Nigon .....................
Konstantin von
Falkenhausen ..........................

$ 28,000
24,000
21,000
21,000
44,000

Option
Awards ($)(1)(2)

$ 46,320
46,320
0
46,320
69,480

All Other
Compensation ($)(3)
$ -
-
-
121,326
-

Total ($)

$ 74,320
70,320
21,000
188,646
113,480

28,000

46,320

74,320

(1) The amounts in this column do not reflect compensation actually received by the directors nor do they reflect
the actual value that will be recognized by the directors. Instead, the amounts reflect the grant date fair value
for option grants made by us in fiscal 2015, as calculated in accordance with Financial Accounting Standards
Board (FASB) Accounting Standards Codification (ASC) Topic 718.

On September 1, 2014, each then current director, other than Dr. Lee and Mr. Lynch, received a stock option to
purchase 4,000 shares of our common stock at an exercise price of $20.10 per share granted under the Northern
Technologies International Corporation Amended and Restated 2007 Stock Incentive Plan, the material terms of
which are described in more detail under “Executive Compensation—Stock Incentive Plan.” These options
vested in full on September 1, 2015 and will expire on August 31, 2024 or earlier in the case of a director whose
service as a director is terminated prior to such date. In addition, on September 1, 2014, Mr. Nigon received an
additional stock option to purchase 2,000 shares of our common stock in consideration for his service as
Chairman of the Board. The terms of this stock option are identical to the other director stock options granted
on that date. See “—Non-Employee Director Compensation Program—Stock Options.” The grant date fair
value associated with these awards and as calculated in accordance with FASB ASC Topic 718 is determined
based on our Black-Scholes option pricing model. The grant date fair value per share for the options granted on
September 1, 2014 was $11.58 and was determined using the following specific assumptions: risk free interest
rate: 1.63%; expected life: 10.0 years; expected volatility: 46.6%; and expected dividend yield: 0%.

(2) The table below provides information regarding the aggregate number of options to purchase shares of our
common stock outstanding at August 31, 2015 and held by each of the directors listed in the Director
Compensation Table. Note that because of the grant date, neither the Director Compensation Table nor the table
below reflects option grants on September 1, 2015. See “—Non-Employee Director Compensation Program—
Stock Options.”

Name
Barbara D. Colwell ..................
Soo-Keong Koh .......................
Sunggyu Lee, Ph.D. .................

Aggregate Number
Of Securities
Underlying Options

7,000
16,000
12,000

Exercisable/
Unexercisable
3,000/4,000
12,000/4,000
12,000/0

Exercise
Price(s)
$17.11 – 20.10
$10.25 – 20.10
$10.25 – 16.45

Expiration
Date(s)
11/18/2023 – 8/31/2024
8/31/2016 – 8/31/2024
8/31/2016 – 8/31/2023

Name
Ramani Narayan, Ph.D. ...........
Richard J. Nigon ......................
Konstantin von Falkenhausen ..

Aggregate Number
Of Securities
Underlying Options

16,000
21,500
11,000

Exercisable/
Unexercisable
12,000/4,000
15,500/6,000
7,000/4,000

Exercise
Price(s)
$10.25 – 20.10
$10.25 – 20.10
$10.25 – 20.10

Expiration
Date(s)

8/31/2016 – 8/31/2024
8/31/2016 – 8/31/2024
11/15/2022 – 8/31/2024

(3) We do not provide perquisites or other personal benefits to our directors. The amounts reflected for

Dr. Narayan reflects consulting fees and royalties paid during the fiscal year ended August 31, 2015 as
described in more detail below under “—Consulting Arrangement.”

Non-Employee Director Compensation Program

Overview. Our non-employee directors for purposes of our director compensation program currently
consist of Barbara D. Colwell, Soo-Keong Koh, Sunggyu Lee, Ph.D., Ramani Narayan, Ph.D., Richard J.
Nigon and Konstantin von Falkenhausen.

We use a combination of cash and long-term equity-based incentive compensation in the form of annual
stock option grants to attract and retain qualified candidates to serve on the Board of Directors. In setting
non-employee director compensation, we follow the process and procedures described under “Corporate
Governance—Nominating and Corporate Governance Committee—Processes and Procedures for the
Determination of Director Compensation.”

Cash Retainers and Meeting Fees. Each of our non-employee directors receives annual cash retainers and
meeting fees. The following table sets forth the current annual cash retainers paid to our non-employee
directors:

Description
Chairman of the Board ..............................................................................................................
Board Member (not including Chairman of the Board) ............................................................
Audit Committee Chair .............................................................................................................
Audit Committee Member (not including Chair) ......................................................................

Annual Cash
Retainer
15,000
15,000
5,000
4,000

Each of our non-employee directors also receives $1,000 for each Board, Board committee and strategy
review meeting attended. No director, however, earns more than $1,000 per day in Board, Board
committee and strategy review meeting fees.

Stock Options. Each of our non-employee directors, other than Dr. Sunggyu Lee and a director who will
not stand for re-election at the next annual meeting of stockholders, is automatically granted a ten-year
non-qualified option to purchase 4,000 shares of our common stock on the first day of each fiscal year in
consideration for his or her service as a director of NTIC and the Chairman of the Board is automatically
granted an additional ten-year non-qualified option to purchase 2,000 shares of our common stock on the
first day of each fiscal year in consideration for his services as Chairman. In addition, each new non-
employee director is automatically granted a ten-year non-qualified option to purchase a pro rata portion
of 4,000 shares of our common stock calculated by dividing the number of months remaining in the fiscal
year at the time of election or appointment by 12 on the date the director is first elected or appointed as a
director of NTIC. Each automatically granted option becomes exercisable, on a cumulative basis, on the
one-year anniversary of the date of its grant. The exercise price of such options is equal to the fair market
value of a share of our common stock on the date of grant. Dr. Sunggyu Lee has chosen not to accept the
automatic option grant to purchase 4,000 shares of NTIC common stock that was granted to him effective
as of September 1, 2014 in connection with his services as a director of NTIC and has rejected all future
option grants to directors in connection with his services as a director of NTIC.

Under the terms of our stock incentive plan, unless otherwise provided in a separate agreement or
modified in connection with the termination of a director’s service, if a director’s service with our
company terminates for any reason, the unvested portion of options then held by the director will
immediately terminate and the director’s right to exercise the then vested portion will:



immediately terminate if the director’s service relationship with our company terminated for
“cause”;
continue for a period of 12 months if the director’s service relationship with our company
terminates as a result of the director’s death, disability or retirement; or
continue for a period of three months if the director’s service relationship with our company
terminates for any reason, other than for cause or upon the director’s death, disability or
retirement.

We refer you to note (1) to the Director Compensation Table for a summary of all option grants to our
non-employee directors during the fiscal year ended August 31, 2015 and note (2) to the Director
Compensation Table for a summary of all options to purchase shares of our common stock held by our
non-employee directors as of August 31, 2015.

Reimbursement of Expenses. All of our directors are reimbursed for travel expenses for attending
meetings and other miscellaneous out-of-pocket expenses incurred in performing their Board functions.

Consulting Arrangement

We paid consulting fees to Bioplastic Polymers LLC which is owned by Ramani Narayan, Ph.D. in the
aggregate amount of $100,000 and royalty fees in an aggregate amount of $21,326 during the fiscal year
ended August 31, 2015. The consulting services rendered by Bioplastic Polymers LLC related to research
and development associated with various new technologies. The royalty fees were paid pursuant to an
oral agreement pursuant to which we have agreed to pay Bioplastic Polymers LLC and Dr. Narayan in
consideration of the transfer and assignment by Biopolymer Plastics LLC and Dr. Narayan of certain
biodegradable polymer technology to us, an aggregate of three percent of the gross margin on any net
sales of products incorporating the biodegradable polymer technology transferred to us by Bioplastic
Polymers LLC and Dr. Narayan for a period of 10 years, provided that if a patent for or with respect to
biodegradable polymer technology is issued before the expiration of such 10 year period, then until the
expiration of such patent we will pay to Bioplastic Polymers LLC and Dr. Narayan an aggregate of three
percent of the biodegradable polymer technology gross margin attributable to such patent.

Indemnification Agreements

We have entered into agreements with all of our directors under which we are required to indemnify them
against expenses, judgments, penalties, fines, settlements and other amounts actually and reasonably
incurred, including expenses of a derivative action, in connection with an actual or threatened proceeding
if any of them may be made a party because he or she is or was one of our directors. We will be obligated
to pay these amounts only if the director acted in good faith and in a manner that he or she reasonably
believed to be in or not opposed to our best interests. With respect to any criminal proceeding, we will be
obligated to pay these amounts only if the director had no reasonable cause to believe his or her conduct
was unlawful. The indemnification agreements also set forth procedures that will apply in the event of a
claim for indemnification.

EXECUTIVE COMPENSATION
________________

Compensation Discussion and Analysis

In this Compensation Discussion and Analysis (“CD&A”), we describe the key principles and approaches
we use to determine elements of compensation paid to, awarded to and earned by G. Patrick Lynch, who
serves as our President and Chief Executive Officer (“CEO”), and Matthew C. Wolsfeld, who serves as
our Chief Financial Officer (“CFO”). Their compensation is set forth in the Summary Compensation
Table found later in this proxy statement. The CEO and CFO are the only two individuals who have been
designated by our Board of Directors as “executive officers” of NTIC within the meaning of the federal
securities laws. This CD&A should be read in conjunction with the accompanying compensation tables,
corresponding notes and narrative discussion, as they provide additional information and context to our
compensation disclosures. We refer to the CEO and CFO in this proxy statement as our “named executive
officers” or “executives.”

Executive Summary

One of our key executive compensation objectives is to link pay to performance by aligning the financial
interests of our executives with those of our stockholders and by emphasizing pay for performance in our
compensation programs. We believe we accomplish this objective primarily through our annual bonus
plan, which compensates executives for achieving annual corporate financial goals and individual goals.

Although our total net sales increased 13.0% to $30,322,694 during fiscal 2015 compared to fiscal 2014,
our net income attributable to NTIC deceased 56.8%, to $1,789,571 or $0.39 per diluted common share,
for fiscal 2015 compared to $4,106,374, or $0.90 per diluted common share, for fiscal 2014. Accordingly,
total compensation for our named executive officers for fiscal 2015 decreased over 25% compared to
fiscal 2014, as a result of decreased bonuses under our annual bonus plan.

Compensation Highlights and Best Practices

Our compensation practices include many best pay practices that support our executive compensation
objectives and principles and benefit our stockholders, such as the following:

 Pay for performance. We tie compensation directly to financial performance. Our annual
bonus plan pays out only if a certain minimum adjusted earnings threshold is met and the
payouts are completely dependent upon our actual adjusted earnings.

 At-risk pay. A significant portion of executives’ compensation is “performance-based” or “at
risk.” For fiscal 2015, 27% of total compensation for our named executive officers was
performance-based, assuming grant date fair values for equity awards.

 Equity-based pay. A significant portion of executives’ compensation is “equity-based” and in
the form of stock-based incentive awards. For fiscal 2015, 13% of total compensation for our
named executive officers was equity-based, assuming grant date fair values for equity
awards.

 Three-year vesting. Value received under our long-term equity-based incentive awards,
which is comprised solely of stock options, is tied to three-year vesting and any value
received is contingent upon our long-term stock price performance since stock options have
value only if the market value of our common stock exceeds the exercise price of the options.

 Clawback policy. Our stock incentive plan and related award agreements include a

“clawback” mechanism to recoup incentive compensation if it is determined that executives
engaged in certain conduct adverse to our interests.

 No tax gross-ups. We do not provide tax “gross-up” payments in connection with any

compensation, benefits or perquisites provided to our executives.

 Limited perquisites. We provide only limited perquisites to our executives.

 No hedging or pledging. We prohibit our executives from engaging in hedging transactions,
such as short sales, transactions in publicly traded options, such as puts, calls and other
derivatives, and pledging our common stock in any significant respect.

Say-on-Pay Vote

At our 2015 annual meeting of stockholders, our stockholders had the opportunity to provide an advisory
vote on the compensation paid to our named executive officers, or a “say-on-pay” vote. Of the votes cast
by our stockholders, 98% were in favor of our “say-on-pay” proposal. Accordingly, the Compensation
Committee generally believes that these results affirmed stockholder support of our approach to executive
compensation and did not believe it was necessary to make; and therefore, has not made, any changes to
our executive pay program solely in response to that vote. In accordance with the result of the advisory
vote on the frequency of the say-on-pay vote, which was conducted at our 2014 annual meeting of
stockholders, our board of directors has determined that we will conduct an executive compensation
advisory vote every year. Accordingly, the next say-on-pay vote will occur in January 2016 in connection
with our 2016 annual meeting of stockholders.

Executive Compensation Objectives

Our guiding compensation philosophy is to maintain an executive compensation program that allows us
to attract, retain, motivate and reward qualified and talented executives that will enable us to grow our
business, achieve our annual, long-term and strategic goals and drive long-term stockholder value.

The following core principles provide a framework for our executive compensation program:

 Align interests of our executives with stockholder interests;



Integrate compensation with our business plans and strategic goals;

 Link amount of compensation to both company and individual performance; and

 Provide fair and competitive compensation opportunities that attract and retain executives.

How We Make Compensation Decisions

There are several elements to our executive compensation decision-making, which we believe allow us to
most effectively implement our compensation philosophy. Each of these elements and their roles are
described briefly below.

Role of the Compensation Committee. The Compensation Committee, which is comprised solely of
independent directors, oversees our executive compensation program. Within its duties, the Compensation
Committee recommends compensation for the CEO and CFO. In doing so, the Compensation Committee:

 Approves and recommends that the Board approve the total executive compensation package
for each executive, including his base salary, annual bonus payout and annual stock option
awards;

 Approves and recommends that the Board approve the terms of our annual bonus plan;

 Approves and recommends that the Board approve annual stock option grants;

 Evaluates market competitiveness of our executive compensation program; and

 Evaluates proposed significant changes to all other elements of our executive compensation

program.

In setting or recommending executive compensation for our executives, the Compensation Committee
considers the following primary factors:



each executive’s position within the company and the level of responsibility;

the ability of the executive to impact key business initiatives;

the executive’s individual experience and qualifications;

company performance, as compared to specific pre-established objectives;

individual performance, generally and as compared to specific pre-established objectives;

the executive’s current and historical compensation levels;

advancement potential and succession planning considerations;

an assessment of the risk that the executive would leave NTIC and the harm to our business
initiatives if the executive left;

the retention value of executive equity holdings, including outstanding stock options;

the dilutive effect on the interests of our stockholders of long-term equity-based incentive
awards; and

anticipated share-based compensation expense as determined under applicable accounting
rules.

The Compensation Committee also considers the recommendations of the CEO with respect to executive
compensation to be paid to other executives and employees. The significance of any individual factor
described above in setting executive compensation will vary from year to year and may vary among our
executives. In making its final decision regarding the form and amount of compensation to be paid to our
named executive officers (other than the CEO), the Compensation Committee considers and gives great
weight to the recommendations of the CEO recognizing that due to his reporting and otherwise close
relationship with each executive and employee, the CEO often is in a better position than the
Compensation Committee to evaluate the performance of each executive (other than himself). In making
its final decision regarding the form and amount of compensation to be paid to the CEO, the
Compensation Committee considers the results of the CEO’s self-review and his individual annual

performance review by the Compensation Committee and the recommendations of our non-employee
directors. The CEO’s compensation is approved by the Board of Directors (with the CEO abstaining),
upon recommendation of the Compensation Committee.

Role of Management. Management’s role is to provide current compensation information to the
Compensation Committee and provide analysis and recommendations on executive compensation to the
Compensation Committee based on the executive’s level of professional experience; the executive’s
duties and responsibilities; individual performance; tenure; and historic corporate performance. None of
our executives, including the CEO, provides input or recommendations with respect to his own
compensation.

Use of Market Data. Since there are no public companies of which NTIC is aware that are substantially
similar to NTIC, in terms of its business, industry and corporate profile, the Compensation Committee has
not used market data to review and evaluate executive compensation in any material respect.

Elements of Our Executive Compensation Program

Our executive compensation program for the fiscal year ended August 31, 2015 consisted of the following
key elements:

 Base salary;
 Annual incentive compensation;
 Long-term equity-based incentive compensation, in the form of stock options; and
 All other compensation, including health and welfare benefits, retirement plans and

perquisites.

The table below provides some of the key characteristics of and purpose for each element along with
some key actions taken during fiscal 2015.

Element
Base Salary A fixed amount, paid in cash

Key Characteristics

and reviewed annually and,
if appropriate, adjusted.

Purpose

Provide a source of fixed income
that is competitive and reflects
scope and responsibility of the
position held.

Annual
Incentive

A variable, short-term
element of compensation that
is typically payable in cash
and is based on Adjusted
EBITDOI and individual
performance goals.

Motivate and reward our executives
for achievement of annual business
results intended to drive overall
company performance.

Long-Term
Equity-
Based
Incentive

A variable, long-term element
of compensation that is
provided in the form of stock
options. Stock options are
time-based and vest annually
over three years.

Align the interests of our executives
with the long-term interests of our
stockholders; promote stock
ownership and create significant
incentives for executive retention.

Key Fiscal 2015 Actions
Our named executive officers
received 8% increases to annual
base salaries, effective as of
September 1, 2014, the first day
of fiscal 2015.

No significant changes were
made.

Health and
Welfare
Benefits

Includes health, dental and
life insurance.

Provide competitive health and
welfare benefits at a reasonable cost
and promote employee health.

No significant changes were
made.

Element
Retirement
Plans

Perquisites

Key Characteristics

Includes a 401(k) plan.
We do not provide pension
arrangements or post-
retirement health coverage for
our executives or employees.
We also do not provide any
nonqualified defined
contribution or other deferred
compensation plans.

Includes use of a company-
owned automobile. We do not
provide any other perquisites
to our executives.

Purpose

Provide an opportunity for
employees to save and prepare
financially for retirement.

Key Fiscal 2015 Actions

No significant changes were
made.

Assist in the attraction and retention
of executives.

No significant changes were
made.

We describe each key element of our executive compensation program in more detail in the following
pages, along with the compensation decisions made in fiscal 2015.

Base Salary. We provide a base salary for our named executive officers, which, unlike some of the other
elements of our executive compensation program, is not subject to company or individual performance
risk. We recognize the need for most executives to receive at least a portion of their total compensation in
the form of a guaranteed base salary that is paid in cash regularly throughout the year.

We initially fix base salaries for our executives at a level that we believe enables us to hire and retain
them in a competitive environment and to reward satisfactory individual performance and a satisfactory
level of contribution to our overall business objectives. The Compensation Committee reviews base
salaries for our named executive officers each year typically in July and generally recommends to the
Board of Directors any increases for the following fiscal year in July or August or as soon as practicable
thereafter. Regardless of when the final decision regarding base salaries for a fiscal year is made by the
Board of Directors, any increases in base salaries are effective as of September 1 of that year, which
depending upon the timing of the final decision could result in a retroactive payment to the executive
shortly after the final decision is made.

The Compensation Committee’s recommendations to the Board of Directors regarding the base salaries of
our named executive officers are based on a number of factors, including: the executive’s level of
responsibility, prior experience and base salary for the prior year, the skills and experiences required by
the position, length of service with our company, past individual performance, cost of living increases and
other considerations the Compensation Committee deems relevant. The Compensation Committee also
recognizes that in addition to the typical responsibilities and duties held by our executives, by virtue of
their positions, our executives, due to the small number of our executives and employees, often possess
additional responsibilities and perform additional duties that would be typically delegated to others in
most organizations with additional personnel and resources.

Annualized base salary rates for fiscal 2014 and fiscal 2015 for our named executive officers were as
follows:

Name
G. Patrick Lynch ......................
Matthew C. Wolsfeld ................

Fiscal
2014

$ 300,464
222,082

Fiscal
2015

$ 324,502
239,849

% Change From
Fiscal 2014
8.0%
8.0%

An increase of eight percent was determined appropriate in light of the increased responsibilities taken on
by our executives and performance during fiscal 2014. The Board of Directors, upon recommendation of
the Compensation Committee, recently set base salaries for fiscal 2016. Mr. Lynch’s base salary for fiscal
2016 is $340,726, and Mr. Wolsfeld’s base salary for fiscal 2016 is $251,841, representing base salary
increases of five percent over their respective base salaries for fiscal 2014.

Annual Incentive Compensation. In addition to base compensation, we provide our named executive
officers the opportunity to earn annual incentive compensation based on the achievement of certain
company and individual related performance goals. Our annual bonus program directly aligns the
interests of our executive officers and stockholders by providing an incentive for the achievement of key
corporate and individual performance measures that are critical to the success of our company and linking
a significant portion of each executive’s annual compensation to the achievement of such measures.

Under the annual bonus plan for fiscal 2015, the total amount available under the bonus plan for all plan
participants, including executives, as in past years, was a percent of NTIC’s earnings before interest, taxes
and other income, as adjusted to take into account amounts to be paid under the bonus plan and certain
other adjustments (“Adjusted EBITOI”). For fiscal 2015, the other adjustments included amounts paid
under NTIC’s sales and management bonus plan and profit sharing plan. For each named executive
officer participant, 75 percent of the amount of their individual bonus payout was determined based upon
their individual allocation percentage of the total amount available under the bonus plan and 25 percent of
their individual payout was determined based upon their achievement of certain pre-established but more
qualitative individual performance objectives.

A plan participant’s individual allocation percentage of the total amount available under the bonus plan
was based on the number of plan participants, the individual’s annual base salary and the individual’s
position and level of responsibility within the company. Mr. Lynch’s individual allocation percentage for
fiscal 2015 was 17.6 percent and Mr. Wolsfeld’s individual allocation percentage for fiscal 2015 was 13.0
percent.

Mr. Lynch’s individual performance objectives for fiscal 2015 related primarily to NTIC’s operations in
China, the improvement and maintenance of key joint venture relationships, improvement and
maintenance of investors relations and retention and improvement of key personnel. Mr. Wolsfeld’s
individual performance objectives for fiscal 2015 related primarily to financial oversight of NTIC’s
subsidiary in China, integration of NTIC’s ZERUST® Oil & Gas business operations into NTIC’s
operations in Circle Pines, and improvement and maintenance of investor relations and internal controls.
In the case of both Mr. Lynch and Mr. Wolsfeld, the Compensation Committee determined each
executive achieved his individual performance objectives at a 15% percent achievement level.

Mr. Lynch received a total bonus of $64,981 for fiscal 2015 and Mr. Wolsfeld received a total bonus of
$48,029 for fiscal 2015. The Board of Directors, upon recommendation of the Compensation Committee,
determined to pay all bonuses in cash as opposed to a mix of cash and NTIC common stock in light of our
cash and cash equivalent balance which is higher than in past years and the implementation of a long-term
incentive plan component to our executive compensation, payable in annual stock option grants, as
described in more detail below.

The structure and material terms of our annual bonus plan for fiscal 2016 are similar to the annual bonus
plan for fiscal 2015. As in past years, the payment of bonuses under the plan will be discretionary and
may be paid to participants in cash and/or shares of NTIC common stock.

Long-Term Equity-Based Incentive Compensation. In November 2012, we adopted and began to
implement a long-term equity-based incentive compensation component to our executive compensation
program. The long-term equity-based incentive compensation component consists of annual option
grants to our executives and certain other employees, which options vest on an annual basis over a three-
year period. The stock options are typically granted on the first business day of each fiscal year.

Accordingly, on September 1, 2014, NTIC granted Mr. Lynch an option to purchase 5,244 shares of
common stock and Mr. Wolsfeld an option to purchase 3,876 shares of common stock. More recently, on
September 1, 2015, NTIC granted Mr. Lynch an option to purchase 7,287 shares of common stock and
Mr. Wolsfeld an option to purchase 5,386 shares of common stock. In determining the number of stock
options to grant to our executives and other employees, the Board of Directors, upon recommendation of
the Compensation Committee, considered the total amount of stock-based compensation expense
budgeted for such options and divided that amount by the grant date fair value per share to obtain a total
option pool. Of the total option pool, the number of options to be granted to each executive and employee
receiving options was then determined based on the individual’s base salary as a percentage of the total
aggregate base salaries of all executive and employees receiving option grants.

The Compensation Committee’s primary objectives with respect to long-term equity-based incentive
compensation are to align the interests of our executives with the long-term interests of our stockholders,
promote stock ownership and create significant incentives for executive retention. Long-term equity-
based incentives are intended to comprise a significant portion of each executive’s compensation package,
consistent with our executive compensation objective to align the interests of our executives with the
interests of our stockholders. For fiscal 2015, equity-based compensation comprised 13 percent of the
total compensation for Mr. Lynch and Mr. Wolsfeld, assuming grant date fair value for equity awards. All
equity-based compensation granted to our executives and other employees is granted under the Northern
Technologies International Corporation Amended and Restated 2007 Stock Incentive Plan, which was
approved by the Board of Directors and our stockholders.

The Compensation Committee uses stock options as opposed to other equity-based incentive awards since
the Compensation Committee believes that options effectively incentivize executives to maximize
company performance, as the value of awards is directly tied to an appreciation in the value of our
common stock. Stock options also provide an effective retention mechanism because of vesting
provisions. An important objective of our long-term equity-based incentive program is to strengthen the
relationship between the long-term value of our common stock and the potential financial gain for our
executives. Stock options provide recipients with the opportunity to purchase our common stock at a
price fixed on the grant date regardless of future market price. The vesting of our stock options is time-
based – annually over a three-year period. Our policy is to grant options only with an exercise price equal
to or more than the fair market value of our common stock on the grant date. Under the terms of our
incentive plan, fair market value is defined as the mean between the reported high and low sale prices of
our common stock as of the grant date during the regular daily trading session, as reported on the
NASDAQ Global Market. Because stock options become valuable only if the share price increases above
the exercise price and the option holder remains employed during the period required for the option to
vest, they provide an incentive for an executive to remain employed. In addition, stock options link a
portion of an employee’s compensation to the interests of our stockholders by providing an incentive to
achieve corporate goals and increase the market price of our common stock over the three-year vesting
period.

Although we do not have any stock retention or ownership guidelines, the Board of Directors encourages
our executives to have a financial stake in our company in order to align the interests of our executives
with the interests of our stockholders. Through the grant of stock options, we seek to align the long-term
interests of our executives with the long-term interests of our stockholders by creating a strong and direct

linkage between compensation and long-term stockholder return. When our executives deliver returns to
our stockholders, in the form of increases in our stock price or otherwise, stock options permit an increase
in their compensation. We also believe that stock options enable our executives to achieve a meaningful
equity ownership in our company and enable us to attract, retain and motivate our executives by
maintaining competitive levels of total compensation. As described in more detail below, under the terms
of our insider trading policy, our executives are prohibited from engaging in any hedging or significant
pledging of their shares of our common stock.

All Other Compensation. It is generally our policy not to extend significant perquisites to our executives
that are not available to our employees generally. The only significant perquisite that we provide to our
executives is the personal use of a company-owned vehicle. Our executives also receive benefits, which
are also received by our other employees, including participation in the Northern Technologies
International Corporation 401(k) Plan and health, dental and life insurance benefits. Under the 401(k)
plan, all eligible participants, including our executives, may voluntarily request that we reduce his or her
pre-tax compensation by up to 10 percent (subject to certain special limitations) and contribute such
amounts to a trust. We typically contribute an amount equal to 50 percent of the first seven percent of the
amount that each participant contributed under this plan. We do not provide pension arrangements or
post-retirement health coverage for our executives or employees. We also do not provide any
nonqualified defined contribution or other deferred compensation plans.

Change in Control and Post-Termination Severance Arrangements

Change in Control Arrangements. To encourage continuity, stability and retention when considering the
potential disruptive impact of an actual or potential corporate transaction, we have established change in
control arrangements, including provisions in our stock incentive plan and written employment
agreements with our executives. These arrangements are designed to incentivize our executives to remain
with NTIC in the event of a change in control or potential change in control.

Under the terms of our stock incentive plan and the individual award documents provided to recipients of
awards under that plan, all stock options become immediately vested and exercisable upon the completion
of a change in control of NTIC. For more information, see “—Potential Payments Upon Termination or
Change in Control—Change in Control Arrangements.” Thus, the immediate vesting of stock options is
triggered by the change in control, itself, and thus is known as a “single trigger” change in control
arrangement. We believe these “single trigger” equity acceleration change in control arrangements
provide important retention incentives during what can often be an uncertain time for executives. They
also provide executives with additional monetary motivation to focus on and complete a transaction that
the Board of Directors believes is in the best interests of our stockholders rather than to seek new
employment opportunities. If an executive were to leave before the completion of the change in control,
non-vested options held by the executive would terminate.

In addition, we have entered into employment agreements with our named executive officers to provide
certain payments and benefits in the event of a change in control, which are payable only in the event
their employment is terminated in connection with the change in control (“double-trigger” provisions).
These change in control protections provide consideration to executives for certain restrictive covenants
that apply following termination of employment and provide continuity of management in connection
with a threatened or actual change in control transaction. If an executive’s employment is terminated
without “cause” or by the executive for “good reason” (as defined in the employment agreements) within
24 months following a change in control, the executive will be entitled to receive a lump sum payment
equal to two times, in the case of the CEO, and one and one-half times, in the case of the CFO, his
average total annual compensation for the two most recently completed fiscal years, plus a pro rata
portion of the target bonus that the executive otherwise would have been eligible to receive under our

bonus plan for the fiscal year during which the executive’s employment is terminated, with such pro rata
portion based on the number of completed months during the fiscal year that the executive was employed
with our company. These arrangements, and a quantification of the payment and benefits provided under
these arrangements, are described in more detail under “—Potential Payments Upon Termination or
Change in Control—Change in Control Arrangements.” Other than the immediate acceleration of equity-
based awards which we believe aligns our executives’ interests with those of our stockholders by
allowing executives to participate fully in the benefits of a change in control as to all of their equity, in
order for a named executive officer to receive any other payments or benefits as a result of a change in
control of NTIC, there must be a termination of the executive’s employment, either by us without cause
or by the executive for good reason. The termination of the executive’s employment by the executive
without good reason will not give rise to additional payments or benefits either in a change in control
situation or otherwise. Thus, these additional payments and benefits will not just be triggered by a change
in control, but also will require a termination event not within the control of the executive, and thus are
known as “double trigger” change in control arrangements. As opposed to the immediate acceleration of
stock options, we believe that other change in control payments and benefits should properly be tied to
termination following a change in control, given the intent that these amounts provide economic security
to ease in the executive’s transition to new employment.

We believe these change in control arrangements are an important part of our executive compensation
program in part because they mitigate some of the risk for executives working in a smaller company
where there is a meaningful risk that the company may be acquired. Change in control benefits are
intended to attract and retain qualified executives who, absent these arrangements and in anticipation of a
possible change in control of NTIC, might consider seeking employment alternatives to be less risky than
remaining with NTIC through the transaction. We believe that relative to our company’s overall value,
our potential change in control benefits are relatively small. We also believe that the form and amount of
these change in control benefits are fair and reasonable to both our company and our executives. The
Compensation Committee reviews our change of control arrangements periodically to ensure that they
remain necessary and appropriate.

Other Severance Arrangements. Each of our named executive officers is entitled to receive severance
benefits upon certain other qualifying terminations of employment, other than a change in control,
pursuant to the provisions of such executive’s employment agreement. These severance arrangements are
primarily intended to retain our executives and provide consideration to those executives for certain
restrictive covenants that apply following termination of employment. Additionally, we entered into the
employment agreements because they provide us valuable protection by subjecting the executives to
restrictive covenants that prohibit the disclosure of confidential information during and following their
employment and limit their ability to engage in competition with us or otherwise interfere with our
business relationships following their termination of employment. For more information on our
employment agreements and severance arrangements with our named executive officers, see the
discussions below under “—Summary Compensation—Employment Agreements” and “—Potential
Payments Upon a Termination or Change in Control.”

We believe that the form and amount of these severance benefits are fair and reasonable to both our
company and our executives. The Compensation Committee reviews our severance arrangements
periodically to ensure that they remain necessary and appropriate.

Hedging and Pledging

Our insider trading policy prohibits officers and directors from purchasing NTIC securities on margin,
borrowing against any account in which NTIC securities are held, or pledging NTIC securities in any
significant respect as collateral for a loan. In addition, our insider trading policy prohibits employees

(including executive officers) and directors from purchasing any financial instruments (including, without
limitation, prepaid variable forward contracts, equity swaps, collars and exchange funds) that are designed
to hedge or offset any decrease in the market value of NTIC securities.

Compensation Committee Report

The Compensation Committee has reviewed and discussed the “Compensation Discussion and Analysis”
with management and, based on such review and discussion, the Compensation Committee recommended
to the Board that the “Compensation Discussion and Analysis” be included in this proxy statement and in
our Annual Report on Form 10-K for the fiscal year ended August 31, 2015.

Compensation Committee:
Richard J. Nigon (Chair)
Dr. Sunggyu Lee
Konstantin von Falkenhausen

Summary of Cash and Other Compensation

The table below provides summary information concerning all compensation awarded to, earned by or
paid to named executive officers. G. Patrick Lynch, our President and Chief Executive Officer who serves
as our principal executive officer, and Matthew C. Wolsfeld, our Chief Financial Officer and Corporate
Secretary who serves as our principal financial officer. Mr. Lynch and Mr. Wolsfeld are the only two
individuals who have been designated by our Board of Directors as “executive officers” of our company.

SUMMARY COMPENSATION TABLE – FISCAL 2015

Name and Principal
Position
G. Patrick Lynch ....................
President and Chief
Executive Officer

Fiscal
Year
2015
2014
2013

Matthew C. Wolsfeld .............
Chief Financial Officer
and Corporate
Secretary

2015
2014
2013

Salary
$ 324,501
300,464
278,208

239,850
222,082
205,632

Option
Awards(1)
60,623
49,343
106,977

Non-Equity
Incentive Plan
Compensation(2)
64,981
$
267,362
152,716

All Other
Compensation(3)
13,102
$
12,161
11,911

44,808
36,474
79,070

48,029
197,615
112,877

12,875
11,918
11,668

Total
$ 463,207
629,328
549,812

345,561
468,085
409,247

(1) On September 1, 2014, each of the named executive officers was granted a stock option under the Northern

Technologies International Corporation Amended and Restated 2007 Stock Incentive Plan. We refer you to the
information under the heading “Compensation Discussion and Analysis—Elements of Our Executive
Compensation Program—Long-Term Equity-Based Incentive Compensation” for a discussion of the option
grants and their terms. The amounts reflected in the column entitled “Option Awards” for each officer represent
the aggregate grant date fair value for the option awards, as computed in accordance with FASB ASC Topic
718. The grant date fair value is determined based on a Black-Scholes option pricing model. The grant date
fair value per share for the options granted on September 1, 2014 was $11.58 and was determined using the
following specific assumptions: risk free interest rate: 1.63%; expected life: 10.0 years; expected volatility:
46.6%; and expected dividend yield: 0%.

(2) The amounts reflected in the column entitled “Non-Equity Incentive Plan Compensation” reflect the cash
amount of bonus earned by each of the officers in consideration for their fiscal 2015, 2014 and 2013
performance, respectively, but paid to such officers during fiscal 2016, 2015 and 2014, respectively. We refer
you to the information under “Compensation Discussion and Analysis—Elements of Our Executive
Compensation Program—Annual Incentive Compensation” for a discussion of the factors taken into

consideration by the Board of Directors, upon recommendation of the Compensation Committee, in determining
the amount of bonus paid to each named executive officer.

(3) The amounts shown in the column entitled “All Other Compensation” for fiscal 2015 include the following with

respect to each named executive officer:

Name
G. Patrick Lynch ................................................
Matthew C. Wolsfeld .........................................

401(k) Match
$ 8,750
8,750

Personal Use
of Auto
$ 4,352
4,125

Grants of Plan-Based Awards

The table below provides information concerning grants of plan-based awards to each of our named
executive officers during the year ended August 31, 2015. The option awards were granted to our named
executive officers under the Northern Technologies International Corporation Amended and Restated
2007 Stock Incentive Plan, which was approved by the Board of Directors and our stockholders and the
non-equity incentive plan awards were granted under the Northern Technologies International
Corporation Performance Incentive Plan. The material terms of these awards and the material plan
provisions relevant to these awards are described in the notes to the table below or in the narrative
following the table below. During the year ended August 31, 2015, we did not grant any equity incentive
plan awards or stock awards, in each case, within the meaning of the SEC rules.

GRANTS OF PLAN-BASED AWARDS - 2015

Grant
date

Board
approval
date(1)

Name

G. Patrick Lynch
Non-equity incentive

plan award....................

09/01/14
Stock option ................... 09/01/14
Matthew C. Wolsfeld
Non-equity incentive

plan award....................

09/01/14
Stock option ................... 09/01/14

08/18/14
08/18/14

Estimated future payouts under non-
equity incentive plan awards(2)
Target
($)

Threshold
($)

Maximum
($)

All other
option
awards:
number of
securities
underlying
options(3)
(#)

Exercise
or base
price of
option
awards
($/Sh)

Grant date
fair value
stock and
option
awards(4)
($)

—

$113,010

—

5,244

$20.10

$60,623

—

$83,529

—

3,876

$20.10

$44,808

(1) The grant date with respect to the non-equity incentive awards is September 1, 2014, the first day of the
performance period. The grant date with respect to the option awards is the date on which the Board of
Directors met to approve the option grant.

(2) Represents amounts payable under the NTIC’s annual bonus plan for fiscal 2015, which was approved by our
Board of Directors on August 18, 2014. The actual amounts paid under the bonus plan are reflected in the
“Non-equity incentive compensation” column of the Summary Compensation Table.

(3) Represents an option granted under the Northern Technologies International Corporation Amended and

Restated 2007 Stock Incentive Plan, the material terms of which are described in more detail below under “—
Stock Incentive Plan.” The option has a ten-year term and vests over a three-year period, with one-third of the
underlying shares vesting on each of September 1, 2015, September 1, 2016 and September 1, 2017, so long as
the individual remains an employee of our company as of such date.

(4) We refer you to note (2) to the Summary Compensation Table for a discussion of the assumptions made in

calculating the grant date fair value of the option awards.

Outstanding Equity Awards at Fiscal Year End

The table set forth below provides information regarding stock options for each of our named executive
officers that remained outstanding at August 31, 2015. Note that because of the grant date, the table set
forth below does not reflect option grants on September 1, 2015. We did not have any equity incentive
plan awards or stock awards outstanding at August 31, 2015.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END—FISCAL 2015

Name
G. Patrick Lynch ....................

Matthew C. Wolsfeld .............

Number of Securities
Underlying Unexercised
Options (#)
Exercisable
3,362
6,725
5,550
1,935
0

Option Awards
Number of Securities
Underlying Unexercised
Options (#)
Unexercisable(1)
0
0
2,775(2)
3,870(3)
5,244(4)

2,485
4,971
4,102
1,430
0

0
0
2,051(2)
2,861(3)
3,876(4)

Option
Exercise
Price ($)
$ 10.25
10.25
10.25
14.70
20.10

10.25
10.25
10.25
14.70
20.10

Option
Expiration Date
11/15/2022
11/15/2022
11/15/2022
08/31/2023
08/31/2024

11/15/2022
11/15/2022
11/15/2022
08/31/2023
08/31/2024

(1) All options described in this table were granted under the Northern Technologies International Corporation

Amended and Restated 2007 Stock Incentive Plan. Under the plan, upon the occurrence of a change in control,
the unvested and unexercisable options will be accelerated and become fully vested and immediately
exercisable as of the date of the change in control. For more information, we refer you to the discussion below
under “—Stock Incentive Plan.”

(2) These options vest over a three-year period, with one-third of the underlying shares vesting on each of

November 16, 2013, 2014 and 2015 so long as the individual remains an employee of NTIC as of such date.

(3) These options vest over a three-year period, with one-third of the underlying shares vesting on each of

September 1, 2014, 2015 and 2016 so long as the individual remains an employee of NTIC as of such date.

(4) These options vest over a three-year period, with one-third of the underlying shares vesting on each of

September 1, 2015, 2016 and 2017 so long as the individual remains an employee of NTIC as of such date.

Option Exercises for Fiscal 2015

Neither of the named executive officers exercised any stock options during fiscal 2015 and we did not
have any stock awards outstanding within the meaning of the SEC rules.

Stock Incentive Plan

We have only one stock incentive plan under which stock options are currently outstanding and future
stock incentive awards may be granted – the Northern Technologies International Corporation Amended
and Restated 2007 Stock Incentive Plan. Under the terms of the 2007 plan, our named executive officers,
in addition to other employees and individuals, are eligible to receive stock-based compensation awards,

such as stock options, stock appreciation rights, restricted stock awards, stock bonuses and performance
awards. To date, only incentive and non-statutory stock options and stock bonuses have been granted
under the plan. The plan contains both an overall limit on the number of shares of our common stock that
may be issued, as well as individual and other grant limits.

Incentive stock options must be granted with a per share exercise price equal to at least the fair market
value of a share of our common stock on the date of grant. For purposes of the plan, the fair market value
of our common stock is the mean between the reported high and low sale price of our common stock, as
reported by the NASDAQ Global Market. We generally set the per share exercise price of all stock
options granted under the plan at an amount equal to the fair market value of a share of our common stock
on the date of grant.

Except in connection with certain specified changes in our corporate structure or shares, the Board of
Directors or Compensation Committee may not, without prior approval of our stockholders, seek to effect
any re-pricing of any previously granted, “underwater” option or stock appreciation right by amending or
modifying the terms of the underwater option or stock appreciation right to lower the exercise price,
cancelling the underwater option or stock appreciation right in exchange for cash, replacement options or
stock appreciation rights having a lower exercise price, or other incentive awards, or repurchasing the
underwater options or stock appreciation rights and granting new incentive awards under the plan. For
purposes of the plan, an option or stock appreciation right is deemed to be “underwater” at any time when
the fair market value of our common stock is less than the exercise price.

We generally provide for the vesting of stock options in equal annual installments over a three-year
period commencing on the one-year anniversary of the date of grant for employees and in full on the one-
year anniversary of the date of grant for directors. We generally provide for option terms of ten years.

Optionees may pay the exercise price of stock options in cash, except that the Compensation Committee
may allow payment to be made (in whole or in part) by (1) using a broker-assisted cashless exercise
procedure pursuant to which the optionee, upon exercise of an option, irrevocably instructs a broker or
dealer to sell a sufficient number of shares of our common stock or loan a sufficient amount of money to
pay all or a portion of the exercise price of the option and/or any related withholding tax obligations and
remit such sums to us and directs us to deliver stock certificates to be issued upon such exercise directly
to such broker or dealer; or (2) using a cashless exercise procedure pursuant to which the optionee
surrenders to us shares of our common stock either underlying the option or that are otherwise held by the
optionee.

Under the terms of the plan, unless otherwise provided in a separate agreement or amended in connection
with an optionee’s termination of employment, if a named executive officer’s employment or service with
our company terminates for any reason, the unvested portion of the options held by such officer will
immediately terminate and the executive’s right to exercise the then vested portion of the options will:



immediately terminate if the executive’s employment or service relationship with our
company terminated for “cause”;
continue for a period of 12 months if the executive’s employment or service relationship with
our company terminates as a result of the executive’s death, disability or retirement; or
continue for a period of three months if the executive’s employment or service relationship
with our company terminates for any reason, other than for cause or upon death, disability or
retirement.

As set forth in the plan, the term “cause” is as defined in any employment or other agreement or policy
applicable to the named executive officer or, if no such agreement or policy exists, means (i) dishonesty,
fraud, misrepresentation, embezzlement or other act of dishonesty with respect to us or any subsidiary,
(ii) any unlawful or criminal activity of a serious nature, (iii) any intentional and deliberate breach of a
duty or duties that, individually or in the aggregate, are material in relation to the overall duties, or
(iv) any material breach of any employment, service, confidentiality or non-compete agreement entered
into with us or any subsidiary.

Under the terms of the plan, if a participant is determined by the committee to have taken any action that
would constitute “cause” or an “adverse action” during or within one year after the termination of the
participant’s employment or other service with our company, all rights of the participant under the plan
and any agreements evidencing an award then held by the participant will terminate and be forfeited and
the committee may require the participant to surrender and return to us any shares received, and/or to
disgorge any profits or any other economic value made or realized by the participant in connection with
any awards or any shares issued upon the exercise or vesting of any awards during or within one year
after the termination of the participant’s employment or other service. Additionally, as applicable, we
may defer the exercise of any option or stock appreciation right for a period of up to six months after
receipt of a participant’s written notice of exercise or the issuance of share certificates upon the vesting of
any incentive award for a period of up to six months after the date of such vesting in order for the
committee to make any determination as to the existence of cause or an adverse action. An “adverse
action” includes any of the following actions or conduct that the committee determines to be injurious,
detrimental, prejudicial or adverse to our interests: (i) disclosing any confidential information of our
company or any subsidiary to any person not authorized to receive it; (ii) engaging, directly or indirectly,
in any commercial activity that in the judgment of the committee competes with our business or the
business of any of our subsidiaries; or (iii) interfering with our relationships or the relationships of our
subsidiaries and our and their respective employees, independent contractors, customers, prospective
customers and vendors.

As described in more detail under “—Post-Termination Severance and Change in Control Arrangements”
if there is a change in control of our company, then, under the terms of agreements evidencing options
granted to our named executive officers and other employees under the plan, all outstanding options will
become immediately exercisable in full and will remain exercisable for the remainder of their terms,
regardless of whether the executive to whom such options have been granted remains in the employ or
service of us or any of our subsidiaries.

Post-Termination Severance and Change in Control Arrangements

We have entered into employment agreements with G. Patrick Lynch, NTIC’s President and Chief
Executive Officer, and Matthew C. Wolsfeld, NTIC’s Chief Financial Officer and Corporate Secretary.
Although each of the executive’s employment with our company remains “at will,” the employment
agreements provide each of the executives certain severance benefits in the event the executive’s
employment is terminated by us without “cause” or by the executive for “good reason” and the executive
executes and does not revoke a separation agreement and a release of all claims.

If an executive’s employment is terminated by us without “cause” or by the executive for “good reason,”
in addition to any accrued but unpaid salary and benefits through the date of termination, the executive
will be entitled to a severance cash payment from us in an amount equal to two times (one and one-half
times, in the case of Mr. Wolsfeld) the executive’s average total annual compensation for the two most
recently completed fiscal years, plus a pro rata portion of the target bonus that the executive otherwise
would have been eligible to receive under our bonus plan for the fiscal year during which the executive’s
employment is terminated, with such pro rata portion based on the number of complete months during the

fiscal year that the executive was employed with our company. The severance payment will be paid in
several installments in the form of salary continuation in accordance with our normal payroll practices
over a 24-month period (18-month period, in the case of Mr. Wolsfeld). If, however, the termination
event occurs within 24 months after a change in control of our company, the severance payment will be
paid in one lump sum. If the executive is eligible for and timely elects continued coverage under our
group medical plan, group dental plan and/or group vision plan pursuant to Section 4980B of the Internal
Revenue Code of 1986, as amended (“COBRA”), for each of the first 18 months of the COBRA
continuation period, we also will reimburse the executive in an amount equal to the difference between
the amount the executive pays for such COBRA continuation coverage each month and the amount paid
by a full-time active employee each month for the same level of coverage elected by the executive. In
addition, all outstanding and unvested options to purchase shares of our common stock and other stock
incentive awards granted to the executive under our stock incentive plan will become immediately vested
and exercisable.

Under the employment agreements, “cause” is defined as (i) the executive’s material breach of any of the
executive’s obligations under the employment agreement, or the executive’s willful and continued failure
or refusal to perform his duties, responsibilities and obligations as an executive officer of our company,
for reasons other than the executive’s disability, to the satisfaction of the Board of Directors; (ii) the
executive’s commission of an act of dishonesty, fraud, embezzlement, misappropriation, or intentional
and deliberate injury or material breach of fiduciary duty, or material breach of the duty of loyalty related
to or against us or our business, or any unlawful or criminal activity of a serious nature involving any
felony, or conviction by a court of competent jurisdiction of, or pleading guilty or nolo contendere to, any
felony or any crime involving moral turpitude; or (iii) the existence of any court order or settlement
agreement prohibiting the executive’s continued employment with our company. “Good reason” is
defined as (i) a material diminution in the executive’s authority, duties or responsibilities; (ii) a material
diminution in the executive’s annual base salary; (iii) a material change in the geographic location at
which we require the executive to provide services, except for travel reasonably required in the
performance of the executive’s responsibilities; or (iv) any action or inaction that constitutes a material
breach by us of the employment agreement. “Change in control” has the meaning assigned to such term
in our stock incentive plan as in effect from time to time to the extent such change in control is a “change
of control event” as defined under Code Section 409A and applicable Internal Revenue Service
regulations. Under the terms of our stock incentive plan, a “change in control” means:



the sale, lease, exchange or other transfer of all or substantially all of our assets to a corporation
that is not controlled by us;
the approval by our stockholders of any plan or proposal for our liquidation or dissolution;
certain merger or business combination transactions;



 more than 40 percent of our outstanding voting shares are acquired by any person or group of
persons who did not own any shares of common stock on the effective date of the plan; and
certain changes in the composition of our Board of Directors.



If a change in control of our company had occurred on August 31, 2015, the number of options indicated
in the table below held by each of our named executive officers would have been automatically
accelerated and exercisable. The estimated value of the automatic acceleration of the vesting of unvested
stock options held by a named executive officer as of August 31, 2015 is also indicated in the table below
and is based on the difference between: (i) the market price of the shares of our common stock underlying
the unvested stock options held by such officer as of August 31, 2015 (based on the closing sale price of
our common stock on August 31, 2015 — $15.58), and (ii) the exercise price of the options.

Executive Officer
G. Patrick Lynch .............
Matthew C. Wolsfeld ......

Number of Unvested Options
Subject to Automatic Acceleration
11,889
8,787

Estimated Value of Automatic
Acceleration of Vesting

$ 18,196
13,450

If the employment of our named executive officers was terminated as of August 31, 2015, they would
have been entitled to the following compensation and benefits, depending upon the applicable triggering
event:

Executive Officer
G. Patrick Lynch ............ Cash severance(1)

Type of Payment

Benefits continuation(2)
Equity acceleration(3)
Total:

Voluntary/
For Cause
Termination
$ 0
0
0
$ 0

Involuntary
Termination
without
Cause
$1,157,816
24,971
18,196
$1,200,983

Triggering Event
Qualifying
Change in
Control
Termination
$1,157,816 $ 0
0
0
$ 0

24,971
18,196
$1,200,983

Death

Matthew C. Wolsfeld..... Cash severance(1)

Benefits continuation(2)
Equity acceleration(3)
Total:

$ 0
0
0
$ 0

$ 658,264
22,627
13,450
$ 694,341

$ 658,264 $ 0
0
22,627
13,450
0
$ 0
$ 694,341

Disability
$

0
0
0
0

(1)

(2)

(3)

Includes the value of two times (one and one-half times, in the case of Mr. Wolsfeld) the executive’s
average total annual compensation for the two most recently completed fiscal years plus a pro rata portion
of the target bonus that the executive otherwise would have been eligible to receive under our bonus plan
for the fiscal year during which the executive’s employment is terminated, which in this case in light of the
assumed termination date of August 31, 2015, the last day of the fiscal year, represents the value of the full
target bonus for the entire year.

Includes the value of medical, dental and vision benefit continuation for each executive and their family for
18 months following the executive’s termination.

Includes the value of acceleration of all unvested shares that are subject to options, based on a closing sale
price of $15.58 per share as of August 31, 2015.

Indemnification Agreements

We have entered into agreements with all of our executive officers under which we are required to
indemnify them against expenses, judgments, penalties, fines, settlements and other amounts actually and
reasonably incurred, including expenses of a derivative action, in connection with an actual or threatened
proceeding if any of them may be made a party because he or she is or was one of our executive officers.
We will be obligated to pay these amounts only if the executive officer acted in good faith and in a
manner that he or she reasonably believed to be in or not opposed to our best interests. With respect to
any criminal proceeding, we will be obligated to pay these amounts only if the executive officer had no
reasonable cause to believe his or her conduct was unlawful. The indemnification agreements also set
forth procedures that will apply in the event of a claim for indemnification.

Risk Assessment of Compensation Policies, Practices and Programs

As a result of our annual assessment on risk in our compensation programs, we concluded that our
compensation policies, practices and programs and related compensation governance structure work
together in a manner so as to encourage our employees, including our named executive officers, to pursue
growth strategies that emphasize shareholder value creation, but not to take unnecessary or excessive
risks that could threaten the value of our company. As part of our assessment, we noted in particular the
following:



annual base salaries for employees are not subject to performance risk and, for most non-
executive employees, constitute the largest part of their total compensation;

 while performance-based, or at risk, compensation constitutes a significant percentage of the
overall total compensation of many of our employees, including in particular our named
executive officers, and thereby we believe motivates our employees to help fulfill our
business goals and strategies, including specific and focused company performance goals,
the non-performance based compensation for most employees for most years is also a
sufficiently high percentage of their overall total compensation that we do not believe that
unnecessary or excessive risk taking is encouraged by the performance-based compensation;



a significant portion of performance-based compensation of our employees is in the form of
stock options which do not encourage unnecessary or excessive risk because they generally
vest over a three-year period of time thereby focusing our employees on our long-term
interests; and

performance-based or variable compensation awarded to our employees, which for our
higher-level employees, including our named executive officers, constitutes the largest part
of their total compensation, is appropriately balanced between annual and long-term
performance and cash and equity compensation, and utilizes several different performance
measures and goals that are drivers of long-term success for NTIC and our stockholders.

As a matter of best practice, we will continue to monitor our compensation policies, practices and
programs to ensure that they continue to align the interest of our employees, including in particular our
executive officers, with those of our long-term stockholders while avoiding unnecessary or excessive risk.

RELATED PERSON RELATIONSHIPS AND TRANSACTIONS
________________

Introduction

Below under “—Description of Related Party Transactions” is a description of transactions that have
occurred during the past fiscal year, or any currently proposed transactions, to which we were or are a
participant and in which:



the amounts involved exceeded or will exceed $120,000; and

a related person (including any director, director nominee, executive officer, holder of more
than 5% of our common stock or any member of their immediate family) had or will have a
direct or indirect material interest.

These transactions are referred to as “related party transactions.”

Procedures Regarding Approval of Related Party Transactions

As provided in our Corporate Governance Guidelines, the Audit Committee will review, approve or ratify
reportable related party transactions by use of the following procedures:

 NTIC’s Chief Financial Officer, with the assistance of NTIC’s legal counsel, will evaluate
the disclosures provided in the director and officer questionnaires and from data obtained
from NTIC’s records for potential related person transactions.

 Management will periodically, but no less than annually, report to the Audit Committee on

all related person transactions that occurred since the beginning of the prior fiscal year or
that it believes will occur in the next year. Such report should include information as to (i)
the related person’s relationship to NTIC and interest in the transaction; (ii) the material
facts of the transaction; (iii) the benefits to NTIC of the transaction; and (iv) an assessment
of whether the transaction is (to the extent applicable) in the ordinary course of business, at
arm’s length, at prices and on terms customarily available to unrelated third party vendors or
customers generally, and whether the related party had any direct or indirect personal
interest in, or received any personal benefit from, such transaction.

 Taking into account the factors listed above, and such other factors and information as the
Audit Committee may deem appropriate, the Audit Committee will determine whether or
not to approve or ratify (as the case may be) each related party transaction so identified.

 Transactions in the ordinary course of business, between NTIC and an unaffiliated

corporation of which a non-employee director of NTIC serves as an officer, that are:

o at arm’s length,

o at prices and on terms customarily available to unrelated third party vendors or

customers generally,

in which the non-employee director had no direct or indirect personal interest,
nor received any personal benefit, and

in amounts that are not material to NTIC’s business or the business of such
unaffiliated corporation,

are deemed conclusively pre-approved.

Description of Related Party Transactions

Please see “Director Compensation” and “Executive Compensation” for information regarding a
consulting arrangement we have with one of our current directors and the other compensation
arrangements with our directors and executive officers.

G. Patrick Lynch is the President and Chief Executive Officer of NTIC. Inter Alia Holding Company
owns 13.3% of the total voting power of NTIC. According to a Schedule 13D/A filed with the Securities
and Exchange Commission on December 2, 2011, Inter Alia Holding Company is an entity of which Mr.
Lynch is a 25 percent stockholder. Mr. Lynch shares equal voting and dispositive power over such shares
with three other members of his family. Inter Alia Holding Company’s address is 23205 Mercantile
Road, Beachwood, Ohio 44122.

STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS FOR
2017 ANNUAL MEETING OF STOCKHOLDERS
________________

Stockholder Proposals for 2017 Annual Meeting

Stockholders who, in accordance with Rule 14a-8 under the Exchange Act, wish to present proposals for
inclusion in the proxy materials relating to the 2017 Annual Meeting of Stockholders must submit their
proposals so that they are received by us at our principal executive offices no later than the close of
business on August 5, 2016, unless the date of the meeting is delayed by more than 30 calendar days. The
proposals must satisfy the requirements of the proxy rules promulgated by the Securities and Exchange
Commission and as the rules of the Securities and Exchange Commission make clear, simply submitting a
proposal does not guarantee that it will be included.

Any other stockholder proposals to be presented at the 2017 Annual Meeting of Stockholders (other than
a matter brought pursuant to SEC Rule 14a-8) must be given in writing to our Corporate Secretary and
must be delivered to or mailed and received at our principal executive offices, not less than 90 days nor
more than 120 days prior to the anniversary date of the 2017 Annual Meeting of Stockholders; provided,
however, that in the event that the 2017 Annual Meeting of Stockholders is not held within 30 days before
or after such anniversary date, notice by the stockholder to be timely must be received not later than the
close of business on the 10th day following the day on which such notice of the date of the annual meeting
was mailed or such public disclosure was made, whichever first occurs. The proposal must contain
specific information required by our Bylaws, a copy of which may be obtained by writing to our
Corporate Secretary. If a proposal is not timely and properly made in accordance with the procedures set
forth in our Bylaws, it will be defective and may not be brought before the meeting. If the proposal is
nonetheless brought before the meeting and the Chairman of the meeting does not exercise the power and
duty to declare the proposal defective, the persons named in the proxy may use their discretionary voting
with respect to the proposal.

Director Nominations for 2017 Annual Meeting

In accordance with procedures set forth in our Bylaws, NTIC stockholders may propose nominees for
election to the Board of Directors only after providing timely written notice to our Corporate Secretary.
To be timely, a stockholder’s notice to the Corporate Secretary must be delivered to or mailed and
received at NTIC’s principal executive offices not less than 90 days nor more than 120 days prior to the
anniversary date of the immediately preceding annual meeting; provided, however, that in the event that
the annual meeting with respect to which such notice is to be tendered is not held within 30 days before or
after such anniversary date, notice by the stockholder to be timely must be received not later than the
close of business on the 10th day following the day on which such notice of the date of the meeting was
mailed or public disclosure was made, whichever first occurs. The notice must set forth, among other
things:



the nominee’s name, age, business address, residence address and record address;

the nominee’s principal occupation or employment;

the class and number of shares of NTIC capital stock which are beneficially owned by the
nominee;



signed consent to serve as a director of NTIC; and



any other information concerning the nominee required under the rules of the Securities and
Exchange Commission in a proxy statement soliciting proxies for the election of directors.

Submissions must be made by mail, courier or personal delivery. E-mailed submissions will not be
considered. The Nominating and Corporate Governance Committee will consider only those stockholder
recommendations whose submissions comply with the procedural requirements set forth in NTIC’s
Bylaws. The Nominating and Corporate Governance Committee will evaluate candidates recommended
by stockholders in the same manner as those recommended by others.

COPIES OF FISCAL 2015 ANNUAL REPORT
________________

We have sent or made electronically available to each of our stockholders a copy of our annual
report on Form 10-K (without exhibits) for the fiscal year ended August 31, 2015. The exhibits to
our Form 10-K are available by accessing the Securities and Exchange Commission’s EDGAR
filing database at www.sec.gov. We will furnish a copy of any exhibit to our Form 10-K upon
receipt from any such person of a written request for such exhibits upon the payment of our
reasonable expenses in furnishing the exhibits. This request should be sent to: Northern
Technologies International Corporation, 4201 Woodland Road, Circle Pines, Minnesota 55014,
Attention: Stockholder Information.

_________________________

Your vote is important. Whether or not you plan to attend the Annual Meeting in person, vote your
shares of NTIC common stock by the Internet or telephone, or request a paper proxy card to sign, date
and return by mail so that your shares may be voted.

By Order of the Board of Directors

Richard J. Nigon
Chairman of the Board

December 3, 2015
Circle Pines, Minnesota

3136665 v.13

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________
FORM 10-K

(Mark one)

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

For the fiscal year ended August 31, 2015

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

For the transition period from ________________ to __________________.

Commission file number 001-11038
____________________

NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation or organization)
4201 Woodland Road
P.O. Box 69
Circle Pines, Minnesota
(Address of principal executive offices)

41-0857886
(I.R.S. Employer Identification No.)

55014
(Zip Code)

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

Securities registered under Section 12(b) of the Act:

Title of each class
Common Stock, par value $0.02 per share

Name of each exchange on which registered
The NASDAQ Stock Market LLC
(NASDAQ Global Market)

Securities registered under Section 12(g) of the Act:
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES  NO 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES  NO 

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files). YES  NO 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See

definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act). (Check one):

Large accelerated filer 

Accelerated filer 

Non-accelerated filer 
(Do not check if a smaller reporting company)

Smaller reporting company 

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Act). YES  NO 

The aggregate market value of the registrant’s common stock, excluding shares beneficially owned by affiliates, computed by reference to the closing
sales price at which the common stock was last sold as of February 27, 2015 (the last business day of the registrant’s second fiscal quarter) as reported by the
NASDAQ Global Market on that date was $77.1 million.

As of November 10, 2015, 4,538,317 shares of common stock of the registrant were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Part III of this Annual Report on Form 10-K incorporates by reference information (to the extent specific sections are referred to herein) from the

registrant’s Proxy Statement for its 2016 Annual Meeting of Stockholders to be held January 15, 2016.

NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION

ANNUAL REPORT ON FORM 10-K
FISCAL YEAR ENDED AUGUST 31, 2015

TABLE OF CONTENTS

Page

PART I ........................................................................................................................................................... 1

Item 1.

BUSINESS ............................................................................................................................ 1

Item 1A. RISK FACTORS ................................................................................................................. 16

Item 1B. UNRESOLVED STAFF COMMENTS .............................................................................. 32

Item 2.

PROPERTIES ..................................................................................................................... 33

Item 3.

LEGAL PROCEEDINGS ................................................................................................... 33

Item 4. MINE SAFETY DISCLOSURES ....................................................................................... 33

Item 4A. EXECUTIVE OFFICERS OF THE REGISTRANT .......................................................... 34

PART II ....................................................................................................................................................... 36

Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER

MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES ............................. 36

Item 6.

SELECTED FINANCIAL DATA ...................................................................................... 39

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS .................................................................................. 40

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ... 60

Item 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA .................................... 61

Item 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE .................................................................................... 90

Item 9A. CONTROLS AND PROCEDURES.................................................................................... 90

Item 9B. OTHER INFORMATION ................................................................................................... 90

PART III ..................................................................................................................................................... 91

Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE ............ 91

Item 11.

EXECUTIVE COMPENSATION ...................................................................................... 91

Item 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS ................................. 92

Page

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR

INDEPENDENCE ............................................................................................................... 93

Item 14.

PRINCIPAL ACCOUNTING FEES AND SERVICES ..................................................... 93

PART IV ...................................................................................................................................................... 94

Item 15.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES ................................................... 94

SIGNATURES ............................................................................................................................................ 95

_______________

This annual report on Form 10-K contains certain 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,
and are subject to the safe harbor created by those sections. For more information, see “Part I. Item 1. Business
– Forward-Looking Statements.”

As used in this report, references to “NTIC,” the “Company,” “we,” “our” or “us,” unless the context otherwise
requires, refer to Northern Technologies International Corporation and its wholly-owned subsidiaries, NTIC
(Shanghai) Co., Ltd., NTI Facilities, Inc. and Northern Technologies Holding Company, LLC, and its majority-
owned subsidiaries, Zerust Prevenção de Corrosão S.A., NTI Asean LLC and Natur-Tec India Private Limited, all
of which are consolidated on NTIC’s consolidated financial statements.

NTIC’s consolidated financial statements do not include the accounts of any of its joint ventures. Except as
otherwise indicated, references in this report to NTIC’s joint ventures do not include: (1) NTIC’s majority-owned
Brazilian subsidiary, Zerust Prevenção de Corrosão S.A.; (2) NTIC’s majority-owned subsidiary, NTI Asean LLC,
which is a holding company that holds investments in eight entities that operate in the Association of Southeast
Asian Nations (ASEAN) region, including the following countries: China (although the joint venture agreements
for the Chinese joint venture were terminated as of December 31, 2014 and liquidation of this joint venture is
anticipated), Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand; or (3) NTIC’s majority-
owned subsidiary, Northern Technologies India Private Limited, in India.

As used in this report, references to “NTIC China” refer to NTIC’s wholly-owned subsidiary in China, NTIC
(Shanghai) Co., Ltd.

As used in this report, references to “Tianjin Zerust” refer to NTIC’s former joint venture in China, Tianjin-
Zerust Anticorrosion Co., Ltd.

As used in this report, references to “Zerust Brazil” refer to NTIC’s majority-owned Brazilian subsidiary, Zerust
Prevenção de Corrosão S.A.

As used in this report, references to “NTI Asean” refer to NTIC’s majority-owned holding company subsidiary,
NTI Asean LLC.

As used in this report, references to “Natur-Tec India” refer to NTIC’s majority-owned subsidiary in India,
Natur-Tec India Private Limited.

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

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

Item 1. BUSINESS

Overview

PART I

Northern Technologies International Corporation (NTIC) develops and markets proprietary environmentally
beneficial products and services in over 60 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 40 years,
and in recent years, has targeted and expanded into the oil and gas industry. NTIC also markets and sells a
portfolio of biobased and compostable (fully biodegradable) polymer resins 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 and
coatings, rust removers and cleaners, diffusers and also 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 technical
requirements. In North America, NTIC sells its ZERUST® corrosion prevention solutions through a direct
sales force as well as a network of independent distributors and agents. Internationally, NTIC sells its
ZERUST® corrosion prevention solutions through its wholly-owned subsidiary in China, NTIC (Shanghai)
Co., Ltd. (NTIC China), its majority-owned joint venture holding company for NTIC’s joint venture
investments in the Association of Southeast Asian Nations (ASEAN) region, its majority-owned subsidiary
in Brazil, Zerust Prevenção de Corrosão S.A. (Zerust Brazil) and joint venture arrangements in North
America, Europe and Asia.

One of NTIC’s strategic initiatives is to expand into and penetrate other markets for its ZERUST® corrosion
prevention solutions. Consequently, for the past several years, NTIC has focused 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 corrosion leaks.

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 a long sales cycle, often including a one- to multi-year trial period with
each customer and a slow integration process thereafter.

Natur-Tec® biobased 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 resins are 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, pet waste collection
bags, cutlery, packaging foam and coated paper products. In North America, NTIC markets its Natur-Tec®
resins 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® resins and finished products both
directly and through its majority-owned subsidiary in India, Natur-Tec India Private Limited (Natur-Tec
India), and through certain joint ventures. In November 2014, NTIC entered into an agreement with
NatureWorks LLC for joint marketing and sales of Ingeo® based packaging solutions to customers in India.
With recent Indian government mandates banning use of non-biodegradable plastics in certain types of food
and consumer packaging, NTIC expects the market in India for bioplastic packaging solutions to grow
substantially.

Termination of Chinese Joint Venture

On January 2, 2015, NTIC announced that, effective as of December 31, 2014, it is selling its ZERUST®
products and services in China through a wholly-owned subsidiary, NTIC (Shanghai) Co., Ltd. (NTIC
China), and has terminated its joint venture agreements with Tianjin Zerust Anticorrosion Co., Ltd. (Tianjin
Zerust). NTIC and NTI Asean LLC have filed a lawsuit against Mr. Tao Meng, a Chinese national and the
former joint venture entity’s other shareholder, and his spouse in the Chinese court of Tianjin, seeking,
among other things, an orderly liquidation of Tianjin Zerust.

NTIC indirectly has a 30% ownership interest in Tianjin Zerust through its 60% owned holding company
subsidiary, NTI Asean LLC. Commencing during the second quarter of fiscal 2015, NTIC’s consolidated
financial statements include the financial results of NTIC China. NTIC anticipates that it may take several
quarters to transition many of the previous customers of Tianjin Zerust to NTIC China and no assurance can
be provided that NTIC China will be able to achieve the net sales and income levels previously achieved by
Tianjin Zerust. For fiscal 2014, Tianjin Zerust had net sales of $15.9 million and net income of $1.3
million. (The operating income of the joint venture before paying royalties in an aggregate amount of $4.2
million to all shareholders was over $5.5 million) NTIC’s indirect ownership of Tianjin Zerust is 30%.

During fiscal 2015, NTIC incurred approximately $1,640,000 in start-up expenses related either directly or
indirectly to the establishment of NTIC China, the termination of the joint venture agreements with Tianjin
Zerust, the pending litigation against Mr. Tao Meng and his spouse and Cortec Corporation, and the
anticipated liquidation of Tianjin Zerust. These expenses are recorded as selling, general and administrative
expenses and expenses incurred in support of joint ventures on the consolidated statements of operations.

NTIC expects its operating results may be volatile over the next few quarters as a result of NTIC’s Chinese
operations. In particular, because of the lack of financial and other information received from Tianjin Zerust,
it is possible that receipt of future financial and other information from Tianjin Zerust may impact the
realization of NTIC’s investment in and realization of a receivable from Tianjin Zerust. The last time NTIC
received financial information from Tianjin Zerust was through November 2014. NTIC, as of August 31,
2015, does not believe there are any triggering events that would require an impairment test. NTIC’s current
net investment is approximately $1.1 million, which is 60% of its investment in Tianjin Zerust, which was
$1,883,668 as of August 31, 2015. NTIC will continue to evaluate the realization of this asset on an ongoing
basis and adjust if necessary.

NTIC’s Joint Venture Network

NTIC participates in 19 active joint venture arrangements in North America, Europe and Asia. Each of these
joint ventures generally manufactures and markets products in the geographic territory to which it is
assigned. While most of NTIC’s joint ventures exclusively sell rust and corrosion inhibiting products, some
of the joint ventures also sell NTIC’s Natur-Tec® resin compounds. NTIC has historically funded its
investments in joint ventures with cash generated from operations.

The following table sets forth a list of NTIC’s operating joint ventures as of November 10, 2015, the country
in which the joint venture is organized and NTIC’s ownership percentage in each joint venture:

Joint Venture Name

TAIYONIC LTD.
ACOBAL SAS
ZERUST-NIC (TAIWAN) CORP.
EXCOR KORROSIONSSCHUTZ – TECHNOLOGIEN UND
PRODUKTE GMBH
ZERUST SINGAPORE PTE. LTD
ZERUST AB
MOSTNIC-ZERUST
KOREA ZERUST CO., LTD.
ZERUST OY
ZERUST (U.K.) LTD.
EXCOR-ZERUST S.R.O.
EXCOR SP. Z.O.O.
ZERUST SPECIALTY TECH CO. LTD.
CHONG WAH-NTIA SDN. BHD.
NTIA ZERUST PHILIPPINES, INC.
ZERUST A.Ş.
ZERUST CONSUMER PRODUCTS, LLC
ZERUST – DNEPR
PT. CHEMINDO – NTIA

____________________

(1)

Indirect ownership interest through NTI Asean.

Country
Japan
France
Taiwan(1)

Germany
Singapore(1)
Sweden
Russia
South Korea(1)
Finland
United Kingdom
Czech Republic
Poland
Thailand(1)
Malaysia(1)
Philippines(1)
Turkey
United States
Ukraine
Indonesia(1)

NTIC
Percent (%)
Ownership
50%
50%
30%

50%
60%
50%
50%
30%
50%
50%
50%
50%
30%
30%
30%
50%
50%
50%
30%

NTIC’s receipt of funds from its joint ventures is dependent upon fees for services that NTIC provides to its
joint ventures, based primarily on the net sales of the individual joint ventures, and NTIC’s receipt of
dividend distributions from the joint ventures. The fees for services provided to joint ventures are
determined based on either a flat fee or a percentage of sales depending on local laws and tax regulations.
With respect to NTIC’s joint venture in Germany (EXCOR), NTIC recognizes an agreed upon quarterly fee
for such services. NTIC recognizes equity income from its joint ventures based on the overall profitability of
its joint ventures. Such profitability is subject to variability from quarter to quarter which, in turn, subjects
NTIC’s earnings to variability from quarter to quarter. The profits of NTIC’s joint ventures are shared by the
respective joint venture owners in accordance with their respective ownership percentages. NTIC typically
directly or indirectly owns 50% or less of each of its joint venture entities and thus does not control the
decisions of these entities regarding whether to pay dividends and, if paid, how much they should be in a
given year. The payment of a dividend by an entity is determined by a joint vote of the owners and is not at
the sole discretion of NTIC.

NTIC accounts for the investments and financial results of its joint ventures in its financial statements
utilizing the equity method of accounting.

The results of Zerust Brazil, NTI Asean and Natur-Tec India, and as of December 31, 2014, NTIC China, are
fully consolidated in NTIC’s consolidated financial statements. NTIC holds 85% of the equity and 85% of
the voting rights of Zerust Brazil. NTIC holds 60% of the equity and 60% of the voting rights of NTI Asean.
NTI Asean holds investments in eight entities that operate in the following eight territories located in the
ASEAN region: China (although liquidation was initiated December 31, 2014), Indonesia, South Korea,
Malaysia, Philippines, Singapore, Taiwan and Thailand. NTIC holds 90% of the equity and 90% of the
voting rights of Natur-Tec India. NTIC China is a wholly-owned subsidiary of NTIC.

Sales by NTIC’s joint ventures are not included in the net sales of NTIC.

NTIC considers EXCOR, Natur-Tec India and its former joint venture in China, Tianjin Zerust, to be
individually significant to NTIC’s consolidated assets and income; and therefore, provides certain additional
information regarding EXCOR, Natur-Tec India and Tianjin Zerust in the notes to NTIC’s consolidated
financial statements and in this section of this report.

For more information regarding NTIC’s joint ventures and their effect on NTIC’s operating results, see
NTIC’s consolidated financial statements in “Part II. Item 8. Financial Statements and Supplementary Data”
and “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations” of this report.

Products

NTIC derives revenues directly and/or indirectly through its subsidiaries and joint ventures from the
following two reportable business segments based on products sold, customer base and distribution center:

ZERUST® Corrosion Prevention Solutions. In fiscal 2015, 85.9% of NTIC’s consolidated net sales were
derived from developing, manufacturing and marketing ZERUST® rust and corrosion inhibiting products and
services. NTIC’s consolidated net sales in fiscal 2015 included $26,042,909 in sales of ZERUST® rust and
corrosion inhibiting products and services, an increase of 9.2% over such sales in fiscal 2014. Corrosion not
only damages the appearance of metal products and components but also negatively impacts their mechanical
performance. This applies to the rusting of ferrous metals (iron and steel) and the deterioration by oxidation
of nonferrous metals (aluminum, copper, brass, etc.). NTIC’s ZERUST® corrosion prevention solutions
include plastic and paper packaging, powders, liquids, coatings, rust removers, cleaners, diffusers and
engineered solutions for the oil and gas industry, as well as technical corrosion management and consulting
services.

Plastic and Paper Packaging. NTIC’s ZERUST® packaging products contain proprietary chemical
formulations that continuously release an invisible and odorless, corrosion inhibiting vapor that passivates
metal surfaces and thereby inhibits rust and corrosion. The corrosion-inhibiting protection is maintained as
long as the metal products to be protected remain enclosed within the ZERUST® packaging. Electron
scanning shows that once the contents are removed from the ZERUST® package, the ZERUST® protection
dissipates from the contents’ surfaces within two hours, leaving a clean, dry and corrosion-free metal
component. This mechanism of corrosion protection enables NTIC’s customers to easily package metal
objects for rust-free shipment or long-term storage. Furthermore, by eliminating costly greasing and
degreasing processes and/or significantly reducing the use of certain coatings to inhibit corrosion, NTIC’s
ZERUST® corrosion prevention solutions provide customers significant savings in labor, material and capital
expenditures for equipment to apply, remove and dispose of oils and greases, as well as the attendant
environmental problems, as compared to traditional methods of corrosion prevention.

NTIC developed the first means of infusing volatile corrosion inhibiting chemical systems (VCIs) into
polyethylene and polypropylene resins. Combining ZERUST® chemical systems with polyethylene and
polypropylene resins permitted NTIC to introduce a line of plastic packaging products in the form of low and
high density polyethylene bags and shroud film, including stretch, shrink, skin and bubble cushioning film,
thereby giving packaging engineers an opportunity to ship and store ferrous, nonferrous and mixed-metal
products in a clean, dry and corrosion-free condition, with an attendant overall savings in total process costs.
In addition to plastic packaging, NTIC has developed additives to imbue kraft paper, corrugated cardboard,
solid fiber and chipboard packaging materials with corrosion protection properties. NTIC’s ZERUST®
plastic and paper packaging products come in various thicknesses, strength enhancements, protection types,
shapes and sizes. This product line also includes items such as ZERUST® gun cases, car covers and tool-
drawer liners, which are targeted at retail consumers.

Liquids and Coatings. NTIC’s corrosion prevention solutions include a line of metal surface treatment
liquids and coatings, which are oil, water and bio-solvent based, marketed under brand names including
Axxatec™, Axxanol™ and Z-Maxx™. These liquids and coatings provide powerful corrosion protection in
aggressive environments, such as salt air and humidity at high temperatures. Products are formulated for
most metal types and protection levels. Customers use a combination of NTIC’s liquids and coatings with
ZERUST® plastic and paper products to achieve robust corrosion protection during manufacturing, shipping
and warehousing stages.

Rust Removers and Cleaners. NTIC also sells rust removal and cleaning products designed to restore rusty
parts to a usable condition by replacing labor-intensive, abrasive cleaners that damage surfaces and
commonly fail to remove rust from complex metal surfaces like the teeth of small gears under the
Axxaclean™ brand name.

Diffusers. NTIC’s corrosion prevention solutions include a line of corrosion inhibiting vapor diffusers, such
as ZERUST® ActivPak®, ZERUST® ICT® Vapor Capsules, ZERUST® ICT® Plastabs® and ZERUST® ICT®
Cor-Tabs®, ZERUST® ICT® Pipe Strip and ZERUST® ICT® Tube Strip. These diffusers are designed to
protect metals within enclosures, like switch gearboxes and electronic cabinets, or can be used as added
protection to ZERUST® packaging products. Diffusers work by permeating the interior air of an enclosure
with an invisible and odorless corrosion inhibiting vapor that protects nearby metal surfaces that are within a
specific “radius of protection” for a period of one or two years depending on the model. This invisible and
dry protective layer revaporizes upon removal of the capsule from the enclosure, leaving all surfaces clean,
dry, residue-free and corrosion-free.

Z-CIS® Technical Services. As an on-going effort to help NTIC’s customers improve and control their
processes in terms of corrosion management, NTIC markets and offers unique corrosion management and
consulting services to target customers. This ZERUST® corrosion inhibition system (known as Z-CIS®)
utilizes NTIC’s global experience in successful corrosion management control. Services and consulting are
billed according to work done on the customer’s behalf to improve the customer’s internal and external
corrosion control systems. Several major automotive companies and their automotive parts suppliers have
used NTIC’s Z-CIS® system.

ZERUST® Corrosion Prevention Solutions Designed Specifically for the Oil and Gas Industry. NTIC has
developed proprietary engineered corrosion inhibiting solutions specifically for the mitigation of corrosion of
the types of capital assets used in the petroleum and chemical process industries and has targeted the sale of
these ZERUST® corrosion solutions to potential customers in the oil and gas industry. NTIC’s consolidated
net sales in fiscal 2015 included $1,886,814 in sales made to customers in the oil and gas industry, an
increase of 10.9% over such sales in fiscal 2014. The infrastructure that supports the oil and gas industry is
predominantly constructed using metals that are highly susceptible to corrosion. The industrial environment
at these facilities usually contains compounds, including sulfides and chlorides, which cause aggressive
corrosion. This problem affects pipelines, petroleum storage tanks, spare parts in long-term storage,
processing and other critical equipment. In addition to the costs associated with the replacement of parts and
structures, maintenance and repairs, and product loss, there are significant economic losses associated with
critical infrastructure down for repair and maintenance. Furthermore, there are also considerable health,
safety and environmental risks caused by corrosion that can greatly increase economic losses. NTIC believes
that its ZERUST® oil and gas corrosion prevention solutions 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’s rust and corrosion inhibiting products for the oil and gas industry include ZERUST® Flange
Savers,® ZERUST® ReCAST-R VCI Dispensers, Zerust ReCAST-SSB solutions and ZERUST®
chemicals, including Zerion chemicals, in addition to many of the traditional ZERUST® rust and corrosion
inhibiting products previously described.

ZERUST® Flange Savers® are specially designed covers that have been impregnated with a proprietary
ZERUST® inhibitor formulation to provide corrosion protection for flanges, valves and welded joints. Oil
and gas pipeline segments are connected by flanges and welded joints of varying sizes, designs and
materials. These connection points often corrode under aggressive industrial environments and harsh
operating conditions, thereby causing costly maintenance, operational and safety problems. ZERUST®
Flange Savers® are available in various sizes to accommodate different pipe diameters, pressure ratings and
international standards for pipeline valves and flanges.

ZERUST® ReCAST-R VCI Dispensers protect the interior surfaces of aboveground storage tank roofs by
delivering proprietary inhibitor formulations into the vapor space between the surface of the product and the
tank roof. Certain grades of oil contain sulphur and emit corrosive acid gas vapors that destroy the internal
surfaces of aboveground storage tank roofs and their support structures above the stored product. Aggressive
pitting and crevice corrosion create holes in tank roofs that cause unsafe operating conditions and
environmental problems. Internal tank coatings decrease surface corrosion but have proven to be ineffective
in preventing dangerous pitting and crevice corrosion, especially in the interstitial spaces between the roof
and support structures. The ZERUST® ReCAST-R solution is designed to extend the service life of a single
tank roof significantly by forming a protective inhibitor barrier which separates the corrosive environment
from the metallic surface of the tank roof support structures and is designed to prevent corrosion in highly
aggressive environments. Each system is tailored to a customer’s requirements, depending upon specific
environmental conditions, product stored, tank diameter and type of metal and can be applied on both new
and existing tank roofs.

ZERUST® ReCAST-SSB solutions protect the Soil Side Bottoms (SSB) of aboveground storage tanks
through a variety of unique and highly effective delivery systems designed by the Zerust Oil & Gas team to
deliver proprietary Zerion FVS corrosion inhibitor to tank bottom spaces that are susceptible to significant
corrosion. Tank bottoms are typically made of steel plates which are in direct contact with the foundation
surface that could be concrete, sand/soil and asphalt/bitumen. It is typically not possible to protect this
underside surface with traditional coatings. Cathodic protection (CP) systems can provide some protection,
but these have significant limitations that cause failures well ahead of the expected service life of a tank. The
ZERUST® solutions provide effective protection even to areas that cannot be addressed with CP. This is an
engineered solution where each system is tailored to a customer’s requirements depending on the tank
foundation design, specific environmental conditions, tank diameter, etc.

ZERUST® Zerion line of powder based inhibitor solutions include:

 Zerion FVS is a unique inhibitor blend that is used in the SSB Solutions. This “best-in-class” product
has been successfully deployed at multiple client sites in the North and South American geographies.

 AutoFog is a revolutionary product that allows for the quick VCI saturation of large volume spaces
without the need for mechanical “fogging” equipment. This rapid self-diffusing capability is good
for sealed void spaces, protection of large/complex assets like Heat Exchangers and Heater-Treaters.

 Sol-V C-Series is designed to provide corrosion prevention in voids and enclosures especially when
there is either stagnant water, or the potential for water seepages and/or accumulation of water over
time. ZERUST® Sol-V™ C-Series packaging allows VCIs to release while conserving a Sol-V
proprietary blend of soluble corrosion inhibitors (SCIs) until water enters the system. Typical
applications of ZERUST® Sol-V™ C-Series packaging include offshore platform leg voids, vessels
and tanks mothballed in tropical environments, ship blocks being fabricated in areas of high
humidity, piping systems and heat exchangers.

During fiscal 2012, two of NTIC’s ZERUST® products designed for the oil and gas industry, ZERUST®
Flange Savers® and the ZERUST® ReCAST-R system, received Materials Performance magazine’s

“Readers’ Choice Corrosion Innovation of the Year” Awards. Materials Performance is published by NACE
International, the world’s largest organization of professional engineers dedicated to the study, prevention
and mitigation of corrosion.

Natur-Tec® Resin Compounds and Finished Products. NTIC manufactures and sells a range of biobased
and compostable (fully biodegradable) polymer resins and finished products under the Natur-Tec® brand.
NTIC’s consolidated net sales in fiscal 2015 included $4,279,785 in sales of Natur-Tec® resins and finished
products, an increase of 43.6% over such sales in fiscal 2014. Market drivers such as volatile petroleum
prices, reduced dependence on foreign oil, reduced carbon footprints, and environmentally responsible end-
of-life solutions increased interest in using sustainable, biobased and renewable plant-biomass resources for
the manufacture of plastics and industrial products. Plastics that are fully biodegradable in composting or
anaerobic digestor systems allow the safe and effective conversion of these plastics to carbon dioxide, water
and fertilizer at the end of their service life. Increased environmental and sustainability awareness at the
corporate and consumer level, improved technical properties and product functionality, as well as recent
foreign, state and local governmental regulations banning the use of traditional, petroleum-based plastics or
mandating the use of certain biodegradable or compostable products, have also fueled this interest in
biobased and biodegradable-compostable plastics. The term “bio-plastics” encompasses a broad category of
plastics that are either bio-based, which means derived from renewable resources such as corn or
cellulosic/plant material or blends thereof, or are engineered to be fully compostable, or both.

Resins. Natur-Tec® resins are produced by blending commercially available base resins, such as Ecoflex®
from BASF, Ingeo® PLA from NatureWorks LLC and/or Bionolle® from Showa-Denko, with organic and
inorganic fillers, and proprietary polymer modifiers and compatabilizers, using NTIC’s proprietary and
patented ReX Process. In this process, biodegradable polymers, natural polymers made from renewable,
plant-biomass resources, and organic and inorganic materials are reactively blended in the presence of
proprietary compatibilizers and polymer modifiers to produce biobased and/or compostable polymer resin
formulations that exhibit unique and stable morphology. Natur-Tec® resin compounds are engineered for
high performance, ease of processing and reduced cost compared to most other bio-plastic materials, and can
be processed by converters using conventional plastic manufacturing processes and equipment.

Natur-Tec® resins are available in several grades tailored for a variety of applications, such as blown-film
extrusion, extrusion coating and injection molding.

Natur-Tec® flexible film resins are fully compostable and meet requirements of international standards for
compostable plastics such as ASTM (American Society for Testing and Materials) D6400 (U.S.), EN 13432
(European standards for products and services by European Committee for Standardization) and ISO
(International Organization for Standardization) 17088, and are certified as 100% compostable by
organizations including the BPI (Biodegradable Products Institute) in the United States and Vincotte in
Europe. Natur-Tec® film resins can be used to produce film for applications, such as bags, including
compost bags, lawn and leaf bags, pet waste bags and carry-out bags, agricultural film and consumer and
industrial packaging.

The Natur-Tec® compostable extrusion coating resin compounds are biobased and biodegradable and are
designed to replace conventional plastic materials for extrusion coating applications. Natur-Tec® extrusion
coating resin compounds are manufactured using sustainable and renewable resources, per the ASTM D6866
standard, which allows industry and consumers the opportunity to reduce or neutralize their carbon footprint,
and are designed to meet the requirements of international standards for compostable plastics, such as ASTM
D6400. Natur-Tec® extrusion coating resins provide good adhesion to paper, an excellent print surface and
good heat seal strength and the coating material is suitable for food contact applications including both hot
and cold applications. Natur-Tec® extrusion coating resins can be used for coating paper and paperboards for
the manufacture of disposable cups, plates and other food service ware items.

The Natur-Tec® compostable injection molding resin compounds are biobased and compostable and are
designed to replace conventional plastic materials for injection molded plastic applications. Natur-Tec®
compostable injection molding resin compounds are manufactured using sustainable and renewable
resources, per the ASTM D6866 standard and are designed to meet the requirements of international
standards for compostable plastics, such as ASTM D6400 and EN 13432. Natur-Tec® compostable injection
molding resin compounds can be used for injection molded plastic applications, such as cutlery, pens,
hangers, containers and packaging. Natur-Tec® biobased injection molding resin compounds are made with
at least 50% of biobased/renewable resource-based materials per the ASTM D6866 standard and are meant to
enhance sustainability by replacing petroleum-based plastics. Natur-Tec® also produces biobased injection
molding resin compounds that are not designed or intended to biodegrade but rather aid in sustainability by
requiring less energy for production and by reducing dependence on petroleum as a raw material. Natur-
Tec® biobased injection molding resin compounds exhibit the same properties as conventional plastic
materials and can be used in applications, such as automotive components, consumer goods, electronics,
medical products, furniture and packaging.

Finished Products. Natur-Tec® finished products include totally biodegradable and compostable trash bags,
agricultural film and other single-use disposable products, such as compostable cutlery, food and consumer
goods packaging that are currently marketed under the Natur-Bag® or Natur-Ware® brands.

The Natur-Bag® product line offers 12 different compostable trash bag sizes, from 3-gallon to 96-gallon.
The bags are available in various SKU configurations from retail packs that are sold to the consumer either
through retail outlets or through online stores, and industrial case packs that are sold to commercial and
industrial customers primarily through wholesalers and distributors. The Natur-Bag® products are
manufactured from the Natur-Tec® flexible film resin compounds and thus are fully biodegradable and
compostable.

The Natur-Ware® product line consists of biobased and compostable cutlery made from the Natur-Tec®
compostable injection molding resin compounds. Natur-Ware® cutlery can be composted along with food
scraps in zero-waste programs.

Both Natur-Bag® and Natur-Ware® products are fully certified compostable, and carry the BPI
Compostable logo in the United States and the Vincotte OK Compost in Europe. Furthermore, these products
were also independently tested and approved for use in organic waste diversion systems by Cedar Grove, one
of the largest compost operators in the United States.

Sales, Marketing and Distribution

ZERUST® Corrosion Prevention Solutions. In the United States, NTIC markets its ZERUST® rust and
corrosion inhibiting products and services, including its products designed for the oil and gas industry,
principally to industrial users in the automotive, electronics, electrical, mechanical, military, retail consumer
and oil and gas markets by a direct sales force and through a network of independent distributors,
manufacturer’s sales representatives and strategic partners. NTIC’s technical service consultants work
directly with the end users of NTIC’s ZERUST® products to analyze their specific corrosion prevention
needs and develop systems to meet their technical requirements.

Internationally, NTIC has entered into a series of joint ventures with foreign partners (either directly or
through a holding company). NTIC receives fees for providing technical support, marketing assistance and
other services to its joint ventures based primarily on the net sales of the individual joint ventures in
accordance with the terms of the joint venture arrangements. Such services include consulting, legal,
insurance, technical and marketing services.

With respect to the sales and marketing of ZERUST® rust and corrosion inhibiting products and services to
the oil and gas industry, NTIC uses a combination of direct sales personnel, independent sales agents and its
joint venture network. In addition, in an attempt to penetrate the oil and gas industry within certain markets
more quickly, NTIC has entered into certain sales and marketing agency agreements with specific
organizations that have existing long term relationships with key oil and gas industry clients. NTIC also
engages in certain direct marketing activities to build its brand within the oil and gas industry, such as
traditional advertising and direct mail campaigns and presence and participation at selected key trade shows
and technical forums. NTIC continues to believe the sale of its ZERUST® corrosion prevention solutions to
customers in the oil and gas industry will involve a long sales cycle, likely including a one- to multi-year trial
period with each customer and a slow integration process thereafter.

Natur-Tec® Resin Compounds and Finished Products. In the United States, NTIC markets its Natur-Tec®
resin compounds and finished products through a network of national and regional distributors and
independent manufacturer’s sales representatives and three NTIC direct sales employees as of August 31,
2015. Target customers for Natur-Tec® finished products include individual consumers and commercial and
institutional organizations such as corporations and government agencies, and educational organizations such
as universities and school districts. NTIC is also targeting key national and regional retailers utilizing
independent sales agents. Target customers for Natur-Tec® resin compounds include film extruders and
injection molders who would purchase Natur-Tec® resin compounds to manufacture and sell their own
finished biobased, and compostable end products, such as film, bags and cutlery.

Internationally, NTIC uses NTI India, and its joint ventures and a network of international distributors to
market its Natur-Tec® resin compounds and finished products.

Competition

ZERUST® Corrosion Prevention Solutions. While NTIC is unaware of any third parties with which NTIC
competes on a worldwide basis with respect to its corrosion prevention solutions, NTIC does compete with
several third parties on a regional basis. NTIC evaluates competing rust and corrosion inhibiting products on
an ongoing basis. Some of NTIC’s competitors are established companies that may have financial,
marketing, distribution networks and other resources substantially greater than those of NTIC. As a result,
they may be able to adapt more quickly to new or emerging technologies and changes in customer
requirements, or devote greater resources to the promotion and sale of their products than NTIC. With
respect to its rust and corrosion inhibiting products, NTIC competes on the basis of product innovation,
quality and reliability, product support, customer service, reputation as well as price. Some of NTIC’s
competitors may have achieved significant market acceptance of their competing products and brand
recognition. NTIC, however, believes it has an advantage over most of its competitors as a result of NTIC’s
technical innovation and its value added service. NTIC attempts to provide its customers with the highest
level of technical service and applications engineering in addition to ZERUST® rust and corrosion inhibiting
products. Nonetheless, the commoditization of certain of NTIC’s ZERUST® rust and corrosion inhibiting
products have led and may continue to lead to lower prices and lower margins on such products. In addition,
because certain barriers to entry are low, additional competitors, including plastic extrusion companies, may
emerge, which likely would lead to the further commoditization of NTIC’s rust and corrosion inhibiting
products.

With respect to NTIC’s corrosion prevention solutions for use in the oil and gas industry, NTIC’s primary
barrier to entry is a combination of conservatism, complacency, confidence in old approaches as well as the
complexity of the buying organizations. Some of NTIC’s competitors with respect to its traditional
ZERUST® rust and corrosion inhibiting products also compete in the oil and gas industry. NTIC also faces
competition from new suppliers who provide alternative approaches to corrosion prevention, some of which
have a significant market presence and more years of experience and credibility in the oil and gas industry.

Original equipment manufacturer (OEM) suppliers to the oil and gas industry present a new market vertical
for NTIC’s traditional industrial ZERUST® products.

Natur-Tec® Resin Compounds and Finished Products. With respect to NTIC’s Natur-Tec® resin
compounds and finished products, NTIC competes with several established companies that have been
producing and selling similar products for a significantly longer time period, and have significantly more
sales, more extensive and effective distribution networks and better brand recognition than NTIC. Most of
these companies also have substantially more financial and other resources than NTIC. NTIC competes on
the basis of performance, brand awareness, distribution network, product availability, product offering, shelf
life, place of manufacture and price. Because of price competition, NTIC’s margins on its Natur-Tec® resin
compounds and finished products are lower than its margins on its ZERUST® corrosion prevention
solutions. NTIC also could face supply constraints for the base resins used to manufacture NTIC’s Natur-
Tec® resin compounds and finished products since there are a limited number of suppliers of such base resins
and limited capacity for their production.

Research and Development

NTIC’s research and development activities are directed at improving existing products, developing new
products, reducing costs and improving quality assurance through improved testing of NTIC’s products.
NTIC’s internal research and development activities are conducted at its facilities located in Circle Pines,
Minnesota; Beachwood, Ohio; and Dresden, Germany under the direction of internationally known scientists
and research institutes under exclusive contract to NTIC with respect to the subject of their respective
research efforts. EXCOR has established a wholly-owned subsidiary, Excor Korrosionsforschung GmbH, to
conduct research into new fields of corrosion inhibiting packaging and the applications engineering of such
products in conjunction with NTIC’s domestic research and development operations. With respect to
NTIC’s Natur-Tec® resin compounds and finished products, Ramani Narayan, Ph.D., a current director of
NTIC and Distinguished Professor in the Department of Chemical Engineering & Materials Science at
Michigan State University, provides his expertise and technical support to NTIC.

NTIC spent $4,047,279 in fiscal 2015 in connection with its research and development activities, compared
to $4,368,752 in fiscal 2014 and $3,815,515 in fiscal 2013. NTIC anticipates that it will spend between
$4,000,000 and $4,500,000 in fiscal 2016 on research and development activities. These amounts are net of
reimbursements related to certain research and development contracts. Such reimbursements totaled $0,
$45,788 and $274,728 in fiscal 2015, 2014 and 2013, respectively. Most of NTIC’s research and
development contracts under which NTIC received reimbursements during fiscal 2014 were in connection
with developing corrosion prevention solutions for the U.S. government in connection with developing future
potential Natur-Tec® products.

NTIC was awarded three National Science Foundation (NSF) awards -- one in June 2009 as a Phase I Small
Business Technology Transfer (STTR) grant for $150,000 on advanced polylactide materials for biobased
and biodegradable products, the second in September 2009 as a Phase I Small Business Innovation Research
(SBIR) grant for an additional $150,000 on “Biobased coatings for corrosion protection” and a third in
November 2011 as a Phase II SBIR grant of $500,000 for the development of advanced polylactide materials
for biobased and biodegradable plastic products. The Phase I projects were completed in June 2010 and have
helped NTIC develop biobased technologies for new innovative applications in the ZERUST® and Natur-
Tec® business areas. The Phase II project work was completed in fiscal 2015. The modified polylactic acid
chemistries developed with this program helped NTIC to expand its product portfolio and commercialize
novel bioplastics packaging solutions along with enhanced formulations for molded food service-ware. The
research and technology development was conducted in collaboration with Ramani Narayan, Ph.D., a current
director of NTIC, and Michigan State University.

During fiscal 2010, NTIC was awarded funding from the U.S. Department of Defense for a Phase I Small
Business Innovation Research contract worth $70,000 to develop non-plastic marine biodegradable waste
bags for the U.S. Navy. NTIC collaborated with the U.S. Army Natick labs and Michigan State University
(MSU) on this project. In November 2011, NTIC was awarded a Department of Defense Small Business
Innovation Research Phase II grant of $500,000 for the ongoing development and commercialization of
biobased and marine biodegradable non-plastic bags for the U.S. Navy. The Phase II grant work continued
during fiscal 2014 and was completed in April 2014 by supplying the NAVSUP office with marine
biodegradable coated paper bags for evaluation. The NAVSUP office was unable to evaluate the bags due to
lack of funding and later closed out the project due to cost and commercialization reasons. They identified
this would currently be a niche product and would like to reevaluate once the technology was mature and
commercialized in more markets. MSU is currently continuing research on the vegetable oil coating
technology for usage in other applications.

Intellectual Property Rights

NTIC’s success depends and will continue to depend in part upon its ability to maintain patent and trademark
protection for its products and processes, to preserve its proprietary information and trade secrets and to
operate without infringing the proprietary rights of third parties. NTIC’s policy is to attempt to protect its
technology by, among other things, filing patent applications and trademark applications and vigorously
preserving the trade secrets covering its technology and other intellectual property rights.

In 1979, NTIC developed and patented the first polyolefin (plastic) based industrial corrosion inhibiting
packing material in the world. The U.S. patent granted under this patent application became the most
important intellectual property right in NTIC’s history. This patent expired in 2000. NTIC has since filed
for 12 letters of patents in the United States covering various corrosion inhibiting technologies, systems and
applications, and now owns several patents in these areas. These patents as well as patent applications have
been extended to the countries of strategic relevance to NTIC including, but not limited to, the Patent
Cooperation Treaty. In addition, EXCOR owns several patents in the area covering various corrosion
inhibiting technologies and also applied for new patents on proprietary new corrosion inhibiting
technologies. NTIC is also seeking additional patent protection covering various host materials into which
its corrosion inhibiting additives and other protective features can be incorporated, proprietary new process
technologies, and chemical formulations outside the area of corrosion protection. NTIC owns several patents
outside the area of corrosion protection both in the United States and in countries of strategic relevance to
NTIC including, but not limited to, the Patent Cooperation Treaty.

In addition to seeking patent protection, NTIC maintains an extensive portfolio of trademarks in countries
where NTIC has a presence directly or through its subsidiaries and joint ventures. NTIC continuously
pursues new trademark applications of strategic interest worldwide. NTIC owns the following U.S.
registered trademarks: NTI®, NTI & Globe Design, ZERUST®, EXCOR®, ICT®, Z-CIS®, COR TAB®,
PLASTABS®, NATUR-TEC®, NATUR-TEC & Design®, NATUR-BAG® and NATUR-WARE®. NTIC
also has a registered trademark on the use of the Color Yellow with respect to corrosion inhibiting
packaging. Furthermore, NTI®, ZERUST®, The ZERUST People®, EXCOR®, the Color Yellow®, NTI
ASEAN® and COR/SCI®, as well as other marks have been registered in the European Union with several
new applications pending.

NTIC requires its employees, consultants and advisors having access to its confidential information,
including trade secrets, to execute confidentiality agreements upon commencement of their employment or
consulting relationships with NTIC. These agreements generally provide that all confidential information
NTIC develops or makes known to the individual during the course of the individual’s employment or
consulting relationship with NTIC must be kept confidential by the individual and not disclosed to any third
parties. NTIC also requires all of its employees and consultants who perform research and development for
NTIC to execute agreements that generally provide that all inventions developed by these individuals during

their employment by or service arrangement with NTIC will fall under NTIC’s proprietary intellectual
property rights.

Manufacturing

NTIC’s ZERUST® rust and corrosion inhibiting products are manufactured according to NTIC’s
specifications primarily by selected independent sub-contractors under trade secrecy agreements and/or
license agreements. In addition, during fiscal 2015 and 2014, NTIC expanded its production capabilities and
began to manufacture select ZERUST® rust and corrosion inhibiting products, consisting primarily of liquids
and powders, in house at its corporate headquarters location in Circle Pines, Minnesota.

NTIC’s Natur-Tec® resin compounds and finished products are produced at facilities in China and Malaysia.
Starting in fiscal 2014, NTIC made arrangements with a facility in California as an alternative production
source. NTIC’s Natur-Tec® resin compounds can be shipped to any manufacturing facility around the world
where they then can be converted into finished products, such as a bag or piece of cutlery. NTIC’s Natur-
Tec® finished products are manufactured using NTIC’s Natur-Tec® resin compounds by selected sub-
contractors.

NTIC is ISO 9001 certified with respect to the manufacturing of its products. NTIC believes that the process
of ISO 9001 certification serves as an excellent total quality management tool, enabling NTIC to ensure
consistency in the performance of its products. In addition, because potential customers may prefer or
require manufacturers to have achieved ISO certification, such ISO certifications may provide NTIC with
certain competitive advantages.

Availability of Raw Materials

NTIC does not typically carry excess quantities of raw materials because of widespread availability for such
materials from various suppliers. However, with respect to its Natur-Tec® resin compounds and finished
products, there are a limited number of suppliers of the base resins used to manufacture the resin compounds
and finished products, and in the past NTIC has experienced some delay in obtaining such base resins. In
addition, a few raw materials and purchased parts used in NTIC’s rust and corrosion inhibiting products and
Natur-Tec® finished products are sourced from suppliers who currently serve as NTIC’s sole source of
supply for these materials and parts. Although NTIC believes it can obtain these raw materials and parts
from other sources of supply, an unexpected loss of supply over a short period of time may not allow NTIC
time to replace these sources in the ordinary course of business.

Backlog

NTIC had an order backlog of $667,000 as of August 31, 2015, compared to $995,000 as of August 31, 2014
and $641,000 as of August 31, 2013. These are orders that are held by NTIC pending release instructions
from the customers to be used in just-in-time production. Customers generally place orders on an “as
needed” basis and expect delivery within a relatively short period of time.

Governmental Regulation

The U.S. Food and Drug Administration (FDA) has indicated to NTIC that it has no objection to the use of
ZERUST® ICT® packaging products in protecting metal food containers and processing equipment. In
addition, the manufacture, sale and use of NTIC’s Natur-Tec® resin compounds and finished products are
subject to regulation in the United States by the FDA. The FDA’s regulations are concerned with substances
used in food packaging materials. Thus, food and beverage containers are in compliance with FDA
regulations if the components used in the food and beverage containers are approved by the FDA as indirect
food additives for their intended uses and comply with the applicable FDA indirect food additive regulations,

or are generally recognized as safe for their intended uses and are of suitable purity for those intended uses.
NTIC believes that its resins are in compliance with all FDA requirements and do not require further FDA
approval prior to the sale of its products.

Employees

As of August 31, 2015, NTIC had 75 full-time employees located in the United States, consisting of 17 in
sales and marketing, 29 in research and development and lab, 16 in administration, 12 in production and one
responsible for international coordination. As of August 31, 2015, NTIC’s wholly-owned subsidiary in
China had 22 full-time employees, its majority-owned subsidiary in Brazil had 20 full-time employees, its
majority-owned subsidiary in India had 6 full-time employees and its holding company, NTI Asean, had no
full-time employees. There are no unions representing NTIC’s employees and NTIC believes that its
relations with its employees are good.

Financial Information about Segments and Geographic Areas

Financial information regarding our segments and geographic information can be found in Note 13 to
NTIC’s consolidated financial statements included in this report under “Part II. Item 8. Financial Statements
and Supplementary Data.”

Available Information

NTIC is a Delaware corporation that was originally organized as a Minnesota corporation in 1970. NTIC’s
principal executive office is located at 4201 Woodland Road, Circle Pines, Minnesota 55014, and its
telephone number is (763) 225-6600. NTIC’s website is located at www.ntic.com. References to NTIC’s
website addressed in this report are provided as a convenience and as an inactive textual reference only. The
information on NTIC’s website or any other website is not incorporated by reference into, and not considered
a part of, this report.

NTIC makes available, free of charge and through its Internet web site, its annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to any such reports filed
or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon
as reasonably practicable after NTIC electronically files such material with, or furnishes it to, the Securities
and Exchange Commission (SEC). Reports filed with the SEC may be viewed at www.sec.gov or obtained at
the SEC Public Reference Room in Washington, D.C. Information regarding the operation of the Public
Reference Room may be obtained by calling the SEC at 1-800-SEC-0330.

Forward-Looking Statements

This report on Form 10-K 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, and 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 outcome of
contingencies such as legal proceedings and the effect of the liquidation of Tianjin Zerust and the
establishment of NTIC China. NTIC has identified some of these forward-looking statements in this report
with words like “believe,” “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:

 The establishment of NTIC China, the termination of the joint venture agreements with Tianjin
Zerust, the pending litigation against Mr. Tao Meng and Cortec Corporation and the anticipated
liquidation of Tianjin Zerust and the effect on NTIC’s business and future operating results,
including possible future impairment charges on NTIC’s investment in Tianjin Zerust and a
receivable from Tianjin Zerust;

 The variability in NTIC’s sales of ZERUST® products and services into oil and gas industry and
Natur-Tec® products and NTIC’s equity income of joint ventures, which variability in sales and
equity in income of joint venture in turn, subject NTIC’s earnings to quarterly fluctuations;

 Risks associated with NTIC’s international operations and exposure to fluctuations in foreign

currency exchange rates and import duties and taxes;

 The effect of current worldwide economic conditions, the European sovereign debt crisis and

turmoil and disruption in the global credit and financial markets on NTIC’s business;

 The health of the U.S. automotive industry on NTIC’s business;

 NTIC’s dependence on the success of its joint ventures and fees and dividend distributions that

NTIC receives from them;

 NTIC’s relationships with its joint ventures and its ability to maintain those relationships,

especially in light of anticipated succession planning issues;

 NTIC’s dependence upon sales by Zerust Brazil to Petroleo Brasileiro S.A. (Petrobras), an oil
company located in Brazil, and the effect of such sales on NTIC’s quarterly operating results,
including in particular its net sales and margins;

 Fluctuations in the cost and availability of raw materials, including resins and other commodities;

 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 into oil and gas industry and Natur-Tec® products and the often
lengthy and extensive sales process involved in selling such products and services;

 NTIC’s ability to introduce new products and services that respond to changing market conditions

and customer demand;

 Market acceptance of NTIC’s existing and new products, especially in light of existing and new

competitive products;

 Maturation of certain existing markets for NTIC’s ZERUST® products and services and NTIC’s

ability to grow market share and succeed in penetrating other existing and new markets;

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

 NTIC’s reliance upon and its relationships with its distributors, independent sales representatives

and joint ventures;

 NTIC’s reliance upon suppliers;

 The costs and effects of complying with laws and regulations and changes in tax, fiscal,

government and other regulatory policies, including rules relating to environmental, health and
safety matters;

 Unforeseen product quality or other problems in the development, production and usage of new

and existing products;

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

 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 accelerated filer status and its joint venture arrangements;

 changes in applicable laws or regulations and NTIC’s failure to comply with applicable laws,

rules and regulations;

 changes in generally accepted accounting principles and the effect of new accounting

pronouncements;

 Fluctuations in NTIC’s effective tax rate; 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 “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, as well as 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 NTIC
files with or furnishes to the Securities and Exchange Commission.

Item 1A. RISK FACTORS

The following are the most significant factors known to NTIC that could materially adversely affect its
business, operating results or financial condition.

The termination of NTIC’s joint venture agreements with and the anticipated liquidation of Tianjin Zerust
and the formation and establishment of NTIC China have had and could continue to have a material
adverse effect on NTIC’s operating results.

Effective as of December 31, 2014, NTIC terminated its joint venture agreements with Tianjin Zerust,
initiated the process to liquidate the joint venture entity and established a wholly-owned subsidiary to
conduct business in China. Commencing during the second quarter of fiscal 2015, NTIC’s consolidated
financial statements include the financial results of NTIC China. Tianjin Zerust was individually significant
to NTIC’s consolidated assets and income. Accordingly, the termination of NTIC’s joint venture agreements
with and the anticipated liquidation of Tianjin Zerust adversely affected NTIC’s operating results, including
in particular, its equity in income, fee income for services provided to joint ventures and operating expenses,
during fiscal 2015 since NTIC accounted for its investment in Tianjin Zerust in NTIC’s consolidated
financial statements utilizing the equity method of accounting. Of the total equity in income from joint
ventures of $5,936,565 during fiscal 2015 and $5,920,603 during fiscal 2014, NTIC had equity in income
from joint ventures of $132,824 and $626,763 attributable to Tianjin Zerust, respectively. Of the total fee
income for services provided to joint ventures of $5,715,491 during fiscal 2015 and $8,142,863 during fiscal
2014, $494,080 and $2,118,018 were attributable to Tianjin Zerust.

NTIC anticipates that it may take some time to transition the previous customers of Tianjin Zerust to NTIC
China and no assurance can be provided that NTIC China will be able to achieve the net sales and income
levels previously achieved by Tianjin Zerust. NTIC has incurred, and expects to continue to incur,
significant operating expenses associated with NTIC China and the anticipated liquidation of Tianjin Zerust
and expects that NTIC’s operating results may be volatile over the next several quarters. This is true
especially since NTIC has commenced litigation against Mr. Tao Meng, Tianjin Zerust’s other shareholder,
and his spouse in order to force the liquidation of Tianjin Zerust and has commenced litigation against Cortec
Corporation alleging, among other things, that Cortec Corporation aided and abetted breaches of duties and
contractual commitments owed to NTIC and NTI Asean related to Tianjin Zerust. During fiscal 2015, NTIC
incurred approximately $1,642,258 in start-up expenses related either directly or indirectly to the
establishment of NTIC China, the termination of the joint venture agreements with Tianjin Zerust, the
pending litigation against Mr. Tao Meng and his spouse and Cortec Corporation, and the anticipated
liquidation of Tianjin Zerust. The start-up expenses are inclusive of the losses incurred by the subsidiary of
$1,042,258 during the same period.

NTIC’s pending litigation is expensive and may have an adverse effect on NTIC’s business and operating
results.

During fiscal 2015, NTIC commenced litigation against Mr. Tao Meng, Tianjin Zerust’s other shareholder,
and his spouse in order to force the liquidation of Tianjin Zerust and against Cortec Corporation alleging,
among other things, that Cortec Corporation aided and abetted breaches of duties and contractual
commitments owed to NTIC and NTI Asean related to Tianjin Zerust. Litigation is expensive and often
uncertain. There is no assurance that NTIC will be successful in this litigation. In the meantime, it is likely
that NTIC will incur significant expenses in pursuing the litigation. In addition, the pending litigation may
have an adverse effect on NTIC’s business and operating results.

Any weakness in the global economy, and in particular in the United States, Europe and China, may
negatively impact NTIC’s business, operating results and financial condition.

NTIC’s operating results are dependent upon the economic health of the global economy, including in
particular the United States, Europe and China. Of NTIC’s net sales in fiscal 2015, approximately $19.3
million were to customers in the United States and $1.1 million were to customers in China. In addition,
approximately 63.5% of the $99 million in net sales of NTIC’s joint ventures during fiscal 2015 were to
customers based in Europe. Accordingly, any weakness in the global economy, and in particular in the
United States, Europe and China, may negatively impact NTIC’s business, operating results and financial
condition.

The possibility that Greece and other EU member states may default on their debt obligations, the uncertainty
regarding international and the European Union’s financial support programs, the possibility that EU
member states may experience similar financial troubles and the austerity measures that have been
implemented by Greece and certain other EU member states could negatively impact NTIC’s business,
operating results and financial condition. During fiscal 2014, total net sales of NTIC’s joint ventures were
adversely affected in part by the European economic slowdown, which NTIC believes adversely affected the
net sales of NTIC’s European joint ventures, as well as certain of NTIC’s other non-European joint ventures.
Although NTIC believes its fiscal 2015 financial results were not similarly affected, there is no assurance
that its fiscal 2016 or future financial results will not be adversely affected. In addition, if the European
sovereign debt crisis worsens, the value of the Euro and other European currencies could deteriorate, which
could negatively impact the business, operating results and financial condition of NTIC and its joint ventures
in light of the substantial operations of its joint ventures and the revenues its joint ventures derive from
customers in the European Union. Apart from the European sovereign debt crisis, other global economies
have experienced adverse economic conditions either as a result of the European sovereign debt crisis or
otherwise that have affected all sectors of the economy.

During fiscal 2009, NTIC’s operating results were significantly adversely affected by worldwide economic
conditions, particularly adverse conditions affecting the worldwide automobile industry at that time. Since a
significant portion of NTIC’s ZERUST® rust and corrosion inhibiting products and services are sold to

customers in the automotive industry, adverse economic conditions affecting the automotive industry again
in particular may result in another adverse effect on NTIC’s net sales and its other operating results.

Global credit and financial markets in the past have experienced disruptions, including diminished
liquidity and credit availability and rapid fluctuations in market valuations, which if they happen again,
could negatively impact NTIC’s business, operating results and financial condition.

Any tightening of the credit and financial markets as a result of the European sovereign debt crisis or
otherwise could negatively impact the ability of companies to borrow money from their existing lenders,
obtain credit from other sources or raise financing to fund their operations. This could negatively impact the
ability of NTIC’s customers and the customers of NTIC’s joint ventures to purchase NTIC’s products,
suppliers’ ability to provide NTIC and its joint ventures with materials and components and the ability of
NTIC and its joint ventures, distributors and sales representatives to finance operations, if needed, on
commercially reasonable terms, or at all. Any or all of these events could negatively impact NTIC’s
business, operating results and financial condition. Although NTIC maintains allowances for doubtful
accounts for estimated losses resulting from the inability of its customers, distributors and joint ventures to
make required payments and such losses historically have been within NTIC’s expectations and the
provisions established, NTIC cannot guarantee that it will continue to experience the same loss rates that it
has in the past, especially if there are weaknesses in the worldwide economy. A significant change in the
liquidity or financial condition of NTIC’s customers, distributors or joint ventures could cause unfavorable
trends in NTIC’s receivable collections and additional allowances may be required, which could adversely
affect NTIC’s operating results. In addition, weaknesses in the worldwide economy may adversely impact
the ability of suppliers to provide NTIC with materials and components, which could adversely affect
NTIC’s business and operating results. NTIC is unable to predict the prospects for a global economic
recovery, but the longer the duration of such adverse and uncertain economic conditions, the greater the risks
NTIC faces in operating its business.

NTIC’s liquidity and financial position rely on the receipt of fees for services provided to its joint ventures
and dividend distributions from its joint ventures. No assurance can be provided that NTIC will continue
to receive such fees and dividend distributions in amounts NTIC historically has received or anticipates to
receive.

NTIC conducts business, either directly or indirectly through several joint venture arrangements that operate
in North America, Europe and Asia. Each of these joint ventures manufactures, markets and sells finished
products in the geographic territory that it is assigned. NTIC’s receipt of funds as a result of sales by its joint
ventures is dependent upon NTIC’s receipt of fees for services that NTIC provides to its joint ventures based
primarily on the net sales of the individual joint ventures and NTIC’s receipt of dividend distributions from
its joint ventures based on the profitability of its joint ventures. NTIC’s liquidity and financial position rely
on NTIC’s receipt of fees for services that NTIC provides to its joint ventures and dividend distributions
from its joint ventures. During fiscal 2015, NTIC recognized $5,715,491 in fees and $2,983,338 in dividend
distributions from its joint ventures. Because NTIC owns 50% or less of each of its joint venture entities,
NTIC does not control the decisions of these entities regarding whether to pay dividends and, if paid, how
much they should be in any given year. Thus, NTIC cannot guarantee that any of its joint ventures will pay
dividends in any given year. The failure of NTIC’s joint ventures to declare dividends or the failure of NTIC
to receive fees for services provided to joint ventures in amounts typically expected by NTIC could adversely
affect NTIC’s liquidity and financial position.

Since a significant portion of NTIC’s earnings results from NTIC’s equity income from joint ventures and
since NTIC’s equity income from joint ventures varies from quarter to quarter, NTIC’s earnings are
subject to quarterly fluctuations.

A significant portion of NTIC’s earnings results from NTIC’s equity income from its joint ventures. NTIC’s
equity in income from joint ventures consists of NTIC’s share of equity in income from its joint ventures
based on the overall profitability of the joint ventures. Such profitability varies from quarter to quarter. Since
NTIC’s management typically receives quarterly joint venture financial information after the completion of
each fiscal quarter, it is impossible for NTIC’s management to cut costs and expenses to make up for any
unanticipated shortfall in NTIC’s equity income from joint ventures. Accordingly, the variability in NTIC’s
equity income from joint ventures, in turn, subjects NTIC’s earnings to quarterly fluctuations.

Out of NTIC’s joint ventures, NTIC’s joint venture in Germany is the most significant in terms of assets
and income to NTIC. If sales of NTIC’s products and services by this joint venture were to decline
significantly or if NTIC’s relationships with this joint venture were to deteriorate significantly, NTIC’s
operating results likely would be adversely affected.

NTIC considers its joint venture in Germany, EXCOR, to be individually significant to NTIC’s consolidated
assets and income; and therefore, provides certain additional information regarding this joint venture entity in
the notes to NTIC’s consolidated financial statements and in certain sections of this report. Of the total
equity in income from joint ventures of $5,936,565 during fiscal 2015, NTIC had equity in income from joint
ventures of $4,091,608 attributable to EXCOR. Of the total fee income for services provided to joint
ventures of $5,715,491 during fiscal 2015, fees of $873,400 were attributable to EXCOR. Accordingly, if
sales of NTIC’s products and services by this joint venture were to decline significantly or if NTIC’s
relationships with this joint venture or joint venture partner were to deteriorate significantly such that the
joint venture is terminated or not motivated to sell NTIC’s products and services, NTIC’s operating results
likely would be adversely affected.

In addition, pursuant to Rule 3-09 of Regulation S-X, NTIC intends to file an amendment to this report to
include the audited financial statements and related notes of EXCOR.

NTIC’s international business, which is conducted primarily through its subsidiaries and joint ventures,
requires management attention and financial resources and exposes NTIC to difficulties and risks
presented by international economic, political, legal, accounting and business factors.

NTIC sells products and services directly, through its wholly-owned subsidiary, NTIC China, its majority-
owned subsidiaries, Zerust Brazil and Natur-Tec India, and its majority-owned holding company subsidiary,
NTI Asean, and indirectly via a network of joint ventures, independent distributors, manufacturer’s sales
representatives and agents in over 60 countries, including countries in North America, South America,
Europe, Asia and the Middle East. One of NTIC’s strategic objectives is the continued expansion of its
international operations. The expansion of NTIC’s existing international operations and entry into additional
international markets require management attention and financial resources.

The sale and shipping of products and services across international borders subject NTIC to extensive U.S.
and foreign governmental trade regulations. Compliance with such regulations is costly and exposes NTIC
to penalties for non-compliance. Other laws and regulations that can significantly impact NTIC include
various anti-bribery laws, including the U.S. Foreign Corrupt Practices Act, laws restricting business with
suspected terrorists and anti-boycott laws. Any failure to comply with applicable legal and regulatory
obligations could impact NTIC in a variety of ways that include, but are not limited to, significant criminal,
civil and administrative penalties, including imprisonment of individuals, fines and penalties, denial of
export privileges, seizure of shipments and restrictions on certain business activities. Also, the failure to

comply with applicable legal and regulatory obligations could result in the disruption of NTIC’s shipping and
sales activities.

Many of the countries in which NTIC sells its products directly or indirectly through NTIC China, Zerust
Brazil, Natur-Tec India, NTI Asean, its joint ventures, distributors, representatives and agents are, to some
degree, subject to political, economic and/or social instability. NTIC’s international operations expose NTIC
and its joint venture partners, distributors, representatives and agents to risks inherent in operating in foreign
jurisdictions. These risks include:

 difficulties in managing and staffing international operations and the required infrastructure costs



including legal, tax, accounting and information technology;
the imposition of additional U.S. and foreign governmental controls or regulations, new trade
restrictions and restrictions on the activities of foreign agents, representatives and distributors, the
imposition of costly and lengthy export licensing requirements and changes in duties and tariffs,
license obligations and other non-tariff barriers to trade;
the imposition of U.S. and/or international sanctions against a country, company, person or entity
with whom NTIC does business that would restrict or prohibit continued business with the
sanctioned country, company, person or entity;

 pricing pressure that NTIC or its joint ventures, distributors, representatives and agents may


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experience internationally;
laws and business practices favoring local companies;
currency exchange rate fluctuations;
longer payment cycles and difficulties in enforcing agreements and collecting receivables through
certain foreign legal systems;

 difficulties in enforcing or defending intellectual property rights;
 multiple, changing and often inconsistent enforcement of laws and regulations; and


the potential payment of U.S. income taxes on certain earnings of joint ventures upon repatriation.

Failure to comply with the U.S. Foreign Corrupt Practices Act could subject NTIC to, among other things,
penalties and legal expenses that could harm its reputation and have a material adverse effect on its
business, financial condition and results of operations.

NTIC is subject to the U.S. Foreign Corrupt Practices Act, or the FCPA, which generally prohibits covered
entities and their intermediaries from engaging in bribery or making other prohibited payments to foreign
officials for the purpose of obtaining or retaining business or other benefits. In addition, the FCPA imposes
accounting standards and requirements on U.S. publicly traded corporations and their foreign affiliates,
which are intended to prevent the diversion of corporate funds to the payment of bribes and other improper
payments, and to prevent the establishment of “off books” slush funds from which such improper payments
can be made. NTIC also is subject to similar anticorruption legislation implemented in Europe under the
Organization for Economic Co-operation and Development’s Convention on Combating Bribery of Foreign
Public Officials in International Business Transactions. NTIC and its joint ventures, distributors,
independent representatives and agents operate in a number of jurisdictions that pose a high risk of potential
violations of the FCPA and other anticorruption laws, based on measurements such as Transparency
International’s Corruption Perception Index, and NTIC utilizes a number of joint ventures, distributors,
independent representatives and agents for whose actions NTIC could be held liable under the FCPA. NTIC
informs its personnel, joint ventures, distributors, independent representatives and agents of the requirements
of the FCPA and other anticorruption laws, including, but not limited to their reporting requirements. NTIC
also has developed and will continue to develop and implement systems for formalizing contracting
processes, performing due diligence on agents and improving its recordkeeping and auditing practices
regarding these regulations. However, there is no guarantee that NTIC’s employees, joint ventures,
distributors, independent representatives or other agents have not or will not engage in conduct undetected by

NTIC’s processes and for which NTIC might be held responsible under the FCPA or other anticorruption
laws.

If NTIC’s employees, joint ventures, distributors, third-party sales representatives or other agents are found
to have engaged in such practices, NTIC could suffer severe penalties, including criminal and civil penalties,
disgorgement and other remedial measures, including further changes or enhancements to its procedures,
policies and controls, as well as potential personnel changes and disciplinary actions. The Securities and
Exchange Commission has increased its enforcement of the FCPA during the past several years. Although
NTIC does not believe it is currently a target in any such enforcement action, any investigation of any
potential violations of the FCPA or other anticorruption laws by U.S. or foreign authorities also could have
an adverse impact on NTIC’s business, financial condition and results of operations.

Certain private and foreign companies, including some of NTIC’s competitors, are not subject to prohibitions
as strict as those under the FCPA or, even if subjected to strict prohibitions, such prohibitions may be laxly
enforced in practice. If NTIC’s competitors engage in corruption, extortion, bribery, pay-offs, theft or other
fraudulent practices, they may receive preferential treatment from personnel of some companies or from
government officials, giving NTIC’s competitors an advantage in securing business and which would put
NTIC at a disadvantage.

Fluctuations in foreign currency exchange rates could result in declines in NTIC’s earnings and changes
in NTIC’s foreign currency translation adjustments.

Because the functional currency of NTIC’s foreign operations 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, Indian Rupee, Chinese
Renminbi, Korean won and the English pound against the U.S. dollar. NTIC’s fees for services provided to
its 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 earnings. 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.

Economic uncertainty in developing markets could adversely affect our revenue and earnings.

NTIC conducts business, or is contemplating expansion, in developing markets with economies that tend to
be more volatile than those in the United States and Western Europe. The risk of doing business in
developing markets such as China, Brazil, India, Russia, the United Arab Emirates and other economically
volatile areas could adversely affect NTIC’s operations and earnings. Such risks include the financial
instability among customers in these regions, political instability, fraud or corruption and other non-
economic factors such as irregular trade flows that need to be managed successfully with the help of the local
governments. In addition, commercial laws in some developing countries can be vague, inconsistently
administered and retroactively applied. If NTIC is deemed not to be in compliance with applicable laws in
developing countries where NTIC conducts business, its prospects and business in those countries could be
harmed, which could then have a material adverse impact on NTIC’s operating results and financial position.
NTIC’s failure to successfully manage economic, political and other risks relating to doing business in
developing countries and economically and politically volatile areas could adversely affect its business.

NTIC faces intense competition in almost all of its product lines, including from competitors that have
substantially greater resources than NTIC does. No assurance can be provided that NTIC will be able to
compete effectively, which would harm its business and operating results.

NTIC’s products are sold in intense competitive markets throughout the world. This intense competition
could result in pricing pressures, lower sales, reduced margins and lower market share. The principal
competitive factors in NTIC’s corrosion prevention solutions markets are pricing, product innovation, quality
and reliability, product support, customer service and reputation. Additional competitive factors present in
NTIC’s bioplastics business are brand awareness, distribution network, product availability, product offering,
shelf life and place of manufacture. NTIC often competes with numerous manufacturers, many of which
have substantially greater financial, marketing, and other resources than NTIC. As a result, they may be able
to adapt more quickly than NTIC to new or emerging technologies, industry trends, and changes in customer
requirements, or to devote greater resources to the promotion and sale of their products than NTIC. In
addition, competition could increase if new companies enter the markets in which NTIC competes, especially
when the barriers to entry are low, which may be true with respect to NTIC’s rust and corrosion prevention
business, or if existing competitors expand their product lines or intensify efforts within existing product
lines. NTIC’s current products, products under development and its ability to develop new and improved
products may be insufficient to enable NTIC to compete effectively with its competitors. No assurance can
be provided that NTIC will be able to compete effectively, which would harm its business and operating
results. In particular, NTIC has experienced more intense competition with respect to many of its traditional
ZERUST® rust and corrosion inhibiting products and services, which have led to decreased pricing and
smaller margins for NTIC. NTIC anticipates that such intense competition likely will continue and that new
competitors may emerge, including plastic extrusion companies, which would continue to adversely affect
NTIC’s operating results.

NTIC’s ZERUST® rust and corrosion inhibiting products and services generate a significant portion of
NTIC’s net sales and the net sales of NTIC’s joint ventures. Accordingly, if sales of these products and
services were to decline, NTIC’s operating results would be adversely affected.

NTIC’s ZERUST® rust and corrosion inhibiting products and services generate a significant portion of
NTIC’s net sales and the net sales of NTIC’s joint ventures. During fiscal 2015, 85.9% of NTIC’s
consolidated net sales were derived from sales of ZERUST® rust and corrosion inhibiting products and
services. While the net sales of NTIC’s joint ventures are not included in NTIC’s net sales on NTIC’s
consolidated financial statements, NTIC’s receipt of fees for services that NTIC provides to its joint ventures
and NTIC’s receipt of dividend distributions from its joint ventures is based primarily on the revenues and
profitability of the joint ventures. Accordingly, if sales of these products and services were to decline due to
increased competition, the introduction of a new disruptive technology or otherwise, NTIC’s operating
results would be adversely affected.

If NTIC is unable to continue to enhance its existing products and develop and market new products that
respond to customer needs and achieve market acceptance, NTIC may experience a decrease in demand
for its products, and its business could suffer.

One of NTIC’s strategies is to enhance its existing products and develop and market new products that
respond to customer needs. NTIC may not be able to compete effectively with its competitors unless NTIC
can keep up with existing or new products or alternative technologies in the markets in which it competes.
Product development requires significant research and development, financial and other resources. Although
in the past NTIC has implemented lean manufacturing and other productivity improvement initiatives to
provide investment funding for new products, no assurance can be provided that NTIC will be able to
continue to do so in the future. Product improvements and new product introductions also require significant
planning, design, development and testing at the technological, product, and manufacturing process levels
and NTIC may not be able to timely develop product improvements or new products. NTIC’s competitors’
new products may beat NTIC’s products to market, may be more effective or less expensive than NTIC’s
products or render NTIC’s products obsolete. Any new products that NTIC may develop may not receive
market acceptance or otherwise generate any meaningful net sales or profits for NTIC relative to its

expectations, based on, among other things, existing and anticipated investments in manufacturing capacity
and commitments to fund advertising, marketing, promotional programs, and research and development.

NTIC has invested and intends to continue to invest additional research and development and marketing
efforts and resources into the application of its corrosion prevention solutions into the oil and gas industry
and the continued launch of its Natur-Tec® resin compounds and finished products. No assurance can be
provided, however, that NTIC’s investments in these new markets and products will be successful and
result in additional revenue to NTIC.

In an effort to increase net sales, NTIC has expanded the marketing of its corrosion prevention solutions into
the oil and gas industry and its Natur-Tec® resin compounds and finished products. The majority of NTIC’s
research and development expense in fiscal 2015 was spent in connection with research and development
activities related to these two strategic initiatives. NTIC expects to continue to invest additional research and
development and marketing efforts and resources into these strategic initiatives. No assurance can be
provided, however, that such strategic initiatives will be successful or that NTIC will be successful in
obtaining additional revenue as a result of them. The introduction of new products into new markets takes
significant resources and there can be no assurance that NTIC is dedicating a sufficient amount of resources
to ensure the success of these strategic initiatives. The sale of NTIC’s ZERUST® rust and corrosion
inhibiting products and services into the oil and gas industry, in particular, typically involves a long sales
cycle, often including a one- to multi-year trial period with each customer and a slow integration process
thereafter. This long sales cycle may cause NTIC’s management, stockholders and investors to lose faith in
the business opportunities for NTIC’s ZERUST® rust and corrosion inhibiting products and services in the
oil and gas industry.

The expansion of NTIC’s corrosion prevention solutions into the oil and gas industry and the continued
launch of NTIC’s Natur-Tec® resin compounds and finished products may require additional capital in
the future, which may not be available or may be available only on unfavorable terms. In addition, any
equity financings may be dilutive to NTIC’s stockholders.

The expansion of NTIC’s corrosion prevention solutions into the oil and gas industry and the continued
launch of NTIC’s Natur-Tec® resin compounds and finished products will continue to require significant
resources during fiscal 2016 and beyond. To the extent that NTIC’s existing capital, including amounts
available under its revolving line of credit, is insufficient to meet these requirements, NTIC may raise
additional capital through financings or additional borrowings. Any equity or debt financing, if available at
all, may be on terms that are not favorable to NTIC and any equity financings could result in dilution to
NTIC’s stockholders.

NTIC’s strategy of expanding its corrosion prevention solutions into the oil and gas industry and
continuing its launch of its Natur-Tec® bioplastics resin compounds and finished products is risky and
may not prove to be successful, which could harm NTIC’s operating results and financial condition.

NTIC’s strategy of expanding its corrosion prevention solutions into the oil and gas industry and continuing
its launch of its Natur-Tec® bioplastics resin compounds and finished products, either directly or indirectly
through joint ventures and independent distributors and agents, is risky and subject to all of the risks inherent
in the establishment of a new business enterprise, including:


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

the absence of a significant operating history;
the lack of commercialized products;
the lack of market acceptance of new products;
expected substantial and continual losses for such businesses for the foreseeable future;
the lack of manufacturing experience and limited marketing experience;






an expected reliance on third parties for the manufacture and commercialization of some of the
products;
a competitive environment characterized by numerous, well-established and well-capitalized
competitors;
insufficient capital and other resources; and
reliance on key personnel.

NTIC relies on others for its production and any interruptions of these arrangements could disrupt
NTIC’s ability to fill its customers’ orders.

NTIC utilizes contract manufacturers for a significant portion of its production requirements. The majority
of NTIC’s manufacturing is conducted in the United States by contract manufacturers that also perform
services for numerous other companies. NTIC does not have a guaranteed level of production capacity with
any of its contract manufacturers. Qualifying new contract manufacturers is time consuming and might
result in unforeseen manufacturing and operations problems. The loss of NTIC’s relationships with its
contract manufacturers or their inability to conduct their manufacturing and assembly services for NTIC as
anticipated in terms of capacity, cost, quality and timeliness could adversely affect NTIC’s ability to fill
customer orders in accordance with required delivery, quality, and performance requirements, and thus
adversely affect NTIC’s net sales and other operating results.

NTIC’s dependence on key suppliers puts NTIC at risk of interruptions in the availability of its products,
which could reduce its net sales and adversely affect its operating results and harm its reputation.

NTIC relies on suppliers for certain raw materials and components used in its products. For reasons of
quality assurance, cost effectiveness or availability, NTIC procures certain raw materials and components
from sole or limited source suppliers. NTIC generally acquires such raw materials and components through
purchase orders placed in the ordinary course of business, and as a result, NTIC does not have a significant
inventory of these materials and components and does not have any guaranteed or contractual supply
arrangements with many of these suppliers for these materials and components. NTIC’s dependence on
third-party suppliers involves several risks, including limited control over pricing, availability, quality and
delivery schedules, as well as manufacturing yields and costs. Suppliers of such raw materials and
components may decide, or be required, for reasons beyond NTIC’s control to cease supplying such raw
materials and components to NTIC or to raise their prices. Shortages of raw materials, quality control
problems, production capacity constraints or delays by suppliers could negatively affect NTIC’s ability to
meet its production obligations and result in increased prices for affected parts. Any such shortage,
constraint or delay may result in delays in shipments of products or components, which could adversely
affect NTIC’s net sales and other operating results, and its reputation. From time to time, materials and
components used in NTIC’s products are subject to allocation because of shortages of these materials and
components. With respect to NTIC’s Natur-Tec® resin compounds and finished products, there are a limited
number of suppliers of the base resins used to manufacture NTIC’s Natur-Tec® resin compounds and
finished products, and in the past, NTIC has experienced some delay in obtaining such base resins. In
addition, a number of raw materials and purchased parts used in NTIC’s rust and corrosion inhibiting
products and Natur-Tec® finished products are sourced from suppliers who currently serve as NTIC’s sole
source of supply for these components. Future shortages of materials and components could cause delayed
shipments and customer dissatisfaction and adversely affect net sales.

Increases in prices for raw materials and components used in NTIC’s products could adversely affect
NTIC’s operating results.

NTIC uses certain raw materials and components in its products, including in particular plastic resins, which
are subject to price increases. Increases in prices for raw materials and components used in NTIC’s products
could adversely affect NTIC’s gross margins and other operating results.

The commercial success of NTIC’s Natur-Tec® resin compounds and finished products depends on the
widespread market acceptance of products manufactured with biobased and biodegradable resins.

Although there is a developed market for petroleum-based plastics, the market for “bio-plastics” which are
plastics produced with biobased resins, which are derived from renewable resources such as corn or
cellulosic/plant material or blends thereof, or plastics that are engineered to be fully biodegradable or both, is
still developing. The commercial success of NTIC’s Natur-Tec® resin compounds and finished products
depends on the widespread market acceptance of products manufactured with biobased and biodegradable
resins. It is currently difficult to assess or predict with any assurance the potential size, timing and viability
of market opportunities for NTIC’s Natur-Tec® resin compounds and finished products. The traditional
plastics market sector is well-established with entrenched competitors with whom NTIC competes. Pricing
for traditional plastics has been highly volatile in recent years, which drive, to some extent, the commercial
and other support for bioplastics. While NTIC expects to be able to command a premium price for its Natur-
Tec® resin compounds and finished products, a widening gap in the pricing for bioplastics versus petroleum-
based plastics may reduce the size of the addressable market for NTIC’s Natur-Tec® resin compounds and
finished products. In addition, the growth of the market will create some pressure on price for applications
today considered commodities, including in particular NTIC’s current Natur-Tec® finished products.

NTIC’s business, properties and products are subject to governmental regulation and taxes, compliance
with which may require NTIC to incur expenses or modify its products or operations, and which may
expose NTIC to penalties for non-compliance. Governmental regulation also may adversely affect the
demand for some of NTIC’s products and its operating results.

NTIC’s business, properties and products are subject to a wide variety of international, federal, state and
local laws, rules, taxes and regulations relating to the protection of the environment, natural resources, and
worker health and safety and the use, management, storage, and disposal of hazardous substances, wastes and
other regulated materials. These laws, rules and regulations may affect the way NTIC conducts its
operations, and the failure to comply with these regulations could lead to fines and other penalties. Because
NTIC owns and operates real property, various environmental laws also may impose liability on NTIC for
the costs of cleaning up and responding to hazardous substances that may have been released on NTIC’s
property, including releases unknown to NTIC. These environmental laws and regulations also could require
NTIC to pay for environmental remediation and response costs at third-party locations where NTIC disposed
of or recycled hazardous substances. NTIC’s future costs of complying with the various environmental
requirements, as they now exist or may be altered in the future, could adversely affect NTIC’s financial
condition and operating results. NTIC is also subject to other international, federal and state laws, rules and
regulations, the future non-compliance with which may harm NTIC’s business or may adversely affect the
demand for some of its products. Changes in laws and regulations, including changes in accounting
standards and taxation changes, including tax rate changes, new tax laws, revised tax law interpretations, also
may adversely affect NTIC’s operating results.

Fluctuations in NTIC’s effective tax rate could have a significant impact on NTIC’s financial position,
results of operations or cash flows.

The mix of pre-tax income or loss among the tax jurisdictions in which NTIC operates that have varying tax
rates could impact NTIC’s effective tax rate. NTIC is subject to income taxes as well as non-income based
taxes, in both the United States and various foreign jurisdictions. Judgment is required in determining the
worldwide provision for income taxes, other tax liabilities, interest and penalties. Future events could
change management’s assessment. NTIC operates within multiple taxing jurisdictions and is subject to tax
audits in these jurisdictions. These audits can involve complex issues, which may require an extended period
of time to resolve. NTIC also has made assumptions about the realization of deferred tax assets. Changes in
these assumptions could result in a valuation allowance for these assets. Final determination of tax audits or
tax disputes may be different from what is currently reflected by NTIC’s income tax provisions and accruals.

NTIC may grow its business through additional joint ventures, alliances and acquisitions, which could be
risky and harm its business.

One of NTIC’s growth strategies may be to expand its business by entering into additional joint ventures and
alliances and acquiring businesses, technologies and products that complement or augment NTIC’s existing
products. The benefits of a joint venture, alliance or acquisition may take more time than expected to
develop, and NTIC cannot guarantee that any future joint ventures, alliances or acquisitions will in fact
produce the intended benefits. In addition, joint ventures, alliances and acquisitions involve a number of
risks, including:

 diversion of management’s attention;
 difficulties in assimilating the operations and products of a new joint venture or acquired business or

in realizing projected efficiencies, cost savings and revenue synergies;

 potential loss of key employees or customers of the new joint venture or acquired business or



adverse effects on existing business relationships with suppliers and customers;
adverse impact on overall profitability if the new joint venture or acquired business does not achieve
the financial results projected in NTIC’s valuation models;
reallocation of amounts of capital from other operating initiatives and/or an increase in NTIC’s
leverage and debt service requirements to pay the joint venture capital contribution or the acquisition
purchase price, which could in turn restrict NTIC’s ability to access additional capital when needed
or to pursue other important elements of NTIC’s business strategy;
inaccurate assessment of undisclosed, contingent or other liabilities or problems and unanticipated
costs associated with the new joint venture or acquisition; and
incorrect estimates made in the accounting for acquisitions, occurrence of non-recurring charges and
write-off of significant amounts of goodwill that could adversely affect NTIC’s operating results.

NTIC’s ability to grow through joint ventures, alliances and acquisitions will depend, in part, on the
availability of suitable opportunities at an acceptable cost, NTIC’s ability to compete effectively for these
opportunities and the availability of capital to complete such transactions.

NTIC relies on its joint ventures, distributors, manufacturer’s sales representatives and other agents to
market and sell its products.

In addition to its direct sales force, NTIC relies on its joint ventures, distributors, manufacturer’s sales
representatives and other agents to market and sell its products in the United States and internationally.
NTIC’s joint ventures, distributors, manufacturer’s sales representatives and other agents might terminate
their relationship with NTIC, or devote insufficient sales efforts to NTIC’s products. NTIC does not control
its joint ventures, distributors, manufacturer’s sales representatives and other agents and they may not be
successful in implementing NTIC’s marketing plans. NTIC’s failure to maintain its existing relationships
with these entities, or its failure to recruit and retain additional skilled joint venture partners, distributors,
manufacturer’s sales representatives and other agents could have an adverse effect on NTIC’s operations. It
is anticipated that several of NTIC’s joint venture partners will retire during the next several years which will
require a transition on the part of the joint venture as well as NTIC and could harm NTIC’s relationship with
the joint venture and NTIC’s business.

NTIC may be subject to product liability claims or other claims arising out of the activities of its joint
ventures, which could adversely affect NTIC and its business.

While NTIC is not aware of any specific potential risk beyond its initial investment in and any undistributed
earnings of each of its joint ventures, there can be no assurance that NTIC will not be subject to lawsuits
based on product liability claims or other claims arising out of the activities of its joint ventures. To mitigate
the ramifications of such an occurrence, NTIC maintains liability insurance specifically applicable to its

ownership positions in its joint venture arrangements in excess of any insurance the joint ventures may
maintain. No assurance can be provided, however, that such insurance will be available or adequate in the
event of a claim.

The sale of ZERUST® rust and corrosion inhibiting products into the oil and gas industry is especially
risky in light of the hazards typically associated with such operations and the significant amount of
potential liability involved, which could adversely affect NTIC’s business if ZERUST® rust and corrosion
inhibiting products are involved, even if the cause of such events was not related to NTIC’s products.

Because NTIC sells its ZERUST® rust and corrosion inhibiting products into the oil and gas industry, NTIC
is subject to some of the risks and hazards typically associated with such operations, including hazards such
as fire, explosion, blowouts, cratering, unplanned gas releases and spills, each of which could be claimed to
be attributed to the failure of NTIC’s products to perform as anticipated. If such events occur and NTIC’s
products are involved, NTIC’s business and operating results may suffer even if the cause of such events was
not related to NTIC’s products.

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

During fiscal 2015, NTIC experienced seasonality with respect to the sale of its ZERUST® rust and corrosion
inhibiting products into the oil and gas industry, with sales during parts of the second and third fiscal quarters
being adversely affected by winter in the United States. In addition, although not anticipated, the sale of
NTIC’s ZERUST® rust and corrosion inhibiting products into the oil and gas industry were hampered by low
global crude oil prices, which NTIC believes constrained capital improvement budgets of its existing and
prospective customers.

NTIC has limited staffing and will continue to be dependent upon key employees.

NTIC’s success is dependent upon the efforts of a small management team and group of employees. NTIC’s
future success will depend in large part on its ability to retain its key employees and identify, attract and
retain other highly qualified managerial, technical, research and development, sales and marketing and
customer service personnel when needed. Competition for these individuals may be intense, especially in the
markets in which NTIC operates. NTIC may not succeed in identifying, attracting and retaining these
personnel. NTIC’s current management, other than its President and Chief Executive Officer, does not have
any material stock ownership in NTIC. In addition, none of NTIC’s employees has any contractual
obligation to maintain his or her employment with NTIC. The loss or interruption of services of any of
NTIC’s key personnel, including in particular its technical personnel, the inability to identify, attract or retain
qualified personnel in the future, delays in hiring qualified personnel, or any employee slowdowns, strikes or
similar actions could make it difficult for NTIC to manage its business and meet key objectives, which could
harm NTIC’s business, financial condition and operating results.

Given NTIC’s limited resources, it may not effectively manage its growth.

NTIC’s strategy to grow its business, including in particular its ZERUST® rust and corrosion inhibiting
products for the oil and gas industry and its Natur-Tec® bio-plastic resin compounds and finished products,
requires significant management time and operational and financial resources. There is no assurance that
NTIC has the necessary operational and financial resources to manage its growth. This is especially true as it
expands facilities and manufactures its products on a larger commercial scale. In addition, rapid growth in
NTIC’s headcount and operations may place a significant strain on its management, administrative,
operational and financial infrastructure. Failure to adequately manage its growth could have a material and
adverse effect on NTIC’s business, financial condition and operating results. For example, NTIC’s soil side
bottom solutions for tanks require implementation teams comprised of both internal NTIC personnel and

outside consulting firms. NTIC’s failure to expand these implementation teams to service additional
customers may limit NTIC’s ability to grow this business. In addition, NTIC may not be successful in its
strategy to grow its business.

Certain of NTIC’s operations are subject to regulation by the U.S. Food and Drug Administration.

The manufacture, sale and use of NTIC’s Natur-Tec® bio-plastic resin compounds are subject to regulation
by the U.S. FDA. The FDA’s regulations are concerned with substances used indirectly in food packaging
materials, not with specific finished food packaging products. Thus, food and beverage containers are in
compliance with FDA regulations if the components used in the food and beverage containers: (i) are
approved by the FDA as indirect food additives for their intended uses and comply with the applicable FDA
indirect food additive regulations; or (ii) are generally recognized as safe for their intended uses and are of
suitable purity for those intended uses. NTIC believes that its Natur-Tec® resin compounds are in
compliance with all FDA requirements. However, failure to comply with FDA regulations could subject
NTIC to administrative, civil or criminal penalties.

NTIC relies on its management information systems for inventory management, distribution and other
functions. If these information systems fail to adequately perform these functions or if NTIC experiences
an interruption in their operation, NTIC’s business and operating results could be adversely affected.

The efficient operation of NTIC’s business is dependent on its management information systems. NTIC
relies on its management information systems to effectively manage accounting and financial functions;
manage order entry, order fulfillment and inventory replenishment processes; and to maintain its research
and development data. The failure of management information systems to perform as anticipated could
disrupt NTIC’s business and product development and could result in decreased sales, causing NTIC’s
business and operating results to suffer. In addition, NTIC’s management information systems are
vulnerable to damage or interruption from natural or man-made disasters, terrorist attacks and attacks by
computer viruses or hackers, or power loss or computer systems, Internet, telecommunications or data
network failure. Any such interruption could adversely affect NTIC’s business and operating results.

NTIC’s reliance upon patents, trademark laws, trade secrets and contractual provisions to protect its
proprietary rights may not be sufficient to protect its intellectual property from others who may sell similar
products.

NTIC holds patents relating to various aspects of its products and believes that proprietary technical know-
how is critical to many of its products. Proprietary rights relating to NTIC’s products are protected from
unauthorized use by third parties only to the extent that they are covered by valid and enforceable patents or
are maintained in confidence as trade secrets. NTIC cannot be certain that it will be issued any patents from
any pending or future patent applications owned by or licensed to NTIC or that the claims allowed under any
issued patents will be sufficiently broad to protect its technology. In the absence of patent protection, NTIC
may be vulnerable to competitors who attempt to copy NTIC’s products or gain access to its trade secrets and
know-how. NTIC’s competitors may initiate litigation to challenge the validity of NTIC’s patents, or they
may use their resources to design comparable products that do not infringe NTIC’s patents. NTIC may incur
substantial costs if its competitors initiate litigation to challenge the validity of its patents or if it initiates any
proceedings to protect its proprietary rights and if the outcome of any such litigation is unfavorable to NTIC,
its business and operating results could be materially adversely affected.

In addition, NTIC relies substantially on trade secrets and proprietary know-how that it seeks to protect, in
part, by confidentiality agreements with its employees, and consultants. These agreements may be breached
and NTIC may not have adequate remedies for any such breach. Even if these confidentiality agreements are
not breached, NTIC’s trade secrets may otherwise become known or be independently developed by
competitors.

NTIC may not achieve its annual financial guidance or projected goals and objectives in the time periods
that NTIC anticipates or announces publicly, which could have an adverse effect on NTIC’s business and
could cause its stock price to decline.

On a quarterly basis, NTIC typically provides projected annual financial information, including its
anticipated annual net sales and net earnings. These financial projections are based on management’s then
current expectations and typically do not contain any margin of error or cushion for any specific
uncertainties, or for the uncertainties inherent in all financial forecasting. The failure to achieve such
financial projections could have an adverse effect on NTIC’s business, disappoint investors and analysts and
cause its stock price to decline.

NTIC also sets goals and objectives for, and makes public statements regarding, the timing of certain
accomplishments and milestones regarding its business, such as its progress in selling its ZERUST® rust and
corrosion inhibiting products and services to customers in the oil and gas industry, the progress and timing of
its various field trials with prospective customers in the oil and gas industry, its ability to increase sales of its
Natur-Tec® resin compounds and finished products, and other developments and milestones. The actual
timing of these events can vary dramatically due to a number of factors including without limitation the
timing of the receipt of purchase orders, delays or failures in current field trials, the amount of time, effort
and resources committed to the sales and marketing of NTIC’s products and services by NTIC and its current
and potential future distributors and agents and the uncertainties inherent in introducing new products and
services. As a result, there can be no assurance that NTIC will succeed in achieving its projected goals and
objectives in the time periods that NTIC anticipates or announces publicly. The failure to achieve such
projected goals and objectives in the time periods that NTIC anticipates or announces publicly could have an
adverse effect on NTIC’s business, disappoint investors and analysts and cause its stock price to decline.

NTIC’s quarterly results are typically unpredictable and subject to variation.

NTIC’s quarterly operating results vary from quarter to quarter for a variety of reasons. For example,
NTIC’s quarterly sales to joint ventures can be affected by individual orders to joint ventures. Because of the
typical size of individual orders to joint ventures and overall size of NTIC’s net sales to joint ventures, the
timing of one or more orders can affect materially NTIC’s quarterly sales to joint ventures and the
comparisons to prior year quarters. In addition, because of the typical size of individual orders and overall
size of NTIC’s net sales derived from sales of Natur-Tec® products, the timing of one or more orders can
affect materially NTIC’s quarterly sales of Natur-Tec® products and the comparisons to prior year quarters.
Furthermore, since ZERUST® products for the oil and gas industry typically carry higher margins than other
traditional ZERUST® products, the amount of sales of ZERUST® products for the oil and gas industry
typically affects NTIC’s overall margins. Such variability in operating results makes the prediction of
NTIC’s net sales, earnings and other operating results for each quarter difficult and increases the risk of
unanticipated variations in quarterly operating results. NTIC’s quarterly results have been and in the future
may be below the expectations of public market analysts and investors.

As a result of NTIC’s status as an “accelerated filer” under SEC rules, NTIC is subject to additional SEC
disclosure and other rules and regulations, which will cause NTIC to incur additional costs to comply with
such rules and regulations and the non-compliance of which may have an adverse effect on NTIC’s
operating results.

Beginning in fiscal 2015, NTIC became an “accelerated filer” under SEC rules and, as a result, is subject to
additional SEC disclosure and other rules and regulations, such as additional financial statement
requirements with respect to its joint ventures, the requirement of its independent registered public
accounting firm to attest to NTIC’s management’s report on the effectiveness of NTIC’s internal control over
financial reporting and the requirement of NTIC to comply with certain additional disclosures rules and
regulations, including the requirement to include additional executive compensation disclosures in its proxy
statement in connection with its annual meeting of stockholders. NTIC’s compliance with such additional
rules and regulations may result in additional expense, which may adversely affect its operating results.

NTIC is exposed to risks relating to its evaluation of its internal control over financial reporting as
required by Section 404 of the Sarbanes-Oxley Act.

Changing laws, regulations and standards relating to corporate governance and public disclosure, including
the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Sarbanes-Oxley Act of 2002 and
related and other regulations implemented by the SEC and the NASDAQ Stock Market, are challenging for
small publicly-held companies, including NTIC. NTIC’s efforts to comply with evolving laws, regulations
and standards have resulted in, and are likely to continue to result in, significant general and administrative
expenses and a diversion of management time and attention from revenue-generating activities to compliance
activities. In particular, NTIC’s efforts to comply with Section 404 of the Sarbanes-Oxley Act of 2002 and
the related regulations regarding NTIC’s assessment of its internal control over financial reporting have
required and will continue to require the expenditure of significant financial and managerial resources,
especially in light of NTIC’s new status as an “accelerated filer” under SEC rules. Although NTIC’s
management has concluded that NTIC’s internal control over financial reporting was effective as of August
31, 2015 and NTIC’s independent registered public accounting firm agreed, no assurance can be provided
that NTIC’s management or independent registered public accounting firm will reach a similar conclusion as
of any later date. NTIC’s failure to maintain effective internal control over financial reporting may have an
adverse effect on its stock price.

NTIC’s compliance with accounting principles generally accepted in the United States of America and
any changes in such principles might adversely affect NTIC’s operating results and financial condition.
Any requirement to consolidate NTIC’s joint ventures or subject them to compliance with the internal
control provisions of the Sarbanes-Oxley Act of 2002 could adversely affect NTIC’s operating results and
financial condition.

If there were a change in accounting rules and NTIC were required to fully consolidate its joint ventures or if
NTIC’s joint ventures otherwise would be required to be consolidated with NTIC or be in compliance with
the internal control provisions of the Sarbanes-Oxley Act of 2002, NTIC and the individual joint venture
would incur significant additional costs. In addition, other accounting pronouncements issued in the future
could have a material cost associated with NTIC’s implementation of such new accounting pronouncements.

NTIC’s business is subject to a number of other miscellaneous risks that may adversely affect NTIC’s
operating results, financial condition or business.

NTIC’s business is subject to a number of other miscellaneous risks that may adversely affect NTIC’s
operating results, financial condition or business, such as natural or man-made disasters or global pandemics
that may result in shortages of raw materials, higher commodity costs, an increase in insurance premiums
and other adverse effects on NTIC’s business; the continued threat of terrorist acts and war that may result in

heightened security and higher costs for import and export shipments of components or finished goods; and
the ability of NTIC’s management to adapt to unplanned events.

Risks Related to NTIC’s Common Stock

The trading volume of NTIC’s common stock is typically very low, leaving NTIC’s common stock open to
risk of high volatility.

The number of shares of NTIC’s common stock being traded on a daily basis is often very low and on some
trading days, there is no trading volume at all. During fiscal 2015, the daily trading volume ranged from zero
shares to 80,300 shares. Any NTIC stockholder wishing to sell his, her or its stock may cause a significant
fluctuation in the trading price of NTIC’s common stock. In addition, low trading volume of a stock
increases the possibility that, despite rules against such activity, the price of the stock may be manipulated by
persons acting in their own self-interest. NTIC may not have adequate market makers and market making
activity to prevent manipulation in its common stock.

The price and trading volume of NTIC’s common stock has been, and may continue to be, volatile.

The market price and trading volume of NTIC’s common stock price historically has fluctuated over a wide
range. During fiscal 2015, the sale price of NTIC’s common stock ranged from a low of $14.98 per share to
a high of $24.85 per share, and the daily trading volume ranged from zero shares to 80,300 shares. It is
likely that the price and trading volume of NTIC’s common stock will continue to fluctuate in the future.
The securities of small capitalization companies, including NTIC, from time to time experience significant
price and volume fluctuations, often unrelated to the operating performance of these companies. Securities
class action litigation is sometimes brought against a company following periods of volatility in the market
price of its securities or for other reasons. NTIC may become the target of similar litigation, especially if we
fail to meet our annual projected financial guidance or lower our annual projected financial guidance.
Securities litigation, whether with or without merit, could result in substantial costs and divert management’s
attention and resources, which could harm NTIC’s business, financial condition, and operating results, as
well as the market price of its common stock.

A large percentage of NTIC’s outstanding common stock is held by insiders, and, as a result, the trading
market for NTIC’s common stock is not as liquid as the stock of other public companies.

As of November 10, 2015, NTIC had 4,538,317 shares of common stock outstanding, of which 19.2% of
these outstanding shares were beneficially owned by directors, executive officers, principal stockholders and
their respective affiliates. The stock of companies with a substantial amount of stock held by insiders is
usually not as liquid as the stock of other public companies where insider ownership is not as concentrated.
Thus, the trading market for shares of NTIC’s common stock may not be as liquid as the stock of other
public companies.

If securities or industry analysts do not publish research or reports about NTIC’s business, or if they
adversely change their recommendations regarding NTIC’s common stock, the market price for NTIC’s
common stock and trading volume could decline.

The trading market for NTIC’s common stock has been influenced by research or reports that industry or
securities analysts publish about NTIC or its business. If one or more analysts who cover NTIC downgrade
NTIC’s common stock, the market price for NTIC’s common stock would likely decline. If one or more of
these analysts cease coverage of NTIC or fail to regularly publish reports on NTIC, NTIC could lose
visibility in the financial markets, which, in turn, could cause the market price or trading volume for NTIC’s
common stock to decline.

NTIC does not intend to pay dividends for the foreseeable future.

Although in the past NTIC has paid dividends on its common stock, NTIC has not done so since fiscal 2005.
The payment of any future dividends will be determined by NTIC’s Board of Directors in light of conditions
then existing, including NTIC’s earnings (if any), financial condition, cash requirements, restrictions in
financing agreements, business conditions and other factors. NTIC’s Board of Directors currently does not
anticipate paying a dividend on NTIC’s common stock in the near future, but rather intends to retain all of its
earnings for the foreseeable future to finance the operation and expansion of its business. As a result,
NTIC’s stockholders will only receive a return on their investment in NTIC’s common stock if the market
price of NTIC’s common stock increases.

One of NTIC’s principal stockholders beneficially owns a significant percentage of NTIC’s outstanding
common stock and is affiliated with NTIC’s President and Chief Executive Officer and thus may be able
to influence matters requiring stockholder approval, including the election of directors, and could
discourage or otherwise impede a transaction in which a third party wishes to purchase NTIC’s
outstanding shares at a premium.

As of November 10, 2015, Inter Alia Holding Company, or Inter Alia, beneficially owned approximately
13.3% of NTIC’s outstanding common stock. Inter Alia is an entity partially owned by G. Patrick Lynch,
NTIC’s President and Chief Executive Officer and a director, as well as three other members of the Lynch
family. Mr. Lynch shares voting and dispositive power of shares of NTIC’s common stock held by Inter
Alia with the other owners. As a result of his share ownership through Inter Alia and his position as
President and Chief Executive Officer and a director of NTIC, Mr. Lynch may be able to influence the affairs
and actions of NTIC, including matters requiring stockholder approval, such as the election of directors and
approval of significant corporate transactions. The interests of Mr. Lynch and Inter Alia may differ from the
interests of NTIC’s other stockholders. This concentration of ownership may have the effect of delaying,
preventing or deterring a change in control of NTIC, could deprive NTIC’s stockholders of an opportunity to
receive a premium for their common stock as part of a sale or merger of NTIC and may negatively affect the
market price of NTIC’s common stock. Transactions that could be affected by this concentration of
ownership include proxy contests, tender offers, mergers or other purchases of common stock that could give
stockholders the opportunity to realize a premium over the then-prevailing market price for shares of NTIC’s
common stock.

Future equity issuances by NTIC may have dilutive and other effects on NTIC’s existing stockholders.

As of November 10, 2015, there were 4,538,317 shares of NTIC’s common stock outstanding, and in
addition, security holders held options, which, if vested and exercised, would obligate NTIC to issue up to
295,181 additional shares of common stock. It is expected that such shares, when NTIC issues them upon
exercise, will be available for immediate resale in the public market. The market price of NTIC’s common
stock could fall as a result of sales of these shares of common stock due to the increased number of shares
available for sale in the market. Any issuances by NTIC of equity securities may be at or below the
prevailing market price of NTIC’s common stock and may have a dilutive impact on NTIC’s existing
stockholders. These issuances or other dilutive issuances also would cause NTIC’s net income per share, if
any, to decrease in future periods. As a result, the market price of NTIC’s common stock could decrease.

Item 1B. UNRESOLVED STAFF COMMENTS

None.

Item 2.

PROPERTIES

NTIC’s principal executive offices, production facilities and domestic research and development operations
are located at 4201 Woodland Road, Circle Pines, Minnesota 55014. NTIC owns this real estate and
building, which is no longer subject to any mortgage.

NTIC leased approximately 17,000 square feet of office, manufacturing, laboratory and warehouse space
located in Beachwood, Ohio. NTIC had a number of research and development personnel at this location.
This lease expired on December 31, 2014. At that time, such personnel then moved to a new facility that was
purchased in July 2014. NTIC purchased certain real property and a building in Beachwood, Ohio, for the
purchase price of $1,100,000 in cash. This purchase was completed on August 20, 2014. NTIC owns this
real estate and building, which is not subject to any mortgage.

Additionally, NTIC has contract warehousing agreements in place in California and Indiana to hold and
release stock products to customers.

NTIC’s management considers NTIC’s current properties suitable and adequate for its current and
foreseeable needs.

Item 3. LEGAL PROCEEDINGS

On March 23, 2015, NTIC and NTI Asean LLC, a majority-owned subsidiary of NTIC, filed a lawsuit in
Tianjin No 1 Intermediate People’s Court against two individuals, Meng Tao and Xu Hui, related to breaches
of duties and contractual commitments owed to NTI Asean under certain agreements related to NTIC’s
former joint venture in China, Tianjin Zerust Anti-Corrosion Technologies Ltd. The lawsuit alleges, among
other things, that Mr. Meng Tao and Xu Hui have engaged in self-dealing, usurped business opportunities,
and received economic benefits that were required to go to Tianjin Zerust. At this point it is too early in the
lawsuit to reasonably estimate the amount of any recovery to NTI Asean.

On April 21, 2015, NTIC and NTI Asean initiated a lawsuit in the District Court for the Second Judicial
District, County of Ramsey, State of Minnesota against Cortec Corporation alleging, among other things, that
Cortec Corporation aided and abetted breaches of duties and contractual commitments owed to NTIC and
NTI Asean related to NTIC’s joint venture in China, Tianjin Zerust.

From time to time, NTIC is subject to various other claims and legal actions in the ordinary course of its
business. NTIC is not currently involved in any legal proceeding in which NTIC believes that there is a
reasonable possibility of a material loss.

Item 4. MINE SAFETY DISCLOSURES

Not applicable.

Item 4A. EXECUTIVE OFFICERS OF THE REGISTRANT

The two individuals named below have been designated by NTIC’s Board of Directors as “executive
officers” of NTIC. Their ages and the offices held, as of November 10, 2015, are as follows:

Name

G. Patrick Lynch

Age
48

President and Chief Executive Officer

Position with NTIC

Matthew C. Wolsfeld

Chief Financial Officer and Corporate Secretary

G. Patrick Lynch, an employee of NTIC since 1995, has been President since July 2005 and Chief Executive
Officer since January 2006 and was appointed a director of NTIC in February 2004. From July 2005 to
January 2006, Mr. Lynch served as Chief Operating Officer of NTIC. Mr. Lynch served as President of
North American Operations of NTIC from May 2004 to July 2005. Prior to May 2004, Mr. Lynch held
various positions with NTIC, including Vice President of Strategic Planning, Corporate Secretary and Project
Manager. Mr. Lynch is also an officer and director of Inter Alia Holding Company, a holding company that
is a significant stockholder of NTIC. Prior to joining NTIC, Mr. Lynch held positions in sales management
for Fuji Electric Co., Ltd. in Tokyo, Japan and programming project management for BMW AG in Munich,
Germany. Mr. Lynch received an M.B.A. degree from the University of Michigan Ross School of Business
in Ann Arbor, Michigan.

Matthew C. Wolsfeld, an employee of NTIC since February 2001, has been NTIC’s Chief Financial Officer
since November 2001 and Corporate Secretary since November 2004. Mr. Wolsfeld was Controller of NTIC
from May 2001 through November 2001. Prior to joining NTIC, Mr. Wolsfeld held an auditing position
with PricewaterhouseCoopers LLP in Minneapolis, Minnesota from 1997 to 2001. Mr. Wolsfeld received a
B.A. degree in Accounting from the University of Notre Dame and received his M.B.A. degree at the
University of Minnesota, Carlson School of Business. Mr. Wolsfeld is a Certified Public Accountant.

Other corporate officers of NTIC, their ages and the offices held, as of November 10, 2015, are as follows:

Name

Age

Position with NTIC

Vineet R. Dalal

45 Vice President and Director – Global Market Development –

Natur-Tec®

Gautam Ramdas

42 Vice President and Director – Global Market Development –

Oil & Gas

Vineet R. Dalal, an employee of NTIC since 2004, has served as Vice President and Director – Global
Market Development – Natur-Tec® since November 2005. Prior to joining NTIC, Mr. Dalal was a Principal
in the Worldwide Product Development Practice of PRTM, a management consultancy to technology based
companies (now part of PricewaterhouseCoopers Management Consulting). In this position, Mr. Dalal
consulted to several Fortune 500 companies, in the areas of product strategy, Product Lifecycle Management
(PLM) and technology management. Prior to that, Mr. Dalal held positions in program management and
design engineering at National Semiconductor Corporation in Santa Clara, California. Mr. Dalal received an
M.B.A. degree from the University of Michigan Ross School of Business in Ann Arbor, Michigan. He also
holds an M.S. degree in Electrical and Computer Engineering from Oregon State University, and a B.Eng.
degree in Electronics Engineering from Karnatak University, India.

Gautam Ramdas, an employee of NTIC since 2005, has served as Vice President and Director – Global
Market Development – Oil & Gas since 2005. Prior to joining NTIC, Mr. Ramdas was a Manager in the
Strategic Change group of IBM Business Consulting Services. In this position, Mr. Ramdas led consulting
engagements at several Fortune 500 companies, in the areas of service strategy, global supplier relationship
management and supply chain streamlining. Mr. Ramdas held positions in the E-Commerce and Supply
Chain strategy groups at PricewaterhouseCoopers Management Consulting, again providing consulting
services for Fortune 500 clients. Prior to management consulting, Mr. Ramdas worked as a program
manager and design engineer with Kinhill Engineers in Australia. He has also been involved in the start-up
stage of successful small businesses in the United States and in India. Mr. Ramdas received an M.B.A. from
the University of Michigan Ross School of Business in Ann Arbor, Michigan. He also holds a bachelor’s
degree in Mechanical Engineering from the College of Engineering, Guindy (Chennai), India.

Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER

MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

PART II

Market Information

NTIC’s common stock is listed for trading on the NASDAQ Global Market under the symbol “NTIC.” The
following table sets forth the high and low daily sales prices for NTIC’s common stock, as reported by the
NASDAQ Global Market, for the fiscal quarter indicated:

High

Low

Fiscal 2015

Fourth Quarter ...........................................
Third Quarter ............................................
Second Quarter ..........................................
First Quarter ..............................................

$ 18.48
21.40
24.85
23.89

Fiscal 2014

$ 22.20
22.95
23.83
19.00

$ 14.98
16.45
19.00
17.75

$ 16.30
19.87
17.17
14.55

Dividends

Although NTIC’s Board of Directors has declared cash dividends to NTIC’s stockholders in the past, the
payment of any future dividends 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. The Board of Directors currently does not anticipate
paying a dividend on NTIC’s common stock in the near future, but rather intends to retain all of its earnings
for the foreseeable future to finance the operation and expansion of its business.

Number of Record Holders

As of August 31, 2015, there were 183 record holders of NTIC’s common stock. This does not include
shares held in “street name” or beneficially owned.

Recent Sales of Unregistered Equity Securities

NTIC did not sell any shares of its common stock or any other equity securities of NTIC that were not
registered under the Securities Act of 1933, as amended, during the fourth quarter of fiscal 2015.

Issuer Purchases of Equity Securities

The following table shows NTIC’s fourth quarter of fiscal 2015 stock repurchase activity.

Total Number
of Shares
(or Units)
Purchased
0

Average Price
Paid Per Share
(or Unit)
N/A

Total Number of
Shares (or Units)
Purchased As
Part of Publicly
Announced
Plans or
Programs
0

Maximum
Number of
Shares (or Units)
that May Yet Be
Purchased Under
the Plans or
Programs
(1)

1,587

N/A

$15.34

1,587

(1)

(1)(2)

Period
June 1, 2015 through
June 30, 2015
July 1, 2015 through
July 31, 2015
August 1, 2015 through
August 31, 2015
Total

(1)

On January 15, 2015, NTIC’s Board of Directors authorized the repurchase of up to $3,000,000 in
shares of NTIC common stock through open market purchases or unsolicited or solicited privately
negotiated transactions. This program has no expiration date but may be terminated by NTIC’s
Board of Directors at any time.

(2)

As of August 31, 2015, up to $2,975,654 in shares of NTIC common stock remained available for
repurchase under NTIC’s stock repurchase program.

NTIC Common Stock Comparative Performance Graph

The information contained in this section shall not be deemed to be “soliciting material” or “filed” or
incorporated by reference in future filings with the SEC, or subject to the liabilities of Section 18 of the
Exchange Act, except to the extent that NTIC specifically requests that it be treated as soliciting material or
incorporate it by reference into a document filed under the Securities Act or the Exchange Act.

The following graph and table depict the cumulative total shareholder return (assuming reinvestment of
dividends) on $100 invested in each of NTIC common stock, Russell Microcap Index and Wilshire Microcap
index for the five-year period from August 31, 2010 through August 31, 2015.

Item 6.

SELECTED FINANCIAL DATA

The following tables set forth certain of NTIC’s selected consolidated financial data as of the dates and for
the years indicated. The selected consolidated financial data was derived from NTIC’s consolidated financial
statements. The audited consolidated financial statements as of August 31, 2015 and 2014 and for the fiscal
years ended August 31, 2015, 2014 and 2013 are included elsewhere in this report. The audited consolidated
financial statements as of August 31, 2013, 2012 and 2011 and for the fiscal years ended August 31, 2012
and 2011 are not included in this report. Historical results are not necessarily indicative of the results to be
expected for any future period.

2015

2014

2013

2012

2011

Fiscal Year Ended August 31,

Statements of Operations Data:
Net sales, excluding joint ventures .............................. $ 27,491,392 $ 23,601,514 $ 19,724,205
2,777,659
Net sales, to joint ventures .......................................... 2,831,301
22,501,864
Total net sales ............................................................ 30,322,693
Cost of goods sold ....................................................... 20,555,932
15,473,212
7,028,652
Gross profit ............................................................... 9,766,761
5,237,711
Equity in income from joint ventures .......................... 5,936,565
7,352,980
Fees for services provided to joint ventures ................ 5,715,491
12,590,691
Total joint venture operations ................................. 11,652,056
4,845,676
Selling expenses .......................................................... 5,820,748
4,605,979
General and administrative expenses .......................... 6,531,576
1,387,197
Expenses incurred in support of joint ventures ............ 1,867,570
3,815,515
Research and development expenses ........................... 4,047,279
14,654,367
Total operating expenses ......................................... 18,267,173
4,964,976
Operating income ........................................................ 3,151,644
34,614
34,835
Interest income ............................................................
(52,215)
(20,960)
Interest expense ...........................................................
670,126
Other income ...............................................................
515
5,617,501
Income before income taxes ........................................ 3,166,034
864,000
648,674
4,753,501
Net income .................................................................. 2,517,360
Net income attributable to non-controlling

3,224,594
26,826,108
17,803,153
9,022,955
5,920,603
8,142,863
14,063,466
5,221,738
5,393,531
1,408,014
4,368,752
16,392,035
6,694,386
11,617
(47,322)
4,393
6,663,074
1,124,662
5,538,412

Income tax expense (benefit) ..................................

interests ...................................................................

1,386,607
Net income attributable to NTIC ................................. $ 1,789,571 $ 4,106,372 $ 3,366,894
Net income attributable to NTIC per common

1,432,040

727,789

$ 20,227,719
2,553,934
22,781,653
14,528,785
8,252,868
5,519,795
4,622,912
10,142,707
4,585,901
4,309,410
1,054,914
3,875,581
13,825,806
4,569,769
54,652
(29,388)
21,613
4,616,646
1,041,000
3,575,646

$ 16,594,004
2,932,523
19,526,527
12,768,640
6,757,887
5,536,243
6,129,979
11,666,222
4,090,704
4,343,283
1,000,576
4,364,109
13,798,672
4,625,437
108,692
(59,541)
27,300
4,701,888
706,000
3,995,888

127,450
$ 3,448,196

95,768
$ 3,900,120

Basic ....................................................................... $
Diluted .................................................................... $
Weighted-average common shares assumed

outstanding:

0.40 $
0.38 $

0.92 $
0.90 $

0.76
0.75

$
$

0.79
0.78

$
$

0.90
0.89

4,454,836
4,579,498

4,421,636
4,475,895

Basic ....................................................................... 4,521,788
Diluted .................................................................... 4,649,060
Balance Sheet Data:
Cash and cash equivalents ........................................... $ 2,623,981 $ 2,477,017 $ 4,314,258
Available for sale securities ........................................ 2,027,441
—
16,932,505
Total current assets ...................................................... 19,275,612
49,053,949
Total assets .................................................................. 51,565,648
3,662,053
Total current liabilities ................................................ 3,671,841
857,295
Note payable, net of current portion ............................
—
3,800,929
Non-controlling interests ............................................. 3,019,702
40,733,672
Total stockholders’ equity ........................................... 44,874,105
Total equity ................................................................. 47,893,807
44,534,601
Other Financial Data:
Net cash used in operating activities ........................... $
Net cash (used in) provided by investing activities ..... 1,901,224
Net cash (used in) provided by financing activities .....
(874,652)
Effect of exchange rate changes on cash and cash

(755,545) $ 7,422,912 $ 1,910,702
1,752,842
7,457,380
(1,563,867)
(1,814,418)

5,519,766
22,319,966
54,057,775
4,466,655
—
3,837,257
45,753,863
49,591,120

4,391,424
4,451,594

4,325,863
4,404,100

$ 4,137,547
—
14,059,726
41,877,627
3,999,645
933,413
187,913
36,756,656
36,944,569

$ 3,266,362
—
13,490,514
40,039,742
4,404,766
1,009,533
91,795
34,533,648
34,625,443

$ 2,671,851
(1,709,077)
13,822

$ 1,702,214
(653,522)
408,719

equivalents ..............................................................

(124,064)

11,646

(39,574)

(105,411)

32,789

Item 7. 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 1. Business—Forward-Looking Statements” and under the heading “Part I. Item 1A.
Risk Factors.” 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 “Part II. Item 8. Financial Statements and Supplementary Data.”

This Management’s Discussion and Analysis is organized in the following major sections:

 Business Overview. This section provides a brief overview description of NTIC’s business,

focusing in particular on developments during the most recent fiscal year.

 NTIC’s Joint Venture Network. This section provides a brief overview of NTIC’s joint venture
network, the joint ventures which are considered individually significant to NTIC’s consolidated
assets and income and how NTIC’s joint ventures are accounted for by NTIC.

 Financial Overview. This section provides a brief summary of NTIC’s financial results and

financial condition for fiscal 2015.

 Sales and Expense Components. This section provides a brief description of the significant line

items in NTIC’s consolidated statements of operations.

 Results of Operations. This section provides an analysis of the significant line items in NTIC’s

consolidated statements of operations.

 Liquidity and Capital Resources. This section provides an analysis of NTIC’s liquidity and cash

flows and a discussion of NTIC’s financial condition and financial commitments.

 Off-Balance Sheet Arrangements. This section describes NTIC’s material off-balance sheet

arrangements.



Inflation and Seasonality. This section describes the effects of inflation and seasonality, if any, on
NTIC’s business and operating results.

 Market Risk. This section describes material market risks to which NTIC is subject.

 Related Party Transactions. This section describes any material related party transactions to

which NTIC is a party.

 Critical Accounting Policies and Estimates. This section discusses NTIC’s critical accounting
policies and estimates which require NTIC to exercise subjective or complex judgments in their
application. All of NTIC’s significant accounting policies, including its critical accounting estimates,
are summarized in Note 1 to NTIC’s consolidated financial statements.

 Recent Accounting Pronouncements. This section discusses recently issued accounting

pronouncements that have had or may affect NTIC’s results of operations and financial condition
and references Note 2 to NTIC’s consolidated financial statements, which summarizes such
pronouncements.

Business Overview

NTIC develops and markets proprietary environmentally beneficial products and services in over 60
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 40 years, and in recent years, has targeted and
expanded into the oil and gas industry. NTIC also markets and sells a portfolio of biobased and compostable
(fully biodegradable) polymer resins 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 and
coatings, rust removers and cleaners, diffusers and 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 technical
requirements. In North America, NTIC sells its ZERUST® corrosion prevention solutions through a direct
sales force as well as a network of independent distributors and agents. Internationally, NTIC sells its
ZERUST® corrosion prevention solutions through its wholly-owned subsidiary in China, NTIC (Shanghai)
Co., Ltd. (NTIC China), its majority-owned subsidiary in Brazil, Zerust Prevenção de Corrosão S.A. (Zerust
Brazil), its majority-owned joint venture holding company for NTIC’s joint venture investments in the
Association of Southeast Asian Nations (ASEAN) region, and joint venture arrangements in North America,
Europe and Asia.

One of NTIC’s strategic initiatives is to expand into and penetrate other markets for its ZERUST® corrosion
prevention solutions. Consequently, for the past several years, NTIC has focused its 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 corrosion leaks.

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

Natur-Tec® biobased 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 resins are fully biodegradable in a composting environment and are currently being used to produce
finished products including shopping and grocery bags, lawn and leaf bags, can liners, pet waste collection
bags, cutlery, packaging foam and coated paper products. In North America, NTIC markets its Natur-Tec®
resins 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® resins and finished products both
directly and through its majority-owned subsidiary in India, Natur-Tec India Private Limited (Natur-Tec
India), and through certain joint ventures. In November 2014, NTIC entered into an agreement with
NatureWorks LLC for joint marketing and sales of Ingeo® based packaging solutions to customers in India.

With recent Indian government mandates banning use of non-biodegradable plastics in certain types of food
and consumer packaging, NTIC expects the market in India for bioplastic packaging solutions to grow
substantially.

Termination of Chinese Joint Venture

On January 2, 2015, NTIC announced that, effective as of December 31, 2014, it is selling its ZERUST®
products and services in China through a wholly-owned subsidiary, NTIC (Shanghai) Co., Ltd. (NTIC
China), and has terminated its joint venture agreements with Tianjin-Zerust Anticorrosion Co., Ltd. (Tianjin
Zerust). NTIC and NTI Asean have filed a lawsuit against Mr. Tao Meng, a Chinese national and the former
joint venture entity’s other shareholder, and his spouse in the Chinese court of Tianjin, seeking, among other
things, an orderly liquidation of Tianjin Zerust.

NTIC indirectly has a 30% ownership interest in Tianjin Zerust through its 60% owned holding company
subsidiary, NTI Asean LLC. Commencing during the second quarter of fiscal 2015, NTIC’s consolidated
financial statements include the financial results of NTIC China. NTIC anticipates that NTIC’s net sales,
costs of goods sold and operating expenses will increase and its equity in income from joint ventures and fee
income for services provided to its joint ventures will decrease in future periods compared to the comparable
prior fiscal year periods as NTIC started recognizing Tianjin Zerust based on its carrying value instead of the
equity method and will continue to do so until Tianjin Zerust is fully liquidated.

NTIC anticipates that it may take several quarters to transition many of the previous customers of Tianjin
Zerust to NTIC China and no assurance can be provided that NTIC China will be able to achieve the net
sales and income levels previously achieved by Tianjin Zerust. For fiscal 2014, Tianjin Zerust had net sales
of $15.9 million and net income of $1.3 million. The operating income of the joint venture before paying
royalties in an aggregate amount of $4.2 million to all shareholders was over $5.5 million; NTIC’s indirect
ownership of Tianjin Zerust is 30%.

During fiscal 2015, NTIC incurred approximately $1,640,000 in start-up expenses related either directly or
indirectly to the establishment of NTIC China, the termination of the joint venture agreements with Tianjin
Zerust and its pending litigation against Mr. Tao Meng and his spouse, and the anticipated liquidation of
Tianjin Zerust and against Cortec Corporation. These expenses are recorded as selling, general and
administrative expenses and expenses incurred in support of joint ventures on the consolidated statements of
operations.

NTIC expects that its operating results may be volatile over the next few quarters as a result of NTIC’s
Chinese operations.

NTIC’s Joint Venture Network

its joint ventures. Such profitability is subject to variability from quarter to quarter which, in turn, subjects
NTIC’s earnings to variability from quarter to quarter. The profits of NTIC’s joint ventures are shared by the
respective joint venture owners in accordance with their respective ownership percentages. NTIC typically
directly or indirectly owns 50% or less of each of its joint venture entities and thus does not control the
decisions of these entities regarding whether to pay dividends and, if paid, how much they should be in a
given year. The payment of a dividend by an entity is determined by a joint vote of the owners and is not at
the sole discretion of NTIC.

NTIC accounts for the investments and financial results of its joint ventures in its financial statements
utilizing the equity method of accounting.

NTIC considers EXCOR and its former joint venture in China, Tianjin Zerust, to be individually significant
to NTIC’s consolidated assets and income; and therefore, provides certain additional information regarding
EXCOR and Tianjin Zerust in the notes to NTIC’s consolidated financial statements and in this section of
this report.

For fiscal 2015, 2014 and 2013, EXCOR met the conditions of a significant subsidiary of NTIC under Rule
1-02(w) of Regulation S-X. Pursuant to Rue 3-09 of Regulation S-X, NTIC intends to file an amendment to
this report containing separate audited financial statements for EXCOR.

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.

NTIC’s consolidated net sales increased 13.0% during fiscal 2015 compared to fiscal 2014. This increase
was primarily a result of increased demand for ZERUST® rust and corrosion inhibiting packaging products
and services and Natur-Tec® products and, to some extent, sales at NTIC China, which subsidiary did not
exist during fiscal 2014. During fiscal 2015, 85.9% of NTIC’s consolidated net sales were derived from
sales of ZERUST® products and services, which increased 9.2% to $26,042,909 during fiscal 2015
compared to $23,845,288 during fiscal 2014. This increase was due to increased demand from both new and
existing customers for new and existing products. NTIC has focused its sales efforts of ZERUST® products
and services by strategically targeting customers with specific corrosion issues in new market areas,
including the oil and gas industry and other industrial sectors that offer sizable growth opportunities. NTIC’s
consolidated net sales for fiscal 2015 included $1,886,814 of sales made to customers in the oil and gas
industry compared to $1,702,130 for fiscal 2014. 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 market in particular.

During fiscal 2015, 14.1% of NTIC’s consolidated net sales were derived from sales of Natur-Tec® products
compared to 11.1% during fiscal 2014. Net sales of Natur-Tec® products increased 43.6% to $4,279,785
during fiscal 2015 compared to fiscal 2014 primarily due to finished product sales in North America and

finished product sales at NTIC’s majority-owned subsidiary in India, Natur-Tec India Private Limited
(Natur-Tec India).

Cost of goods sold as a percentage of net sales increased to 67.8% during fiscal 2015 compared to 66.4%
during fiscal 2014 primarily as a result of increased sales during fiscal 2015 of Natur-Tec® products, which
carry lower margins than ZERUST® products.

NTIC’s equity in income from joint ventures increased 0.3% to $5,936,565 during fiscal 2015 compared to
$5,920,603 during fiscal 2014. This increase was primarily due to increases in profitability at the joint
ventures, partially offset by decreases associated with the anticipated liquidation of Tianjin Zerust and
adverse effects of foreign currency exchange rate fluctuations, including in particular the Euro compared to
the U.S. dollar. NTIC recognized a 29.8% decrease in fees for services provided to joint ventures during
fiscal 2015 compared to fiscal 2014 primarily due to the anticipated liquidation of Tianjin Zerust. Fees for
services provided to Tianjin Zerust decreased $1,623,938 to $494,080 during fiscal 2015 compared to
$2,118,018 during fiscal 2014. Additionally, there was a decrease in sales at the joint ventures, which were
$99,026,251 during fiscal 2015, compared to $118,848,890 during fiscal 2014. This decrease resulted in a
corresponding decrease in fees for services provided to joint ventures as such fees are a function of net sales
of NTIC’s joint ventures. Net sales of NTIC’s joint ventures decreased also as a result of a significant
weakening of the Euro compared to the U.S. dollar and, to a lesser extent, the sale in November 2013 of
NTIC’s ownership interest in Mütec GmbH.

NTIC’s total operating expenses increased 11.4% to $18,267,173 during fiscal 2015 compared to
$16,392,035 in fiscal 2014. This increase was primarily due to $1,642,258 in expenses related to the
formation and establishment of NTIC China and the anticipated liquidation of Tianjin Zerust. Such expenses
consisted primarily of legal and personnel expenses associated with the establishment of the subsidiary, the
hiring of new personnel and initial operations.

NTIC expenses all costs related to product research and development as incurred. NTIC incurred $4,047,279
of research and development expense during fiscal 2015 compared to $4,368,752 during fiscal 2014. These
represent net amounts after being reduced by reimbursements related to certain research and development
contracts. Such reimbursements totaled $0 and $45,788 for fiscal 2015 and 2014, respectively. NTIC
anticipates that it will spend between $4,000,000 and $4,400,000 in total during fiscal 2016 on research and
development activities related to its new technologies. This estimate is a net range after being reduced by
anticipated reimbursements related to certain research and development contracts.

Net income attributable to NTIC decreased 56.4%, to $1,789,571, or $0.39 per diluted common share, for
fiscal 2015 compared to $4,106,372, or $0.90 per diluted common share, for fiscal 2014. This decrease was
primarily the result of the decrease in income from NTIC’s joint venture operations as a result of the
anticipated liquidation of Tianjin Zerust and the establishment of NTIC China.

NTIC anticipates that its quarterly net income or loss will continue to remain subject to significant volatility
primarily due to the financial performance of its subsidiaries and joint ventures and sales of its ZERUST®
products and services into the oil and gas industry and Natur-Tec® bioplastics products, which sales
fluctuate more on a quarterly basis than the traditional ZERUST® business. NTIC also anticipates that its
operating results during the next few quarters will remain volatile as a result of the changes in its Chinese
operations.

NTIC’s working capital was $15,603,771 at August 31, 2015, including $2,623,981 in cash and cash
equivalents and $2,027,441 in available for sale securities, compared to $17,853,311 at August 31, 2014,
including $2,477,017 in cash and cash equivalents and $5,519,766 in available for sale securities.

Sales and Expense Components

The following is a description of the primary components of net sales and expenses:

Net Sales, Excluding Joint Ventures. NTIC derives net sales from the sale of its ZERUST® products and
services and its Natur-Tec® products. NTIC sells its ZERUST® products and services and its Natur-Tec®
products either directly, through its subsidiaries or via a network of joint ventures, independent distributors
and agents. Net sales, excluding joint ventures represents net sales by NTIC either directly to end users or to
distributors worldwide, but not sales to NTIC’s joint ventures and not sales by NTIC’s joint ventures. NTIC
recognizes revenue from the sale of its products when persuasive evidence of an arrangement exists, the
product has been delivered, the fee is fixed and determinable and collection of the resulting receivable is
reasonably assured, all of which criteria are generally met upon shipment when risk of loss and title passes to
the customer or distributor. NTIC records all amounts billed to customers and distributors in a sales
transaction related to shipping and handling as sales and records costs related to shipping and handling in
cost of goods sold.

Net Sales, To Joint Ventures. Net sales, to joint ventures represents net sales by NTIC to NTIC’s joint
ventures, but not sales by NTIC either directly to end users or to distributors or sales by NTIC’s joint
ventures. NTIC’s revenue recognition policy for sales to its joint ventures is the same as NTIC’s policy for
sales to unaffiliated customers. NTIC recognizes revenue from the sale of its products to joint ventures when
persuasive evidence of an arrangement exists, the product has been delivered, the fee is fixed and
determinable and collection of the resulting receivable is reasonably assured, all of which criteria are
generally met upon shipment when risk of loss and title passes to the joint venture.

Cost of Goods Sold. Most of NTIC’s products are manufactured by third parties and its cost of goods sold
for those products consists primarily of the price invoiced by its third-party vendors. For the portion of
products that NTIC manufactures, NTIC’s cost of goods sold for those products consists primarily of direct
labor, allocated manufacturing overhead, raw materials and components. NTIC’s margins on its Natur-Tec®
resin compounds and finished products are generally smaller than its margins on its ZERUST® products and
services, and NTIC’s margins on its ZERUST® products and services sold into the oil and gas industry are
generally greater than its margins on its traditional ZERUST® products and services.

Equity in Income from Joint Ventures. NTIC’s equity in income from joint ventures consists of NTIC’s
share of equity in income from its joint ventures based on the overall profitability of the joint ventures. Such
profitability is subject to variability from quarter to quarter which, in turn, subjects NTIC’s earnings to
variability from quarter to quarter. Traditionally, a portion of the equity income recorded in a given fiscal
year is paid to the owners of the joint venture entity during the following fiscal year through a dividend. The
payment of a dividend by a joint venture entity is determined by a vote of the joint venture owners and is not
at the sole discretion of NTIC. NTIC typically owns only 50% or less of its joint venture entities and thus
does not control the decisions of these entities regarding whether to pay dividends and, if paid, how much
they should be in a given year.

Fees for Services Provided To Joint Ventures. NTIC provides certain services to its joint ventures including
consulting, legal, travel, insurance, technical and marketing services. NTIC receives fees for these services it
provides to its joint ventures based primarily on the net sales by NTIC’s joint ventures, the latter of which are
not included in NTIC’s net sales reflected on NTIC’s consolidated statements of operations. The fees for
services received by NTIC from its joint ventures are generally determined based on either a flat fee or a
percentage of net sales by NTIC’s joint ventures depending on local laws and tax regulations. With respect
to EXCOR, NTIC receives an agreed upon fixed quarterly fee for such services. NTIC records revenue
related to fees for services provided to joint ventures when earned, amounts are determinable and
collectability is reasonably assured. Under NTIC’s agreements with its joint ventures in which the fees for
services is described, fees are earned when the joint venture recognizes the revenue.

NTIC sponsors a worldwide joint venture conference periodically in which all of NTIC’s joint ventures are
invited to participate. It is anticipated that the next joint venture conference will be held next year or the year
thereafter. NTIC defers a portion of its fees for services provided to joint ventures in each accounting period
leading up to the next conference, reflecting that NTIC has not fully earned the payments received during
that period. The amount deferred is based on the historical experience of NTIC, current conditions and the
intentions of NTIC’s management. The costs associated with these joint venture conferences are offset
against the deferral as incurred, generally in the period in which the conference is held and immediately
before.

Selling Expenses. Selling expenses consist primarily of sales commissions and support costs for NTIC’s
direct sale and distribution system, and marketing costs.

General and Administrative Expenses. General and administrative expenses consist primarily of salaries
and benefits, and other costs for NTIC’s executives, accounting, stock-based compensation, finance, legal,
information technology and human resources functions.

Expenses Incurred in Support of Joint Ventures. NTIC incurs direct expenses related to its joint ventures
and in connection with NTIC’s provision of support and services to its joint ventures. Such expenses include
items such as employee compensation and benefits, travel, consulting, legal and laboratory supplies and
testing expenses.

Research and Development Expenses. Research and development expenses include costs associated with
the design, development, market analysis, lab testing and field trials and enhancements of NTIC’s products
and services. NTIC expenses all costs related to product research and development as incurred. Research
and development expenses reflect the net amount after being reduced by reimbursements related to certain
research and development contracts. With respect to such research and development contracts, NTIC
accrues proceeds received under the contracts and offsets research and development expenses incurred in
equal installments over the timelines associated with completion of the contracts’ specific objectives and
milestones.

Interest Income. Interest income consists of interest earned on investments, which typically consist of
investment-grade, interest-bearing securities and money market accounts.

Interest Expense. Interest expense results primarily from interest associated with NTIC’s former term loan
with PNC Bank, National Association (PNC Bank) and any borrowings under NTIC’s line of credit with
PNC Bank.

Other Income. Other income consists of income from activities other than normal business operations, such
as foreign exchange gains, rent income, and profit from the sale of non-inventory assets.

Income Tax Expense. Income tax expense includes federal income taxes, income tax of consolidated
entities in foreign jurisdictions, state income tax and changes to NTIC’s deferred tax valuation allowance.
NTIC utilizes the liability method of accounting for income taxes which requires an asset and liability
approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities
are computed annually for differences between the financial statement and tax basis of assets and liabilities
that will result in taxable or deductible amounts in the future, based on enacted tax laws and rates applicable
to the periods in which the differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected to be realized. NTIC
records a tax valuation allowance when it is more likely than not that some portion or all of its deferred tax
assets will not be realized. NTIC makes this determination based on all available evidence, including
historical data and projections of future results. Income tax expense is the tax payable or refundable for the
period plus or minus the change during the period in deferred tax assets and liabilities.

Results of Operations

Fiscal Year 2015 Compared to Fiscal Year 2014

The following table sets forth NTIC’s results of operations for fiscal 2015 and fiscal 2014.

Fiscal 2015
Net sales, excluding joint ventures ................. $ 27,491,392
Net sales, to joint ventures ...........................
2,831,301
20,555,932
Cost of goods sold ..............................................
5,936,565
Equity in income from joint ventures .................
5,715,491
Fees for services provided to joint ventures .......
Selling expenses ........................................
5,820,748
General and administrative expenses ..............
6,531,576
Expenses incurred in support of joint
ventures ...................................................
Research and development expenses ..............

1,867,570

4,047,279

% of
Net
Sales
90.7%
9.3%
67.8%
19.6%
18.8%
19.2%
21.5%

Fiscal 2014
$ 23,601,514
3,224,594
17,803,153
5,920,603
8,142,863
5,221,738
5,393,531

% of
Net
Sales
88.0%
12.0%
66.4%
22.1%
30.4%
19.5%
20.1%

$
Change
$ 3,889,878
(393,293)
2,752,779
15,962
(2,427,372)
599,010
1,138,045

%
Change
16.5%
(12.2%)
15.5%
.3%
(29.8%)
11.5%
21.1%

6.2%

1,408,014

5.2%

459,556

32.6%

13.3%

4,368,752

16.3%

(321,473)

(7.4%)

Net Sales. NTIC’s consolidated net sales increased 13.0% to $30,322,693 during fiscal 2015 compared to
$26,826,108 during fiscal 2014. NTIC’s consolidated net sales to unaffiliated customers excluding NTIC’s
joint ventures increased 16.5% to $27,491,392 during fiscal 2015 compared to $23,601,514 during fiscal
2014. These increases were primarily a result of increased demand and sales of ZERUST® rust and
corrosion inhibiting packaging products and services and Natur-Tec® products. Net sales to joint ventures
decreased 12.2% to $2,831,301 in fiscal 2015 compared to fiscal 2014. This decrease was due primarily to
the decrease in sales of the joint ventures.

The following table sets forth NTIC’s net sales by product segment for fiscal 2015 and fiscal 2014:

Fiscal 2015
ZERUST® net sales ......................... $ 26,042,909
Natur-Tec® net sales .........................
4,279,784
Total net sales ...................................
$30,322,693

Fiscal 2014
$ 23,845,288
2,980,820
$26,826,108

$
Change
$ 2,197,621
1,298,965
$ 3,496,586

%
Change
9.2%
43.6%
13.0%

During fiscal 2015, 85.9% of NTIC’s consolidated net sales were derived from sales of ZERUST® products
and services, which increased 9.2% to $26,042,909 compared to $23,845,288 during fiscal 2014. This
increase was due to increased demand from existing customers and the addition of new customers. NTIC has
strategically focused its sales efforts for ZERUST® products and services on customers with sizeable
corrosion problems in industry sectors that offer sizable growth opportunities, including the oil and gas
sector. The following table sets forth NTIC’s net sales of ZERUST® products for fiscal 2015 and 2014:

ZERUST® industrial net sales .............................
ZERUST® joint venture net sales ........................
ZERUST® oil & gas net sales ..............................
Total ZERUST® net sales .............................

Fiscal 2015
$ 21,324,793
2,831,302
1,886,814
$ 26,042,909

Fiscal 2014
$ 18,918,563
3,224,594
1,702,131
$ 23,845,288

$
Change
$ 2,406,230
(393,292)
184,683
$ 2,197,621

%
Change
12.7%
(12.2%)
10.9%
9.2%

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.

During fiscal 2015, 14.1% of NTIC’s consolidated net sales were derived from sales of Natur-Tec®
products, compared to 11.1% during fiscal 2014. Sales of Natur-Tec® products increased 43.6% to
$4,279,784 during fiscal 2015 compared to $2,980,820 during fiscal 2014. This increase was due primarily
to finished product sales in North America and finished product sales through Natur-Tec India. Demand for
Natur-Tec® 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 Natur-Tec® products, the timing of one or more orders can materially affect NTIC’s
quarterly sales of Natur-Tec® products and the comparisons to prior fiscal year quarters.

Cost of Goods Sold. Cost of goods sold increased 15.5% in fiscal 2015 compared to fiscal 2014 primarily as
a result of the increase in net sales as described above. Cost of goods sold as a percentage of net sales
increased to 67.8% during fiscal 2015 compared to 66.4% during fiscal 2014 primarily as a result of
increased sales during fiscal 2015 of Natur-Tec® products, which carry lower margins than other traditional
ZERUST® products. NTIC anticipates that due to the change in its China operations, NTIC’s costs of goods
sold will increase in future periods compared to the prior fiscal year periods.

Equity in Income from Joint Ventures. NTIC’s equity in income from joint ventures increased 0.3% to
$5,936,565 compared to equity in income from joint ventures of $5,920,603 during fiscal 2014. This
increase was primarily a result of increases in profitability at the joint ventures, partially offset by a decrease
in profitability associated with the anticipated liquidation of Tianjin Zerust and adverse effects of foreign
exchange rate fluctuations, including in particular the Euro compared to the U.S. dollar. Of the total equity
in income from joint ventures, NTIC had equity in income from joint ventures of $4,091,608 attributable to
EXCOR during fiscal 2015 compared to $3,950,915 attributable to EXCOR during fiscal 2014. Of the total
equity in income of joint ventures, NTIC had equity in income of joint ventures of $132,824 attributable to
Tianjin Zerust during fiscal 2015 compared to $626,763 attributable to Tianjin Zerust during fiscal 2014.
NTIC had equity in income of all other joint ventures of $1,712,133 during fiscal 2015 compared to
$1,342,925 during fiscal 2014. NTIC expects its equity in income of joint ventures to be lower in future
periods compared to prior fiscal year periods as a result of the anticipated liquidation of Tianjin Zerust.

Fees for Services Provided to Joint Ventures. NTIC recognized fee income for services provided to joint
ventures of $5,715,491 during fiscal 2015 compared to $8,142,863 during fiscal 2014, representing a
decrease of 29.8%. This decrease was primarily a result of the anticipated liquidation of Tianjin Zerust as
fees for services provided to joint ventures from Tianjin Zerust decreased $1,623,938 to $494,080 during
fiscal 2015 compared to $2,118,018 during fiscal 2014. Additionally, the decrease in fees for services
provided to joint ventures was a result of a decrease in total sales at all joint ventures, which were
$99,026,251 during fiscal 2015 compared to $118,848,890 during fiscal 2014, a decrease of 16.7%. Net
sales of NTIC’s joint ventures decreased due to the anticipated liquidation of Tianjin Zerust, a significant
weakening of the Euro compared to the U.S. dollar and, to a lesser extent, the sale of NTIC’s ownership
interest in Mütec GmbH. Sales of NTIC’s joint ventures are not included in NTIC’s product sales and are
not combined with NTIC’s sales in NTIC’s consolidated financial statements or in any description of NTIC’s
sales.

Of the total fee income for services provided to its joint ventures, fees of $873,400 were attributable to
EXCOR during fiscal 2015 compared to $1,032,234 attributable to EXCOR during fiscal 2014. The decrease
in fee income for services provided to joint ventures attributable to EXCOR was primarily the result of
foreign currency exchange rate fluctuations. Of the total fee income for services provided to its joint
ventures, fees of $494,080 were attributable to Tianjin Zerust during fiscal 2015 compared to $2,118,018
during fiscal 2014. NTIC received fee income for services provided to all of its other joint ventures of
$4,348,010 during fiscal 2015 compared to $4,992,611 during fiscal 2014. NTIC anticipates that due to the
consolidation of NTIC China, NTIC’s fee income for services provided to its joint ventures will decrease in
future periods compared to the prior fiscal year periods.

Selling Expenses. NTIC’s selling expenses increased 11.5% in fiscal 2015 compared to fiscal 2014 due to
increases in compensation and employee benefits, lab testing related expenses, commission expenses, travel
and related expenses, and consulting expenses. Selling expenses as a percentage of net sales decreased to
19.2% in fiscal 2015 compared to 19.5% in fiscal 2014 primarily due to the increase in net sales as well as
certain personnel expenses, partially offset by the increase in selling expenses, as previously described.

General and Administrative Expenses. NTIC’s general and administrative expenses increased by 21.1% in
fiscal 2015 compared to fiscal 2014 due primarily to expenses incurred to establish and operate NTIC China.
As a percentage of net sales, general and administrative expenses increased to 21.5% for fiscal 2015 from
20.1% in fiscal 2014 due primarily to the increase in general and administrative expenses, as previously
described, partially offset by the increase in net sales.

Expenses Incurred in Support of Joint Ventures. Expenses incurred in support of NTIC’s joint ventures were
$1,867,570 during fiscal 2015 compared to $1,408,014 during fiscal 2014, representing an increase of 32.6%.
This increase was due primarily to expenses related to the change in NTIC’s Chinese operations during fiscal
2015. NTIC incurred direct expenses during fiscal 2015 related to the anticipated liquidation of Tianjin
Zerust and the formation and operation of NTIC China. Such expenses consisted primarily of legal expenses
and personnel expenses associated with the establishment of the subsidiary, the hiring of new personnel and
initial operations.

Research and Development Expenses. NTIC’s research and development expenses decreased 7.4% in fiscal
2015 compared to fiscal 2014. This decrease was due primarily to decreases in personnel and consulting
expenses.

Interest Income. NTIC’s interest income increased to $34,835 in fiscal 2015 compared to $11,617 in fiscal
2014.

Interest Expense. NTIC’s interest expense decreased to $20,960 in fiscal 2015 compared to $47,322 in fiscal
2014. This decrease was primarily due to higher average outstanding debt levels during fiscal 2014.

Income Before Income Tax Expense. Income before income tax expense decreased to $3,166,034 for fiscal
2015 compared to $6,663,074 for fiscal 2014.

Income Tax Expense. Income tax expense was $648,674 for fiscal 2015 compared to $1,124,662 during
fiscal 2014 for an effective rate of 14.4% and 16.9%, respectively. NTIC’s annual effective income tax rate
during fiscal 2015 and 2014 was lower than the statutory rate primarily due to NTIC’s equity in income of
joint ventures being recognized based on after-tax earnings of these entities. To the extent undistributed
earnings of NTIC’s joint ventures are distributed to NTIC, any material additional income tax liability after
the application of foreign tax credits is not expected. NTIC records a tax valuation allowance when it is more
likely than not that some portion or all of its deferred tax assets will not be realized to reduce deferred tax
assets to the amount expected to be realized. NTIC determined based on all available evidence, including
historical data and projections of future results, that it is more likely than not that all of its deferred tax assets,
except for its foreign tax credit carryforwards and Minnesota state research and development credit
carryforwards, will be fully realized. In addition, NTIC determined based upon all available evidence,
including new IRS guidance, historical results, projected future taxable income and foreign tax credit
utilization, that it was not more likely than not that the federal research and development credits would not be
utilized during the carryforward period and as a result, a valuation allowance was recorded against all of
NTIC’s federal research and development credits. In addition, NTIC continues to believe that its deferred
tax asset related to foreign tax credit carryforwards will not be realized due to insufficient federal taxable
income within the carryforward period and the fact that for ordering purposes the foreign tax credit
carryforwards are not allowed to be used until after any current year foreign tax credits are utilized.

NTIC considers the earnings of certain foreign joint ventures to be indefinitely invested outside the United
States on the basis of estimates that future domestic cash generation will be sufficient to meet NTIC’s future
domestic cash needs. As a result, U.S. income and foreign withholding taxes have not been recognized on the
cumulative undistributed earnings of $18,483,377 and $20,540,523 at August 31, 2015 and August 31, 2014,
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.

Other Comprehensive Income - Foreign Currency Translations Adjustment. The significant changes in the
foreign currency translations adjustment was due to the strengthening of the U.S. dollar compared to the
Euro and other foreign currencies during fiscal 2015 compared to fiscal 2014.

Fiscal Year 2014 Compared to Fiscal Year 2013

The following table sets forth NTIC’s results of operations for fiscal 2014 and fiscal 2013.

Fiscal 2014
Net sales, excluding joint ventures ................. $ 23,601,514
Net sales, to joint ventures ...........................
3,224,594
17,803,153
Cost of goods sold ..............................................
5,920,603
Equity in income from joint ventures .................
8,142,863
Fees for services provided to joint ventures .......
Selling expenses ........................................
5,221,738
General and administrative expenses ..............
5,393,531
1,408,014
Expenses incurred in support of joint
ventures ...................................................
Research and development expenses ..............

4,368,752

% of
Net
Sales
88.0%
12.0%
66.4%
22.1%
30.4%
19.5%
20.1%

5.2%
16.3%

Fiscal 2013
$ 19,724,205
2,777,659
15,473,212
5,237,711
7,352,980
4,845,676
4,605,979

% of
Net
Sales
87.7%
12.3%
68.8%
23.3%
32.7%
21.5%
20.5%

$
Change
$ 3,877,309
446,935
2,329,941
682,892
789,883
376,062
787,552

%
Change
19.7%
16.1%
15.1%
13.0%
10.7%
7.8%
17.1%

1,387,197
3,815,515

6.2%
17.0%

20,817
553,237

1.5%
14.5%

Net Sales. NTIC’s consolidated net sales increased 19.2% to $26,826,108 during fiscal 2014 compared to
$22,501,864 during fiscal 2013. NTIC’s consolidated net sales to unaffiliated customers excluding NTIC’s
joint ventures increased 19.7% to $23,601,514 during fiscal 2014 compared to $19,724,205 during fiscal
2013. These increases were primarily a result of increased demand from existing customers and the addition
of new customers. Net sales to joint ventures increased 16.1% to $3,224,594 in fiscal 2014 compared to
fiscal 2013. This increase was due primarily to the increase in sales of the joint ventures.

The following table sets forth NTIC’s net sales by product segment for fiscal 2014 and fiscal 2013:

Fiscal 2014
ZERUST® net sales ......................... $ 23,845,288
Natur-Tec® net sales .........................
2,980,820
Total net sales ...................................
$26,826,108

Fiscal 2013
$ 20,457,198
2,044,666
$22,501,864

$
Change
$ 3,388,090
936,154
$ 4,324,244

%
Change
16.6%
45.8%
19.2%

During fiscal 2014, 88.9% of NTIC’s consolidated net sales were derived from sales of ZERUST® products
and services, which increased 16.6% to $23,845,288 compared to $20,457,198 during fiscal 2013 due to
increased demand from existing customers and the addition of new customers. NTIC has strategically
focused its sales efforts for ZERUST® products and services on customers with sizeable corrosion problems
in industry sectors that offer sizable growth opportunities, including the oil and gas sector. The following
table sets forth NTIC’s net sales of ZERUST® products for fiscal 2014 and 2013:

Fiscal 2014
$ 18,918,563
3,224,594
1,702,131
$ 23,845,288

Fiscal 2013
$ 16,695,197
2,767,103
994,898
$ 20,457,198

$
Change
$ 2,223,366
457,491
707,233
$ 3,388,090

%
Change
13.3%
16.5%
71.1%
16.6%

During fiscal 2014, 11.1% of NTIC’s consolidated net sales were derived from sales of Natur-Tec®
products, compared to 9.1% during fiscal 2013. Sales of Natur-Tec® products increased 45.8% to
$2,980,820 during fiscal 2014 compared to $2,044,666 during fiscal 2013. This increase was due primarily
to finished product sales both in North America and abroad through Natur-Tec India.

Cost of Goods Sold. Cost of goods sold increased 15.1% in fiscal 2014 compared to fiscal 2013 primarily as
a result of the increase in net sales. Cost of goods sold as a percentage of net sales decreased to 66.4%
during fiscal 2014 compared to 68.8% during fiscal 2013 primarily as a result of increased sales during fiscal
2014 of ZERUST® products for the oil and gas industry which carry higher margins than other traditional
ZERUST® products and increased expenses during fiscal 2013 associated with the production and shipping
of ZERUST® products to a new customer.

Equity in Income from Joint Ventures. NTIC’s equity in income from joint ventures increased 13.0% to
$5,920,603 compared to equity in income from joint ventures of $5,237,711 during fiscal 2013. Of the total
equity in income from joint ventures, NTIC had equity in income from joint ventures of $3,950,915
attributable to EXCOR during fiscal 2014 compared to $3,507,057 attributable to EXCOR during fiscal
2013. Of the total equity in income from joint ventures, NTIC had equity in income from joint ventures of
$626,763 attributable to NTIC’s joint venture in China during fiscal 2014 compared to $579,376 attributable
to NTIC’s joint venture in China during fiscal 2013. NTIC had equity in income from all other joint ventures
of $1,342,924 during fiscal 2014 compared to $1,151,278 during fiscal 2013. These increases were primarily
as a result of increases in sales at the joint ventures, which improved during fiscal 2014 compared to fiscal
2013 primarily as a result of improved economic conditions in Europe.

Fees for Services Provided to Joint Ventures. NTIC recognized fee income for services provided to joint
ventures of $8,142,863 during fiscal 2014 compared to $7,352,980 during fiscal 2013, representing an
increase of 10.7%. Fee income for services provided to joint ventures are a function of the sales made by
NTIC’s joint ventures, which were $118,848,890 during fiscal 2014 compared to $113,189,068 during fiscal
2013, an increase of 5.0%. Sales made by NTIC’s joint ventures during fiscal 2014 improved compared to
fiscal 2013 primarily as a result of improved economic conditions in Europe. Total net sales of NTIC’s joint
ventures for fiscal 2013 were adversely affected in part by the European economic slowdown, which NTIC
believes also adversely affected net sales of certain of NTIC’s other non-European joint ventures, as well as
the weakening of the Euro and other currencies compared to the U.S. dollar. Sales of NTIC’s joint ventures
are not included in NTIC’s product sales and are not combined with NTIC’s sales in NTIC’s consolidated
financial statements or in any description of NTIC’s sales.

Of the total fee income for services provided to its joint ventures, fees of $1,032,234 were attributable to
EXCOR during fiscal 2014 compared to $1,004,958 attributable to EXCOR during fiscal 2013. Fees of
$2,118,018 were attributable to NTIC’s joint venture in China during fiscal 2014 compared to $2,063,369

during fiscal 2013. NTIC received fee income for services provided to all of its other joint ventures of
$4,992,611 during fiscal 2014 compared to $4,284,653 during fiscal 2013.

Selling Expenses. NTIC’s selling expenses increased 7.8% in fiscal 2014 compared to fiscal 2013 due to
increases in compensation and employee benefits, lab testing related expenses, commission expenses, travel
and related expenses, and consulting expenses. Selling expenses as a percentage of net sales decreased to
19.5% in fiscal 2014 compared to 21.5% in fiscal 2013 primarily due to the increase in net sales as well as
certain fixed costs, partially offset by the increase in selling expenses, as previously described.

General and Administrative Expenses. NTIC’s general and administrative expenses increased by 17.1% in
fiscal 2014 compared to fiscal 2013 due to an increase in consulting expenses to support new business
development. As a percentage of net sales, general and administrative expenses decreased to 20.1% for
fiscal 2014 from 20.5% in fiscal 2013 due primarily to the increase in net sales as well as certain fixed costs,
partially offset by the increase in general and administrative expenses, as previously described.

Expenses Incurred in Support of Joint Ventures. Expenses incurred in support of NTIC’s joint ventures were
$1,408,014 during fiscal 2014 compared to $1,387,197 during fiscal 2013, representing an increase of 1.5%.
This increase was due primarily to increased headcount to support anticipated expanding operations and
anticipated sales growth.

Research and Development Expenses. NTIC’s research and development expenses increased 14.5% in fiscal
2014 compared to fiscal 2013. This increase was primarily as a result of increased spending on headcount
and field development associated with the new businesses.

Interest Income. NTIC’s interest income decreased to $11,617 in fiscal 2014 compared to $34,614 in fiscal
2013.

Interest Expense. NTIC’s interest expense decreased to $47,322 in fiscal 2014 compared to $52,215 in fiscal
2013.

Other Income. NTIC’s other income decreased to $4,393 in fiscal 2014 compared to $670,126 in fiscal 2013
primarily due to the receipt of life insurance proceeds during the prior fiscal year period.

Income Before Income Tax Expense. Income before income tax expense increased to $6,663,074 for fiscal
2014 compared to $5,617,501 for fiscal 2013.

Income Tax Expense. Income tax expense was $1,124,662 for fiscal 2014 compared to $864,000 during
fiscal 2013 for an effective rate of 16.9% and 15.4%, respectively. Income tax expense was calculated
based on management’s estimate of NTIC’s annual effective income tax rate. NTIC’s annual effective
income tax rate during fiscal 2014 and fiscal 2013 was lower than the statutory rate primarily due to NTIC’s
equity in income of joint ventures being recognized based on after-tax earnings of these entities. To the
extent undistributed earnings of NTIC’s joint ventures are distributed to NTIC, any material additional
income tax liability after the application of foreign tax credits is not expected. NTIC records a tax valuation
allowance when it is more likely than not that some portion or all of its deferred tax assets will not be
realized to reduce deferred tax assets to the amount expected to be realized. NTIC determined based on all
available evidence, including historical data and projections of future results, that it is more likely than not
that all of its deferred tax assets, except for its foreign tax credit carryforwards and Minnesota state research
and development credit carryforwards, will be fully realized. In addition, NTIC determined based upon all
available evidence, including new IRS guidance, historical results, projected future taxable income and
foreign tax credit utilization, that it was not more likely than not that the federal research and development
credits would be utilized during the carryforward period and as a result, a valuation allowance was recorded
against all of NTIC’s federal research and development credits. In addition, NTIC continues to believe that

its deferred tax asset related to foreign tax credit carryforwards will not be realized due to insufficient federal
taxable income within the carryforward period and the fact that for ordering purposes the foreign tax credit
carryforwards are not allowed to be used until after any current year foreign tax credits are utilized.

Other Comprehensive Income - Foreign Currency Translations Adjustment. The volatility of the foreign
currency translations adjustment was due to the strengthening of the U.S. Dollar compared to the Euro and
other foreign currencies during fiscal 2014 compared to fiscal 2013.

Liquidity and Capital Resources

Sources of Cash and Working Capital. As of August 31, 2015, NTIC’s working capital was $15,603,771,
including $2,623,981 in cash and cash equivalents and $2,027,441 in available for sale securities, compared
to working capital of $17,853,311, including $2,477,017 in cash and cash equivalents as of August 31, 2014
and $5,519,766 in available for sale securities.

As of August 31, 2015, NTIC had a revolving line of credit with PNC Bank of $3,000,000, with no amounts
outstanding. The line of credit is evidenced by an amended and restated committed line of credit note in the
principal amount of up to $3,000,000. The line of credit has a $1,200,000 standby letter of credit sub-
facility, with any standby letters of credit issued thereunder being at the sole discretion of PNC Bank.

The line of credit is subject to 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 August 31, 2015, NTIC was
in compliance with all debt covenants.

On January 5, 2015, PNC Bank extended the maturity date of the line of credit from January 7, 2015 to
January 7, 2016 under substantially similar terms, and waived a technical covenant default by NTIC to
deliver quarterly compliance certificates. It is anticipated that, as historically has been the practice, the line
of credit will be renewed each year for one additional year for the immediate foreseeable future.

NTIC believes that a combination of its existing cash and cash equivalents, 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 and any stock repurchases for at least the next 12 months. During fiscal 2016,
NTIC expects to continue to invest in NTIC China, research and development and in marketing efforts and
resources into the application of its corrosion prevention technology into the oil and gas industry and its
Natur-Tec® bio-plastics business, the amount of these various investments is not known at this time. In
order to take advantage of such new product and market opportunities to expand its business and increase its
revenues, NTIC may decide to finance such opportunities by borrowing under its revolving line of credit or
raising additional financing through the issuance of debt or equity securities. There is no assurance that any
financing transaction will be available on terms acceptable to NTIC or at all, or that any financing transaction
will not be dilutive to NTIC’s current stockholders.

NTIC traditionally has used the cash generated from its operations, distributions of earnings 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.

Uses of Cash and Cash Flow. Net cash used in operating activities during fiscal 2015 was $755,544, which
resulted principally from NTIC’s equity in income from joint ventures and increases in receivables,
inventories and prepaid expenses and a decrease in accrued liabilities and income taxes payable, partially
offset by NTIC’s net income, dividends received from joint ventures, expensing of fair value of stock options
vested, depreciation and amortization. Net cash provided by operating activities during fiscal 2014 was
$7,422,912, which resulted principally from NTIC’s net income, dividends received from joint ventures,
expensing of fair value of stock options vested, depreciation and amortization, partially offset by NTIC’s
equity in income from joint ventures and increases in receivables, inventories and prepaid expenses and a
decrease in accrued liabilities. Net cash provided by operating activities during fiscal 2013 was $1,910,702,
which resulted principally from NTIC’s net income, dividends received from joint ventures, depreciation and
amortization, partially offset by NTIC’s equity in income from joint ventures and increases in receivables
and inventories and a decrease in accounts payables, accrued liabilities and income taxes payable.

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. 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, and 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 for trade
receivables from its joint ventures are 90 days. 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 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 receivables and an increase in inventory as of August 31, 2015 compared to
August 31, 2014 due to the increase in sales and a desire to stock more products to shorten lead times and
anticipate customer demand. Trade receivables excluding joint ventures as of August 31, 2015 increased
$699,088 compared to August 31, 2014, primarily related to miscellaneous differences in the timing of
collections and the increase in sales.

Outstanding trade receivables excluding joint ventures balances as of August 31, 2015 decreased two days to
an average of 50 days from balances outstanding from these customers as of August 31, 2014.

Outstanding trade receivables from joint ventures as of August 31, 2015 decreased $305,909 compared to
August 31, 2014 primarily due to the decrease in sales to joint ventures due to the anticipated liquidation of
Tianjin Zerust. There was an increase of outstanding balances from trade receivables from joint ventures as
of August 31, 2015 of two days from an average of 91 days from balances outstanding from these customers
compared to August 31, 2014. The significant average days outstanding of trade receivables from joint
ventures as of August 31, 2015 were primarily due to the receivable balance at NTIC’s joint venture in South
Korea and Tianjin Zerust. Because of the lack of financial and other information received from Tianjin
Zerust, it is possible that if and when financial and other information is received from Tianjin Zerust that
NTIC may need to recognize an impairment charge on its receivable from Tianjin Zerust. NTIC estimates
that its maximum exposure in terms of an impairment charge on this receivable would be approximately
$114,000.

Outstanding receivables for services provided to joint ventures as of August 31, 2015 decreased $1,163,737
compared to August 31, 2014, which resulted in a decrease of 18 days of fees receivable outstanding as of
August 31, 2015 to an average of 104 days compared to August 31, 2014.

Net cash provided by investing activities during fiscal 2015 was $1,901,224, which was primarily the result
of cash provided by the sale of available for sale securities, partially offset by additions to property and
equipment and additions to patents. Net cash used in investing activities for fiscal 2014 was $7,457,380,
which was primarily the result of cash used to purchase available for sale securities, additions to property and
equipment and additions to patents. Net cash used in investing activities for fiscal 2013 was $3,025,187,
which was comprised of the effect of the NTI Asean consolidation on cash, partially offset by additions to
property and equipment and additions to patents.

Net cash used in financing activities for fiscal 2015 was $874,652, which resulted from a dividend paid to a
non-controlling interest, partially offset by proceeds from stock option exercises and NTIC’s employee stock
purchase plan. Net cash used in financing activities for fiscal 2014 was $1,814,418, which resulted from a
dividend paid to a non-controlling interest and repayment of the bank loan for NTIC’s corporate headquarters
building, and partially offset by proceeds from NTIC’s employee stock purchase plan and stock option
exercises. Net cash used in financing activities for fiscal 2013 was $1,563,867, which resulted from a
dividend received by non-controlling interest and principal payments on the bank loan for NTIC’s corporate
headquarters building, partially offset by proceeds from option exercises and 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 August 31, 2015, up to $2,975,654 in shares of NTIC common stock
remained available for repurchase under NTIC’s stock repurchase program.

Capital Expenditures and Commitments. NTIC spent $1,438,919 on capital expenditures during fiscal 2015
which related primarily to the purchase of new equipment and the expansion of its lab capabilities. NTIC
expects to spend an aggregate of approximately $200,000 to $400,000 on capital expenditures during fiscal
2016, which will relate primarily to the purchase of new equipment.

Contractual Obligations

Set forth below is information concerning NTIC’s known contractual obligations as of August 31, 2015 that
are fixed and determinable by year starting with the twelve months ending August 31, 2016.

Contractual
Obligations

Total

Less than
1 Year

1-3 Years

3-5 Years

More than
5 Years

Payments Due By Period

Short-term debt .......... $
Long-term debt ..........
Rent obligations .........
Purchase obligations ..
Total ....................... $

Inflation and Seasonality

– $
–
31,500
–
31,500 $

– $
–
18,000
–
18,000 $

– $
–
13,500
–
13,500 $

– $
–
–
–
- $

–
–
–
–
–

Inflation in the United States and abroad historically has had little effect on NTIC. NTIC’s business has not
historically been seasonal.

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, Indian Rupee, Chinese Renminbi, 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 of joint ventures reflected in its
consolidated statements of income. 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 resins.

At the option of NTIC, outstanding advances under NTIC’s $3,000,000 revolving line of credit with PNC
Bank bear interest at either (a) an annual rate based on LIBOR plus 2.15% for the applicable LIBOR interest
period selected by NTIC or (b) at the rate publicly announced by PNC Bank from time to time as its prime
rate, and thus may subject NTIC to some market risk on interest rates. As of August 31, 2015, NTIC had no
borrowings under the line of credit.

Related Party Transactions

Since NTIC’s joint ventures are considered related parties, NTIC records sales to its joint ventures as a
separate line item on the face of NTIC’s consolidated statements of operations and records fees for services
provided to its joint ventures and expenses incurred in support of its joint ventures as separate line items on
the face of NTIC’s consolidated statements of operations. NTIC also records as separate line items trade
receivables from joint ventures, receivables for fees for services provided to joint ventures and NTIC’s
investments in joint ventures on its consolidated balance sheets.

NTIC established its joint venture network approximately 25 years ago as a method to increase its worldwide
distribution network for ZERUST® rust and corrosion inhibiting products and services. NTIC participates,
either directly or indirectly, in 19 active joint venture arrangements in North America, Europe and Asia.
Each of these joint ventures generally manufactures and markets finished products in the geographic territory
to which it is assigned. NTIC’s joint venture partners are knowledgeable in the applicable environmental,
labor, tax and other requisite regulations and laws of the respective foreign countries in which they operate,
as well as the local customs and business practices. NTIC’s revenue recognition policy for sales to its joint
ventures is the same as its policy for sales to unaffiliated customers.

The fees for services received by NTIC from its joint ventures are generally determined based on either a flat
fee or a percentage of net sales by NTIC’s joint ventures depending on local laws and tax regulations. With
respect to NTIC’s German joint venture, NTIC receives an agreed upon quarterly fee for such services.
NTIC records revenue related to fees for services provided to joint ventures when earned, amounts are
determinable and collectability is reasonably assured. Under NTIC’s agreements with its joint ventures, fee
amounts are earned when product is shipped from joint venture facilities. NTIC reviews the financial
situation of each joint venture to assist in the likelihood of collections on amounts earned. From time to
time, NTIC elects to account for such fees on a cash basis for certain joint ventures when uncertainty exists
surrounding the collections of such fees, there are no fees being accounted for in this manner at present. The

expenses incurred in support of its joint ventures are direct expenses that NTIC incurs related to its joint
ventures and include such items as employee compensation and benefit expenses, travel expense, insurance,
consulting expense, legal expense and lab supplies and testing expense.

See Note 16 to NTIC’s consolidated financial statements for other related party transaction disclosures.

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 would have been 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.

Critical Accounting Policies and Estimates

The preparation of NTIC’s consolidated financial statements requires management to make estimates and
judgments that affect the reported amount of assets, liabilities, revenues and expenses, and related disclosure
of contingent assets and liabilities. The Securities and Exchange Commission has defined a company’s most
critical accounting policies as those that are most important to the portrayal of its financial condition and
results of operations, and which require the company to make its most difficult and subjective judgments,
often as a result of the need to make estimates of matters that are inherently uncertain. Based on this
definition, NTIC has identified the following critical accounting policies. Although NTIC believes that its
estimates and assumptions are reasonable, they are based upon information available when they are made.
Actual results may differ significantly from these estimates under different assumptions or conditions.

Principles of Consolidation

NTIC evaluates its voting and variable interests in entities on a qualitative and quantitative basis. NTIC
consolidates entities in which it concludes it has the power to direct the activities that most significantly
impact an entity’s economic success and has the obligation to absorb losses or the right to receive benefits
that could be significant to the entity. All such relationships are evaluated on an ongoing basis. The
consolidated financial statements include the accounts of Northern Technologies International Corporation,
its wholly-owned subsidiary, Northern Technologies Holding Company, LLC, its wholly-owned subsidiary,
NTIC (Shanghai) Co., Ltd., and NTIC’s majority-owned subsidiary in Brazil, Zerust Prevenção de Corrosão
S.A., NTIC’s majority-owned holding company, NTI Asean LLC, and NTIC’s majority-owned subsidiary in
India, Northern Technologies India Private Limited. NTIC’s consolidated financial statements do not include
the accounts of any of its joint ventures.

Investments in Joint Ventures and Recoverability of Investments in Joint Ventures

NTIC’s investments in its joint ventures are accounted for using the equity method. NTIC assesses its joint
ventures for impairment on an annual basis as of August 31 of each year as part of its fiscal year end
analysis. In addition to the annual review for impairment, NTIC reviews the operating results of each joint
venture on a quarterly basis in comparison to its historical operating results and its accrual for fees for
services provided to joint ventures. If the operating results of a joint venture do not meet NTIC’s financial
performance expectations, an additional evaluation is performed on the joint venture. In addition to the
annual assessments for impairment, non-periodic assessments for impairment may occur if cash remittances
are less than accrued balances, a joint venture’s management requests capital or other events occur
suggesting an other than temporary decline in value. If an investment were determined to be impaired, then a
reserve would be created to reflect the impairment on the financial results of NTIC. NTIC’s evaluation of its
investments in joint ventures requires NTIC to make assumptions about future cash flows of its joint
ventures. These assumptions require significant judgment and actual results may differ from assumed or

estimated amounts. NTIC’s investments in joint ventures were $20,544,238 as of August 31, 2015 and
$22,961,989 as of August 31, 2014.

Revenue Recognition

NTIC recognizes revenue from the sale of its products when persuasive evidence of an arrangement exists,
the product has been delivered, the price is fixed and determinable and collection of the resulting receivable
is reasonably assured. These criteria are met at the time of shipment when risk of loss and title pass to the
customer, distributor or joint venture entity.

With respect to recording revenue related to fees earned for services provided to NTIC’s joint ventures,
NTIC recognizes revenue related to support of joint ventures when earned, amounts are determinable and
collectability is reasonably assured. The support and services NTIC provides its joint ventures include
consulting, travel, insurance, technical and marketing services to existing joint ventures, legal fees incurred
in the establishment of new joint ventures, registration and promotion and legal defense of worldwide
trademarks, and legal fees incurred in connection with the filing of patent applications. NTIC receives fees
for these services it provides to its joint ventures based primarily on the net sales by NTIC’s joint ventures.
The fees for support services received by NTIC from its joint ventures are generally determined based on
either a flat fee or a percentage of net sales by NTIC’s joint ventures depending on local laws and tax
regulations. Under NTIC’s agreements with its joint ventures, amounts are earned when product is shipped
from joint venture facilities. NTIC reviews the financial situation of each of its joint ventures to assist in the
likelihood of collections on amounts earned. NTIC elects to account for these fees on a cash basis for certain
joint ventures when uncertainty exists surrounding the collections of such fees.

Accounts and Notes Receivable

Trade receivables arise from sales of NTIC’s products and services to NTIC’s joint ventures and to
unaffiliated customers. Trade receivables from joint ventures arise from sales NTIC makes to its joint
ventures of products and the essential additives required to make ZERUST® industrial corrosion inhibiting
products functional. Receivables for services to NTIC’s joint ventures are contractually based primarily on a
percentage of the sales of the joint ventures and are intended to compensate NTIC for services NTIC
provides to its joint ventures, including consulting, legal, travel, insurance, technical and marketing services.

Payment terms for NTIC’s unaffiliated customers are determined based on credit risk and vary by customer.
NTIC typically offers standard payments terms to unaffiliated customers of net 30 days. Payment terms for
NTIC’s joint ventures also are determined based on credit risk; however, additional consideration also is
given to the individual joint venture due to the transportation time associated with ocean delivery of most
products and certain other factors. NTIC typically offers payment terms to joint ventures of net 90 days.
NTIC does not accrue interest on past due accounts receivable. NTIC reviews the credit histories of its
customers, including its joint ventures, before extending unsecured credit. NTIC values accounts and notes
receivable, net of an allowance for doubtful accounts. Each quarter, NTIC prepares an analysis of its ability
to collect outstanding receivables that provides a basis for an allowance estimate for doubtful accounts. In
doing so, NTIC evaluates the age of its receivables, past collection history, current financial conditions of
key customers and its joint ventures, and economic conditions. Based on this evaluation, NTIC establishes a
reserve for specific accounts and notes receivable that it believes are uncollectible, as well as an estimate of
uncollectible receivables not specifically known. Deterioration in the financial condition of any key
customer or joint venture or a significant slowdown in the economy could have a material negative impact on
NTIC’s ability to collect a portion or all of the accounts and notes receivable. NTIC believes that an analysis
of historical trends and its current knowledge of potential collection problems provide NTIC with sufficient
information to establish a reasonable estimate for an allowance for doubtful accounts. However, since NTIC
cannot predict with certainty future changes in the financial stability of its customers or joint ventures,
NTIC’s actual future losses from uncollectible accounts may differ from its estimates. In the event NTIC

determined that a smaller or larger uncollectible accounts reserve is appropriate, NTIC would record a credit
or charge to selling expense in the period that it made such a determination. Accounts receivable have been
reduced by an allowance for uncollectible accounts of $40,000 as of August 31, 2015 and August 31, 2014.

Recoverability of Long-Lived Assets

NTIC reviews its long-lived assets whenever events or changes in circumstances indicate the carrying
amount of the assets may not be recoverable and determines potential impairment by comparing the carrying
value of the assets with expected net cash flows expected to be provided by operating activities of the
business or related products. If the sum of the expected undiscounted future net cash flows were less than
the carrying value, NTIC would determine whether an impairment loss should be recognized. An
impairment loss would be measured by comparing the amount by which the carrying value exceeds the fair
value of the asset.

Foreign Currency Translation (Accumulated Other Comprehensive Income)

The functional currency of each international joint venture is the applicable local currency. The translation
of the applicable foreign currencies into U.S. dollars is performed for balance sheet accounts using exchange
rates in effect at the balance sheet date and for revenue and expense accounts using an average monthly
exchange rate. Translation gains or losses are reported as an element of accumulated other comprehensive
income.

NTIC (excluding NTIC China, Zerust Brazil, Natur-Tec India, NTI Asean and its joint ventures) conducts all
foreign transactions based on the U.S. dollar. Since NTIC’s investments in its joint ventures are accounted
for using the equity method, any changes in foreign currency exchange rates would be reflected as a foreign
currency translation adjustment and would not change the equity in income from joint ventures reflected in
NTIC’s consolidated statements of operations.

Stock-Based Compensation

NTIC recognizes compensation cost relating to share-based payment transactions, including grants of
employee stock options and transactions under NTIC’s employee stock purchase plan in its consolidated
financial statements. That cost is measured based on the fair value of the equity or liability instruments
issued. NTIC measures the cost of employee services received in exchange for stock options or other stock-
based awards based on the grant-date fair value of the award, and recognizes the cost over the period the
employee is required to provide services for the award.

Inventory Valuation

NTIC’s inventories consist primarily of production materials and finished goods. NTIC purchases
production materials and finished goods based on forecasted demand and records inventory at the lower of
cost or market. Cost is determined by the first-in, first-out (FIFO) method. Management regularly assesses
inventory valuation based on current and forecasted usage, demand and pricing, shelf life, customer
inventory-related contractual obligations and other considerations. If actual results differ from management
estimates with respect to the actual or projected selling of inventories at amounts less than their carrying
amounts, NTIC would adjust its inventory balances accordingly.

Recent Accounting Pronouncements

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

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

NTIC is exposed to some market risk stemming from changes in foreign currency exchange rates,
commodity prices and interest rates.

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

Item 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

The following items are included herein:

62
Report of Independent Registered Public Accounting Firm .....................................................................
63
Consolidated Balance Sheets as of August 31, 2015 and 2014 ................................................................
Consolidated Statements of Operations for the years ended August 31, 2015, 2014 and 2013 ...............
64
Consolidated Statements of Comprehensive Income (Loss) for the years ended August 31, 2015, 2014 and
65
2013
..................................................................................................................................................
66
Consolidated Statements of Equity for the years ended August 31, 2015, 2014 and 2013 ......................
Consolidated Statements of Cash Flows for the years ended August 31, 2015, 2014 and 2013 ..............
67
Notes to Consolidated Financial Statements ............................................................................................ 68-89

Page

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders, Audit Committee and Board of Directors
Northern Technologies International Corporation and Subsidiaries

We have audited the accompanying consolidated balance sheets of Northern Technologies International Corporation
and Subsidiaries as of August 31, 2015 and 2014, and the related consolidated statements of operations, comprehensive
income (loss), equity and cash flows for the years ended August 31, 2015, 2014 and 2013. We also have audited
Northern Technologies International Corporation and Subsidiaries’ internal control over financial reporting as of
August 31, 2015, based on criteria established in Internal Control ‑ Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) (2013 framework). These consolidated financial
statements are the responsibility of the company’s management. Our responsibility is to express an opinion on these
consolidated financial statements and an opinion on the company’s internal control over financial reporting based on
our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement and whether effective internal control over financial
reporting was maintained in all material respects. Our audits of the consolidated financial statements included
examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements,
assessing the accounting principles used and significant estimates made by management and evaluating the overall
consolidated financial statement presentation. Our audit of internal control over financial reporting included obtaining
an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits
also included performing such other procedures as we considered necessary in the circumstances. We believe that our
audits provide a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being
made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of Northern Technologies International Corporation and Subsidiaries as of August 31, 2015 and 2014
and the results of their operations and their cash flows for the years ended August 31, 2015, 2014 and 2013, in
conformity with accounting principles generally accepted in the United States of America. Also in our opinion,
Northern Technologies International Corporation and Subsidiaries maintained, in all material respects, effective internal
control over financial reporting as of August 31, 2015, based on criteria established in Internal Control ‑ Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) (2013
framework).

/s/ Baker Tilly Virchow Krause, LLP
Minneapolis, Minnesota
November 13, 2015

NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - AUGUST 31, 2015 AND 2014

ASSETS
CURRENT ASSETS:

Cash and cash equivalents
Available for sale securities
Receivables:

Trade excluding joint ventures, less allowance for doubtful accounts

of $40,000 at both August 31, 2015 and 2014

Trade joint ventures
Fees for services provided to joint ventures

Income taxes
Inventories
Prepaid expenses
Deferred income taxes

Total current assets

PROPERTY AND EQUIPMENT, net

OTHER ASSETS:

Investments in joint ventures
Investments at carrying value (Note 8)
Deferred income taxes
Patents and trademarks, net
Other
Total other assets
Total assets

LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable
Accrued liabilities:

Payroll and related benefits
Other

Total current liabilities

COMMITMENTS AND CONTINGENCIES (Note 18)

EQUITY:

Preferred stock, no par value; authorized 10,000 shares; none issued and
outstanding
Common stock, $0.02 par value per share; authorized 10,000,000

shares; issued and outstanding 4,539,045 and 4,504,552, respectively

Additional paid-in capital
Retained earnings
Accumulated other comprehensive income (loss)
Stockholders’ equity
Non-controlling interests
Total equity
Total liabilities and equity

See notes to consolidated financial statements.

August 31, 2015

August 31, 2014

2,623,981

2,027,441

2,477,017
5,519,766

4,027,167
645,377
1,449,162
198,462
7,468,441
411,473
424,108
19,275,612

7,293,163

20,544,238
1,883,668
1,176,012
1,262,219
130,736
24,996,873
51,565,648

3,596,247
951,286
2,612,899
762
5,961,399
411,226
789,364
22,319,966

6,477,987

22,961,989
—
943,279
1,197,700
156,854
25,259,822
54,057,775

2,101,175

2,225,029

1,056,257
514,409
3,671,841

1,847,246
394,380
4,466,655

—

90,781
13,441,264
34,522,871
(3,180,811)
44,874,105
3,019,702
47,893,807
51,565,648

—

90,092
12,676,546
32,733,300
253,925
45,753,863
3,837,257
49,591,120
54,057,775

NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED AUGUST 31, 2015, 2014 and 2013

NET SALES:
Net sales, excluding joint ventures
Net sales, to joint ventures
Total net sales

Cost of goods sold
Gross profit

JOINT VENTURE OPERATIONS:

Equity in income from joint ventures
Fees for services provided to joint ventures

To Total joint venture operations

OPERATING EXPENSES:

Selling expenses
General and administrative expenses
Expenses incurred in support of joint ventures
Research and development expenses
Total operating expenses

OPERATING INCOME

INTEREST INCOME
INTEREST EXPENSE
OTHER INCOME

2015

2014

2013

27,491,392
2,831,301
30,322,693

23,601,514
3,224,594
26,826,108

19,724,205
2,777,659
22,501,864

20,555,932
9,766,761

17,803,153
9,022,955

15,473,212
7,028,652

5,936,565
5,715,491
11,652,056

5,920,603
8,142,863
14,063,466

5,237,711
7,352,980
12,590,691

5,820,748
6,531,576
1,867,570
4,047,279
18,267,173

5,221,738
5,393,531
1,408,014
4,368,752
16,392,035

4,845,676
4,605,979
1,387,197
3,815,515
14,654,367

3,151,644

6,694,386

4,964,976

34,835
(20,960)
515

11,617
(47,322)
4,393

34,614
(52,215)
670,126

INCOME BEFORE INCOME TAX EXPENSE

3,166,034

6,663,074

5,617,501

INCOME TAX EXPENSE

NET INCOME

648,674

1,124,662

864,000

2,517,360

5,538,412

4,753,501

NET INCOME ATTRIBUTABLE TO NON-CONTROLLING
INTERESTS

727,789

1,432,040

1,386,607

NET INCOME ATTRIBUTABLE TO NTIC

1,789,571

4,106,372

3,366,894

NET INCOME ATTRIBUTABLE TO NTIC PER COMMON
SHARE:

Basic
Diluted

$
$

0.40
0.38

$
$

0.92
0.90

$
$

0.76
0.75

WEIGHTED AVERAGE COMMON SHARES

ASSUMED OUTSTANDING:

Basic
Diluted

See notes to consolidated financial statements.

4,521,788
4,649,060

4,454,836
4,579,498

4,421,636
4,475,895

NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
YEARS ENDED AUGUST 31, 2015, 2014 AND 2013

NET INCOME

2015
2,517,360

2014
5,538,412

2013
4,753,501

OTHER COMPREHENSIVE (LOSS) INCOME – FOREIGN

CURRENCY TRANSLATION ADJUSTMENT

(3,835,705)

(49,463)

56,909

COMPREHENSIVE (LOSS) INCOME

(1,318,345)

5,488,949

4,810,410

COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO
NON-CONTROLLING INTERESTS

326,820

1,444,813

1,404,938

COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO
NTIC

(1,645,165)

4,044,136

3,405,472

See notes to consolidated financial statements.

NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY – YEARS ENDED AUGUST 31, 2015, 2014 and 2013

STOCKHOLDERS’ EQUITY

Common Stock

Amount

Additional

Paid-in

Capital

Retained

Earnings

Accumulated

Other

Non-

Comprehensive

Controlling

Income (Loss)

Interests

Total

Equity

BALANCE AT AUGUST 31, 2012

4,403,656

$ 88,073

$11,130,966

$ 25,260,034

277,583

$ 187,913

$ 36,944,569

Exercise of stock options
Stock issued for employee stock
purchase plan

Stock option expense

Effect of subsidiary consolidation
Dividend received by non-controlling
interest

Comprehensive income

22,171

6,209

444

124

207,910

56,615

306,451

208,354

56,739

306,451

3,960,920

(1,752,842)

3,366,894

38,578

1,404,938

4,810,410

BALANCE AT AUGUST 31, 2013

4,432,036

$ 88,641

$11,701,942

$ 28,626,928

316,161

$ 3,800,929

$ 44,534,601

Exercise of stock options
Stock issued for employee stock
purchase plan

Stock option expense
Dividend received by non-controlling
interest
Investment by non-controlling
interest

Comprehensive income (loss)

69,184

3,332

1,384

478,076

42,513

454,015

479,460

42,580

454,015

(1,440,000)

31,515

4,106,372

(62,236)

1,444,813

5,488,949

BALANCE AT AUGUST 31, 2014

4,504,552

$ 90,092

$12,676,546

$ 32,733,300

253,925

$ 3,837,257

$ 49,591,120

Repurchase of common stock

Exercise of stock options
Stock issued for employee stock
purchase plan

Stock option expense
Dividend received by non-controlling
interest
Investment by non-controlling
interest

Comprehensive income (loss)

(1,587)

32,874

3,206

(32)

657

(24,314)

235,432

57,917

495,683

1,789,571

(3,434,736)

(24,346)

236,089

57,981

495,683

(1,160,000)

15,625

326,820

15,625

(1,318,345)

BALANCE AT AUGUST 31, 2015

4,539,045

$ 90,781

$13,441,264

$ 34,522,871

(3,180,811)

$ 3,019,702

$ 47,893,807

See notes to consolidated financial statements.

NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED AUGUST 31, 2015, 2014 and 2013

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income

Adjustments to reconcile net income to net cash (used in) provided by operating
activities:

2015

2014

2013

2,517,360

5,538,412

4,753,501

Stock-based compensation
Depreciation expense
Amortization expense
Loss on disposal of assets
Equity in income from joint ventures
Dividends received from joint ventures
Deferred income taxes
Increase in allowance on doubtful accounts
Gain on sale of equipment

Changes in current assets and liabilities:

Receivables:

Trade, excluding joint ventures
Trade, joint ventures
Fees for services provided to joint ventures
Income taxes

Inventories
Prepaid expenses and other
Accounts payable
Income tax payable
Accrued liabilities

Net cash (used in) provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Investment in joint venture

Additions to property and equipment

Effect of subsidiary consolidation on cash
Purchase of available for sale securities
Proceeds from sale of available for sale securities

Additions to patents

Net cash provided by (used in) investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of note payable
Dividend received by non-controlling interest

Investment by non-controlling interest

Repurchase of common stock

Proceeds from employee stock purchase plan
Proceeds from exercise of stock options
Net cash used in financing activities

495,683
530,449
87,663
20,689
(5,936,565)
2,983,338
131,777
—
31,708

(699,088)
305,909
1,163,737
(258,329)
(1,679,654)
25,028
127,907
31,667
(634,823)
(755,544)

—
(1,438,919)
—
—
3,492,325
(152,182)
1,901,224

—
(1,160,000)
15,625
(24,346)
57,981
236,089
(874,651)

454,015
454,889
86,652
472
(5,920,603)
7,431,306
(230,883)
20,000
—

(249,965)
(91,852)
(166,882)
150,764
(825,176)
(62,969)
365,797
(4,191)
473,126
7,422,912

(110,988)
(1,602,441)
—
(6,019,766)
500,000
(224,185)
(7,457,380)

(933,414)
(1,440,000)
36,956
—
42,580
479,460
(1,814,418)

306,451
435,678
71,405
84,396
(5,237,711)
3,155,737
124,935
—
—

(894,888)
(124,891)
213,002
(98,427)
(1,017,188)
363,337
78,623
8,435
(311,693)
1,910,702

—
(1,488,059)
1,612,768
—
—
(255,259)
(130,550)

(76,119)
(1,752,842)
—
—
56,739
208,354
(1,563,867)

EFFECT OF EXCHANGE RATE CHANGES ON CASH:

(124,065)

11,646

(39,574)

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR

146,964
2,477,017

(1,837,239)
4,314,258

176,711
4,137,547

CASH AND CASH EQUIVALENTS AT END OF YEAR

2,623,981

2,477,017

4,314,258

See notes to consolidated financial statements.

NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED AUGUST 31, 2015, 2014 AND 2013

NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Nature of Business – Northern Technologies International Corporation and Subsidiaries (the Company) develops
and markets proprietary environmentally beneficial products and services in over 60 countries either directly or
via a network of joint ventures, independent distributors and agents. The Company’s primary business is
corrosion prevention marketed mainly under the ZERUST® brand. The Company has been selling its
proprietary ZERUST® rust and corrosion inhibiting products and services to the automotive, electronics,
electrical, mechanical, military and retail consumer markets for over 35 years, and more recently, has targeted
and expanded into the oil and gas industry. The Company also sells a portfolio of biobased and compostable
(fully biodegradable) polymer resins and finished products under the Natur-Tec® brand. These products are
intended to reduce the Company’s customers’ carbon footprint and provide environmentally sound disposal
options. The Company’s two operating segments are ZERUST and Nature-Tec.

The Company participates, either directly or indirectly, in 19 active joint venture arrangements in North
America, Europe and Asia. Each of these joint ventures generally manufactures and markets products in the
geographic territory to which it is assigned. While most of the Company’s joint ventures exclusively sell rust
and corrosion inhibiting products, some of the joint ventures also sell the Company’s Natur-Tec® resin
compounds and finished products. The profits of joint ventures are shared by the respective joint venture
owners in accordance with their respective ownership percentages. The Company typically owns 50% or less of
its joint venture entities and does not control the decisions of these entities, including dividend declaration or
amount in any given year.

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

Principles of Consolidation - NTIC evaluates its voting and variable interests in entities on a qualitative and
quantitative basis. NTIC consolidates entities in which it concludes it has the power to direct the activities that
most significantly impact an entity’s economic success and has the obligation to absorb losses or the right to
receive benefits that could be significant to the entity. The consolidated financial statements include the
accounts of Northern Technologies International Corporation, its wholly-owned subsidiaries, Northern
Technologies Holding Company, LLC, NTIC (Shanghai) Co., Ltd. (NTIC China), Northern Technologies India
Private Limited (Natur-Tec India), NTIC’s majority-owned subsidiary in Brazil, Zerust Prevenção de Corrosão
S.A.(Zerust Brazil) and NTIC’s majority-owned holding company, NTI Asean LLC (NTI Asean). NTIC’s
consolidated financial statements do not include the accounts of any of its joint ventures.

Non-Controlling Interests – The Company owns 85% of Zerust Brazil, 60% of NTI Asean, and 90% of Natur-
Tec India. The remaining ownership is accounted for as non-controlling interests and reported as part of equity
in the consolidated financial statements. The Company allocates gains and losses to the non-controlling interest
even when such allocation might result in a deficit balance, reducing the losses attributed to the controlling
interest, changes in ownership interests are treated as equity transactions if the Company maintains control.

Reclassification - Certain amounts reported in the consolidated financial statements for the previous reporting
periods have been reclassified to conform to the current period presentation. Beginning in the second quarter of
fiscal 2015, the Company reclassified dividends received from equity method from investing cash flows to

operating cash flows on the consolidated statements of cash flows for all periods presented. The classification
reflects the continued profitability and returns of those profits to its owners, including the Company. The
reclassification did not impact net income or equity.

Net Sales –The Company includes net sales to its joint ventures and net sales to unaffiliated customers as
separate line items on its consolidated statements of operations. There are no sales originating from the
Company’s joint ventures included in the amount, as the Company’s investments in its joint ventures are
accounted for using the equity method.

Revenue Recognition – The Company recognizes revenue from the sale of its products when persuasive
evidence of an arrangement exists, the product has been delivered, the price is fixed and determinable and
collection of the resulting receivable is reasonably assured. These criteria are met when risk of loss and title
pass to the customer, distributor or joint venture entity. Sales and use taxes charged to customers are reported
on a net basis.

Trade Receivable – Payment terms for the Company’s unaffiliated customers are determined based on credit
risk and vary by customer. The Company typically offers standard payment terms to unaffiliated customers of
net 30 days. The Company does not accrue interest on past due accounts receivable. The Company reviews the
credit histories of its customers before extending unsecured credit. The Company presents accounts and notes
receivable, net of an allowance for doubtful accounts. Each quarter, the Company prepares an analysis of its
ability to collect outstanding receivables that provides a basis for an allowance estimate for doubtful accounts.
In doing so, the Company evaluates the age of its receivables, past collection history, current financial
conditions of key customers and its joint ventures, and economic conditions. Based on this evaluation, the
Company establishes a reserve for specific accounts and notes receivable that it believes are uncollectible, as
well as an estimate of uncollectible receivables not specifically known. The Company believes that an analysis
of historical trends and its current knowledge of potential collection problems provide the Company with
sufficient information to establish a reasonable estimate for an allowance for doubtful accounts. In the event the
Company determines that a smaller or larger uncollectible accounts reserve is appropriate, the Company records
a credit or charge to selling expense in the period that it made such determination. Accounts receivable have
been reduced by an allowance for uncollectible accounts of $40,000 at August 31, 2015 and 2014. Accounts are
considered past due based on terms agreed upon between the Company and the customer. Accounts receivable
are written-off only after all collection attempts have failed and are based on individual credit evaluation and
specific circumstances of the customer.

The following table is a tabular rollforward for the allowance for doubtful accounts:

August 31, 2012
Bad debts

Adjustment to provision
August 31, 2013
Bad debts

Adjustment to provision
August 31, 2014
Bad debts

Adjustment to provision
August 31, 2015

$ 20,000
21,000
(21,000)
$ 20,000
107,000
(87,000)
40,000
6,000
(6,000)
$40,000

Trade Receivables from Joint Ventures – Trade receivables from joint ventures arise from sales of products the
Company makes to its joint ventures. Payment terms for the Company’s joint ventures also are determined
based on credit risk; however, additional consideration also is given to the individual joint venture due to the
transportation time associated with ocean delivery of most products and certain other factors. Generally,

accounts receivable from the Company’s joint ventures unpaid after 90 days are considered past due. The
Company does not accrue interest on past due balances. The Company periodically reviews amounts due from
its joint ventures for collectability, and based on past experience and continuous review of the balances due,
determined an allowance for doubtful accounts related to its joint venture receivables is not necessary at August
31, 2015 or 2014.

Fees for Services Provided to Joint Ventures – The Company provides services to its joint ventures including
consulting, legal, travel, insurance, technical and marketing services. The Company receives fees for the
services it provides to its joint ventures. The fees for services received by the Company from its joint ventures
are generally based on either a flat fee or a percentage of net sales by the Company’s joint ventures depending
on local laws and tax regulations. The Company recognizes revenues related to fees for services provided to its
joint ventures when earned, amounts are determinable and collectability is reasonably assured. Under the
Company’s agreements with its joint ventures, amounts are earned when product is shipped from joint venture
facilities. The Company reviews the financial situation of each of its joint ventures to assist in the likelihood of
collections on amounts earned. The Company accounts for these fees on a cash basis if uncertainty exists
surrounding the collection of such fees.

Cash and Cash Equivalents - The Company includes as cash and cash equivalents highly liquid, short-term
investments with maturity of three months or less when purchased, which are readily convertible into known
amounts of cash. The Company maintains its cash in high quality financial institutions. The balances, at times,
may exceed federally insured limits.

Available for Sale Securities – Available for sale securities are recorded at fair value. Unrealized holding gains
and losses on available for sale securities are excluded from earnings.

Inventories - Inventories are recorded at the lower of cost (first-in, first-out basis) or market.

Property and Depreciation - Property and equipment are stated at cost. Depreciation is computed using the
straight-line method based on the estimated service lives of the various assets as follows:

Buildings and improvements
Machinery and equipment

5-30 years
3-10 years

Investments in Joint Ventures - Investments in the Company’s joint ventures are accounted for using the equity
method. Under the equity method, investments are initially recorded at cost and are adjusted for dividends,
distributed and undistributed earnings and losses, changes in foreign currency exchange rates and additional
investments. In the event the Company’s share of joint venture’s cumulative losses exceed the Company’s
investment balance, the balance is reported at zero value until proportionate income exceeds the losses. The
Company assesses its joint ventures for impairment on an annual basis as of August 31 of each year as part of its
fiscal year end analysis. In addition to the annual review for impairment, the Company reviews the operating
results of each joint venture on a quarterly basis in comparison to its historical operating results and its accrual
of fees for services provided to joint ventures. If the operating results of a joint venture do not meet financial
performance expectations, an additional evaluation is performed on the joint venture. The Company’s
evaluation of its investments in joint ventures requires the Company to make assumptions about future cash
flows of its joint ventures. These assumptions require significant judgment and actual results may differ from
assumed or estimated amounts. All investments in joint ventures have positive equity as of August 31, 2015 and
2014.

Recoverability of Long-Lived Assets - The Company reviews its long-lived assets whenever events or changes in
circumstances indicate the carrying amount of the assets may not be recoverable. The Company determines
potential impairment by comparing the carrying value of the assets with expected net cash flows expected to be

provided by operating activities of the business or related products. If the sum of the expected undiscounted
future net cash flows is less than the carrying value, the Company evaluates if an impairment loss should be
recognized. An impairment loss is measured by comparing the amount by which the carrying value exceeds the
fair value of the asset.

Income Taxes - The Company utilizes the liability method of accounting for income taxes which requires an
asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets
and liabilities are determined based on the differences between the financial statement and tax basis of assets
and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The
effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that
includes the enactment date.

The Company records net deferred tax assets to the extent the Company believes these assets will more likely
than not be realized. In making such a determination, the Company considers all available positive and negative
evidence, including future reversals of existing taxable temporary differences, projected future taxable income,
tax-planning strategies, and results of recent operations. In the event the Company determines that it would be
able to realize its deferred income tax assets in the future in excess of their net recorded amount, the Company
would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for
income taxes.

The Company records uncertain tax positions on the basis of a two-step process whereby the Company
determines whether it is more likely than not that the tax positions will be sustained based on the technical
merits of the position and those tax positions that meet the more-likely-than-not recognition threshold. The
Company recognizes the largest amount of tax benefit that is greater than 50 percent likely to be realized upon
ultimate settlement with the related tax authority.

Foreign Currency Translation (Accumulated Other Comprehensive Income (Loss)) - The functional currency of
NTIC China, Zerust Brazil, Natur-Tec India and each unconsolidated international joint venture is the applicable
local currency. The translation of the applicable foreign currencies into U.S. dollars is performed for balance
sheet accounts using exchange rates in effect at the balance sheet date and for revenue and expense accounts
using an average monthly exchange rate. Translation gains or losses are reported as an element of other
comprehensive income (loss).

The Company (excluding NTIC China, Zerust Brazil, Natur-Tec India, NTI Asean and its joint ventures)
conducts all foreign transactions based on the U.S. dollar. Since investments in joint ventures are accounted for
using the equity method, any changes in foreign currency exchange rates are reflected as a foreign currency
translation adjustment and does not change the equity in income from joint ventures reflected in the Company’s
consolidated statements of operations.

Fair Value of Financial Instruments – The carrying value of cash and cash equivalents, available for sale
securities, short-term accounts and notes receivable, notes payable, trade accounts payables, and other accrued
expenses approximate fair value because of the short maturity of those instruments. The fair value of the
Company’s former long-term debt approximated the carrying values based upon current market rates of interest.

Shipping and Handling - The Company records all amounts billed to customers in a sales transaction related to
shipping and handling as sales. The Company records costs related to shipping and handling in cost of goods
sold.

Research and Development - The Company expenses all costs related to product research and development as
incurred. The costs related to product research and development are the net amount after being reduced by
reimbursements related to certain research and development contracts. The Company accrues proceeds received

under such contracts and offsets research and development expenses incurred in equal installments over the
timelines associated with completion of the contracts’ specific objectives and milestones.

Common Stock – The Company issues new shares of common stock upon the exercise of stock options.

Stock-Based Compensation – The Company recognizes compensation cost relating to share-based payment
transactions, including grants of employee stock options and transactions under the Company’s employee stock
purchase plan, in its consolidated financial statements. That cost is measured based on the fair value of the
equity or liability instruments issued. The Company measures the cost of employee services received in
exchange for stock options and other stock-based awards based on the grant-date fair value of the award, and
recognizes the cost over the period the employee is required to provide services for the award (generally the
vesting term).

Use of Estimates - The preparation of the financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In May 2014, the Financial Accounting Standards Board (FASB) issued Revenue from Contracts with
Customers, Topic 606 (Accounting Standards Update (ASU) No. 2014-09), which provides a framework for the
recognition of revenue, with the objective that recognized revenues properly reflect amounts an entity is entitled
to receive in exchange for goods and services. This guidance, which includes additional disclosure requirements
regarding revenue, cash flows and obligations related to contracts with customers, was originally to be effective
for the Company beginning in fiscal year 2018. In July 2015, the FASB confirmed a one year deferral of the
effective date of the new revenue standard which also allows early adoption as of the original effective date. The
updated guidance will be effective for the Company’s first quarter of 2019. The Company is currently
evaluating the impact of adopting ASU 2014-09 on its consolidated financial statements, but believes there will
be no material impact, if any.

In July 2015, the FASB issued ASU No. 2015-11, “Inventory”, which modifies the subsequent measurement of
inventories recorded under a first-in-first-out or average cost method. Under the new standard, such inventories
are required to be measured at the lower of cost and net realizable value. The new standard is effective for the
Company’s fiscal year 2018, with prospective application. The Company does not expect the adoption of the
provisions of ASU 2015-11 to have a material impact on its consolidated financial statements.

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

NTI ASEAN

NTI Asean is an entity that holds investments in eight entities operating in the Association of Southeast Asian
Nations (ASEAN) region, including the following countries: China (although the joint venture agreements for
the Chinese joint venture were terminated as of December 31, 2014 and liquidation of this joint venture is
anticipated), Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand.

Prior to September 1, 2012, the Company owned 50% of the equity and voting rights of NTI Asean and
accounted for its investment using the equity method, as its ownership was considered to be less than a majority.
On September 1, 2012, the Company obtained an additional 10% ownership interest in NTI Asean in exchange
for a license agreement, and thereafter holds 60% of the equity and voting rights of NTI Asean.

The Company accounted for the transaction resulting in the additional ownership as a business combination.
Beginning in the first quarter of fiscal 2013, the Company consolidated the results of NTI Asean. Immediately
prior to the transaction, the Company re-measured the fair value of NTI Asean and determined that there was no
difference between the fair value and the book value of the entity. As a result, there was no accounting impact
related to the business combination in the consolidated statements of operations.

The Company determined the fair value of NTI Asean using the capitalized income method, including a
capitalization rate of 25%. The allocation of the total transaction amount was as follow:

Net assets acquired (liabilities assumed):
Cash and cash equivalents
Accounts receivables
Investments in joint ventures

Value of assets

Purchase price:
Fair value of non-controlling interest
Value of previously held interest
Total consideration

$ 1,613,000
1,342,000
4,967,000

$ 7,922,000

$ 3,961,000
3,961,000
$ 7,922,000

INVENTORIES

Inventories consisted of the following:

Production materials
Finished goods

PROPERTY AND EQUIPMENT, NET

Property and equipment, net consisted of the following:

Land
Buildings and improvements
Machinery and equipment

Less accumulated depreciation

PATENTS AND TRADEMARKS, NET

Patents and trademarks, net consisted of the following:

Patents and trademarks
Less accumulated amortization

August 31, 2015
1,445,014
6,023,427
7,468,441

August 31, 2014
1,242,649
4,718,750
5,961,399

August 31, 2015
310,365
6,180,089
4,090,619
10,581,073
(3,287,910)
7,293,163

August 31, 2014
310,365
5,695,268
3,713,145
9,718,778
(3,240,791)
6,477,987

August 31, 2015
2,440,022
(1,177,803)

August 31, 2014
2,287,840
(1,090,140)

1,262,219

1,197,700

Patent and trademark costs are amortized over seven years. Costs incurred related to patents and trademarks are
capitalized until filed and approved, at which time the amounts capitalized to date are amortized and any further
costs, including maintenance costs, are expensed as incurred. Amortization expense was $87,663, $86,652 and
$71,405 for the years ended August 31, 2015, 2014 and 2013, respectively. Amortization expense is estimated to
approximate $80,000 in each of the next five fiscal years.

INVESTMENTS IN JOINT VENTURES

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

Financial information of the Company’s joint venture in Germany, Excor Korrosionsschutz – Technologien und
Produkte GmbH (EXCOR), China, Tianjin-Zerust Anticorrosion Co., Ltd. (Tianjin Zerust) (See Note 8), Finland
and India for the periods for which it was accounted for under the equity method and all of the Company’s
other joint ventures, are summarized as follows:

August 31, 2015

Current assets
Total assets
Current liabilities
Noncurrent liabilities
Joint ventures’ equity
Northern Technologies International Corporation’s
share of joint ventures’ equity
Northern Technologies International Corporation's
share of joint ventures’ undistributed earnings

TOTAL
$49,295,116
52,853,938
12,288,383
1,215,139
39,350,417

EXCOR
$22,620,323
24,606,880
3,360,142
—
21,246,738

India
$ 4,035,396
4,328,196
1,030,718
155,168
3,142,310

Finland
$ 1,415,816
2,197,047
178,961
433,624
1,584,461

All Other
$21,223,581
21,721,815
7,718,562
626,347
13,376,908

20,544,238

11,571,361

1,482,342

840,263

6,650,272

$18,483,377

$11,540,456

$617,520

$820,263

$5,505,138

Fiscal Year Ended August 31, 2015

Net sales
Gross profit
Net income
Northern Technologies International Corporation’s
share of equity in income from joint ventures

TOTAL
$99,026,251
48,397,318
11,849,107

EXCOR
$36,872,664
19,993,763
8,201,659

India
$7,000,715
3,292,243
983,179

Finland
$3,557,252
1,858,310
518,900

All Other
$51,595,620
23,253,002
2,145,369

$ 5,936,565

$ 4,091,608

$ 492,379

$ 263,749

$ 1,088,829

August 31, 2014

TOTAL
$ 61,491,957
65,466,964
17,542,634
1,929,488
45,994,842

EXCOR
$ 24,361,157
26,652,165
3,512,143
—
23,140,022

Tianjin
Zerust
9,774,680
9,793,803
4,438,380
868,377
4,487,046

All Other
$ 27,356,120
29,020,996
9,592,111
1,061,111
18,367,775

22,961,989

11,570,013

2,243,524

9,148,452

$ 20,540,523

$ 11,539,108

2,193,524

6,807,891

Net sales
Gross profit
Net income
Northern Technologies International Corporation’s
share of equity in income from joint ventures

Fiscal Year Ended August 31, 2014

TOTAL
$ 118,848,890
56,960,918
11,842,338

EXCOR
$ 39,944,812
21,045,091
7,906,693

Tianjin
Zerust
$ 15,920,685
7,463,168
1,274,487

All Other
$ 62,983,393
28,452,659
2,661,158

$ 5,920,603

$ 3,950,915

626,763

1,342,925

Fiscal Year Ended August 31, 2013

TOTAL
$ 113,189,068
52,058,609
10,650,542

EXCOR
$ 36,476,544
19,470,322
7,009,897

Tianjin
Zerust
$ 15,161,289
7,153,395
1,157,995

All Other
$ 61,551,235
25,434,891
2,482,650

$ 5,237,711

$ 3,507,057

579,376

1,151,278

On January 2, 2015, the Company announced that, effective as of December 31, 2014, the Company terminated
its joint venture agreements with its previous joint venture in China, Tianjin Zerust, and began the process of
liquidating the joint venture entity. Since December 31, 2014, the Company has conducted business in China
through a wholly-owned subsidiary, NTIC (Shanghai) Co. Ltd. As of December 31, 2014, the Company started
recognizing Tianjin Zerust based on its carrying value instead of the equity method since the Company no
longer expects to significantly affect the joint venture’s operations or decision making. See Note 8.

Because of the lack of financial and other information received from Tianjin Zerust, it is possible that receipt of
future financial and other information from Tianjin Zerust may impact the realization of NTIC’s investment in
and realization of a receivable from Tianjin Zerust. The last time the Company received financial information
from Tianjin Zerust was through November 2014. NTIC as of August 31, 2015, does not believe there are any
triggering events that would require an impairment test. NTIC’s current net investment is approximately $1.1
million, which is 60% of its investment in Tianjin Zerust, which was $1,883,668 as of August 31, 2015. The
Company will continue to evaluate the realization of this asset on an ongoing basis and adjust if necessary.

The Company records expenses that are directly attributable to the joint ventures on its consolidated statements
of operations in the line item “Expenses incurred in support of joint ventures.” The expenses include items such
as employee compensation and benefit expenses, travel expense and consulting expense.

The Company did not make any joint venture investments during fiscal 2015. On May 31, 2014, NTI Asean
purchased the other 50% ownership interest in its joint venture in Singapore for $110,988. The Company did not
make any other joint venture investments during fiscal 2014.

On November 30, 2013, the Company agreed to sell its indirect ownership interest in Mütec GmbH (Mütec), the
Company’s former joint venture in Germany which manufactures proprietary electronic sensing instruments. In
connection with the transaction, the owner of Mütec borrowed $168,000 from the Company to be repaid over
four years with no interest. As of August 31, 2015 and August 31, 2014, $125,891 and $156,854 was due to the
Company related to this transaction.

8. CHINA OPERATIONS

Effective December 31, 2014, the Company terminated its joint venture agreements with its previous joint
venture in China, Tianjin Zerust, began the process of liquidating the joint venture entity, and commenced
operations in China through a wholly-owned subsidiary, NTIC (Shanghai) Co. Ltd. on January 1, 2015.
Effective December 31, 2014, the Company’s investment in Tianjin Zerust is reported at carrying value based
on the Company’s decreased level of influence over the entity, and the Company has reclassified previously
unrecognized gains on foreign currency translation from accumulated other comprehensive income. Any
declines in the fair value are reflected as adjustments to the carrying value. No such adjustments were recorded
during fiscal 2015.

The investment in Tianjin Zerust is as follows:

Equity method investment – August 31, 2014
Equity in earnings – fiscal year 2015
Reclassification of translation gains on foreign currency translation
Investment at carrying value – August 31, 2015

Investment
2,243,524
132,824
(492,680)
1,883,668

The Company incurred expenses of $1,642,258 during fiscal 2015 related to the termination of the joint venture
agreement with Tianjin Zerust, the initiation of the liquidation of Tianjin Zerust and the formation and initial
operation of NTIC China. Such expenses consisted primarily of legal expenses and personnel expenses
associated with the establishment of the subsidiary and the hiring of new personnel. These expenses are
recorded as operating expenses on the consolidated statements of operations and are partially off-set by the gross
margin contribution from sales of NTIC China.

Because of the lack of financial and other information received from Tianjin Zerust, it is possible that if and
when financial and other information is received from Tianjin Zerust that the Company may need to recognize
an impairment charge on its investment in Tianjin Zerust. The Company estimates that its maximum exposure in
terms of an impairment charge would be approximately $1,130,200 on its investment in Tianjin Zerust, or 60%
of the entire investment at carrying value, which was $1,883,668 as of August 31, 2015.

CORPORATE DEBT

The Company has a revolving line of credit with PNC Bank of $3,000,000. No amounts were outstanding under
the line of credit as of both August 31, 2015 and August 31, 2014. At the option of the Company, outstanding
advances under the line of credit bear interest at either (a) an annual rate based on LIBOR plus 2.15% for the
applicable LIBOR interest period selected by the Company or (b) at the rate publicly announced by PNC Bank
from time to time as its prime rate. The line of credit matures on January 7, 2016

The line of credit is subject to 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, the
Company is subject to a minimum fixed charge coverage ratio of 1.10:1.00. As of August 31, 2015, the
Company was in compliance with all debt covenants.

10.

STOCKHOLDERS’ EQUITY

On January 15, 2015, the Company’s Board of Directors authorized the repurchase of up to $3,000,000 in shares
of common stock through open market purchases or unsolicited or solicited privately negotiated transactions.
This program has no expiration date but may be terminated by the Company’s Board of Directors at any time.
As of August 31, 2015, up to $2,975,654 in shares of common stock remained available for repurchase under the
stock repurchase program. During fiscal 2015, the Company repurchased and retired 1,587 shares of its common
stock at a price of $15.34 per share.

The following stock options to purchase shares of common stock were exercised during fiscal 2015:

Options
Exercised
18,000
18,000
2,333

Exercise
Price
9.76
7.65
10.20

The total intrinsic value of the options exercised during fiscal 2015 was $297,696.

The Company granted stock options under the Northern Technologies International Corporation Amended and
Restated 2007 Stock Incentive Plan (the 2007 Plan) to purchase an aggregate of 45,067 shares of its common
stock to various employees and directors during fiscal 2015. The weighted average per share exercise price of
the stock options is $20.10, which was equal to the fair market value of the Company’s common stock on the
date of grant.

During fiscal 2014, the Company did not purchase or retire any shares of its common stock. The following
stock options to purchase shares of common stock were exercised during fiscal 2014:

Options
Exercised
60,000
14,000

Exercise
Price
7.65
8.57

The total intrinsic value of the options exercised during fiscal 2014 was $890,955.

The Company granted stock options under the 2007 Plan to purchase an aggregate of 56,373 shares of its
common stock to various employees and directors during fiscal 2014. The weighted average per share exercise
price of the stock options is $14.83, which was equal to the fair market value of the Company’s common stock
on the date of grant.

During fiscal 2013, the Company did not purchase or retire any shares of its common stock. The following
stock options to purchase shares of common stock were exercised during fiscal 2013:

Options
Exercised
25,140
4,000
4,000
1,734
1,500
666

Exercise
Price
9.95
12.84
8.57
7.65
9.76
7.75

The total intrinsic value of the options exercised during fiscal 2013 was $45,533.

11.

NET INCOME PER COMMON SHARE

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

Options to purchase shares of common stock of 45,067 and 22,000 were excluded from the computation of
common share equivalents for fiscal 2015, 2014 and 2013, respectively, as the exercise prices of such options
were greater than market price of a share of common stock.

The following is a reconciliation of the earnings per share computation:

Numerator:
Net income attributable to NTIC

August 31, 2015
1,789,571

August 31, 2014
4,106,372

August 31, 2013
3,366,894

Denominator:
Basic-weighted shares outstanding
Weighted shares assumed upon exercise of
stock options

Diluted – weighted shares outstanding

4,521,788

4,454,836

4,421,636

127,272
4,649,060

124,662
4,579,498

54,259
4,475,895

Basic earnings per share:
Diluted earnings per share:

$
$

0.40
0.38

$
$

0.92
0.90

$
$

0.76
0.75

The dilutive impact summarized above relates to the periods when the average market price of Company stock
exceeded the exercise price of the potentially dilutive option securities granted. Earnings per common share
were based on the weighted average number of common shares outstanding during the periods when computing
the basic earnings per share. When dilutive, stock options are included as equivalents using the treasury stock
market method when computing the diluted earnings per share.

12.

STOCK-BASED COMPENSATION

The Company has two stock-based compensation plans under which stock options and other stock-based awards
have been granted, the Northern Technologies International Corporation Amended and Restated 2007 Stock
Incentive Plan (the 2007 Plan) and the Northern Technologies International Corporation Employee Stock
Purchase Plan (the ESPP). The Compensation Committee of the Board of Directors and the Board of Directors
administer these plans.

The 2007 Plan provides for the grant of incentive stock options, non-statutory stock options, stock appreciation
rights, restricted stock, stock unit awards, performance awards and stock bonuses to eligible recipients to enable
the Company and its subsidiaries to attract and retain qualified individuals through opportunities for equity
participation in the Company, and to reward those individuals who contribute to the achievement of the
Company’s economic objectives. Subject to adjustment as provided in the 2007 Plan, up to a maximum of
800,000 shares of the Company’s common stock are issuable under the 2007 Plan. Options granted under the
2007 Plan generally have a term of ten years and become exercisable over a three- or four-year period beginning
on the one-year anniversary of the date of grant. Options are granted at per share exercise prices equal to the
market value of the Company’s common stock on the date of grant. The Company issues new shares upon the
exercise of options. As of August 31, 2015, only stock options and stock bonuses had been granted under the
2007 Plan.

The maximum number of shares of common stock of the Company available for issuance under the ESPP is
100,000 shares, subject to adjustment as provided in the ESPP. The ESPP provides for six-month offering
periods beginning on September 1 and March 1 of each year. The purchase price of the shares is 90% of the
lower of the fair market value of common stock at the beginning or end of the offering period. This discount
may not exceed the maximum discount rate permitted for plans of this type under Section 423 of the Internal
Revenue Code of 1986, as amended. The ESPP is compensatory for financial reporting purposes.

The fair value of option grants is determined at date of grant, using the Black-Scholes option pricing model with
the assumptions listed below. The volatility factor used in the Black-Scholes option pricing model is based on
historical stock price fluctuations and the risk-free interest rate is based on U.S. treasury rates appropriate for the
expected term. Dividend yield and expected volatility are estimated using historical amounts that are anticipated
to be consistent with current values. Expected life of the option is based on the life of the option agreements.
Based on these valuations, the Company recognized compensation expense of $495,683, $454,015 and
$306,451 during fiscal 2015, 2014 and 2013, respectively, related to the options that vested during such time
period. As of August 31, 2015, the total compensation cost for non-vested options not yet recognized in the
Company’s consolidated statements of operations was $259,585. Stock-based compensation expense of
$179,785 and $79,800 is expected to be recognized during fiscal 2016 and 2017, based on outstanding options
as of August 31, 2015. Future option grants will impact the compensation expense recognized. Stock-based
compensation expense is included in general and administrative expense on the consolidated statements of
operations.

The Company currently estimates a ten percent forfeiture rate for stock options, and will continue to review this
estimate in future periods.

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

Dividend yield
Expected volatility
Expected life of option
Weighted average risk-free interest rate

August 31, 2015
0.00%
46.6%
10 years
1.63%

August 31, 2014
0.00%
47.4%
10 years
1.39%

August 31, 2013

0.00%
48.0%
5-10 years
0.71%

Stock option activity during the periods indicated is as follows:

Outstanding at August 31, 2012

Options granted
Options exercised
Options exercised

Outstanding at August 31, 2013
Options granted
Options exercised
Options terminated

Outstanding at August 31, 2014
Options granted
Options exercised
Options terminated

Aggregate
Intrinsic Value

Number of
Shares (#)
203,873
118,294
(37,040)
(24,500)

260,627
56,373
(74,000)
(4,000)

239,000
45,067
(38,333)
(4,000)

Weighted Average

Exercise Price
$ 10.01
10.25
9.96
13.12

$ 9.84
14.83
7.82
8.57

11.66
20.10
9.00
10.20

Outstanding at August 31, 2015

241,734

$ 13.72

$ 677,475

Number of
Shares (#)

Weighted Average

Exercise Price

Aggregate
Intrinsic Value

Exercisable at August 31, 2015

160,453

$ 12.13

$ 577,528

The weighted average per share fair value of options granted during fiscal 2015, 2014 and 2013 was $11.58,
$8.57, and $5.53, respectively. The weighted average remaining contractual life of the options outstanding as of
August 31, 2015, 2014 and 2013 was 6.60 years, 5.92 and 4.52 years, respectively.

13.

GEOGRAPHIC AND SEGMENT INFORMATION

Segment Information

The Company’s chief operating decision maker ("CODM") is its Chief Executive Officer. The Company’s
business is organized into two reportable segments: ZERUST® and Natur-Tec®. The Company has been selling
its proprietary ZERUST® rust and corrosion inhibiting products and services to the automotive, electronics,
electrical, mechanical, military and retail consumer markets for over 35 years, and more recently, has targeted
and expanded into the oil and gas industry. The Company also sells a portfolio of bio-based and compostable
(fully biodegradable) polymer resins and finished products under the Natur-Tec® brand.

The following tables present the Company’s business segment information in fiscal 2015, 2014 and 2013:

ZERUST® net sales
Natur-Tec® net sales

Total net sales

Fiscal 2015

26,042,909
4,279,784

Fiscal 2014

23,845,288
2,980,820

Fiscal 2013

20,457,198
2,044,666

$ 30,322,693

$ 26,826,108

$ 22,501,864

The following table sets forth the Company’s cost of goods sold for fiscal 2015, 2014 and 2013 by segment:

Fiscal 2015

Fiscal 2014

Fiscal 2013

Direct cost of goods sold
ZERUST®
$ 14,399,456 $ 12,941,234 $ 11,408,604
Natur-Tec®
1,731,398
Indirect cost of goods sold
2,333,210
Total net cost of goods sold $ 20,555,932 $ 17,803,153 $ 15,473,212

2,234,736
2,627,183

3,232,353
2,924,124

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

for each segment category.

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

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

Geographic Information

Net sales by geographic location were as follows:

Inside the U.S.A. to unaffiliated customers
Outside the U.S.A. to:

Joint ventures in which the Company is a

shareholder directly and indirectly

Unaffiliated customers

Fiscal Year Ended August 31,
2014
$ 17,908,563

2015
$ 19,329,979

2013

$16,027,619

3,240,980
7,751,734
$ 30,322,693

3,348,158
5,569,387
$ 26,826,108

2,952,612
3,521,633
$ 22,501,864

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

Fees for services provided to joint ventures by geographic location as a percentage of total fees for services
provided to joint ventures during fiscal 2015, 2014 and 2013, respectively, were as follows:

Germany
Poland
Japan
Thailand
China
France
United Kingdom
Sweden
India
Czech
Korea
Finland
Other

Fiscal 2015
873,400
600,255
599,108
554,881
494,080
412,608
396,514
323,610
277,548
229,185
192,539
281,620
480,143
$ 5,715,491

% of Total Fees
for Services
Provided to
Joint Ventures
in Fiscal 2015

15.3%
10.5%
10.5%
9.7%
8.6%
7.2%
6.9%
5.7%
4.9%
4.0%
3.4%
4.9%
8.4%
100.0%

Fiscal 2014
$ 1,032,234
652,291
669,522
604,316
2,118,018
508,705
385,294
440,117
364,918
288,367
315,916
355,391
407,775
$ 8,142,863

% of Total Fees
for Services
Provided to
Joint Ventures
in Fiscal 2014

12.7%
8.0%
8.2%
7.4%
26.0%
6.2%
4.7%
5.4%
4.5%
3.6%
3.9%
4.4%
5.0%
100.0%

Fiscal 2013
$ 1,004,958
525,282
723,977
621,807
2,063,369
496,897
236,125
415,547
—
210,827
393,307
321,256
339,628
$ 7,352,980

% of Total Fees
for Services
Provided to
Joint Ventures
in Fiscal 2013

13.7%
7.1%
9.8%
8.4%
28.1%
6.8%
3.2%
5.7%
0.0%
2.9%
5.3%
4.4%
4.6%
100.0%

See note 7 for additional details on geographical information regarding equity in income from joint ventures.

The geographical distribution of key financial statement data is as follows:

Brazil
India
China
North America

Total long-lived assets

At August 31, 2015
$

46,918 $
16,402
45,220
7,184,623
7,293,163 $

At August 31, 2014
115,726
24,766
—
6,337,495
6,477,987

Brazil
India
China
North America

Total net sales

Fiscal Year Ended
August 31, 2015
2,623,938
967,241
1,070,422
25,661,092
30,322,693

Fiscal Year Ended
August 31, 2014
3,079,695
581,535

—

23,164,878
26,826,108

Fiscal Year Ended
August 31, 2013
2,394,486
—
—
20,107,378
22,501,864

14.

RESEARCH AND DEVELOPMENT

The Company incurred $4,047,279, $4,368,752 and $3,815,515 of expense during fiscal 2015, 2014 and 2013,
respectively, in connection with its research and development activities. These amounts are net of
reimbursements related to certain research and development contracts. Such reimbursements totaled $0,
$45,788 and $274,728 for fiscal 2015, 2014 and 2013, respectively. The net fees are accounted for in the
“Research and Development Expenses” section of the consolidated statements of operations.

15.

RETIREMENT PLAN

The Company has a 401(k) employee savings plan. Employees who meet certain age and service requirements
may elect to contribute up to 15% of their salaries. The Company typically contributes the lesser of 50% of the
participant’s contributions or 3.5% of the employee’s salary. The Company recognized expense for the savings
plan of $214,008, $188,207 and $175,016 for fiscal 2015, 2014 and 2013, respectively.

16.

RELATED PARTY TRANSACTIONS

During fiscal 2015, 2014 and 2013, the Company made consulting payments of $100,000 per year to Bioplastic
Polymers LLC, an entity owned by Ramani Narayan, Ph.D., a director of the Company, and paid royalties of
$21,327, $14,388, and $10,244, respectively, based on net sales of the Company’s bioplastics products.

17.

INCOME TAXES

The provision for income taxes for the fiscal years ended August 31, 2015, 2014 and 2013 consists of the
following:

Current:

Federal
State

Foreign

Deferred:
Federal
State
Foreign

2015

Fiscal Year Ended August 31,
2014

2013

—
(37,000)
542,000

505,000

—
19,000
1,200,000

1,219,000

87,000
5,000
52,000
144,000

(89,000)
(6,000)

—

(95,000)

649,000

1,124,000

—
8,000
731,000

739,000

118,000
7,000
—
125,000

864,000

Reconciliations of the expected federal income tax at the statutory rate with the provisions for income taxes for
the fiscal years ended August 31, 2015, 2014 and 2013 are as follows:

Tax computed at statutory rates
State income tax, net of federal benefit
Tax effect on equity in (income) loss of international joint
ventures
Tax effect on dividends received from joint ventures
Tax effect of foreign operations
Foreign tax credit
Research and development credit
Valuation allowance
Tax-exempt income
Stock based compensation
Non-controlling interest in partnership income

Other

Fiscal Year Ended August 31,
2014
2,265,000
13,000

2015
1,076,000 $
(32,000)

(1,986,000)
1,470,000
996,000
(1,937,000)
(314,000)
1,379,000
-
99,000
(204,000)
102,000

(2,055,000)
3,285,000
1,131,000
(3,710,000)
(88,000)
687,000
-
-
(440,000)
36,000

2013
1,910,000
15,000

(1,781,000)
1,732,000
807,000
(2,524,000)
(364,000)
1,635,000
(230,000)
-
(425,000)
89,000

649,000 $

1,124,000

864,000

The Company has not provided U.S. income taxes or foreign withholding taxes with respect to its portion of the
cumulative undistributed earnings of foreign joint ventures that are essentially permanent in duration. The
Company’s portion of the cumulative undistributed earnings of foreign joint ventures that are essentially
permanent in duration were $18,483,377, $20,540,523 and $22,281,510 at August 31, 2015, 2014 and 2013,
respectively. During fiscal 2015, the Company recorded deferred income tax expense of $79,000 representing
foreign withholding taxes to be paid with respect to the portion of the cumulative undistributed earnings of
foreign joint ventures that it determined were not essentially permanent in duration. If some or all of the
undistributed earnings of the joint ventures are remitted to the Company in the future, income taxes, if any, after
the application of foreign tax credits will be provided at that time. To the extent undistributed earnings of the
Company’s joint ventures are distributed in the future, it is not expected to result in any material additional U.S.
income tax liability after the application of foreign tax credits.

The tax effect of the temporary differences and tax carryforwards comprising the net deferred taxes shown on
the consolidated balance sheets at August 31, 2015 and 2014 are as follows:

Current:
Accrued bonus
Allowance for doubtful accounts
Inventory costs
Prepaid expenses and other
Other accrued expenses
Deferred joint venture expenses

Total current

August 31,

2015

2014

174,000 $
14,500
81,200
(41,800)
102,100
93,200
424,100 $

524,000
14,500
100,800
(40,600)
86,800
104,100
789,600

Noncurrent:
Property and equipment
Goodwill
Other intangible assets
Nonqualified stock options
Foreign net operating loss carryforward
Capital loss carryforward
Foreign tax credit carryforward
Investment in foreign joint ventures
Research and development credit
New hire retention credit

Valuation allowance

Total noncurrent

August 31,

2015

2014

(204,000) $
19,400
1,103,800
308,900
26,800
-
4,654,800
(79,000)
2,224,600
10,600
8,065,900
(6,889,900)
1,176,000

(171,200)
27,300
825,200
260,400
-
50,900
4,141,100
-
1,910,800
10,600
7,055,100
(6,113,400)
941,700

At August 31, 2015, the Company had foreign tax credit carryforwards of approximately $4,654,800, of which
approximately $187,400 will expire if not utilized by August 31, 2016. In addition, the Company had federal
and state tax credit carryforwards of $2,235,200 at August 31, 2015 which begin to expire in fiscal 2019. These
federal and state tax credit carryforwards consist primarily of federal and Minnesota research and development
credit carryforwards. The Company also has foreign net operating loss carryforwards of $26,800 at August 31,
2015 which begin to expire in fiscal 2020.

As of August 31, 2015, the Company recorded a valuation allowance of $4,654,800 with respect to the foreign
tax credit carryforwards. In addition, the Company has recorded a valuation allowance of $2,335,100 with
respect to federal and state tax credit carryforwards.

As of August 31, 2014, the Company recorded a valuation allowance of $4,141,100 with respect to the foreign
tax credit carryforwards. In addition, the Company has recorded a valuation allowance of $1,919,800 with
respect to federal and state tax credit carryforwards.

The Company records a tax valuation allowance to reduce deferred tax assets to the amount expected to be
realized when it is more likely than not that some portion or all of its deferred tax assets will not be realized.
The Company determined based on all available evidence, including historical data and projections of future
results, that it is more likely than not that all of its deferred tax assets, except for its foreign tax credit
carryforward, federal and Minnesota research and development credit carryforwards, and capital loss
carryforwards will be fully realized. The Company determined that its deferred tax asset related to foreign tax
credit carryforwards will not be realized due to insufficient federal taxable income within the carryforward
period and the fact that for ordering purposes the foreign tax credit carryforwards are not allowed to be used
until after any current year foreign tax credits are utilized. In addition, based on historical data and future
projections, the Company determined that it is more likely than not that its deferred tax asset related to federal
and Minnesota research and development credit carryforwards will not be realized due to insufficient federal
and Minnesota taxable income within the carryforward period after considering the foreign tax credit usage.

The following table is a tabular rollforward for the valuation allowance:

August 31, 2012
Adjustment to valuation allowance
August 31, 2013
Adjustment to valuation allowance
August 31, 2014
Adjustment to valuation allowance
August 31, 2015

$ 4,933,100
1,153,000
$ 6,086,100
27,300
6,113,400
776,500
$ 6,889,900

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits:

Gross unrecognized tax benefits – beginning balance
Gross increases - prior period tax positions
Gross increases – current period tax positions
Gross unrecognized tax benefits – ending balance

Fiscal Year Ended August 31,

2015

180,000 $

15,000
8,000
203,000 $

2014

170,000
2,000
8,000
180,000

The entire amount of unrecognized tax benefits would affect the effective tax rate. It is not expected that the
amount of unrecognized tax benefits will change significantly in the next 12 months.

The Company recognizes interest and penalties related to unrecognized tax benefits as a component of the
Company’s income tax provision. Accrued interest and penalties are included within the related tax liability line
in the consolidated balance sheet. There was no liability for the payment of interest and penalties at both August
31, 2015 and August 31, 2014.

The Company is subject to taxation in the United States and various states and foreign jurisdictions. With few
exceptions, as of August 31, 2015, the Company is no longer subject to federal, state, local, or foreign
examinations by tax authorities for years prior to August 31, 2012.

18.

COMMITMENTS AND CONTINGENCIES

On August 18, 2015, the Compensation Committee of the Board of Directors of the Company approved the
material terms of an annual bonus plan for the Company’s executive officers as well as certain officers and
employees for the fiscal year ending August 31, 2016. For fiscal 2016 as in past years, the total amount
available under the bonus plan for all plan participants, including executive officers, is dependent upon the
Company’s earnings before interest, taxes and other income, as adjusted to take into account amounts to be paid
under the bonus plan and certain other adjustments (Adjusted EBITOI). Each plan participant’s percentage of
the overall bonus pool is based upon the number of plan participants, the individual’s annual base salary and the
individual’s position and level of responsibility within the company. In the case of each of the Company’s
executive officer participants, 75% of the amount of their individual bonus payout will be determined based
upon the Company’s actual EBITOI for fiscal 2016 compared to a pre-established target EBITOI for fiscal 2016
and 25% of the payout will be determined based upon such executive officer’s achievement of certain pre-
established individual performance objectives. The payment of bonuses under the plan are discretionary and
may be paid to executive officer participants in both cash and shares of NTIC common stock, the exact amount
and percentages will be determined by the Company’s Board of Directors, upon recommendation of the
Compensation Committee, after the completion of the Company’s consolidated financial statements for fiscal
2016.

On August 19, 2014, the Compensation Committee of the Board of Directors of the Company approved the
material terms of an annual bonus plan for the Company’s executive officers as well as certain officers and
employees for the fiscal year ending August 31, 2015. For fiscal 2015 as in past years, the total amount
available under the bonus plan for all plan participants, including executive officers, was dependent upon the
Company’s Adjusted EBITOI. Each plan participant’s percentage of the overall bonus pool was based upon the
number of plan participants, the individual’s annual base salary and the individual’s position and level of
responsibility within the company. In the case of each of the Company’s executive officer participants, 75% of
the amount of their individual bonus payout was determined based upon the Company’s actual EBITOI for
fiscal 2015 compared to a pre-established target EBITOI for fiscal 2015 and 25% of the payout was determined
based upon such executive officer’s achievement of certain pre-established individual performance objectives.

Accrued bonuses as of August 31, 2015 and 2014 were $620,000 and $1,460,000, respectively.

Four joint ventures (consisting of the Company’s joint venture in Korea, India, Thailand and Tianjin Zerust)
accounted for 67.0% of the Company’s trade joint venture receivables at August 31, 2015. Three joint ventures
(consisting of the Company’s joint ventures in Korea, Thailand and Tianjin Zerust) accounted for 62.9% of the
Company’s trade joint venture receivables at August 31, 2014.

On March 23, 2015, the Company and NTI Asean filed a lawsuit in Tianjin No 1 Intermediate People’s Court
against two individuals, Meng Tao and Xu Hui, related to breaches of duties and contractual commitments owed
to NTI Asean under certain agreements related to the Company’s former joint venture in China, Tianjin Zerust
Anti-Corrosion Technologies Ltd (Tianjin Zerust). The lawsuit alleges, among other things, that Mr. Meng Tao
and Xu Hui have engaged in self-dealing, usurped business opportunities, and received economic benefits that
were required to go to Tianjin Zerust. As of August 31, 2015, the Company is not able to reasonably estimate
the amount of any recovery to NTI Asean, if any. On April 21, 2015, the Company and NTI Asean initiated a
lawsuit in the District Court for the Second Judicial District, County of Ramsey, State of Minnesota against
Cortec Corporation alleging, among other things, that Cortec Corporation aided and abetted breaches of duties
and contractual commitments owed to the Company and NTI Asean related to the Company’s joint venture in
China, Tianjin Zerust.

From time to time, the Company is subject to various claims and legal actions in the ordinary course of its
business. The Company records a liability in its consolidated financial statements for costs related to claims,
including future legal costs, settlements and judgments, where the Company has assessed that a loss is probable
and an amount can be reasonably estimated. If the reasonable estimate of a probable loss is a range, the
Company records the most probable estimate of the loss or the minimum amount when no amount within the
range is a better estimate than any other amount. The Company discloses a contingent liability even if the
liability is not probable or the amount is not estimable, or both, if there is a reasonable possibility that material
loss may be have been incurred. In the opinion of management, as of August 31, 2015, the amount of liability, if
any, with respect to these matters, individually or in the aggregate, will not materially affect the Company’s
consolidated results of operations, financial position or cash flows.

19.

STATEMENTS OF CASH FLOWS

Supplemental disclosures of cash flow information consists of:

Cash paid during the year for income tax
Cash paid during the year for interest
Note receivable issued for sale of joint venture

Fiscal Year Ended
August 31,
2014

—
47,322
245,594

2013
$
—
52,215
—

2015

—
20,960
—

20.

FAIR VALUE MEASUREMENTS

The Company follows the authoritative guidance on fair value measurements and disclosures with respect to
assets and liabilities that are measured at fair value on both a recurring and non-recurring basis. Under this
guidance, fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants as of the measurement date. The
authoritative guidance also establishes a hierarchy for inputs used in measuring fair value that maximizes the use
of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs
be used when available. Observable inputs are inputs market participants would use in valuing the asset or
liability, developed based on market data obtained from sources independent of the Company. Unobservable
inputs are inputs that reflect the Company’s assumptions about the factors market participants would use in
valuing the asset or liability developed based upon the best information available in the circumstances. The
categorization of financial assets and financial liabilities within the valuation hierarchy is based upon the lowest
level of input that is significant to the fair value measurement. The hierarchy is broken down into three levels
defined as follows:

Level 1 - Inputs are quoted prices in active markets for identical assets or liabilities.
Level 2 - Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for

identical or similar assets or liabilities in markets that are not active, and inputs (other than quoted
prices) that are observable for the asset or liability, either directly or indirectly.

Level 3 - Inputs are unobservable for the asset or liability.

See the section below titled Valuation Techniques for further discussion of how the Company determines fair
value for investments.

Assets and Liabilities That Are Measured at Fair Value on a Recurring Basis

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

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

Fair value as of
August 31, 2015
2,027,441

Fair value as of
August 31, 2014
5,519,766

Fair Value Measurements
Using Inputs Considered as

Level 1
$ 2,027,441

Level 2

—

Level 3
$ —

Fair Value Measurements
Using Inputs Considered as

Level 1
$ 5,519,766

Level 2

—

Level 3
$ —

Available for sale securities

Valuation Techniques

Financial assets that are classified as Level 1 securities include cash equivalents and as of August 31, 2015,
available for sale securities. These are valued using quoted market prices in an active market.

The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the ability to
observe valuation inputs may result in a reclassification of levels for certain securities within the fair value
hierarchy. The Company’s policy is to recognize transfers into and out of levels within the fair value hierarchy

at the end of the fiscal quarter in which the actual event or change in circumstances that caused the transfer
occurs. There were no transfers between Level 1, Level 2, or Level 3 during the fiscal years ended August 31,
2015 or August 31, 2014. When a determination is made to classify an asset or liability within Level 3, the
determination is based upon the significance of the unobservable inputs to the overall fair value measurement.

21.

QUARTERLY INFORMATION (UNAUDITED)

Fiscal year 2015:
Net sales
Gross profit
Income before income tax expense
Income tax expense
Net income (loss)
Net income attributable to
non-controlling interests
Net income (loss) attributable to
NTIC

November 30

February 28

May 31

August 31

Fiscal Quarter Ended

$ 7,214,095
2,407,484
1,647,780
183,684
1,464,096

$ 6,728,709
2,070,969
139,149
197,614
(58,465)

$ 8,277,575
2,682,368
1,183,180
114,180
1,069,000

$ 8,102,314
2,605,940
195,925
153,196
42,729

455,831

70,179

163,565

1,008,265

(128,644)

905,435

38,214

4,515

Net income (loss) per share:
Basic
Diluted

Weighted average common
shares assumed outstanding:

Basic
Diluted

$
$

0.22
0.22

$
$

(0.03)
(0.03)

$
$

0.20
0.20

$ 0.00
$ 0.00

4,518,973
4,659,621

4,522,514
4,522,514

4,525,109
4,594,992

4,529,251
4,585,196

November 30

February 28

May 31

August 31

Fiscal Quarter Ended

Fiscal year 2014:
Net sales
Gross profit
Income before income tax expense
Income tax expense
Net income
Net income attributable to
non-controlling interests
Net income attributable to NTIC

$ 6,309,100
2,151,069
1,502,418
198,000
1,304,418

445,832
858,586

$ 6,219,008
2,167,175
1,643,828
259,759
1,384,069

359,025
1,025,044

$ 6,920,820
2,251,498
1,759,537
361,280
1,398,257

$ 7,377,180
2,453,213
1,757,291
305,623
1,451,668

418,040
980,217

209,143
1,242,527

Net income per share:
Basic
Diluted

Weighted average common
shares assumed outstanding:

Basic
Diluted

$
$

0.19
0.19

$
$

0.23
0.22

$
$

0.22
0.21

$ 0.28
$ 0.27

4,434,770
4,552,669

4,434,837
4,579,603

4,461,880
4,590,344

4,487,478
4,592,208

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND

FINANCIAL DISCLOSURE

None

Item 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

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

Management’s Report on Internal Control over Financial Reporting

NTIC’s management is responsible for establishing and maintaining adequate internal control over financial
reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and
with the participation of NTIC’s Chief Executive Officer and Chief Financial Officer, NTIC’s management
conducted an evaluation of the effectiveness of NTIC’s internal control over financial reporting based on the
framework in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on that evaluation, NTIC’s management concluded that
NTIC’s internal control over financial reporting was effective as of August 31, 2015.

The report of Baker Tilly Virchow Krause, LLP, NTIC’s independent registered public accounting firm,
regarding the effectiveness of NTIC’s internal control over financial reporting is included in this report in “Part
II. Item 8, Financial Statements and Supplementary Data” under “Report of Independent Registered Public
Accounting Firm.”

Changes in Internal Control over Financial Reporting

There was no change in NTIC’s internal control over financial reporting that occurred during the quarter ended
August 31, 2015 that has materially affected, or is reasonably likely to materially affect NTIC’s internal control
over financial reporting.

Item 9B. OTHER INFORMATION

Not applicable.

Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

PART III

Directors

The information in the “Proposal One – Election of Directors” section of NTIC’s definitive proxy statement to
be filed with the Securities and Exchange Commission with respect to NTIC’s next annual meeting of
stockholders, which involves the election of directors, is incorporated in this annual report on Form 10-K by
reference.

Executive Officers

Information concerning NTIC’s executive officers and officers is included in this annual report on Form 10-K
under Item 4A of Part I under the heading “Executive Officers of the Registrant.”

Section 16(a) Beneficial Ownership Reporting Compliance

The information in the “Stock Ownership—Section 16(a) Beneficial Ownership Reporting Compliance” section
of NTIC’s definitive proxy statement to be filed with the Securities and Exchange Commission with respect to
NTIC’s next annual meeting of stockholders, which involves the election of directors, is incorporated in this
annual report on Form 10-K by reference.

Code of Ethics

NTIC has adopted a code of ethics that applies to its principal executive officer, principal financial officer,
principal accounting officer or controller or persons performing similar functions, as well as other employees
and NTIC’s directors and meets the requirements of the SEC and the NASDAQ Global Market. A copy of
NTIC’s Code of Ethics is filed as an exhibit to this report. NTIC intends to satisfy the disclosure requirements
of Item 5.05 of Form 8-K regarding amendments to or waivers from any provision of its code of ethics by
posting such information on its corporate website at www.ntic.com.

Changes to Nomination Procedures

During the fourth quarter of fiscal 2015, NTIC made no material changes to the procedures by which
stockholders may recommend nominees to NTIC’s Board of Directors, as described in NTIC’s most recent
proxy statement.

Audit Committee Matters

The information in the “Corporate Governance—Audit Committee” section of NTIC’s definitive proxy
statement to be filed with the Securities and Exchange Commission with respect to NTIC’s next annual meeting
of stockholders, which involves the election of directors, is incorporated in this annual report on Form 10-K by
reference.

Item 11. EXECUTIVE COMPENSATION

The information in the “Director Compensation” and “Executive Compensation” sections of NTIC’s definitive
proxy statement to be filed with the Securities and Exchange Commission with respect to NTIC’s next annual
meeting of stockholders, which involves the election of directors, is incorporated in this annual report on Form
10-K by reference.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

AND RELATED STOCKHOLDER MATTERS

Stock Ownership

The information in the “Stock Ownership—Beneficial Ownership of Significant Stockholders and Management”
section of NTIC’s definitive proxy statement to be filed with the Securities and Exchange Commission with
respect to NTIC’s next annual meeting of stockholders, which involves the election of directors, is incorporated
in this annual report on Form 10-K by reference.

Securities Authorized for Issuance under Equity Compensation Plans

The following table summarizes outstanding options and other awards under NTIC’s equity compensation plans
as of August 31, 2015. NTIC’s equity compensation plans as of August 31, 2015 were the Northern
Technologies International Corporation Amended and Restated 2007 Stock Incentive Plan and the Northern
Technologies International Corporation Employee Stock Purchase Plan. Except for automatic annual grants of
options to purchase 4,000 shares of NTIC common stock to NTIC’s directors in consideration for their services
as directors of NTIC, an automatic annual grant of an option to purchase 2,000 shares of NTIC common stock to
NTIC’s Chairman of the Board in consideration for his services as Chairman on the first day of each fiscal year
and automatic initial grants of options to purchase a pro rata portion of 4,000 shares of NTIC common stock to
NTIC’s new directors in consideration for their services as directors of NTIC, options and other awards granted
in the future under the Northern Technologies International Corporation Amended and Restated 2007 Stock
Incentive Plan are within the discretion of the Board of Directors and the Compensation Committee of the Board
of Directors and therefore cannot be ascertained at this time.

(a)

(b)

Number of Securities to
be Issued Upon Exercise
of Outstanding Options,
Warrants and Rights

Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights

(c)
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation Plans
(excluding securities
reflected in column (a))

241,743(1)(2)

—
241,743(1)(2)

$12.13

—
$12.13

325,005(3)

—
325,005(3)

Plan Category

Equity compensation plans
approved by security holders

Equity compensation plans not
approved by security holders

Total

______________________
(1)

Amount includes shares of NTIC common stock issuable upon the exercise of stock options outstanding as of
August 31, 2015 under the Northern Technologies International Corporation Amended and Restated 2007 Stock
Incentive Plan.

(2)

Excludes employee stock purchase rights accruing under the Northern Technologies International Corporation
Employee Stock Purchase Plan. Under such plan, each eligible employee may purchase up to 2,000 shares of
NTIC common stock at semi-annual intervals on February 28th or 29th (as the case may be) and August 31st each
year at a purchase price per share equal to 90% of the lower of (i) the closing sales price per share of NTIC
common stock on the first day of the offering period or (ii) the closing sales price per share of NTIC common
stock on the last day of the offering period.

(3)

Amount includes 265,793 shares remaining available at August 31, 2015 for future issuance under Northern
Technologies International Corporation Amended and Restated 2007 Stock Incentive Plan and 59,212 shares
available at August 31, 2015 for future issuance under the Northern Technologies International Corporation
Employee Stock Purchase Plan.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR

INDEPENDENCE

The information in the “Related Person Relationships and Transactions” and “Corporate Governance—Director
Independence” sections of NTIC’s definitive proxy statement to be filed with the Securities and Exchange
Commission with respect to NTIC’s next annual meeting of stockholders, which involves the election of
directors, is incorporated in this annual report on Form 10-K by reference.

Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information in the “Proposal Three—Ratification of Selection of Independent Registered Public Accounting
Firm—Audit, Audit-Related, Tax and Other Fees” and “Proposal Three—Ratification of Selection of
Independent Registered Public Accounting Firm—Audit Committee Pre-Approval Policies and Procedures”
sections of NTIC’s definitive proxy statement to be filed with the Securities and Exchange Commission with
respect to NTIC’s next annual meeting of stockholders, which involves the election of directors, is incorporated
in this annual report on Form 10-K by reference.

Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

PART IV

Financial Statements

NTIC’s consolidated financial statements are included in Item 8 of Part III of this report.

Pursuant to Rule 3-09 of Regulation S-X, NTIC intends to file an amendment to this report to include the
audited financial statements and related notes of Excor Korrosionsschutz – Technologien und Produkte GmbHA
(“EXCOR”), an unconsolidated joint venture in which NTIC holds a 50% equity ownership interest.

Financial Statement Schedules

All financial statement schedules are omitted because the required information is inapplicable or the information
is presented in the consolidated financial statements or related notes.

Exhibits

The exhibits to this report are listed in the Exhibit Index to this report. A copy of any exhibits listed or referred
to herein will be furnished at a reasonable cost to any person who is a stockholder upon receipt from any such
person of a written request for any such exhibit. Such request should be sent to: Mr. Matthew Wolsfeld,
Corporate Secretary, Northern Technologies International Corporation, 4201 Woodland Road, P.O. Box 69,
Circle Pines, Minnesota 55014 Attn: Stockholder Information. The Exhibit Index indicates each management
contract or compensatory plan or arrangement required to be filed as an exhibit to this report.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SIGNATURES

NORTHERN TECHNOLOGIES INTERNATIONAL

CORPORATION

November 13, 2015

By: /s/ G. Patrick Lynch
G. Patrick Lynch
President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant on the dates and in the capacities indicated.

Name

Title

Date

President and Chief Executive Officer and
Director
(principal executive officer)

Chief Financial Officer and Corporate
Secretary
(principal financial and accounting officer)

November 13, 2015

Chairman of the Board

November 13, 2015

/s/ G. Patrick Lynch
G. Patrick Lynch

/s/ Matthew C. Wolsfeld, CPA
Matthew C. Wolsfeld, CPA

/s/ Richard J. Nigon
Richard J. Nigon

/s/ Barbara D. Colwell
Barbara D. Colwell

/s/ Soo Keong Koh
Soo Keong Koh

/s/ Sunggyu Lee, Ph.D.
Sunggyu Lee, Ph.D.

/s/ Ramani Narayan, Ph.D.
Ramani Narayan, Ph.D.

Director

/s/ Konstantin von Falkenhausen
Konstantin von Falkenhausen

Director

November 13, 2015

Board of Directors
Mr. Richard J. Nigon
Chairman of the Board, NTIC
Senior Vice President of Cedar Point Capital, Inc.

Mr. G. Patrick Lynch
President & CEO, NTIC

Dr. Ramani Narayan
Distinguished Professor in the Department of
Engineering & Materials Science, Michigan State
University

Dr. Sunggyu Lee
Professor of Chemical & Molecular Engineering,
Russ College of Engineering & Technology at Ohio
University

Mr. Soo-Keong Koh
Managing Director, EcoSave Pte Ltd.

Mr. Konstantin von Falkenhausen
Partner, B Capital Partners AG

Mrs. Barbara D. Colwell
Corporate Director of NTIC, Publishers Clearing House,
and Mutual Trust Financial Group

NTIC Executive Officers
Mr. G. Patrick Lynch
President & CEO

Mr. Matthew C. Wolsfeld
Chief Financial Officer, Treasurer and
Corporate Secretary

Independent Registered Public
Accounting Firm
Baker Tilly Virchow Krause, LLP
Minneapolis, Minnesota

Transfer Agent and Registrar
For a response to questions regarding misplaced stock
certificates, changes of address or the consolidation
of accounts, please contact NTIC’s transfer agent:

Broadridge Corporate Issuer Solutions, Inc.
1717 Arch Street, Suite 1300
Philadelphia, PA 19103
1-877-830-4936
shareholder@broadridge.com

Investor Relations
Northern Technologies International Corporation
welcomes inquiries from its stockholders and other
interested investors. For further information on
NTIC’S activities or additional copies of this report,
please contact:

Investor Relations
Northern Technologies International Corporation
4201 Woodland Road, P.O. Box 69
Circle Pines, Minnesota 55014
(763) 225-6600
www.ntic.com

Stock Listing
NTIC’s common stock is traded on the
NASDAQ Global Market under the symbol NTIC.

Annual Meeting
The annual meeting of stockholders will be held
at 2:00 p.m. on Friday, January 15, 2016 at NTIC’s
corporate headquarters:

Northern Technologies International Corp.
4201 Woodland Road
Circle Pines, MN 55014 USA
(763) 225-6600