Fiscal
2023
Annual
Report
Northern
Technologies
International
Corporation
Northern Technologies
International Corporation
• Notice of 2024
Annual Meeting
• Proxy Statement
• Annual Report on
Form 10-K - August
31, 2023
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.
NTIC uses 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 is no alternative to doing
environmentally sustainable business while working to grow 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:
• Environmentally responsible business practices.
• Advanced R&D processes that promote the use of
environmentally responsible raw materials.
• Selecting components and manufacturing processes that reduce
waste and impact on the environment.
• Raising 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 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.
Our Technology Platforms:
ZERUST®/EXCOR® manufactures and markets corrosion-inhibiting technologies that
provide customers with advanced solutions for corrosion 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 & Gas provides advanced corrosion control technologies and services to the
petrochemical industry. Zerust® Oil & Gas products and services utilize Zerust® proprietary
corrosion inhibitors in combination with advanced cathodic protection systems to
dramatically enhance the 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 currently implemented in refineries, offshore oil rigs,
tank farms, and retail gas stations in several countries.
Natur-Tec® 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 the industry and consumers to move closer to a carbon-
neutral footprint.
To the Stockholders of Northern Technologies International Corporation (NTIC),
Fiscal 2023 marked NTIC’s third consecutive year of record sales, despite the growing economic challenges in
both Europe and China and rising interest rates in the U.S. Our continued sales growth success demonstrates
the increasing value we provide our global customers as well as the efficacy of our strategic focus on diversifying
our products, end markets and geographies.
On an annual basis, consolidated net sales increased 7.7% year-over-year to a record $79.9 million, driven by
stable North American ZERUST® Industrial sales, and growing Natur-Tec® and ZERUST® Oil & Gas sales. The
investments we made over the years to support our emerging Natur-Tec® and ZERUST® Oil & Gas segments
continue to pay off, as ZERUST® Oil & Gas net sales increased 69.3% to an annual record of $7.8 million and
Natur-Tec® net sales increased 8.8% to $18.2 million in fiscal 2023. Over the past ten years, we have successfully
scaled both businesses and expanded our market share in the large compostable plastics and oil & gas markets.
For fiscal 2023, Natur-Tec® represented 22.7% of net sales, compared to 9.1% of net sales in fiscal 2013, while
ZERUST® Oil & Gas represented 9.8% of net sales, compared to 4.4% of net sales in fiscal 2013.
During fiscal 2023, sales of our core ZERUST® Industrial solutions were challenged by tougher economic conditions
in both Europe and China. Throughout the fiscal year, our European joint ventures had to deal with persistent
inflation, as well as significant raw material and energy cost increases, and the economies of both Europe and
China were being shaken by the effects of geopolitical conflicts. These trends impacted both topline results
and overall profitability. We also experienced weaker overall demand at our European joint ventures and are
working closely with our partners on ways to offset the impact of these softer market conditions.
Total net sales for fiscal 2023 by our joint ventures, which we do not consolidate in our financial statements,
decreased 3.3% to $100.7 million. This, in turn, adversely affected our joint venture operating income, which
benefitted from a one-time gain from the final liquidation of NTIC’s former joint venture in China.
NTIC China sales for fiscal 2023 decreased 14.5% year-over-year, primarily due to the government-imposed
COVID-19 related lockdowns throughout much of the fiscal year, as well as weaker overall economic growth after
those lockdowns were finally lifted. While sales remained below fiscal 2022 levels throughout fiscal 2023, sales
did increase sequentially in the third and fourth quarters of fiscal 2023. This sequential improvement supports
our expectation for higher demand in fiscal 2024. Overall, we remain committed to the Chinese market and the
long-term opportunities it represents for NTIC. We continue to take steps to enhance and protect our Chinese
operations, and we continue to believe China will once again be a significant contributor to the profitability of
NTIC in the future.
During fiscal 2023, NTIC created a new indirect majority-owned subsidiary to assume the operations of our
former joint venture in Taiwan. This investment follows the successful acquisition of the remaining ownership
interest in NTIC’s Indian joint venture in the fiscal 2022 first quarter, as well as the fiscal 2022 opening of a facility
in Shanghai, China, that supports our R&D production, sales and marketing, and training efforts. The majority
owned subsidiary in Taiwan furthers expands our commitment to the Asian Pacific region by providing another
location to support NTIC’s global ZERUST® Industrial, ZERUST® Oil & Gas, and Natur-Tec® compostable plastic
customers.
Net income for fiscal 2023 declined 54.0% to $2.9 million, or $0.30 per diluted share, from $6.3 million, or $0.66
per diluted share, for fiscal 2022. This decrease was primarily due to the remeasurement gain on acquisition
of equity method investee recognized during fiscal 2022 in connection with our acquisition of the remaining
ownership interest in our Indian joint venture, which did not repeat in fiscal 2023, and, to a lesser extent, an
increase in operating expenses, partially offset by an increase in gross profit. Several factors impacted our fiscal
2023 profitability, including poor European joint venture performance, significant inflation, increased salaries
and benefits, and friction across our global supply chains.
Throughout fiscal 2023, we implemented several actions to restore our profitability. However, more work in this
regard is still necessary across our business and at our global joint ventures. We believe we have opportunities
to drive up sales growth at NTIC China, which should improve profitability in this geography as well. In addition,
while we expect ZERUST® Oil & Gas sales to be somewhat slow during the first half of fiscal year 2024, compared
to ZERUST® Industrial and Natur-Tec® sales, we anticipate ZERUST® Oil & Gas will be the fastest growing segment
of our business in fiscal 2024.
Overall, our financial position remains strong, and is an important asset as uncertainty about the state of the
global economy has been rising of late. We ended fiscal 2023 with $23.0 million in working capital, including
$5.4 million in cash and cash equivalents. On August 31, 2023, we also had $23.7 million of investments in joint
ventures, of which nearly $13.8 million is cash, with the remaining balance mostly made up of other working
capital. Our asset light business model and strong financial position provides us with the flexibility to allocate
needed capital to support our future growth initiatives while maintaining our quarterly dividend program. In
addition, we plan to use our free cash flow to pay down our revolving line of credit over the course of fiscal 2024.
During fiscal 2023, NTIC declared cash dividends of $0.28 per share, the same amount of cash dividends we
declared for the prior fiscal year. We continue to closely watch our global markets as well as the capital needs of
our business and will adjust our dividend policy, as necessary, to maintain our strong financial position.
ZERUST® Industrial Corrosion Prevention
ZERUST® Industrial sales remained stable throughout fiscal 2023, as sales increased 3.6% on a year-over-year
basis to a record $51.7 million. ZERUST® Industrial sales benefitted from positive demand in North America, as
well as from the contribution of our wholly owned subsidiary, ZERUST® India. Fiscal year 2023 net sales at our
wholly owned NTIC China subsidiary were hurt by residual COVID-19 lockdowns during the year, causing sales at
this operation to decline 14.5% to $13.5 million.
NTIC’s ZERUST® Industrial business continues to benefit from strong relationships with leading, multinational
companies. As we look to fiscal 2024, we remain committed to providing our customers with leading corrosion
prevention solutions and technical advice. We will continue supporting our customers global supply chains and
we are developing additional opportunities to enhance our capabilities and technologies. Fiscal 2024 sales are
expected to benefit from stable North American demand, and several large new customer wins.
ZERUST® in the Oil & Gas Industry
As expected, fiscal 2023 was a strong year of ZERUST® Oil & Gas sales growth, as sales increased 69.3% to a
record $7.8 million. Our performance during fiscal 2023 follows over 10 years of providing value-added corrosion
prevention solutions to some of the largest oil & gas companies globally. These customers have successfully
deployed our VCI technology to provide cost-effective solutions to protect various assets, including above-
ground storage tanks, pipelines, offshore platforms, and other types of oil & gas equipment and spare parts.
In addition, we have seen accelerating adoption of our solutions within the oil & gas industry following the
favorable technical report that was released in calendar 2021 by the American Petroleum Institute (API) detailing
how VCI based technologies, like the ones offered by ZERUST® Oil & Gas, provide effective corrosion protection
for the bottoms of above-ground storage tanks. In combination, these factors validate our technology, and are
helping our long-term sales efforts within the global oil & gas market. We expect positive momentum within
our ZERUST® Oil & Gas business to continue and we believe there are substantial opportunities to drive growth
throughout fiscal 2024 and beyond.
Natur-Tec® Bioplastics
Demand patterns for our Natur-Tec® business continued to strengthen during fiscal 2023, reflecting recovering
market dynamics and growing adoption of compostable plastics globally. Natur-Tec® sales increased 8.8% to a
record $18.2 million and have increased 66.1% over the past two years, reflecting a significant rebound since the
COVID-19 pandemic.
We continue to see growing market demand for new applications of certified compostable plastic products
and resin compounds, as well as increasing interest in commercial and municipal programs that use certified
compostable plastics as alternatives to conventional plastics. As a result, we believe we are well positioned for
long-term sustainable growth within our Natur-Tec® Bioplastics business and believe NTIC is well positioned to
achieve another year of record Natur-Tec® sales in fiscal 2024.
Closing
While fiscal 2023 was a record sales year, profitability was challenged by several items that we are focused
on addressing in fiscal 2024. NTIC ended the year with a strong and diverse platform supported by our global
footprint, our experienced and committed team members, and our robust corrosion prevention and compostable
plastic solutions. We serve large, multinational customers, and continue to increase our market share across
large, global markets. We have work to do to enhance our profitability, but I believe our strong platform will
drive improving profitability in fiscal 2024 and into the future. On behalf of everyone at NTIC, I am confident
in the opportunities we are pursuing and the direction we are headed. As a result, we expect fiscal 2024 to be
another good year for NTIC and our stockholders.
Sincerely,
G. Patrick Lynch
President & CEO, NTIC
G. Patrick Lynch
NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
January 19, 2024
The Annual Meeting of Stockholders of Northern Technologies International Corporation, a Delaware
corporation, will be held at our corporate executive offices located at 4201 Woodland Road, Circle Pines,
Minnesota 55014, beginning at 8:00 a.m., Central Standard Time, on Friday, January 19, 2024, for the
following purposes:
1. To elect eight 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 appointment of Baker Tilly US, LLP as our independent registered public accounting
firm for the fiscal year ending August 31, 2024.
4. To approve the Northern Technologies International Corporation 2024 Stock Incentive Plan.
5. To transact such other business as may properly come before the meeting or any adjournment of the
meeting.
Only those stockholders of record at the close of business on November 21, 2023 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 9, 2024 during normal business hours for examination by any
stockholder registered on NTIC’s stock ledger as of the record date, November 21, 2023, for any purpose
germane to the Annual Meeting.
By Order of the Board of Directors,
Matthew C. Wolsfeld
Corporate Secretary
December 4, 2023
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.
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TABLE OF CONTENTS
Page
PROXY STATEMENT SUMMARY ........................................................................................................... 4
GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING ............................... 15
Date, Time, Place and Purposes of Meeting ........................................................................................... 15
Who Can Vote ........................................................................................................................................ 15
How You Can Vote ................................................................................................................................ 15
How Does the Board Recommend that You Vote .................................................................................. 17
How You May Change Your Vote or Revoke Your Proxy .................................................................... 17
Quorum Requirement ............................................................................................................................. 17
Vote Required ......................................................................................................................................... 17
Other Business ........................................................................................................................................ 19
Procedures at the Annual Meeting .......................................................................................................... 19
Householding of Annual Meeting Materials .......................................................................................... 19
Proxy Solicitation Costs ......................................................................................................................... 20
PROPOSAL ONE—ELECTION OF DIRECTORS .................................................................................. 21
Number of Directors ............................................................................................................................... 21
Nominees for Director ............................................................................................................................ 21
Information about Current Directors and Board Nominees .................................................................... 21
Additional Information about Current Directors and Board Nominees .................................................. 22
Board Recommendation ......................................................................................................................... 25
PROPOSAL TWO—ADVISORY VOTE ON EXECUTIVE COMPENSATION ................................... 26
Introduction ............................................................................................................................................ 26
Board Recommendation ......................................................................................................................... 27
PROPOSAL THREE—RATIFICATION OF APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM .................................................................................. 28
Appointment of Independent Registered Public Accounting Firm......................................................... 28
Audit, Audit-Related, Tax and Other Fees ............................................................................................. 28
Audit Committee Pre-Approval Policies and Procedures ....................................................................... 29
Board Recommendation ......................................................................................................................... 29
PROPOSAL FOUR—APPROVAL OF NORTHERN TECHNOLOGIES INTERNATIONAL
CORPORATION 2024 STOCK INCENTIVE PLAN ........................................................................... 30
Background ............................................................................................................................................. 30
Reasons Why You Should Vote in Favor of the 2024 Plan .................................................................... 31
Summary of Sound Governance Features of the 2024 Plan ................................................................... 32
Background for Shares Authorized for Issuance .................................................................................... 32
Summary of the 2024 Plan Features ....................................................................................................... 34
U.S. Federal Income Tax Consequences ................................................................................................ 43
New Plan Benefits .................................................................................................................................. 45
Board Recommendation ......................................................................................................................... 45
STOCK OWNERSHIP ............................................................................................................................... 46
Beneficial Ownership of Significant Stockholders and Management .................................................... 46
Stock Ownership Guidelines .................................................................................................................. 48
Securities Authorized for Issuance Under Equity Compensation Plans ................................................. 48
CORPORATE GOVERNANCE ................................................................................................................ 50
Governance Best Practices ..................................................................................................................... 50
Corporate Governance Guidelines .......................................................................................................... 51
Board Leadership Structure .................................................................................................................... 51
Director Independence ............................................................................................................................ 52
1
Board Meetings and Attendance ............................................................................................................. 52
Board Committees .................................................................................................................................. 52
Audit Committee .................................................................................................................................... 52
Compensation Committee ...................................................................................................................... 54
Nominating and Corporate Governance Committee .............................................................................. 56
Director Nominations Process ................................................................................................................ 57
Board Diversity Matrix ........................................................................................................................... 58
Board Oversight of Risk ......................................................................................................................... 59
Board Oversight of Strategy ................................................................................................................... 60
Board and Board Committee Evaluations .............................................................................................. 60
Code of Ethics ........................................................................................................................................ 60
No Political Contributions ...................................................................................................................... 60
Policy Regarding Director Attendance at Annual Meetings of Stockholders ........................................ 60
Complaint Procedures ............................................................................................................................. 61
Stockholder Engagement ........................................................................................................................ 61
Process Regarding Stockholder Communications with Board of Directors ........................................... 62
DIRECTOR COMPENSATION ................................................................................................................ 63
Summary of Cash and Other Compensation .......................................................................................... 63
Non-Employee Director Compensation Program ................................................................................... 64
Consulting Agreement ............................................................................................................................ 66
EXECUTIVE COMPENSATION .............................................................................................................. 67
Compensation Review ............................................................................................................................ 67
Summary of Cash and Other Compensation .......................................................................................... 77
Outstanding Equity Awards at Fiscal Year End ..................................................................................... 78
Option Exercises for Fiscal 2023 ............................................................................................................ 79
Stock Incentive Plans .............................................................................................................................. 79
Post-Termination Severance and Change in Control Arrangements ...................................................... 81
Pay Versus Performance Disclosure ....................................................................................................... 83
Compensation Committee Interlocks and Insider Participation ............................................................. 88
RELATED PERSON RELATIONSHIPS AND TRANSACTIONS ......................................................... 89
Introduction ............................................................................................................................................ 89
Procedures Regarding Approval of Related Party Transactions ............................................................ 89
Description of Related Party Transactions ............................................................................................. 90
STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS FOR 2025 ANNUAL
MEETING OF STOCKHOLDERS........................................................................................................ 91
COPIES OF FISCAL 2023 ANNUAL REPORT ....................................................................................... 91
________________
References in this proxy statement to:
“NTIC,” “we,” “us,” “our,” or the “Company” refer to Northern Technologies International
Corporation;
“Board” refer to the Board of Directors of NTIC;
“Annual Meeting” refer to our 2024 Annual Meeting of Stockholders; and
“Fiscal 2023 Annual Report” or “Fiscal 2023 Annual Report to Stockholders” refer to our Annual
Report to Stockholders for fiscal 2023, including our Annual Report on Form 10-K for the year
ended August 31, 2023, being made available together with this proxy statement.
Information on our website and any other website referenced herein is not incorporated by reference into,
and does not constitute a part of, this proxy statement.
2
™ and ® denote trademarks and registered trademarks of Northern Technologies International
Corporation or our affiliates, registered as indicated in the United States. All other trademarks and trade
names referred to in this proxy statement are the property of their respective owners.
We intend to make this proxy statement and our Fiscal 2023 Annual Report available on the Internet and
to commence mailing of the notice to all stockholders entitled to vote at the Annual Meeting beginning on
or about December 4, 2023. We will mail paper copies of these materials, together with a proxy card,
within three business days of a request properly made by a stockholder entitled to vote at the 2024 Annual
Meeting of Stockholders.
3
PROXY STATEMENT SUMMARY
________________
This executive summary provides an overview of the information included in this proxy statement. We
recommend that you review the entire proxy statement and our Fiscal 2023 Annual Report to
Stockholders before voting.
2024 ANNUAL MEETING OF STOCKHOLDERS
DATE AND TIME
Friday, January 19, 2024
8:00 a.m. (Central Time)
LOCATION
4201 Woodland Road
Circle Pines, MN 55014
RECORD DATE
November 21, 2023
Proposal
Proposal No. 1: Election of
directors
Proposal No. 2: Advisory vote on
executive compensation
Proposal No. 3: Ratification of
appointment of independent
registered public accounting firm
Proposal No. 4: Approval of
Northern Technologies
International Corporation 2024
Stock Incentive Plan
Board’s Vote
Recommendation
Page
FOR
FOR
FOR
FOR
21
26
28
30
Holders of record of our common stock at the close of business on
November 21, 2023 are entitled to notice of, to attend, and to vote at
the 2024 Annual Meeting of Stockholders or any continuation,
postponement, or adjournment thereof.
On or about December 4, 2023, we expect to begin mailing a Notice of Internet Availability of Proxy
Materials to stockholders of record as of November 21, 2023 and post our proxy materials on the website
referenced in the Notice of Internet Availability of Proxy Materials (www.proxyvote.com).
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JANUARY 19, 2024
This proxy statement and our Fiscal 2023 Annual Report to Stockholders are available on the Internet,
free of charge, at www.proxyvote.com. On this website, you will be able to access this proxy statement,
our Fiscal 2023 Annual Report to Stockholders, and any amendments or supplements to these materials
that are required to be furnished to stockholders. We encourage you to access and review all of the
important information contained in the proxy materials before voting.
4
FISCAL 2023 BUSINESS HIGHLIGHTS
Below are highlights of our financial, operational and strategic achievements during fiscal 2023.
Financial
Net Sales
Our net sales increased 7.7% to a record $79,902,952 during fiscal 2023
compared to fiscal 2022 primarily due to sales growth within our
ZERUST® industrial and Natur-Tec product categories, as a result of
higher global demand.
Quarterly Cash Dividends We paid a quarterly cash dividend of $0.07 per share during each quarter
of fiscal 2023.
Operational
15 Joint Ventures
Our 15 joint ventures provide us with access to global markets with an
annual global market potential estimated at $500 million.
10 Operating Subsidiaries We maintain 10 wholly or majority-owned operating subsidiaries in
North America, South America, Europe and Asia.
Over 60 Countries
Strategic
Industrial Manufacturing
Industry
Oil and Gas Industry
Bioplastics Industry
Our network of joint ventures and subsidiaries allows us to operate in
over 60 countries worldwide, allowing us reach customers globally.
ZERUST® rust and corrosion inhibiting packaging solutions resolve
corrosion problems while reducing operating costs, increasing
productivity and enhancing customer satisfaction. During fiscal 2023,
ZERUST® industrial sales increased by 2.1% compared to fiscal 2022 as
a result of increased demand.
Our global network of trained corrosion management professionals and
channel partners help us develop specialized corrosion mitigation
solutions for the oil and gas industry, provide local support, and conduct
client training. ZERUST® oil and gas net sales increased 69.2% during
fiscal 2023 compared to fiscal 2022 primarily as a result of new
opportunities with new customers.
Our Natur-Tec® biobased and compostable plastics are manufactured
using NTIC’s patented and/or proprietary technologies and are intended
to replace conventional plastics and thereby reduce our customers’
carbon footprint and provide environmentally sound waste disposal
options. Sales of our Natur-Tec® products increased by 8.7% during
fiscal 2023 compared to fiscal 2022 due to re-opening initiatives and
government regulation related to disposable plastics.
5
CORPORATE GOVERNANCE HIGHLIGHTS
Annual election of directors
Majority of independent directors
Independent Board Chairman
Three fully independent Board committees
Corporate governance guidelines
Annual review of governance documents
Stock ownership guidelines for executive
officers and directors
STOCKHOLDER ENGAGEMENT
Recent Board refreshment efforts
100% Board meeting attendance by directors
No poison pill
Annual say-on-pay vote
Robust clawback policy
No guaranteed bonuses or significant perks
Limits on board memberships held
We are committed to a robust and proactive stockholder engagement program. The Board of Directors
values the perspectives of our stockholders, and feedback from stockholders on our business, corporate
governance, executive compensation, and sustainability practices are important considerations for Board
discussions throughout the year. Some of the actions we have taken in response to feedback from proxy
advisory firms and stockholders over the last several years are described below.
What We Heard
Encourage Board refreshment
Increase Board gender diversity
Increase stockholder influence over
director elections
Align long-term incentives
Increase visibility of Environmental, Social
and Governance (“ESG”) principles
What We Did
We added Cristina Pinho to our Board in January 2023.
We added Nancy E. Calderon, Sarah E. Kemp and
Cristina Pinho to the Board of Directors and updated our
Nominating and Corporate Governance Committee
Charter to include responsibility for making
recommendations to the Board of Directors regarding
director diversity.
We adopted a “plurality plus” vote standard for
uncontested director elections, with a director resignation
policy, instead of a simple plurality vote standard.
We extended the vesting of our annual stock option
grants to three-year vesting in response to a concern
raised by one of our institutional stockholders.
We adopted a Health, Safety and Environment Policy as
well as a Human Rights Policy to formalize our approach
and further our goals with respect to these matters, as
described below. We have also added an ESG section to
our investor relations website to increase visibility.
Ensure the recovery of incentive
compensation based on incorrect
calculations that resulted in a financial
restatement or egregious behavior
We adopted a robust clawback policy which applies to
not only financial restatements but also if an executive
engages in egregious conduct that is substantially
detrimental to NTIC.
Align the interests of executive officers and
directors with those of stockholders
We adopted stock ownership guidelines applicable to our
executive officers and directors to ensure that their
interests would be closely aligned with those of our
stockholders.
6
BOARD OF DIRECTORS COMPOSITION AND DIVERSITY
The Board of Directors understands the importance of adding diverse, experienced talent to the Board of
Directors in order to establish an array of experience and strategic views. The Nominating and Corporate
Governance Committee is committed to refreshment efforts to ensure that the composition of the Board of
Directors and each of its committees encompasses a wide range of perspectives and knowledge.
All of our Board nominees collectively bring tremendous diversity to the Board. Each nominee is a
strategic thinker and has varying, specialized experience in the areas relevant to NTIC and its businesses.
Moreover, their collective experience covers a wide range of geographies and industries, and roles in
academia, corporate governance and government. Our eight current directors range in age from 56 to 75;
three of the eight directors are women; two are of Asian descent; one is of African descent; one is a
citizen of Brazil, one is a citizen of the Republic of Korea and one is a citizen of Germany.
7
BOARD OF DIRECTORS NOMINEES
Below are the director nominees for election by stockholders at the 2024 Annual Meeting of Stockholders
for a one-year term. All director nominees are current directors and attended 100% of all Board meetings
and 100% of the sum of all meetings of the Board of Directors and its committees, as applicable.
Director
Nancy E. Calderon
Sarah E. Kemp
Sunggyu Lee, Ph.D.
G. Patrick Lynch
Ramani Narayan, Ph.D.
Richard J. Nigon
Cristina Pinho
Konstantin von Falkenhausen
Age
64
56
71
56
74
75
65
56
Serving Since
2019
2019
2004
2004
2004
2010
2023
2012
Independent
Yes
Yes
Yes
No
No
Yes
Yes
Yes
The Board of Directors recommends a vote “FOR” each of these nominees.
COMMITTEE COMPOSITION
The Board of Directors maintains a standing Audit Committee, Compensation Committee, and
Nominating and Corporate Governance Committee, each comprised of the following directors:
Director
Nancy E. Calderon
Sarah E. Kemp
Sunggyu Lee, Ph.D.
G. Patrick Lynch
Ramani Narayan, Ph.D.
Richard J. Nigon
Cristina Pinho
Konstantin von Falkenhausen
Audit
Committee
●
Compensation
Committee
Nominating and Corporate
Governance Committee
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KEY QUALIFICATIONS
The following are some key qualifications, skills and experiences of our directors.
Director
Leadership/
Management
Financial
Expertise
International
Experience
Prior Board
Experience
Government
Experience
Nancy E. Calderon
Sarah E. Kemp
Sunggyu Lee, Ph.D.
G. Patrick Lynch
Ramani Narayan, Ph.D.
Richard J. Nigon
Cristina Pinho
Konstantin von
Falkenhausen
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8
Bioplastics
Industry
Experience
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EXECUTIVE COMPENSATION PHILOSOPHY
Our guiding compensation philosophy is to maintain an executive compensation program that allows us
to attract, retain, motivate and reward qualified and talented executives who 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.
EXECUTIVE COMPENSATION BEST PRACTICES
Our compensation practices include many best practices that support our executive compensation
objectives and principles and benefit our stockholders.
What we do:
Emphasize pay for performance
Structure our executive compensation so a
What we don’t do:
No guaranteed salary increases or bonuses
No repricing of stock options unless approved
significant portion of pay is at risk
by stockholders
Structure our executive compensation so a
No pledging of NTIC securities, unless certain
significant portion is paid in equity
Maintain competitive pay packages
Maintain robust clawback policy
Hold an annual say-on-pay vote
Maintain stock ownership guidelines
HOW WE PAY
criteria are met
No hedging of NTIC securities
No excessive perquisites
No tax gross-ups
Our executive compensation program consists of the following principal elements:
Base salary – a fixed amount, paid in cash and reviewed annually and, if appropriate, adjusted.
Annual incentive – a variable, short-term element that is typically payable in cash and is based on a
corporate profitability goal and individual performance goals.
Long-term incentive – a variable, long-term element that is provided in stock options.
9
FISCAL 2023 EXECUTIVE COMPENSATION ACTIONS
Fiscal 2023 compensation actions and incentive plan outcomes based on performance are summarized
below:
Element
Base Salary
Annual Incentive
Long-Term Incentive
Key Fiscal 2023 Actions
Our executives received base salary increases at the start of fiscal 2023 of
5.0%.
Our executives received annual bonuses based primarily on Adjusted
EBITOI (earnings before interest, taxes, and other income, as adjusted to
take into account amounts paid under bonus plan and other adjustments), in
amounts representing 77.4% of their base salaries. A portion of the annual
incentive earned for fiscal 2023 was paid in the form of stock option grants
made at the beginning of fiscal 2023.
Our executives received stock option grants on September 1, 2022, which
vest annually over a three-year period. The fiscal 2023 stock option grants
were intended as partial payout of the fiscal 2023 annual bonus program.
Health and Welfare Benefits No significant changes were made.
Retirement Plans
No significant changes were made.
Perquisites
No significant changes were made.
ADVISORY VOTE ON EXECUTIVE COMPENSATION
The Board of Directors is providing our stockholders with an advisory vote on our executive
compensation, commonly known as a “say-on-pay” vote. We last submitted a say-on-pay proposal to our
stockholders at our 2023 Annual Meeting of Stockholders held on January 20, 2023. At that meeting,
approximately 92% of the votes cast by our stockholders were in favor of our say-on-pay vote.
The Board of Directors recommends a vote “FOR” the approval of our say-on-pay proposal.
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Although stockholder ratification is not required, the appointment of Baker Tilly US, LLP as NTIC’s
independent registered public accounting firm for fiscal 2024 is being submitted for ratification at the
2024 Annual Meeting of Stockholders as a matter of good corporate governance.
The Board of Directors recommends a vote “FOR” the ratification of Baker Tilly US, LLP as NTIC’s
independent registered public accounting firm for fiscal 2024.
10
APPROVAL OF NORTHERN TECHNOLOGIES INTERNATIONAL
CORPORATION 2024 STOCK INCENTIVE PLAN
The Board has approved the Northern Technologies International Corporation 2024 Stock Incentive Plan
(which we refer to as the “2024 plan”). The purpose of the 2024 plan is to advance the interests of NTIC
and our stockholders by enabling us to attract and retain qualified individuals to perform services for us,
provide incentive compensation for such individuals in a form that is linked to the growth and
profitability of our Company and increases in stockholder value, and provide opportunities for equity
participation that align the interests of recipients with those of our stockholders. Our continuing ability to
offer equity incentive awards is critical to our ability to attract, motivate and retain qualified personnel,
particularly as we grow and in light of the highly competitive markets for employee talent in which we
operate.
If our stockholders approve the 2024 plan, it will replace the Northern Technologies International
Corporation Amended and Restated 2019 Stock Incentive Plan (which we refer to as the “2019 plan”) and
no new awards will be granted under the 2019 plan. The terms of the 2019 plan, as applicable, will
continue to govern awards outstanding under the 2019 plan, until exercised, expired, paid or otherwise
terminated or canceled. Other than the 2019 plan, we currently have no other equity compensation plans
under which equity awards can be granted, other than the Northern Technologies International
Corporation Employee Stock Purchase Plan.
The Board of Directors recommends a vote “FOR” the proposal to approve the 2024 plan.
2025 ANNUAL MEETING OF STOCKHOLDERS
We anticipate that our 2025 Annual Meeting of Stockholders will be held on or about Friday, January 17,
2025.
The following are important dates in connection with our 2025 Annual Meeting of Stockholders.
Stockholder Action
Proposal Pursuant to Rule 14a-8 of the Securities
Exchange Act of 1934, as amended
Nomination of a Candidate Pursuant to our Bylaws
Proposal of Other Business for Consideration
Pursuant to our Bylaws
Submission Deadline
No later than August 6, 2024
Between September 21, 2024 and
October 21, 2024
Between September 21, 2024 and
October 21, 2024
11
OUR COMMITMENT TO ENVIRONMENTAL, SOCIAL AND
GOVERNANCE PRINCIPLES
ESG APPROACH AND MISSION
At NTIC, we are committed to creating a more sustainable future. We convert unique, environmentally
beneficial materials science into value-added products and services for industrial and consumer
applications. Our research and development teams deliver innovative technologies and products that
address climate change, use renewable materials, and enable sustainable waste management. We do this
while maintaining the highest performance and processability.
ESG COMMITMENTS
Environmental: We are committed to operating in an environmentally responsible manner, as set forth
in our Policy Statement on Health, Safety and Environment, in order to reduce our impact on climate
change, conserve natural resources and operate in compliance with environmental regulations.
Social: We are committed to being a socially responsible employer by prioritizing health and safety, as
set forth in our Policy Statement on Health, Safety and Environment, and fostering an environment of
diversity and inclusion across our business, as set forth in our Human Rights Policy.
Governance: We are committed to building a culture dedicated to ethical business behavior and
responsible corporate activity, as set forth in our Code of Ethics. We believe strong corporate governance
is the foundation to delivering on our commitments.
ESG INITIATIVES
We utilize electricity generated by 100% renewable sources, through the purchase of energy off-
set credits, for all NTIC facilities in the United States. This annually offsets greenhouse gas
emissions equivalent to 380 metric tons of carbon dioxide, which is the equivalent energy used by
47.8 average households in one year.
We develop technologies that support green manufacturing processes and energy production.
Our corrosion management solutions are used for product packaging, rust prevention, and rust
removers to reduce the impact manufacturing has on the environment by preserving metal assets,
reducing waste and energy required to make new items, aiding in the refurbishing and
remanufacturing of used metal items, preventing waste by enabling the recycling of rusted metal
items, providing alternative solutions from the use of oil and solvents to protect metal assets, and
offering recyclable and compostable products.
Our oil and gas products reduce the environmental impact of the oil and gas industry by reducing
the waste of metal assets and fossil fuels, preventing spillage and leaks, and extending the service
life of metal assets.
Our oil and gas solutions are designed to meet stringent Environmental Protection Agency
regulations.
Our Natur-Tec® bioplastics business supports the sustainability goals of people and companies by
enabling users to reduce their carbon footprint, offering high-quality certified bio-based and
100% compostable resins and products, and researching new technologies to improve sustainable
product choices.
Our Board of directors and executive leadership team is committed to building a diverse and
inclusive workforce and is committed to equal opportunity in regard to all hiring decisions,
including the hiring/promoting of management positions and Board of Director appointments.
12
Our efforts to diversify its workforce have resulted in a workforce that is comprised of 42%
female employees and 29% racially or ethnically diverse employees and a management team that
is comprised of 40% female leaders and 23% racially or ethnically diverse leaders.
We believe that sustainability means being a responsible and ethical corporate citizen, and we
support employees as they give back to the communities in which they live and work by engaging
in efforts to strengthen community relationships and foster employee engagement.
HEALTH, SAFETY AND ENVIRONMENT
Health, safety and environment are the cornerstone of NTIC. We are in the business of converting
unique, environmentally beneficial materials science into value added products and services for industrial
and consumer applications. We believe that we are responsible to our worldwide customers, our people,
our communities and our stockholders, and we take these responsibilities seriously. We are dedicated to
investing in the future of the planet and our people and we intend to continue to invest in health, safety
and environmental protection and improvements in a timely manner consistent with available technology.
We are guided by our Policy Statement on Health, Safety and Environment, which describes our health,
safety and environmental objectives, including ensuring that all activities across the value chain are
conducted in a manner consistent with our quality management standard and health, safety and
environmental programs, ensuring that business activities are conducted to prevent harm and protect
health and safety, and developing, manufacturing, distributing and marketing products and services with
full regard for health, safety and environmental aspects. To accomplish these objectives, we intend to
establish targets within our quality management standard and health, safety and environmental programs
to measure progress and ensure continuous improvement, provide safe and healthy workplaces for our
employees and contractors, and provide continued training to enable employees to meet their
responsibility to contribute to compliance with our health, safety and environmental objectives.
ENVIRONMENTAL MANAGEMENT SYSTEM POLICY
NTIC has an environmental management system to establish the operational controls related to the
identified significant environmental aspects of NTIC’s international operations and activities, the goods
and services used by NTIC and communicating relevant requirements to our suppliers and subcontractors.
Our Environmental Management System Policy is administered by our Chief Executive Officer and
relates to the development and implementation of plans and activities to minimize, avoid and manage
impacts on the environment. Significant aspects include disposal of scrap film generated by
subcontractors, recycling and composting internally generated waste, electricity, lighting, heating and
cooling of our buildings, handling, storage and disposal of hazardous material, and the disposal of NTIC
product after use. NTIC strives to abide by all applicable laws, regulations and internal standards.
DIVERSITY AND INCLUSION; CODE OF ETHICS
Diversity and inclusion are embedded in our values and integrated into our strategies. Our Human Rights
Policy was designed to align with the United Nations Global Compact and core elements of the United
Nations Universal Declaration of Human Rights. We are committed to providing an environment free of
discrimination and harassment, where all individuals are treated with respect and dignity, can contribute
fully, and have equal opportunities. We have worked to build a diverse and inclusive workforce and are
committed to equal opportunity. We invest in building diverse talent pools and provide training to
improve skills where appropriate. We uphold and support the right to equal treatment without
discrimination or harassment, as reflected in our Equal Opportunity, Non-Discrimination, and Anti-
Harassment Policy.
13
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 employees.
SUPPLIER CONDUCT
At NTIC, our company values are respect, integrity, innovation, stewardship and excellence. Our Vendor
Code of Conduct sets forth the requirements that we expect our vendors to comply with in order to
operate lawfully, ethically and with integrity in every jurisdiction where they conduct business. This
policy sets forth our expectations for our vendors with respect to anti-bribery and anti-corruption,
international trade sanctions laws, antitrust laws, employee health and safety laws, environmental laws,
gifts, entertainment and hospitality, anti-human trafficking and anti-modern slavery and other conduct.
NTIC takes pride in setting an example by holding itself to high standards. This includes ensuring that
our supply partners and vendors who are essential for doing business embody these beliefs as well.
ESG OVERSIGHT
Our Nominating and Corporate Governance Committee is responsible for overseeing NTIC’s ESG
activities, including disclosures. In doing so, the Nominating and Corporate Governance Committee
periodically reviews and discusses with senior management the type and presentation of NTIC’s key ESG
disclosures and the adequacy and effectiveness of applicable internal controls related to such disclosures.
In carrying out its responsibilities for ESG oversight, the Nominating and Corporate Governance
Committee coordinates with and solicits input from the Compensation Committee and the Audit
Committee in formulating the approach to NTIC’s ESG activities. Our Compensation Committee is
responsible for overseeing and periodically reviewing NTIC’s culture and policies and strategies related
to human capital management, including with respect to diversity and inclusion initiatives, pay equity,
talent, recruitment and development, performance management and employee engagement. Our Audit
Committee has oversight over general compliance with applicable laws as well as risk management.
14
4201 Woodland Road, Circle Pines, Minnesota 55014
PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS
January 19, 2024
The Board of Directors of Northern Technologies International Corporation is soliciting your proxy for
use at the 2024 Annual Meeting of Stockholders to be held on Friday, January 19, 2024. The Board of
Directors expects to make available to our stockholders beginning on or about December 4, 2023 the
Notice of Annual Meeting of Stockholders, this proxy statement and a form of proxy on the Internet or
will mail 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 19,
2024, at 8:00 a.m., Central 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 21, 2023 will be entitled to notice of and to
vote at the meeting or any adjournment of the meeting. As of that date, there were 9,427,599 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.
15
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 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 Time (10:59 p.m.,
Central 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 eight nominees for director,
WITHHOLD your vote from all eight nominees for director or
WITHHOLD your vote from one or more of the eight nominees for director.
For each of the other proposals, 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 eight of the nominees for election to the
Board of Directors in Proposal One—Election of Directors and FOR each of the other proposals.
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How Does the Board Recommend that You Vote
The Board of Directors unanimously recommends that you vote:
FOR all eight of the nominees for election to the Board of Directors in Proposal One—
Election of Directors;
FOR Proposal Two—Advisory Vote on Executive Compensation;
FOR Proposal Three—Ratification of Appointment of Independent Registered Public
Accounting Firm; and
FOR Proposal Four—Approval of Northern Technologies International Corporation 2024
Stock Incentive Plan.
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 (4,713,800
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. However, under our Corporate Governance Guidelines, in an uncontested
election of directors, any nominee for director who receives a greater number of votes “withheld” from
his or her election than votes “for” his or her election by stockholders present in person or by proxy at the
Annual Meeting and entitled to vote in the election of directors is required to tender a written offer to
resign from the Board of Directors within five business days of the certification of the stockholder vote by
the Inspector of Elections.
17
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 Appointment 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.
Proposal Four—Approval of Northern Technologies International Corporation 2024 Stock Incentive Plan
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, Proposal Two—Advisory Vote on Executive Compensation and Proposal Four—
Approval of Northern Technologies International Corporation 2024 Stock Incentive Plan 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 any 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” or “votes cast” at the meeting and will not be counted as
having been voted on the applicable proposal. Proposal Three—Ratification of Appointment 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 proposals in the absence of your
instruction.
Proposal
Proposal One: Election of
Directors
Proposal Two: Advisory
Vote on Executive
Compensation
Votes Required
Plurality of the voting power of the
shares present in person or
represented by proxy at the
meeting and entitled to vote on the
election of directors. This means
that the eight nominees receiving
the highest number of affirmative
“FOR” votes will be elected as
directors.(1)
Affirmative vote of a majority of
the voting power of the shares
present or represented by proxy at
the meeting and entitled to vote on
the proposal.
Effect of
Broker
Non-Votes
Broker non-
votes will have
no effect.
Effect of Votes
Withheld /
Abstentions
Votes withheld
will have no
effect, unless
there are more
votes withheld
than “FOR”
votes.(1)
Abstentions will
have the effect
of a vote against
the proposal.
Broker non-
votes will have
no effect.
Proposal Three: Ratification
of Appointment of
Independent Registered
Public Accounting Firm
Affirmative vote of a majority of
the voting power of the shares
present or represented by proxy at
the meeting and entitled to vote on
the proposal.
Abstentions will
have the effect
of a vote against
the proposal.
We do not
expect any
broker non-
votes on this
proposal.
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Proposal
Proposal Four: Approval of
Northern Technologies
International Corporation
2024 Stock Incentive Plan
Votes Required
Affirmative vote of a majority of
the voting power of the shares
present or represented by proxy at
the meeting and entitled to vote on
the proposal. (2)
________________________
Effect of Votes
Withheld /
Abstentions
Abstentions will
have the effect
of a vote against
the proposal.
Effect of
Broker
Non-Votes
Broker non-
votes will have
no effect.
(1)
(2)
Under our Corporate Governance Guidelines, in an uncontested election of directors, any
nominee for director who receives a greater number of votes “withheld” from his or her election
than votes “for” his or her election by stockholders present in person or by proxy at the Annual
Meeting and entitled to vote in the election of directors is required to tender a written offer to
resign from the Board of Directors within five business days of the certification of the
stockholder vote by the Inspector of Elections.
While the Nasdaq rules require a minimum vote requirement for this proposal of approval by a
“majority of votes cast,” our Bylaws provide for a more stringent vote requirement to pass the
proposal since abstentions have the effect of a vote against the proposal under our Bylaws and
Delaware law, and therefore is the vote required to pass the 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 on
the proxy card 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, unless contrary instructions have been given. 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
19
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 telephone 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.
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PROPOSAL ONE—ELECTION OF DIRECTORS
________________
Number of Directors
Our Second Amended and Restated Bylaws provide that the Board of Directors will consist of that
number of directors as may be determined by the Board of Directors or by the stockholders at an annual
meeting. The Board of Directors has fixed the number of directors at eight.
Nominees for Director
The Board of Directors has nominated the following eight individuals to serve as our directors until the
next annual meeting of stockholders or until their successors are elected and qualified. All nominees
named below are current members of the Board of Directors.
Nancy E. Calderon
Sarah E. Kemp
Sunggyu Lee, Ph.D.
G. Patrick Lynch
Ramani Narayan, Ph.D.
Richard J. Nigon
Cristina Pinho
Konstantin von Falkenhausen
Proxies can only be voted for the number of persons named as nominees in this proxy statement, which is
eight. 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.
Information about Current Directors and Board Nominees
The following table sets forth as of November 21, 2023 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 NTIC, as well as how long each individual has served as a director of NTIC.
Name
Nancy E. Calderon(1)(2)
Sarah E. Kemp(2)
Sunggyu Lee, Ph.D.(3)
G. Patrick Lynch
Ramani Narayan, Ph.D.
Age Principal Occupation
64
56 Vice President, International Government Affairs of
Former Partner of KPMG LLP
Intel Corporation
Director
Since
2019
2019
71 Chief Technologist of Chemtech Innovators LLC
56
President and Chief Executive Officer of NTIC
74 Distinguished Professor in Department of Chemical
Engineering & Materials Science at Michigan State
University
75
Senior Vice President of Cedar Point Capital, Inc.
65 Chair of the Board of Instituto Luísa Pinho Sartori
56
Partner of B Capital Partners AG
2004
2004
2004
2010
2023
2012
Richard J. Nigon(1)(2)(3)
Cristina Pinho(2)
Konstantin von Falkenhausen(1)(3)
_________________________
(1)
(2)
(3)
Member of the Audit Committee
Member of the Nominating and Corporate Governance Committee
Member of the Compensation Committee
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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 NTIC; 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.
Nancy E. Calderon has been a director of NTIC since October 2019. Ms. Calderon is a CPA and retired
from KPMG LLP in September 2019 after a distinguished 33-year career. Until her retirement, Nancy
served as Global Lead Partner for a Fortune 40 Technology company, managing a global team of over
500 professionals in more than 50 countries, a position she held since July 2012, senior partner of
KPMG’s Board Leadership Center from its inception in 2015, and as a director of KPMG’s Global
Delivery Center in India and its related holding companies since September 2011. Previously, she was
KPMG’s Americas Chief Administrative Officer and U.S. National Partner in Charge, Operations from
July 2008 to June 2012. Ms. Calderon has sat on a number of KPMG committees, including the
Americas Region Management Committee, Enterprise Risk Management, Privacy, Pension Steering and
Investment, Social Media and Knowledge Management. She currently serves on the board of directors of
Belden Inc. We believe Ms. Calderon’s qualifications to sit on the Board of Directors include her
extensive financial accounting experience with KPMG and her current and prior experience on boards of
directors, including, in particular, her experience serving on the audit committees of Arcimoto, Inc.;
Belden, Inc.; KPMG’s Global Delivery Center; Women Corporate Directors Foundation and the New
York YMCA. Ms. Calderon received a Bachelor of Science from UC Berkeley’s Haas Business School
and a Master of Science from Golden Gate University.
Sarah E. Kemp has been a director of NTIC since October 2019. Ms. Kemp is Vice President,
International Government Affairs for Intel Corporation. Before joining Intel Corporation in February
2022, Ms. Kemp was the Associate Vice President for Organon, a global biopharmaceutical company
where she lead Global Women’s Health Policy and ESG, a position she served since April 2021. Prior to
Organon, Ms. Kemp lead Merck’s Policy Communication and Population Health organization responsible
for emerging markets from November 2020 to April 2021. Prior to this role, she was the Executive
Director, Public Policy and Commercial Strategies for China and the Asia Pacific from July 2019 to
October 2020. Before joining Merck, Ms. Kemp was the Deputy Under Secretary, for the International
Trade Administration at the U.S. Department of Commerce in Washington, D.C., from February 2017 to
July 2019. In this role, she oversaw a $485 million annual budget and 2,100 trade and investment
professionals based in 108 US cites and 76 markets around the world. Prior to her time in D.C., she was
the Minister Counselor for Commercial Affairs at the U.S. Embassy in Beijing, overseeing the U.S.
Department of Commerce’s trade promotion and trade policy activities in its operations in Beijing,
Chengdu, Shanghai, Wuhan, Shenyang and Guangzhou. In this capacity, she was a key advisor to the
Ambassador and advised U.S. CEOs—from fortune 500 companies to SME’s—on China business
strategy, market access, export promotion, anti-dumping / countervailing duty cases, intellectual property
protection and export controls. As a career Foreign Commercial Service Officer, she served as the
22
Country Manager in China and Vietnam, and had multiple postings in Beijing, Hong Kong and Bangkok.
Ms. Kemp joined Commerce as a Presidential Management Fellow. Ms. Kemp served on the board of
directors of the Concordia International School in Hanoi, Vietnam, an international day school offering
preschool through high school education, from 2012-2014 and was the Co-Chair of Women Corporate
Directors in Vietnam from 2011-2014 and in Beijing from 2009-2011. Ms. Kemp serves on the Advisory
Board of Indiana University’s Manufacturing Policy Initiative and is on the Board of the Center for
International Private Enterprise. We believe Ms. Kemp’s qualifications to sit on the Board of Directors
include her extensive knowledge and experience in international commerce, particularly with regard to
Asia Pacific and Greater China, her prior board experience and her in depth experience in international
and public affairs. Ms. Kemp received her Master of Business Administration from the Chinese
University of Hong Kong, her Master of Public Administration from Columbia University and her
Bachelor of Arts in Physiological–Anthropology from Hamilton College.
Sunggyu Lee, Ph.D. has been a director of NTIC since January 2004. Dr. Lee is Chief Technologist,
Chemtech Innovators LLC, Akron, Ohio. Previously, he held positions of Russ Ohio Research Scholar
and Professor of Chemical and Biomolecular Engineering, Ohio University, Athens, Ohio from 2010 to
2020, Professor of Chemical and Biological 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 to 1996.
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
ZERUST® industrial business.
G. Patrick Lynch, an employee of NTIC since 1995, has been President since July 2005 and Chief
Executive Officer since January 2006 and has served as a director of NTIC since 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 NTIC 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 200+ refereed publications in leading journals to his credit, 19 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
23
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 of the Biodegradable Products Institute (BPI), North America.
He served on the Technical Advisory Board of Tate & Lyle. He served on the Board of Directors of
ASTM International, an international standard setting organization and was the founding Chair of 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, Biobased 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. In addition to NTIC,
Mr. Nigon also serves on the board of directors of Celcuity Inc. and as chairperson of its audit committee
and serves on the board of directors of a number of privately-held companies. Mr. Nigon previously
served on the board of directors of Tactile Systems Technology, Inc., Virtual Radiologic Corporation and
Vascular Solutions, Inc. until its acquisition by Teleflex Incorporated in February 2017. Through his
30 years of service at Ernst & Young, LLP, Mr. Nigon brings to NTIC’s Board of Directors, and in
particular the Audit Committee, extensive public accounting and auditing experience. The Board believes
Mr. Nigon’s strong background in financial controls and reporting, financial management, financial
analysis and SEC reporting requirements is critical to the Board’s oversight responsibilities. In addition,
his 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 in
assessing and operating NTIC’s newer businesses.
Cristina Pinho has been a director of NTIC since January 2023. Ms. Pinho is Chair of the Board of
Instituto Luísa Pinho Sartori, a nonprofit organization in Brazil whose mission is to support and
incentivize conservationists and biologists to work on environmental protection, a position she has held
since April 2015. Ms. Pinho is also an independent board director of Ocyan, a private company, a
position she has held since August 2020. Ms. Pinho is a member of a sounding board of Shell Brazil, a
position she has held since June 2023. From November 2019 to January 2022, she served as Corporate
Executive Director at Brazilian Petroleum and Gas Institute, a nonprofit organization in Brazil, formed by
major oil and gas producers in Brazil and petroleum products service companies. From January 2019 to
November 2019, Ms. Pinho served as Undersecretary of Energy, Petroleum and Gas at Rio de Janeiro
24
State. From 2012 to 2015, she served as Executive Manager of E&P Services and Logistics for Petrobras.
We believe Ms. Pinho’s qualifications to sit on the Board of Directors include her extensive experience in
the oil and gas industry in Brazil and her extensive experience in ESG matters. Ms. Pinho received an
ESG Competent Boards Certificate in 2021 and is a graduate of the Columbia Senior Executive Program
at the Columbia Business School and also received a Digital Strategy for Business degree from the
Columbia Business School in 2018. She has also received an MBA CoppeAd UFRJ; Senior Strategic
Management, MBA Fundação Getúlio Vargas, Business and Strategic Management and a Mechanical
Engineering degree from the Universidade Federal do Rio de Janeiro.
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. In this capacity, since April 2018, Mr. von
Falkenhausen has been a Director of the general partner of the B Capital Energy Transition Infrastructure
Fund SICAV-SIF, an investment fund registered with the Luxembourg financial authorities CSSF. From
February 2004 to March 2008, Mr. von Falkenhausen served as a Partner of capiton AG, a private equity
firm located in Berlin, Germany. 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 believes is helpful in assessing and operating
NTIC’s newer businesses, and his financial expertise, which the Board 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 eight nominees
named above.
The Board of Directors Recommends a Vote FOR Each Nominee for Director
25
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, as amended (the “Exchange Act”). 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 67. At the 2023
Annual Meeting of Stockholders held on January 20, 2023, approximately 92% 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 principles of our executive compensation
program are:
To align the interests of our executives with those of our stockholders;
Integrate compensation with our business plans and strategic goals;
Link amount of compensation to both company and individual performance goals; and
Provide fair and competitive compensation opportunities that attract and retain executives.
The “Executive Compensation” section of this proxy statement, which begins on page 67, describes our
executive compensation program and the executive compensation decisions made by the Compensation
Committee and Board of Directors for fiscal 2023 in more detail. Important considerations include:
A significant portion of the compensation paid or awarded to our named executive officers in
fiscal 2023 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 and aligns the long-term interests of our executives with the long-term interests of our
stockholders. In response to a concern raised by one of our stockholders, stock options
granted to our executives now vest annually over a three-year period as opposed to a one-year
period.
Our executive officers receive only modest perquisites and have modest severance and
change-in-control arrangements.
We have adopted a clawback policy.
We do not provide any tax “gross-up” payments.
26
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 our most recent advisory vote on the frequency of the say-on-pay vote,
which was conducted at our 2020 Annual Meeting of Stockholders, the Board of Directors has determined
that we will conduct an executive compensation advisory vote on an annual basis. Accordingly, after this
Annual Meeting, the next say-on-pay vote will occur at our next Annual Meeting of Stockholders
anticipated to be held in January 2025. We anticipate that the next say-on-frequency vote will occur at
our 2026 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.
The Board of Directors Recommends a Vote FOR Proposal Two
27
PROPOSAL THREE—RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
_________________
Appointment of Independent Registered Public Accounting Firm
The Audit Committee of the Board of Directors appoints our independent registered public accounting
firm. In this regard, the Audit Committee evaluates the qualifications, performance and independence of
our independent registered public accounting firm and determines whether to re-engage our current
independent registered public accounting firm. As part of its evaluation, the Audit Committee considers,
among other factors, the quality and efficiency of the services provided by the firm, including the
performance, technical expertise, and industry knowledge of the lead audit partner and the audit team
assigned to our account; the overall strength and reputation of the firm; its global capabilities relative to
our business; and its knowledge of our operations. Additionally, the Audit Committee considers the
impact of a change of independent registered public accounting firm. Upon consideration of these and
other factors, the Audit Committee believes the appointment of Baker Tilly US, LLP (“Baker Tilly”) as
our independent registered public accounting firm for the fiscal year ending August 31, 2024 is in the best
interests of NTIC and its stockholders. Baker Tilly has served as our independent registered public
accounting firm since 2004.
Although it is not required to do so, the Board of Directors is asking our stockholders to ratify the Audit
Committee’s appointment of Baker Tilly as a matter of good corporate governance. If our stockholders
do not ratify the appointment of Baker Tilly, another independent registered public accounting firm will
be considered by the Audit Committee. Even if the appointment 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 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 for the fiscal years ended
August 31, 2023 and August 31, 2022.
Audit Fees(1) .........................................................
Audit-Related Fees(2) ............................................
Tax Fees ...............................................................
All Other Fees ......................................................
Aggregate Amount Billed by
Baker Tilly ($)
Fiscal 2023
$
493,991
—
—
—
Fiscal 2022
$
507,663
—
—
—
(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)
Audit-related fees represent fees for services relating to registration statement filings.
28
Audit Committee Pre-Approval Policies and Procedures
All services rendered by Baker Tilly 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
appointment of Baker Tilly as our independent registered public accounting firm for the fiscal year ending
August 31, 2024.
The Board of Directors Recommends a Vote FOR Proposal Three
29
PROPOSAL FOUR—APPROVAL OF NORTHERN TECHNOLOGIES INTERNATIONAL
CORPORATION 2024 STOCK INCENTIVE PLAN
_________________
Background
On November 10, 2023, the Board of Directors, upon recommendation of the Compensation Committee,
approved the Northern Technologies International Corporation 2024 Stock Incentive Plan (referred to in
this section as the “2024 plan” or the “plan”), subject to approval by our stockholders at the Annual
Meeting. The purpose of the 2024 plan is to advance the interests of NTIC and our stockholders by
enabling us to attract and retain qualified individuals to perform services, provide incentive compensation
for such individuals in a form that is linked to the growth and profitability of our company and increases
in stockholder value, and provide opportunities for equity participation that align the interests of
recipients with those of our stockholders.
If our stockholders approve the 2024 plan, it will replace the Northern Technologies International
Corporation Amended and Restated 2019 Stock Incentive Plan (referred to as the “2019 plan”), with the
remaining shares available for grant under the 2019 plan rolling over into the 2024 plan, and no new
awards will be granted under the 2019 plan. The terms of the 2019 plan, as applicable, will continue to
govern awards outstanding under the 2019 plan, until exercised, expired, paid or otherwise terminated or
canceled. Other than the 2019 plan and our employee stock purchase plan, we have no other equity
compensation plans under which equity awards can be granted.
Subject to adjustment, the maximum number of shares of our common stock to be authorized for issuance
under the 2024 plan is 800,000 shares, plus (i) the number of shares of common stock remaining available
for issuance under the 2019 plan but not subject to outstanding awards as of the effective date of the 2024
plan, plus (ii) the number of additional shares of common stock subject to awards outstanding under the
2019 plan as of the effective date of the 2024 plan but only to the extent that such outstanding awards are
forfeited, cancelled, expire or otherwise terminate without the issuance of such shares of common stock
after the effective date of the 2024 plan.
The Board of Directors is asking our stockholders to approve the 2024 plan in order to qualify stock
options for treatment as incentive stock options for purposes of Section 422 of the Internal Revenue Code
of 1986, as amended, or Code. In addition, the Listing Rules of the Nasdaq Stock Market require
stockholder approval of the 2024 plan. If our stockholders do not approve the 2024 plan, the 2019 plan
will remain in effect until it terminates in accordance with its terms.
The 2024 plan allows us to award eligible recipients the following awards:
options to purchase shares of our common stock that qualify as “incentive stock options” within
the meaning of Section 422 of the Code (referred to as “incentive options”);
options to purchase shares of our common stock that do not qualify as incentive options (referred
to as “non-statutory options”);
rights to receive a payment from us, in the form of shares of our common stock, cash or a
combination of both, equal to the difference between the fair market value of one or more shares
of our common stock and a specified exercise price of such shares (referred to as “stock
appreciation rights” or “SARs”);
shares of our common stock that are subject to certain forfeiture and transferability restrictions
(referred to as “restricted stock awards”);
30
rights to receive shares of common stock (or the equivalent value in cash or other property) at a
future time (referred to as “deferred stock units” or “DSUs”);
rights to receive the fair market value of one or more shares of our common stock, payable in
cash, shares of our common stock, or a combination of both, the payment, issuance, retention
and/or vesting of which is subject to the satisfaction of specified conditions, which may include
achievement of specified objectives (referred to as “restricted stock unit awards” or “RSUs”);
rights to receive an amount of cash, a number of shares of our common stock, or a combination of
both, contingent upon achievement of specified objectives during a specified period (referred to
as “performance awards”); and
other stock-based awards.
In the following discussion, we refer to both incentive options and non-statutory options as “options,” and
to options, stock appreciation rights, restricted stock awards, deferred stock units, restricted stock units,
performance awards and other stock based awards as “incentive awards.”
Reasons Why You Should Vote in Favor of the 2024 Plan
The Board of Directors recommends a vote “FOR” the approval of the 2024 plan because the Board of
Directors believes the proposed 2024 plan is in the best interests of NTIC and its stockholders for the
following reasons:
Aligns directors, employee and stockholder interests. We currently provide long-term incentives
in the form of stock option grants to our non-employee directors, executive officers and other key
employees. We believe that our stock-based compensation program helps align the interests of
our directors, executive officers and other key employees with our stockholders. We believe that
our long-term stock-based incentives help promote long-term retention of our employees and
encourage ownership of our common stock. If the 2024 plan is approved, we will be able to
maintain our means of aligning the interests of our directors, executive officers and other key
employees with the interests of our stockholders.
Attracts and retains talent. Talented, motivated and effective directors, executives and
employees are essential to executing our business strategies. Stock-based and annual cash
incentive compensation has been an important component of total compensation at NTIC for
many years because such compensation enables us to effectively recruit executives and other
employees while encouraging them to act and think like owners of NTIC. If the 2024 plan is
approved, we believe we will maintain our ability to offer competitive compensation packages to
both retain our best performers and attract new talent.
Supports our pay-for-performance philosophy. We believe that stock-based compensation, by its
very nature, is performance-based compensation. We use incentive compensation to help
reinforce desired financial and other business results to our executives and to motivate them to
make decisions to produce those results.
Protects stockholder interests and embraces sound stock-based compensation practices. As
described in more detail below under “Summary of Sound Governance Features of the 2024
Plan,” the 2024 plan includes a number of features that are consistent with the interests of our
stockholders and sound corporate governance practices.
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Summary of Sound Governance Features of the 2024 Plan
The Board of Directors and Compensation Committee believe that the 2024 plan contains several features
that are consistent with the interests of our stockholders and sound corporate governance practices,
including the following:
No automatic share replenishment or
Members of the committee administering the
“evergreen” provision
plan are non-employee and independent directors
Will not be excessively dilutive to our
Stockholder approval is required for material
stockholders
revisions to the 2024 plan
Limit on number of “full value” awards
No liberal share counting or “recycling” of
shares from exercised stock options, SARs or
other stock-based awards
No reload stock options or SARs
No re-pricing of “underwater” stock options
or SARs without stockholder approval
No “tax gross-ups”
Options, SARs and unvested performance awards
are not entitled to dividend equivalent rights and
no dividends will be paid on unvested awards
Limits on non-employee director compensation
Stock option and SAR exercise prices will not be
lower than the fair market value on the grant date
“Clawback” provisions
Background for Shares Authorized for Issuance
If the 2024 plan is approved, the maximum number of shares of common stock available for issuance
under the 2024 plan will be 800,000 shares, plus the number of shares of common stock remaining
available for issuance under the 2019 plan but not subject to outstanding awards as of the effective date of
the 2024 plan, plus the number of additional shares of common stock subject to awards outstanding under
the 2019 plan as of the effective date of the 2024 plan but only to the extent that such outstanding awards
are forfeited, cancelled, expire or otherwise terminate without the issuance of such shares of common
stock after the effective date of the 2024 plan. As of November 21, 2023, 1,387,415 shares of common
stock were subject to outstanding awards under the 2019 plan, and 157,059 shares of common stock
remained available for issuance under the 2019 plan.
In determining the number of shares of common stock available under the 2024 plan, the Board of
Directors and Compensation Committee considered a number of factors, which are discussed further
below, including:
Shares currently available under the 2019 plan and total outstanding equity-based awards and
how long the shares available are expected to last;
Historical equity award granting practices, including our three-year average share usage rate
(commonly referred to as “burn rate”); and
Potential dilution.
Shares Available and Outstanding Equity Awards
While the use of long-term incentives, in the form of equity awards, is an important part of our
compensation program, we are mindful of our responsibility to our stockholders to exercise judgment in
the granting of equity awards. In setting the number of shares of common stock available for issuance
under the 2024 plan, the Board of Directors and Compensation Committee also considered shares
currently available under the 2019 plan and total outstanding equity awards and how long the shares
available under the 2019 plan are expected to last. To facilitate approval of the 2024 plan, set forth below
32
is certain information about our shares of common stock that may be issued under our equity
compensation plans as of November 21, 2023.
As of November 21, 2023,
we had 9,427,599 shares of common stock issued and outstanding. The market value of one
share of common stock on November 21, 2023, as determined by reference to the closing price as
reported on the Nasdaq Global Market, was $11.21;
1,387,415 shares were subject to outstanding stock options under the 2019 plan and 439,560
shares were subject to outstanding stock options under the prior equity compensation plan; and
157,059 shares remained available for issuance under the 2019 plan.
Historical Equity Award Granting Practices
In setting the number of shares of common stock authorized for issuance under the 2024 plan, the Board
of Directors and Compensation Committee also considered the historical number of equity awards
granted under the 2019 plan in each of the last three fiscal years. The following table sets forth
information regarding awards granted and earned and the annual burn rate for each of the last three fiscal
years. The only equity awards granted during the last three fiscal years are stock options.
Stock options granted
Weighted average basic common shares outstanding
during fiscal year
Burn rate
Fiscal 2023
277,613
Fiscal 2022
174,840
Fiscal 2021
419,874
9,693,482
3.1%
9,216,216
1.9%
9,116,472
4.6%
The Board of Directors and Compensation Committee also considered our three-year average burn rate
(fiscal 2021 to fiscal 2023) of approximately 3.1%, which is lower than the industry thresholds
established by certain major proxy advisory firms.
Based on historical and anticipated granting practices and the recent trading price of our common stock,
we expect the additional shares authorized for issuance by the 2024 plan to cover awards for
approximately three to four years. However, we cannot predict our future equity grant practices, the
future price of our shares, or future hiring activity with any degree of certainty at this time, and the shares
available for issuance under the 2024 plan could last for a shorter or longer time.
Potential Dilution
In setting the number of shares of common stock authorized for issuance under the 2024 plan, the Board
of Directors and Compensation Committee also considered the potential dilution (often referred to as
overhang) that would result by approval of the 2024 plan, including the policies of certain institutional
investors and major proxy advisory firms. Potential dilution, or overhang, is as set forth in the table
below, as of November 21, 2023, assuming approval of the 2024 plan. The 957,059 shares that would be
available under the 2024 plan would represent 29.5% of our fully diluted shares of common stock
assuming the 2024 plan is approved, as described in the table below.
Options Outstanding as of November 21, 2023
Weighted Average Exercise Price of Options Outstanding
Assuming Approval of
2024 Plan
1,826,975
$ 11.40
33
Weighted Average Remaining Term of Options Outstanding
Total Equity Awards Outstanding(1)
Common Stock Outstanding as of November 21, 2023
Current Dilution as of November 21, 2023(2)
Shares Available for Grant under the 2019 Plan (will carry over to 2024 plan)
Current Potential Dilution, or Overhang, Under the 2019 Plan, as a Percentage
of Common Stock Outstanding as of November 21, 2023(3)
Shares Available for Future Grant Under the 2024 Plan (not including carryover
shares)
Potential Dilution, or Overhang, Under the 2024 Plan, as a Percentage of
Common Stock Outstanding as of November 21, 2023(4)
Assuming Approval of
2024 Plan
6.57 years
1,826,975
9,427,599
19.4%
157,059
21.0%
800,000
29.5%
(1) The only equity awards outstanding are stock options. No restricted stock, restricted stock units, performance
stock units or other equity awards are outstanding.
(2) Dilution consists of the number of shares subject to equity awards outstanding as of November 21, 2023 divided
by the number of shares of common stock outstanding as of November 21, 2023.
(3) Current potential dilution, or overhang, under the 2019 plan consists of the number of shares subject to equity
awards outstanding as of November 21, 2023 and the number of shares available for future grant under the 2019
plan divided by the number of shares of common stock outstanding as of November 21, 2023.
(4) Current potential dilution, or overhang, under the 2024 Plan consists of the number of shares subject to equity
awards outstanding as of November 21, 2023 and the number of shares available for future grant under the 2024
Plan, including the carryover shares, divided by the number of shares of common stock outstanding as of
November 21, 2023.
Summary of the 2024 Plan Features
The major features of the 2024 plan are summarized below. The summary is qualified in its entirety by
reference to the full text of the 2024 plan, a copy of which may be obtained from us. A copy of the 2024
plan also has been filed electronically with the Securities and Exchange Commission, or SEC, as an
appendix to this proxy statement, and is available through the SEC’s website at www.sec.gov.
Purpose. The purpose of the 2024 plan is to advance the interests of NTIC and its stockholders by
enabling us to attract and retain qualified individuals through opportunities for equity participation in
NTIC and to reward those individuals who contribute to the achievement of our economic objectives.
Eligibility. All employees (including officers and directors who are also employees), non-employee
directors, consultants, advisors and independent contractors of NTIC or any subsidiary will be eligible to
receive incentive awards under the 2024 plan. As of November 21, 2023, there were approximately 90
persons who would be eligible to receive awards under the 2024 plan. Although not necessarily
indicative of future grants under the 2024 plan, 15 employees, or approximately 16% of the
approximately 90 eligible recipients, have been granted awards under the 2019 plan.
Shares Available for Issuance. The maximum number of shares of our common stock available for
issuance under the 2024 plan will be 800,000 shares plus the number of shares of common stock
remaining available for issuance under the 2019 plan but not subject to outstanding awards as of the
effective date of the 2024 plan, plus the number of additional shares of common stock subject to awards
outstanding under the 2019 plan as of the effective date of 2024 plan but only to the extent that such
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outstanding awards are forfeited, cancelled, expire or otherwise terminate without the issuance of such
shares of common stock after the effective date of the 2019 plan.
Shares of our common stock that are issued under the 2024 plan or that are potentially issuable pursuant
to outstanding incentive awards reduce the number of shares remaining available. All shares so
subtracted from the amount available under the plan with respect to an incentive award that lapses,
expires, is forfeited or for any reason is terminated, unexercised or unvested and any shares of our
common stock that are subject to an incentive award that is settled or paid in cash or any other form other
than shares of our common stock will automatically again become available for issuance under the 2024
plan. However, any shares not issued due to the exercise of an option by a “net exercise” or the tender or
attestation as to ownership of previously acquired shares (as described below), as well as shares covered
by a stock-settled stock appreciation right and shares withheld by us to satisfy any tax withholding
obligations will not again become available for issuance under the 2024 plan. Any shares of our common
stock that we repurchase on the open market using the proceeds from the exercise of an award under the
2024 plan will not increase the number of shares available for future grants of awards under the 2024
plan.
Non-Employee Director Compensation Limit. The 2024 plan provides that the sum of any cash
compensation, or other compensation, and the value (determined as of the grant date in accordance with
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718,
or any successor thereto) of awards granted to a non-employee director as compensation for services as a
non-employee director during any fiscal year of NTIC may not exceed $300,000 (increased to $400,000
with respect to any non-employee director serving as chair of the Board of Directors or lead independent
director or in the fiscal year of a non-employee director’s initial service as a non-employee director). Any
compensation that is deferred will count towards this limit for the year in which the compensation is first
earned, and not a later year of settlement.
Grant Limits. Under the terms of the 2024 plan:
no more than 800,000 shares of our common stock may be issued pursuant to the exercise of
incentive stock options; and
no more than 200,000 shares of our common stock may be issued or issuable in connection with
full-value awards.
All of the share limitations in the 2024 plan may be adjusted to reflect changes in our corporate structure
or shares, as described below. In addition, the number of shares that may be issued as incentive options
or other incentive awards will not apply to certain incentive awards granted upon our assumption or
substitution of like awards in any acquisition, merger or consolidation.
Adjustments. In the event of any reorganization, merger, consolidation, recapitalization, liquidation,
reclassification, stock dividend, stock split, combination of shares, rights offering, divestiture or
extraordinary dividend (including a spin-off) or any other similar change in our corporate structure or
shares of common stock, we must adjust or substitute:
the number and kind of securities available for issuance under the 2024 plan, including the sub-
limits described above; and
in order to prevent dilution or enlargement of the rights of participants, the number, kind and,
where applicable, the exercise price of securities subject to outstanding incentive awards.
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Administration. The 2024 plan is administered by our Board of Directors or by a committee of the Board.
Any such committee will consist of at least two members of the Board, all of whom are “non-employee
directors” within the meaning of Rule 16b-3 under the Exchange Act, and all of whom are “independent”
as required by the listing standards of the Nasdaq Stock Market. We expect both the Board of Directors
and the Compensation Committee of the Board of Directors to administer the 2024 plan. The Board of
Directors or the committee administering the 2024 plan is referred to as the “committee.” The committee
may delegate its duties, power and authority under the 2024 plan to any of our officers to the extent
consistent with applicable Delaware corporate law, except with respect to participants subject to Section
16 of the Exchange Act.
The committee has the authority to determine all provisions of incentive awards consistent with terms of
the 2024 plan, including, the eligible recipients who will be granted one or more incentive awards under
the 2024 plan, the nature, extent and terms of the incentive awards to be made to each participant and the
form of an incentive award agreement, the time or times when incentive awards will be granted, the
duration of each incentive award, and the restrictions and other conditions to which the payment or
vesting of incentive awards may be subject. The committee has the authority to pay the economic value
of any incentive award or settle any incentive award in the form of cash, our common stock or any
combination of both, construe and interpret the 2024 plan and incentive awards, determine fair market
value of NTIC common stock, determine whether incentive awards will be adjusted for dividend
equivalents and may amend or modify the terms of outstanding incentive awards (except for any
prohibited “re-pricing” of options, discussed below) so long as the amended or modified terms are
permitted under the 2024 plan and any adversely affected participant has consented to the amendment or
modification.
In the event of any reorganization, merger, consolidation, recapitalization, liquidation, reclassification,
stock dividend, stock split, combination of shares, rights offering, extraordinary dividend or divestiture
(including a spin off) or any other similar change in corporate structure or shares; any purchase,
acquisition, sale, disposition or write-down of a significant amount of assets or a significant business; any
change in accounting principles or practices, tax laws or other such laws or provisions affecting reported
results; any uninsured catastrophic losses or extraordinary non-recurring items as described in
management’s discussion and analysis of financial performance appearing in our annual report to
stockholders for the applicable year; or any other similar change, in each case with respect to NTIC or
any other entity whose performance is relevant to the grant or vesting of an incentive award, the
committee (or, if NTIC is not the surviving corporation in any such transaction, the board of directors of
the surviving corporation) may, without the consent of any affected participant, amend or modify the
vesting criteria (including performance criteria) of any outstanding incentive award that is based in whole
or in part on the financial performance of NTIC (or any subsidiary or division or other subunit thereof) or
such other entity so as equitably to reflect such event, with the desired result that the criteria for
evaluating such financial performance of NTIC or such other entity will be substantially the same (in the
sole discretion of the committee or the board of directors of the surviving corporation) following such
event as prior to such event; provided, however, that the amended or modified terms are permitted by the
2024 plan as then in effect.
The committee may, in its sole discretion, amend the terms of the 2024 plan or incentive awards with
respect to participants resident outside of the United States or employed by a non-U.S. subsidiary in order
to comply with local legal requirements, to otherwise protect our or subsidiary’s interests, or to meet
objectives of the 2024 plan, and may, where appropriate, establish one or more sub-plans for the purposes
of qualifying for preferred tax treatment under foreign tax laws. This authority does not, however, permit
the committee to take any action:
to reserve shares or grant incentive awards in excess of the limitations provided in the 2024 plan;
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to effect any re-pricing of options, as discussed below;
to grant options or stock appreciation rights having an exercise price or grant price less than
100% of the “fair market value” (as defined below) of one share of our common stock on the date
of grant; or
for which stockholder approval would then be required pursuant to Section 422 of the Code or the
Listing Rules of the Nasdaq Stock Market or other applicable market or exchange.
Except in connection with certain specified changes in our corporate structure or shares, the 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 or grant price;
canceling the underwater option or stock appreciation right in exchange for cash, replacement
options or stock appreciation rights having a lower exercise price or grant price, or other incentive
awards;
repurchasing the underwater options and stock appreciation rights and granting new incentive
awards under the 2024 plan; or
re-pricing within the meaning of the applicable accounting standard.
For purposes of the 2024 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 or grant price.
Options. The exercise price to be paid by a participant at the time an option is exercised may not be less
than 100% of the fair market value of one share of our common stock on the date of grant (or 110% of the
fair market value of one share of our common stock on the date of grant of an incentive option if the
participant owns, directly or indirectly, more than 10% of the total combined voting power of all classes
of stock of NTIC or any parent or subsidiary). However, in the event options are granted as a result of
our assumption or substitution of options in a merger or acquisition, the exercise price will be the price
determined by the committee pursuant to the conversion terms applicable to the transaction. At any time
while our common stock is listed on the Nasdaq Stock Market, “fair market value” under the 2024 plan
means the mean between the reported high and low sale price of a share at the end of the regular trading
session as reported by the Nasdaq Global Market as of the date in question (or, if no shares were traded
on such date, the next preceding day on which there was such a trade). As of November 21, 2023, the
closing sale price of a share of our common stock on the Nasdaq Global Market was $11.21.
The total purchase price of the shares of common stock to be purchased upon exercise of an option will be
paid entirely in cash; provided, however, that the committee may allow exercise payments to be made, in
whole or in part, by delivery of a broker exercise notice (pursuant to which a broker or dealer is
irrevocably instructed to sell enough shares or loan the optionee enough money to pay the exercise price
and to remit such sums to us), by tender, either by actual delivery or attestation as to ownership, of
previously acquired shares of our common stock that are acceptable to the committee, by a “net exercise”
of the option, by a combination of such methods or by any other method approved or accepted by the
committee. In the case of a “net exercise” of an option, we will not require a payment of the exercise
price of the option from the participant but will reduce the number of shares of our common stock issued
upon the exercise by the largest number of whole shares having a fair market value that does not exceed
the aggregate exercise price for the shares exercised. Any shares of our common stock tendered or
covered by an attestation will be valued at their fair market value on the exercise date of the option.
37
Options may be exercised in whole or in installments, as determined by the committee, and the committee
may impose conditions or restrictions to the exercisability of an option, including that the participant
remain continuously employed by us for a certain period or that the participant or us (or any subsidiary,
division or other subunit of NTIC) satisfy certain specified objectives. An option may not become
exercisable, nor remain exercisable after 10 years from its date of grant (five years from its date of grant
in the case of an incentive option if the participant owns, directly or indirectly, more than 10% of the total
combined voting power of all classes of stock of NTIC or any parent or subsidiary).
Options may, but need not, include a provision whereby the participant may elect at any time before the
participant’s employment or service terminates to exercise the option as to any part or all of the shares
subject to the option prior to the full vesting of the option. Any unvested shares so purchased will be
subject to a repurchase option in favor of us and to any other restriction the committee determines to be
appropriate.
Stock Appreciation Rights. A stock appreciation right is the right to receive a payment from us, in the
form of shares of our common stock, cash or a combination of both, equal to the difference between the
fair market value of one or more shares of our common stock and a specified exercise price of such
shares. Stock appreciation rights will be subject to such terms and conditions, if any, consistent with the
other provisions of the plan, as may be determined by the committee. The committee will have the sole
discretion to determine the form in which payment of the economic value of stock appreciation rights will
be made to a participant (i.e., cash, our common stock or any combination thereof) or to consent to or
disapprove the election by a participant of the form of such payment.
The grant price of a stock appreciation right will be determined by the committee, in its discretion, at the
date of grant but may not be less than 100% of the fair market value of one share of our common stock on
the date of grant, except as provided below in connection with certain “tandem” grants (as further defined
below). However, in the event that stock appreciation rights are granted as a result of our assumption or
substitution of stock appreciation rights in a merger or acquisition, the grant price will be the price
determined by the committee pursuant to the conversion terms applicable to the transaction.
A stock appreciation right will become exercisable at such times and in such installments as may be
determined by the committee in its sole discretion at the time of grant; provided, however, that no stock
appreciation right may be exercisable after 10 years from its date of grant.
Stock appreciation rights may be granted alone or in addition to other incentive awards, or in tandem with
an option, either at the time of grant of the option or at any time thereafter during the term of the option.
A stock appreciation right granted in tandem with an option shall cover the same number of shares of our
common stock as covered by the option (or such lesser number as the committee may determine), shall be
exercisable at such time or times and only to the extent that the related option is exercisable, have the
same term as the option and will have a grant price equal to the exercise price for the option. Upon the
exercise of a stock appreciation right granted in tandem with an option, the option shall be canceled
automatically to the extent of the number of shares covered by such exercise; conversely, upon exercise
of an option having a related stock appreciation right, the stock appreciation right will be canceled
automatically to the extent of the number of shares covered by the option exercise.
Restricted Stock Awards, Restricted Stock Units and Deferred Stock Units. A restricted stock award,
restricted stock units and deferred stock units are awards of our common stock that vest at such times and
in such installments as may be determined by the committee and, until the incentive award vest, is subject
to restrictions on transferability and the possibility of forfeiture. The committee may impose such
restrictions or conditions to the vesting of restricted stock awards, restricted stock units or deferred stock
units, as it deems appropriate, including that the participant remain continuously employed by us for a
38
certain period and/or that the participant or us (or any subsidiary, division or other subunit of NTIC)
satisfy specified objectives. To enforce the restrictions, the committee may place a legend on the stock
certificates or book-entry notations representing restricted stock awards referring to such restrictions and
may take other steps to enforce the restrictions. Restricted stock units and deferred stock units are similar
to restricted stock awards except that no shares of our common stock are actually awarded on the grant
date of the restricted stock unit or deferred stock unit, respectively, and are denominated in shares of our
common stock but paid in cash, shares of our common stock or a combination of cash and shares of our
common stock.
Unless the committee determines otherwise, any dividends (including regular quarterly cash dividends) or
distributions paid with respect to shares of our common stock subject to the unvested portion of a
restricted stock award will be subject to the same restrictions as the shares to which such dividends or
distributions relate.
In the committee’s discretion, any restricted stock units and deferred stock units awarded under the 2024
plan may carry with it a right to dividend equivalents. Such right would entitle the participant to be
credited with an amount equal to all cash dividends paid on one share of our common stock while the
restricted stock unit or deferred stock unit is outstanding. Dividend equivalents may be converted into
additional restricted stock units or deferred stock units and may be made subject to the same conditions
and restrictions as the restricted stock units or deferred stock units to which they attach. Settlement of
dividend equivalents may be made in the form of cash, in the form of shares of our common stock, or in a
combination of both. Dividend equivalents as to restricted stock units or deferred stock units will be
subject to forfeiture and termination to the same extent as the corresponding restricted stock units or
deferred stock units as to which the dividend equivalents relate. In no event will participants holding
restricted stock units receive any dividend equivalents on such restricted stock units until the vesting
provisions of such restricted stock units lapse. Additionally, unless the 2024 plan provides otherwise, a
participant will have all voting, liquidation and other rights with respect to shares of our common stock
issued to the participant as a restricted stock award upon the participant becoming the holder of record of
such shares as if the participant were a holder of record of shares of our unrestricted common stock. A
participant will have no voting rights to any restricted stock units or deferred stock units granted under the
2024 plan.
Performance Award. A participant may be granted one or more performance awards under the 2024 plan,
and such performance awards will be subject to such terms and conditions, if any, consistent with the
other provisions of the 2024 plan, as may be determined by the committee in its sole discretion, including,
but not limited to, the achievement of one or more specified objectives; provided, however, that in all
cases payment of the performance award will be made within two and one-half months following the end
of the tax year during which receipt of the performance award is no longer subject to a “substantial risk of
forfeiture” within the meaning of Section 409A of the Code, except upon certain conditions.
Performance Criteria. The committee may grant incentive awards contingent upon achievement of
performance goals, including the following, without limitation: net sales; operating income; income
before income taxes; income before interest, taxes, depreciation and amortization; income before income
taxes; income before interest, taxes, depreciation and amortization and other non-cash items; net income;
net income per share (basic or diluted); profitability as measured by return ratios (including return on
assets, return on equity, return on capital, return on investment and return on sales); cash flows; market
share; cost of sales; sales, general and administrative expense, cost reduction goals; margins (including
one or more of gross, operating and net income margins); stock price; total return to stockholders;
economic value added; working capital and strategic plan development and implementation. The
committee may select one criterion or multiple criteria for measuring performance, and the measurement
may be based on NTIC, any NTIC subsidiary or NTIC’s business unit performance, either absolute or by
39
relative comparison to prior periods or other companies or any other external measure of the selected
criteria.
Other Stock-Based Awards. A recipient may be granted one or more other stock-based awards under the
2024 plan, and such other-stock based awards will be subject to such terms and conditions, consistent
with the other provisions of the 2024 plan, as may be determined by the committee in its sole discretion in
such amounts and subject to such terms and conditions as the committee will determine. Such other
stock-based awards may involve the transfer of actual shares of our common stock to participants as a
bonus or in lieu of obligations to pay cash or deliver other property under the 2024 plan or under other
plans or compensatory arrangements, or payment in cash or otherwise of amounts based on the value of
shares of our common stock.
Change in Control. In the event a “change in control” of NTIC occurs, then, if approved by the
committee in its sole discretion either at the time of the grant of the incentive award or at any time after
such grant, all options and stock appreciation rights will become immediately exercisable in full and will
remain exercisable for the remainder of their terms; all outstanding restricted stock awards will become
immediately fully vested and non-forfeitable; and any conditions to the payment of restricted stock units,
deferred stock units, performance awards and other stock-based awards will lapse.
In addition, the committee in its sole discretion may determine that some or all participants holding
outstanding incentive awards, whether or not exercisable or vested, will be canceled and terminated and
what the participant will receive for each share of our common stock subject to such incentive award a
cash payment (or the delivery of shares of stock, other securities or a combination of cash, stock and
securities with a fair market value) equal to the difference, if any, between the consideration received by
our stockholders in respect of a share of common stock in connection with such change in control and the
purchase price per share, if any, under the incentive award, multiplied by the number of shares of our
common stock subject to such incentive award; provided, however, that if such product is zero ($0) or
less or to the extent that the incentive award is not then exercisable, the incentive award may be canceled
and terminated without payment therefor.
For purposes of the 2024 plan a “change in control” of NTIC occurs upon:
the sale, lease, exchange or other transfer of substantially all of the assets of NTIC (in one
transaction or in a series of related transaction) to a person or entity that is not controlled, directly
or indirectly, by NTIC;
a merger or consolidation to which NTIC is a party if our stockholders immediately prior to
effective date of such merger or consolidation do not have “beneficial ownership” (as defined in
Rule 13d-3 under the Exchange Act) immediately following the effective date of such merger or
consolidation of more than 80% of the combined voting power of the surviving corporation’s
outstanding securities ordinarily having the right to vote at elections of directors; or
a change in control of NTIC of a nature that would be required to be reported pursuant to Section
13 or 15(d) of the Exchange Act, whether or not NTIC is then subject to such reporting
requirements, including, without limitation, such time as (i) any person becomes, after the
effective date of the 2024 plan, the “beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of 40% or more of the combined voting power of our
outstanding securities ordinarily having the right to vote at elections of directors, or
(ii) individuals who constitute the Board of Directors on the effective date of the 2024 plan cease
for any reason to constitute at least a majority of the Board of Directors, provided that any person
becoming a director subsequent to the effective date of the 2024 plan whose election, or
nomination for election by our stockholders, was approved by a vote of at least a majority of the
40
directors comprising the Board of Directors on the effective date of the 2024 plan will, for
purposes of this clause (ii), be considered as though such persons were a member of the Board of
Directors on the effective date of the 2024 plan.
Effect of Termination of Employment or Other Services. If a participant ceases to be employed by, or
perform other services for, us, all incentive awards held by the participant will be treated as set forth
below unless otherwise expressly provided by the committee in its sole discretion in an incentive award
agreement of the terms of an individual agreement or modified by the committee in its discretion as set
forth below. Upon termination due to death, disability or retirement, all outstanding, exercisable options
and stock appreciation rights then held by the participant will remain exercisable for a period of
12 months thereafter (but in no event after the expiration date of any such option or stock appreciation
rights), and all unvested restricted stock awards, all outstanding but unpaid and unvested restricted stock
units, deferred stock units, performance awards and other stock based awards then held by the participant
will be terminated and forfeited. Upon termination for a reason, other than death, disability or retirement,
which is not also for “cause” (as defined in the 2024 plan), all outstanding options and stock appreciation
rights then held by the participant will, to the extent exercisable as of such termination, remain
exercisable in full for a period of three months after such termination (but in no event after the expiration
date of any such option or stock appreciation right). Also, upon such termination all options and stock
appreciation rights that are not exercisable; all unvested restricted stock awards; and all outstanding but
unpaid and unvested restricted stock units, deferred stock units, performance awards and other stock
based awards then held by the participant will be terminated and forfeited.
The committee may at any time (including on or after the date of grant or following termination), in
connection with a participant’s termination, cause options or stock appreciation rights held by the
participant to terminate, become or continue to become exercisable and/or remain exercisable, and
restricted stock awards, restricted stock units, deferred stock units performance awards or other stock
based awards then held by the participant as of the effective date of such termination to terminate, vest
and/or continue to vest or become free of restrictions and conditions to payment, as the case may be.
Forfeiture and Recoupment. 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 NTIC or a subsidiary, all rights of the participant under
the 2024 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.
“Cause,” with respect to any participant, unless otherwise stated in a participant’s employment or other
service agreement, means (i) dishonesty, fraud, misrepresentation, embezzlement or other act of
dishonesty with respect to NTIC 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 participant’s overall duties, or (iv) any material breach by a participant of
any employment, service, confidentiality or non-compete agreement entered into with us or any of our
subsidiaries.
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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
NTIC 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.
In addition, subject to the terms of an incentive award agreement, incentive awards under the 2024 plan
are subject to any automatic forfeiture or voluntary compensation “clawback,” forfeiture or recoupment
provisions under applicable law and any compensation “clawback,” forfeiture or recoupment policy of
NTIC, as in effect from time to time, and such forfeiture and/or penalty conditions or provisions as
determined by the committee and set forth in the applicable incentive award agreement, including without
limitation the Northern Technologies International Corporation Clawback Policy effective as of October
2, 2023.
Dividend Rights. In the committee’s discretion, certain incentive awards (including any award that has
been deferred) may carry with it a right to dividend equivalents. Such right would entitle the participant to
be credited with an amount equal to all cash dividends paid on one share of our common stock while the
incentive award is outstanding. Dividend equivalents may be converted into additional restricted stock
units or other incentive awards and may be made subject to the same conditions and restricted as the
restricted stock units, deferred stock units or other incentive awards to which they attach. Settlement of
dividend equivalents may be made in the form of cash, in the form of shares of our common stock, or in a
combination of both. Dividend equivalents as to restricted stock units, deferred stock units or other
incentive awards will be subject to forfeiture and termination to the same extent as the corresponding
incentive awards as to which the dividend equivalents relate. In no event will dividends be paid out on
any incentive awards until they are vested or provided with performance awards.
Term; Termination; Amendments. Unless terminated earlier, the 2024 plan will terminate at 11:59 p.m.,
central time, on January 18, 2034. Incentive awards outstanding at the time the 2024 plan is terminated
will remain outstanding in accordance with their applicable terms and conditions and the terms and
conditions of the 2024 plan. The Board may suspend or terminate the 2024 plan or any portion of the plan
at any time. In addition to the committee’s authority to amend the 2024 plan with respect to participants
resident outside of the United States or employed by a non-U.S. subsidiary, the Board may amend the
2024 plan from time to time in order that incentive awards under the 2024 plan will conform to any
change in applicable laws or regulations or in any other respect that the Board may deem to be in our best
interests; provided, however, that no amendments to the 2024 plan will be effective without stockholder
approval, if it is required under Section 422 of the Code or the Listing Rules of the Nasdaq Stock Market,
or if the amendment seeks to increase the number of shares reserved for issuance under the 2024 plan
(other than as a result of a permitted adjustment upon certain corporate events, such as stock splits) or to
modify the prohibitions on underwater option re-pricing discussed above. Termination, suspension or
amendment of the 2024 plan will not adversely affect any outstanding incentive award without the
consent of the affected participant, except for adjustments in the event of changes in our capitalization or
a “change in control” of NTIC.
Transferability. In general, no right or interest in any incentive award may be assigned or transferred by a
participant, except by will or the laws of descent and distribution, or subjected to any lien or otherwise
encumbered. However, a participant is entitled to designate a beneficiary to receive an incentive award
on such participant’s death, and in the event of such participant’s death, payment of any amounts due
under the 2024 plan will be made to, and exercise of any options or stock appreciation rights may be
made by, such beneficiary. Additionally, upon a participant’s request, the committee may permit a
42
participant to transfer all or a portion of a non-statutory option, other than for value, to certain of the
participant’s family members or related family trusts, foundations or partnerships. Permitted transferees
of non-statutory options will remain subject to all the terms and conditions of the incentive award
applicable to the participant.
U.S. Federal Income Tax Consequences
The following is a general summary, as of the date of this proxy statement, of the U.S. federal income tax
consequences to participants and NTIC of transactions under the 2024 plan. This summary is intended
for the information of stockholders considering how to vote at the Annual Meeting and not as tax
guidance to participants in the 2024 plan, as the consequences may vary with the types of grants made,
the identity of the participant, and the method of payment or settlement. The summary does not address
the effects of other U.S. federal taxes or taxes imposed under state, local, or foreign tax laws. Participants
are encouraged to seek the advice of a qualified tax advisor regarding the tax consequences of
participation in the 2024 plan.
Incentive Stock Options. With respect to incentive stock options, generally, the participant is not taxed,
and we are not entitled to a deduction, on either the grant or the exercise of an incentive stock option so
long as the requirements of Section 422 of the Code continue to be met. If the participant meets the
employment requirements and does not dispose of the shares of our common stock acquired upon
exercise of an incentive stock option until at least one year after date of the exercise of the stock option
and at least two years after the date the stock option was granted, gain or loss realized on sale of the
shares will be treated as long-term capital gain or loss. If the shares of our common stock are disposed of
before those periods expire, which is called a disqualifying disposition, the participant will be required to
recognize ordinary income in an amount equal to the lesser of (i) the excess, if any, of the fair market
value of our common stock on the date of exercise over the exercise price, or (ii) if the disposition is a
taxable sale or exchange, the amount of gain realized. Upon a disqualifying disposition, we will generally
be entitled, in the same tax year, to a deduction equal to the amount of ordinary income recognized by the
participant, assuming that a deduction is allowed under Section 162(m) of the Code.
Non-Statutory Stock Options. The grant of a stock option that does not qualify for treatment as an
incentive stock option, which is generally referred to as a non-statutory stock option, is generally not a
taxable event for the participant. Upon exercise of the stock option, the participant will generally be
required to recognize ordinary income in an amount equal to the excess of the fair market value of our
common stock acquired upon exercise (determined as of the date of exercise) over the exercise price of
the stock option, and we will be entitled to a deduction in an equal amount in the same tax year, assuming
that a deduction is allowed under Section 162(m) of the Code. At the time of a subsequent sale or
disposition of shares obtained upon exercise of a non-statutory stock option, any gain or loss will be a
capital gain or loss, which will be either a long-term or short-term capital gain or loss, depending on how
long the shares have been held.
SARs. The grant of a SAR will not cause the participant to recognize ordinary income or entitle us to a
deduction for federal income tax purposes. Upon the exercise of a SAR, the participant will recognize
ordinary income in the amount of the cash or the value of shares payable to the participant (before
reduction for any withholding taxes), and we will receive a corresponding deduction in an amount equal
to the ordinary income recognized by the participant, assuming that a deduction is allowed under Section
162(m) of the Code.
Restricted Stock Awards, RSUs, DSUs and Other Stock-Based Awards. The federal income tax
consequences with respect to restricted stock awards, RSUs, DSUs, performance awards, and other stock-
based awards depend on the facts and circumstances of each award, including, in particular, the nature of
43
any restrictions imposed with respect to the awards. In general, if an award of stock granted to the
participant is subject to a “substantial risk of forfeiture” (e.g., the award is conditioned upon the future
performance of substantial services by the participant) and is nontransferable, a taxable event occurs
when the risk of forfeiture ceases or the awards become transferable, whichever first occurs. At such
time, the participant will recognize ordinary income to the extent of the excess of the fair market value of
the stock on such date over the participant’s cost for such stock (if any), and the same amount is
deductible by us, assuming that a deduction is allowed under Section 162(m) of the Code. Under certain
circumstances, the participant, by making an election under Section 83(b) of the Code, can accelerate
federal income tax recognition with respect to an award of stock that is subject to a substantial risk of
forfeiture and transferability restrictions, in which event the ordinary income amount and our deduction,
assuming that a deduction is allowed under Section 162(m) of the Code, will be measured and timed as of
the grant date of the award. If the stock award granted to the participant is not subject to a substantial risk
of forfeiture or transferability restrictions, the participant will recognize ordinary income with respect to
the award to the extent of the excess of the fair market value of the stock at the time of grant over the
participant’s cost, if any, and the same amount is deductible by us, assuming that a deduction is allowed
under Section 162(m) of the Code. If a stock unit award or other stock-based award is granted but no
stock is actually issued to the participant at the time the award is granted, the participant will recognize
ordinary income at the time the participant receives the stock free of any substantial risk of forfeiture (or
receives cash in lieu of such stock) and the amount of such income will be equal to the fair market value
of the stock at such time over the participant’s cost, if any, and the same amount is then deductible by us,
assuming that a deduction is allowed under Section 162(m) of the Code.
Annual Performance Cash Awards and Other Cash-Based Awards. Annual performance cash awards and
other cash-based awards will be taxable as ordinary income to the participant in the amount of the cash
received by the participant (before reduction for any withholding taxes), and we will receive a
corresponding deduction in an amount equal to the ordinary income recognized by the participant,
assuming that a deduction is allowed under Section 162(m) of the Code.
Withholding Obligations. We are entitled to withhold and deduct from future wages of the participant, to
make other arrangements for the collection of, or to require the participant to pay to us, an amount
necessary for us to satisfy the participant’s federal, state, or local tax withholding obligations with respect
to awards granted under the 2024 plan. Withholding for taxes may be calculated based on the maximum
applicable tax rate for the participant’s jurisdiction or such other rate that will not trigger a negative
accounting impact on NTIC. The Compensation Committee may permit a participant to satisfy a tax
withholding obligation by withholding shares of common stock underlying an award, tendering
previously acquired shares, delivery of a broker exercise notice, or a combination of these methods.
Code Section 409A. A participant may be subject to a 20% penalty tax, in addition to ordinary income
tax, at the time a grant becomes vested, plus an interest penalty tax, if the grant constitutes deferred
compensation under Section 409A of the Code and the requirements of Section 409A of the Code are not
satisfied.
Code Section 162(m). Pursuant to Section 162(m) of the Code, the annual compensation paid to an
individual who is a “covered employee” may not be deductible to the extent it exceeds $1 million. The
Tax Cut and Jobs Act, signed into law on December 22, 2017, amended Section 162(m), effective for tax
years beginning after December 31, 2017, (i) to expand the definition of a “covered employee” to include
any person who was the Chief Executive Officer or the Chief Financial Officer at any time during the
year and the three most highly compensated officers (other than the Chief Executive Officer or the Chief
Financial Officer) who were employed at any time during the year whether or not the compensation is
reported in the Summary Compensation Table included in our proxy statement for our Annual Meeting;
(ii) to treat any individual who is considered a covered employee at any time during a tax year beginning
44
after December 31, 2017 as remaining a covered employee permanently; and (iii) to eliminate the
performance-based compensation exception to the $1 million deduction limit (with a transition provision
continuing the performance-based exception for certain compensation covered by a written binding
contract in existence on November 2, 2017).
Excise Tax on Parachute Payments. Unless otherwise provided in a separate agreement between a
participant and NTIC, if, with respect to a participant, the acceleration of the vesting of an award or the
payment of cash in exchange for all or part of an award, together with any other payments that such
participant has the right to receive from NTIC, would constitute a “parachute payment,” then the
payments to such participant will be reduced to the largest amount as will result in no portion of such
payments being subject to the excise tax imposed by Section 4999 of the Code. Such reduction, however,
will only be made if the aggregate amount of the payments after such reduction exceeds the difference
between the amount of such payments absent such reduction minus the aggregate amount of the excise tax
imposed under Section 4999 of the Code attributable to any such excess parachute payments. If such
provisions are applicable and if an employee will be subject to a 20% excise tax on any “excess parachute
payment” pursuant to Section 4999 of the Code, we will be denied a deduction with respect to such
excess parachute payment pursuant to Section 280G of the Code.
New Plan Benefits
It is not presently possible to determine the benefits or amounts that will be received by or allocated to
participants under the 2024 plan or would have been received by or allocated to participants for the last
completed fiscal year if the 2024 plan had then been in effect because awards under the 2024 plan will be
made at the discretion of the Compensation Committee. However, under the policy currently in effect,
each non-employee director who is expected to stand for re-election at the next annual meeting of
stockholders will receive a stock option, or RSUs if elected by such director, valued at $50,000 on each
September 1st, and our Chairman of the Board of Directors will receive an additional stock option valued
at $10,000.
Board Recommendation
The Board of Directors unanimously recommends that stockholders vote FOR approval of the Northern
Technologies International Corporation 2024 Stock Incentive Plan.
The Board of Directors Recommends a Vote FOR Proposal Four
45
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 21, 2023, 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 and director nominees;
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, director nominees, 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 21, 2023.
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 21, 2023 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.
Title of Class
Name and Address of Beneficial Owner(1)
Directors, Director Nominees, and Officers:
Common Stock Nancy E. Calderon
Common Stock Sarah E. Kemp
Common Stock Sunggyu Lee, Ph.D.
Common Stock G. Patrick Lynch(3)
Common Stock Ramani Narayan, Ph.D.
Common Stock Richard J. Nigon
Common Stock Cristina Pinho
Common Stock Konstantin von Falkenhausen
Common Stock Matthew C. Wolsfeld
Common Stock All directors, director nominees, and executive
Amount and
Nature of
Beneficial
Ownership(2)
Percent of
Class
34,367
35,736
3,319
1,505,600
119,168
117,802
5,511
87,368
308,017
*
*
*
15.6%
1.3%
1.2%
*
*
3.2%
officers as a group (9 persons)(4)
2,216,888
22.1%
Significant Beneficial Owners:
Common Stock
Inter Alia Holding Company(5)
23205 Mercantile Road
Beachwood, Ohio 44122
1,203,334
12.8%
46
Title of Class
Name and Address of Beneficial Owner(1)
Amount and
Nature of
Beneficial
Ownership(2)
Percent of
Class
Common Stock Punch & Associates Investment Management, Inc.(6)
525,328
5.6%
7701 France Avenue South
Suite 300
Edina, Minnesota 55435
__________________________
* Represents beneficial ownership of less than one percent.
(1)
(2)
(3)
(4)
(5)
(6)
The business address for each of the directors, director nominees, 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 21, 2023:
Name
Directors and Director Nominees
Nancy E. Calderon .................................................................................
Sarah E. Kemp .......................................................................................
Sunggyu Lee, Ph.D. ...............................................................................
G. Patrick Lynch ....................................................................................
Ramani Narayan, Ph.D...........................................................................
Richard J. Nigon ....................................................................................
Cristina Pinho ........................................................................................
Konstantin von Falkenhausen ................................................................
Named Executive Officers
G. Patrick Lynch ......................................................................................
Matthew C. Wolsfeld ...............................................................................
All current directors, director nominees, and executive officers as a
group (9 persons) ..................................................................................
Shares of Common Stock
Underlying
Stock Options
31,251
31,251
0
199,760
12,405
84,202
5,511
72,168
199,760
147,648
584,196
Includes 1,203,334 shares held by Inter Alia Holding Company. See note (5) below.
The amount beneficially owned by all current directors, director nominees, and executive officers as a
group includes 1,203,334 shares held of record by Inter Alia Holding Company. See notes (3) above and
(5) below.
According to a Schedule 13D/A filed with the SEC on October 22, 2019, Inter Alia Holding Company is an
entity of which G. Patrick Lynch, our President and Chief Executive Officer, is a 47% stockholder.
G. Patrick Lynch shares equal voting and dispositive power over such shares with two other members of
his family. Inter Alia Holding Company’s address is 23205 Mercantile Road, Beachwood, Ohio 44122.
According to a Schedule 13G/A filed with the SEC on February 13, 2023, Punch & Associates Investment
Management, Inc. (“Punch & Associates”) has sole voting and dispositive power over 525,328 shares.
Punch & Associate’s address is 7701 France Avenue South, Suite 300, Edina, Minnesota 55435.
47
Stock Ownership Guidelines
In November 2021, we adopted stock ownership guidelines that are intended to further align the interests
of our directors and executive officers with those of our stockholders. The stock ownership guidelines for
our directors and executive officers are as follows:
Position
Non-Employee Director
Chief Executive Officer
Other Executive Officers
Guideline
3x annual cash retainer
6x annual base salary
3x annual base salary
Each director and executive officer has five years from the establishment of these guidelines and,
thereafter, from the date of appointment or hire or, if the ownership multiple has increased during such
director’s or executive’s tenure, five years from the date established in connection with such increase to
reach his or her ownership targets. Both our Chief Executive Officer and Chief Financial Officer are in
compliance with these guidelines, as are most of our longer serving directors.
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, 2023. NTIC’s equity compensation plans as of August 31, 2023 were the Northern
Technologies International Corporation Amended and Restated 2019 Stock Incentive Plan, 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 $50,000 in options to purchase shares of NTIC common stock, or RSUs if so elected, to
NTIC’s directors in consideration for their services as directors of NTIC and an automatic annual grant of
$10,000 in options to purchase shares of NTIC common stock to NTIC’s Chairman of the Board in
consideration for his services as Chairman, in each case on the first day of each fiscal year, and automatic
initial pro rata grants of $50,000 in options to purchase shares of NTIC common stock to NTIC’s new
directors in consideration for their services as directors of NTIC on the first date of their appointment as
directors, options and other awards granted in the future under the Northern Technologies International
Corporation Amended and Restated 2019 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. No future grants of options or other stock awards will be made under the
Northern Technologies International Corporation Amended and Restated 2007 Stock Incentive Plan.
(a)
Number of Securities to
be Issued Upon Exercise
of Outstanding Options,
Warrants and Rights
(b)
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))
1,557,130(1)(2)
$11.08
488,937(3)
—
1,557,130(1)(2)
—
$11.08
—
488,937(3)
Plan Category
Equity compensation plans
approved by security holders
Equity compensation plans not
approved by security holders
Total
__________________________
48
(1)
(2)
(3)
Amount includes 439,559 shares of NTIC common stock issuable upon the exercise of stock options
outstanding as of August 31, 2023 under the Northern Technologies International Corporation Amended
and Restated 2007 Stock Incentive Plan and 1,117,571 shares of NTIC common stock issuable upon the
exercise of stock options outstanding as of August 31, 2023 under the Northern Technologies International
Corporation Amended and Restated 2019 Stock Incentive Plan.
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.
Amount includes 426,903 shares available as of August 31, 2023 for future issuance under Northern
Technologies International Corporation Amended and Restated 2019 Stock Incentive Plan and 62,034
shares available at August 31, 2023 for future issuance under the Northern Technologies International
Corporation Employee Stock Purchase Plan.
49
CORPORATE GOVERNANCE
________________
Governance Best Practices
We maintain several corporate governance best practices, which are designed to promote actions that
benefit our stockholders and create a framework for our decision-making.
Annual election of all directors
All directors are elected annually for a one-year term.
“Plurality plus” vote standard for uncontested
director elections, with a director resignation
policy
In an uncontested election, any director nominee who
receives a greater number of votes “withheld” from his or
her election than votes “for” is required to tender a written
offer to resign from the Board.
Three-fourths of our directors are independent
Six of the eight directors on our Board are independent.
Annual Board and committee evaluations
No poison pill
Board oversight of ESG initiatives
It is our practice to conduct annual Board and committees
performance self-evaluations.
We believe that not having a poison pill benefits our
stockholders by not discouraging takeover attempts that
may increase value for our stockholders.
While the Nominating and Corporate Governance
Committee has been delegated oversight authority of our
ESG initiatives, it coordinates with our other two standing
Board committees.
Emphasis on gender and racial/ethnic diversity
in Board refreshment efforts
The Board has added three female directors since October
2019 and one director from Brazil in January 2023.
Robust stockholder outreach program
Annual say-on-pay vote
Officer and director stock ownership
requirements
Hedging and pledging prohibitions
Robust clawback policy
Single class of stock
Each year, our executives hold meetings to seek
stockholder input and strive to take actions that reflect the
input received.
Our Board recommended, and our stockholders voted in
favor of, an annual advisory stockholder vote on executive
compensation.
We have robust stock ownership guidelines for our
directors and officers that require maintenance of a
specified level of ownership based on compensation.
We prohibit our executives from engaging in any hedging
transactions, short sales, transactions in publicly traded
options, such as puts, calls and other derivatives, short-term
trading and pledging our securities.
We maintain a robust clawback policy pursuant to which
we may recover cash and equity incentive compensation
from current or former officers in the event of a restatement
or other egregious behavior.
We have a single class of stock, so our stockholders all
have equal voting rights.
50
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
New director orientation
Board leadership
CEO succession planning
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
Retirement and term limits
Retirement and resignation policy
Stock ownership guidelines
Board Leadership Structure
Procedures for directors who receive less than a
majority vote
Change of principal occupation and board
memberships and limits on board memberships
held
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
Communications with directors
Duty of loyalty and confidentiality
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 NTIC 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 NTIC and the Chairman’s responsibility
to provide oversight of NTIC’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 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.
51
Director Independence
The Board of Directors has affirmatively determined that six of NTIC’s current eight directors are
“independent directors” under the Listing Rules of the Nasdaq Stock Market: Nancy E. Calderon, Sarah
E. Kemp, Sunggyu Lee, Ph.D., Richard J. Nigon, Cristina Pinho and Konstantin von Falkenhausen.
In making these affirmative determinations that such individuals are “independent,” 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 five times during the fiscal year ended August 31, 2023. Each of our current
directors attended at least 75% 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 NTIC 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
Nancy E. Calderon
Sarah E. Kemp
Sunggyu Lee, Ph.D.
G. Patrick Lynch
Ramani Narayan, Ph.D.
Richard J. Nigon
Cristina Pinho
Konstantin von Falkenhausen
Audit Committee
Audit
Chair
—
—
—
—
√
—
√
Compensation
—
—
√
—
—
√
—
Chair
Nominating and
Corporate Governance
√
Chair
—
—
—
√
√
—
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;
52
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;
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;
receiving periodic updates from senior management on NTIC’s policies, processes,
procedures and any significant developments related to the identification, mitigation and
remediation of cybersecurity risks and reviewing the cybersecurity disclosures required to be
included in NTIC’s SEC filings; and
coordinating with the Nominating and Corporate Governance Committee in that committee’s
primary oversight over NTIC’s ESG activities.
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. Calderon, Mr. Nigon, and Mr. von
Falkenhausen. Ms. Calderon is the current Chair of the Audit Committee.
Each member of the Audit Committee who served during fiscal 2023 is considered “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 SEC and is “financially literate” as required by the Listing Rules of
the Nasdaq Stock Market. In addition, the Board of Directors has determined that Ms. Calderon and
Mr. Nigon qualify as “audit committee financial experts” as defined by the rules and regulations of the
SEC and meet the qualifications of “financial sophistication” under the Listing Rules of the Nasdaq Stock
Market as a result of their extensive financial backgrounds and various financial positions they have held
throughout their respective careers. 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 four times during fiscal 2023 and once in executive session with
Baker Tilly, 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, 2023.
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 US, 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, 2023 with NTIC’s management. Management
53
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 US, 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 US, LLP required by applicable requirements of the Public
Company Accounting Oversight Board regarding Baker Tilly US, LLP’s communications with the Audit
Committee concerning independence. The Audit Committee has discussed with Baker Tilly US, 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 US, 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, 2023 be included in its Annual Report on Form
10-K for the fiscal year ended August 31, 2023 for filing with the Securities and Exchange Commission.
This report is dated as of November 9, 2023.
Audit Committee
Nancy E. Calderon, Chair
Richard J. Nigon
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 Appointment 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;
establishing and, from time to time, reviewing and revising processes and procedures for the
consideration and determination of executive compensation;
54
overseeing and periodically reviewing NTIC’s culture and policies and strategies related to
human capital management and reviewing the human capital management disclosures
included in NTIC’s annual reports on Form 10-K; and
coordinating with the Nominating and Corporate Governance Committee in that committee’s
primary oversight over NTIC’s ESG activities.
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. von Falkenhausen is the current Chair of the Compensation Committee.
The Board of Directors has determined that each of the members of the Compensation Committee who
served during fiscal 2023 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 Exchange Act, and
otherwise independent under the rules and regulations of the SEC.
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 NTIC of pre-established performance objectives, the general performance of NTIC and
the individual officers, the performance of NTIC’s stock price and other factors that may be relevant.
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 NTIC. 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 four times during fiscal 2023.
55
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;
making recommendations to the Board of Directors regarding director diversity (which may
include diversity of age, gender, race, ethnicity, education, skills, professional experience,
knowledge, backgrounds and viewpoints), retirement age, tenure and refreshment policies;
being aware of best practices in corporate governance matters;
developing and overseeing an annual Board of Directors and Board committee evaluation
process;
establishing and leading a process for determination of the compensation applicable to the
non-employee directors on the Board;
overseeing NTIC’s ESG activities and coordinating with and soliciting input from the
Compensation Committee and the Audit Committee in formulating the approach to NTIC’s
ESG activities.
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
Ms. Kemp, Ms. Calderon, Mr. Nigon and Ms. Pinho. Ms. Kemp is the current 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 who served during fiscal 2023 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
56
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 four times during fiscal 2023.
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 NTIC. 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 NTIC. 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. We found our newest
director, Cristina Pinho, through the Women Corporate Directors Foundation.
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 2025 Annual Meeting of
Stockholders ─ Director Nominations for 2025 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
57
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 NTIC 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 SEC; 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 SEC; the needs of NTIC 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 the work of the Board of Directors 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 NTIC; whether the candidate possesses strategic thinking and a
willingness to share ideas; the candidate’s diversity of experiences, expertise, background and other
attributes; and the candidate’s ability to represent the interests of all stockholders and not a particular
interest group.
While we do not have a formal stand-alone diversity policy in considering whether to recommend any
director nominee, including candidates recommended by stockholders, and the Board of Directors has not
adopted a formal definition of diversity, the Board’s diversity is a consideration in the director nomination
process. As discussed above, the Nominating and Corporate Governance Committee considers the factors
described above, including the candidate’s diversity of experiences, expertise, background and other
attributes. The Nominating and Corporate Governance Committee seeks nominees with a broad diversity
of experience, expertise, backgrounds and other attributes, including diversity of age, gender, race,
ethnicity, education, skills, knowledge, and viewpoints. 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.
For this year’s election of directors, the Board of Directors has nominated eight individuals, all of whom
are current directors. Collectively, these directors bring tremendous diversity to the Board. Each director
is a strategic thinker and has varying, specialized experience in the areas relevant to NTIC and its
businesses. Moreover, their collective experience covers a wide range of geographies and industries, and
roles in academia, corporate governance and government. The eight directors range in age from 56 to 75;
three of the eight directors are women; two are of Asian descent; one is of African descent; one is a
citizen of Brazil, one is a citizen of the Republic of Korea and one is a citizen of Germany.
Board Diversity Matrix
The Nasdaq listing requirements require each listed company to have, or explain why it does not have,
two diverse directors on the board, including at least one diverse director who self-identifies as female
and one diverse director who self-identifies as an underrepresented minority or LGBTQ+ (subject to the
exceptions). Our current Board composition is in compliance with the Nasdaq diversity requirement.
58
The table below provides certain highlights of the composition of our board members and nominees.
Each of the categories listed in the below table has the meaning as it is used in Nasdaq Rule 5605(f).
Total Number of Directors
Board Diversity Matrix (As of November 21, 2023)
8
Part I: Gender Identity
Directors
Part II: Demographic Background
African American or Black
Alaskan Native or Native American
Asian
Hispanic or Latinx
Native Hawaiian or Pacific Islander
White
Two or More Races or Ethnicities
LGBTQ+
Did Not Disclose Demographic Background
Board Oversight of Risk
Female
Male
Non-
Binary
Did Not
Disclosure
Gender
3
1
—
—
—
—
2
—
5
—
—
2
—
—
3
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
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, cybersecurity, 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 NTIC. The Compensation Committee is responsible for overseeing risks and exposures
associated with our executive compensation programs and arrangements. 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 NTIC. 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 of Directors’
assessment of management’s appetite for risk and also a determination of what constitutes an appropriate
level of risk for NTIC.
59
We believe our current Board leadership structure is appropriate and helps ensure proper risk oversight
for NTIC 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.
Board Oversight of Strategy
The Board of Directors oversees our strategic direction and business activities. Throughout the year, the
Board and management discuss our short and long-term business strategy. As part of our long-term
strategy, management typically formulates three-year financial targets against which performance is
reviewed by the Board. With respect to our short-term strategy, at the beginning of each fiscal year, our
management presents to the Board a proposed annual business plan for the year and receives input from
the Board and a final annual business plan is approved by the Board. At each subsequent regular board
meeting, the Board reviews our operating and financial performance relative to the annual business plan.
Board and Board Committee Evaluations
The Board of Directors recognizes that a thorough evaluation process is an important element of
corporate governance and enhances the effectiveness of the full Board and each committee. Therefore, it
is our practice to conduct annual Board and committee self-evaluations. Each year, the Nominating and
Corporate Governance Committee oversees the evaluation process to ensure that the full Board and each
committee conduct an assessment of their performance and solicit feedback for areas of improvement.
Evaluations include a variety of survey questions to which directors assign a score and open ended
questions and oral interviews. The evaluation results are then aggregated and shared with and discussed
by the full Board and each committee.
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 SEC 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.
No Political Contributions
NTIC made no political contributions during fiscal 2023 and intends to make no political contributions in
the future.
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 is typically held by video call. It is the policy of the Board of Directors that if
a regular in-person Board of Directors meeting occurs on the day of the annual meeting of stockholders,
directors standing for re-election should attend the annual meeting of stockholders, if their schedules
permit. Since a video call Board meeting was held on the day of last year’s annual meeting of
stockholders, the only directors who attended the meeting were Mr. Nigon and Mr. Lynch.
60
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.
Stockholder Engagement
We are committed to a robust and proactive stockholder engagement program. The Board of Directors
values the perspectives of our stockholders, and feedback from stockholders on our business, corporate
governance, executive compensation, and sustainability practices are important considerations for Board
discussions throughout the year. Some of the actions we have taken in response to feedback from proxy
advisory firms and stockholders over the last several years are described below.
What We Heard
Encourage Board refreshment
Increase Board gender diversity
Increase stockholder influence over
director elections
Align long-term incentives
Increase visibility of ESG principles
Ensure the recovery of incentive
compensation based on incorrect
calculations that resulted in a financial
restatement or egregious behavior
Align the interests of executive officers and
directors with those of stockholders
What We Did
We added two new members to the Board of Directors in
October 2019 and one new member in 2023.
We added Nancy E. Calderon, Sarah E. Kemp and
Cristina Pinho to the Board of Directors and updated our
Nominating and Corporate Governance Committee
Charter to include responsibility for making
recommendations to the Board of Directors regarding
director diversity.
In November 2020, we adopted a “plurality plus” vote
standard for uncontested director elections, with a
director resignation policy, instead of a simple plurality
vote standard.
We extended the vesting of our annual stock option
grants to three-year vesting in response to a concern
raised by one of our institutional stockholders.
We adopted a Health, Safety and Environment Policy as
well as a Human Rights Policy to formalize our approach
and further our goals with respect to these matters, as
described above. We have also added an ESG section to
our investor relations website to increase visibility.
We adopted a robust clawback policy which applies to
not only financial restatements but also if an executive
engages in egregious conduct that is substantially
detrimental to NTIC.
We adopted stock ownership guidelines applicable to our
executive officers and directors to ensure that their
interests would be closely aligned with those of our
stockholders.
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Process Regarding Stockholder Communications with Board of Directors
Stockholders may communicate with the Board of Directors 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 of Directors or one or more particular directors. NTIC’s Corporate Secretary
will promptly forward all such stockholder communications to the Board of Directors or the one or more
particular directors, with the exception of any advertisements, solicitations for periodical or other
subscriptions and other similar communications.
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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 NTIC during the fiscal year ended August 31, 2023, 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 2023. His compensation during fiscal 2023 for serving as an executive officer
of NTIC is set forth under “Executive Compensation” included elsewhere in this proxy statement.
DIRECTOR COMPENSATION – FISCAL 2023
Name
Nancy E. Calderon ....................... $
Sarah E. Kemp .............................
Sunggyu Lee, Ph.D. .....................
Ramani Narayan, Ph.D. ...............
Richard J. Nigon ..........................
Cristina Pinho ..............................
Konstantin von Falkenhausen ......
_____________________
(1)
Fees Earned or
Paid in Cash ($)
Option
Awards ($)(1)(2)
All Other
Compensation ($)(3) Total ($)
49,000 $
37,000
35,000
32,000
60,500
25,250
46,500
50,000 $
50,000
50,000
50,000
60,000
31,855
50,000
— $
—
—
144,000
—
—
—
99,000
87,000
85,000
226,000
120,500
57,105
96,500
The amounts in this column do not reflect the 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 2023, as calculated in accordance with FASB ASC Topic
718.
On September 1, 2022, each of our then current directors, other than Mr. Lynch, received a stock option to
purchase 10,309 shares of our common stock at an exercise price of $11.38 per share granted under the
Northern Technologies International Corporation Amended and Restated 2019 Stock Incentive Plan, the
material terms of which are described in more detail under “Executive Compensation—Stock Incentive
Plans.” These options vested in full on September 1, 2023 and will expire on August 31, 2032 or earlier in
the case of a director whose service as a director is terminated prior to such date. In addition, on
September 1, 2022, Mr. Nigon received an additional stock option to purchase 2,062 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, 2022 was $4.85 and was
determined using the following specific assumptions: risk free interest rate: 3.30%; expected life:
10.0 years; expected volatility: 45.2%; and expected dividend yield: 0%.
On January 20, 2023, Ms. Pinho received a stock option to purchase 5,511 shares of our common stock at
an exercise price of $12.95 per share granted under the Northern Technologies International Corporation
Amended and Restated 2019 Stock Incentive Plan. This option vests in full on January 20, 2024 and will
expire on January 19, 2033 or earlier if her service as a director is terminated prior to such date. The grant
date fair value associated with this award 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 January 20, 2023 was $5.78 and was determined using the following specific
assumptions: risk free interest rate: 3.43%; expected life: 10.0 years; expected volatility: 45.1%; and
expected dividend yield: 0%.
63
(2)
The table below provides information regarding the aggregate number of options to purchase shares of our
common stock outstanding at August 31, 2023 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 reflect option grants on September 1, 2023. See “—Non-Employee Director Compensation
Program—Stock Options.”
Name
Nancy E. Calderon ..............
Sarah E. Kemp ....................
Sunggyu Lee, Ph.D. ................
Ramani Narayan, Ph.D. ...........
Richard J. Nigon......................
Cristina Pinho ..........................
Konstantin von Falkenhausen .
Aggregate Number
Of Securities
Underlying Options
41,560
41,560
10,309
22,714
96,573
5,511
82,477
Exercisable/
Unexercisable
31,251/10,309
31,251/10,309
0/10,309
12,405/10,309
84,202/12,371
0/5,511
72,168/10,309
Exercise
Price(s)
$ 8.24 – 16.97
$ 8.24 – 16.97
$11.38
$ 16.97 – 18.23
$ 7.43 – 18.23
$ 12.95
$ 6.70 – 18.23
Expiration
Date(s)
10/21/2029 – 08/31/2032
10/21/2029 – 08/31/2032
08/31/2032
08/31/2028 – 08/31/2032
08/31/2024 – 08/31/2032
01/19/2033
08/31/2024 – 08/31/2032
(3)
We do not provide perquisites or other personal benefits to our directors. The amounts reflected for
Dr. Narayan reflects consulting fees paid during the fiscal year ended August 31, 2023 as described in more
detail below under “—Consulting Agreement.”
Non-Employee Director Compensation Program
Overview. Our non-employee directors for the purposes of our director compensation program currently
consist of Nancy E. Calderon, Sarah E. Kemp, Sunggyu Lee, Ph.D., Ramani Narayan, Ph.D., Richard J.
Nigon, Cristina Pinho and Konstantin von Falkenhausen. Our non-employee directors for fiscal 2023
were Nancy E. Calderon, Sarah E. Kemp, Sunggyu Lee, Ph.D., Ramani Narayan, Ph.D., Richard J.
Nigon, Cristina Pinho 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 processes 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 annual cash retainers paid to our non-employee directors
during fiscal 2023:
Description
Non-employee Board Member ............................................................................. $
Chairman of the Board ..........................................................................................
Audit Committee Chair .........................................................................................
Audit Committee Member (including Chair)........................................................
Compensation Committee Chair ...........................................................................
Compensation Committee (including Chair) .......................................................
Nominating and Corporate Governance Committee Chair ...................................
Nominating and Corporate Governance Committee (including Chair) ................
Annual Cash
Retainer
25,000
15,000
5,000
4,500
4,000
3,000
2,000
3,000
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.
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Stock Options/RSU Grants. Pursuant to our non-employee director compensation program, each non-
employee director who is expected to stand for re-election at the next annual meeting of stockholders, is
automatically granted a ten-year non-qualified option to purchase $50,000 in 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
$10,000 in shares of our common stock on the first day of each fiscal year in consideration for his or her
services as Chairman; provided, however, that a non-employee director may elect to receive $50,000 in
restricted stock units (“RSUs”) in lieu of options so long as such election is made prior to the grant date.
In addition, each new non-employee director is automatically granted a ten-year non-qualified option to
purchase a pro rata portion of $50,000 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. The number of shares of common stock underlying the
options or RSUs is determined based on the grant date fair value of the options or RSUs. Each option
becomes exercisable in full on the one-year anniversary of the grant date. The exercise price of such
options is equal to the fair market value of a share of NTIC’s common stock on the grant date. RSUs will
vest on the one-year anniversary of the grant date.
Each non-employee director of NTIC as of the first day of fiscal 2023, September 1, 2022, received a
stock option award pursuant to this program. More recently, each current non-employee director of NTIC
as of the first day of fiscal 2024, September 1, 2023, received a stock option award pursuant to this
program. These stock options will vest in full on the first anniversary of the grant date.
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 NTIC
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 NTIC terminated for
“cause”;
continue for a period of 12 months if the director’s service relationship with NTIC 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 NTIC
terminates for any reason, other than for cause or upon the director’s death, disability or
retirement.
If a director’s service with NTIC terminates for any reason, the unvested portion of any RSUs such
director has elected to receive will immediately be terminated and forfeited.
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, 2023 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, 2023.
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 of Directors
functions.
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Consulting Agreement
NTIC, Bioplastic Polymers LLC and Dr. Narayan are parties to a consulting agreement, pursuant to which
Dr. Narayan provides certain consulting services to us relating to our Natur-Tec® business and
bioplastics program. The consulting agreement sets out terms for clear separation between Dr. Narayan’s
work at Michigan State University and any related inventions and his work with us and related inventions.
In exchange for the consulting services, we pay Dr. Narayan $12,000 per month. The consulting
agreement was amended effective January 11, 2022 to extend the initial term by an additional five years,
and unless earlier terminated by the parties, the consulting agreement terminates on January 11, 2027.
Either party may terminate the consulting agreement earlier upon 30 days prior written notice. The
consulting agreement will terminate automatically upon the death of Dr. Narayan or in the event of his
disability that prevents him from performing the consulting services under the agreement. We paid
consulting fees to Bioplastic Polymers LLC, which is owned by Ramani Narayan, Ph.D., in the aggregate
amount of $144,000 during the fiscal year ended August 31, 2023.
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EXECUTIVE COMPENSATION
________________
Compensation Review
In this Compensation Review, 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 (referred to as our “CEO”), and Matthew C. Wolsfeld, who serves
as our Chief Financial Officer (referred to as our “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 Compensation Review 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.”
When reading this Compensation Review, please note that we are a “smaller reporting company” under
the federal securities laws and are not required to provide a “Compensation Discussion and Analysis” of
the type required by Item 402 of Regulation S-K. This Compensation Review is intended to supplement
the SEC-required disclosure, which is included below this section, and it is not a Compensation
Discussion and Analysis.
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.
Our fiscal 2023 total net sales increased 7.7% to $79,902,952 compared to fiscal 2022 and NTIC incurred
net income attributable to NTIC of $2,912,276, or $0.30 per diluted common share, for fiscal 2023
compared to net income attributable to NTIC of $6,324,700, or $0.66 per diluted common share, for
fiscal 2022.
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 2023, approximately 43.0% 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 2023, approximately 26.0% of total
compensation for our named executive officers was equity-based, assuming grant date fair
values for equity awards.
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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. In addition, in August 2018, we adopted
a clawback policy pursuant to which we may recover certain incentive compensation from
current or former executive officers in the event a financial metric used to determine the
vesting or payment of incentive compensation to an executive was calculated incorrectly or
the executive engaged in egregious conduct that is substantially detrimental to NTIC.
Effective as of October 2, 2023, we revised this clawback policy to comply with the
mandatory recovery of erroneously paid compensation rules of the Nasdaq Stock Market.
No tax gross-ups. We do not provide any 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.
Stock ownership guidelines. We maintain stock ownership guidelines that allow us to ensure
that the interests of our executive officers are closely aligned with those of our stockholders.
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 2023 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, approximately 92% 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 2020 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 at our 2024 Annual Meeting of Stockholders. Our next vote on the frequency of the say-on-
pay vote will occur at our 2026 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.
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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 NTIC 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
69
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. However,
the Compensation Committee has historically used a group of peer companies with a market
capitalization similar to NTIC and either in a similar industry or located in Minnesota.
Elements of Our Executive Compensation Program
Our executive compensation program for the fiscal year ended August 31, 2023 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 2023.
Element
Base Salary A fixed amount, paid in cash
Key Characteristics
Annual
Incentive
and reviewed annually and,
if appropriate, adjusted.
A variable, short-term element
of compensation that is
typically payable in cash and is
based on Adjusted EBITOI and
individual performance goals.
Purpose
Provide a source of fixed income that
is competitive and reflects scope and
responsibility of the position held.
Key Fiscal 2023 Actions
Our named executive officers
received a 5.0% increase to their
fiscal 2022 annual base salaries.
Motivate and reward our executives
for achievement of annual business
results intended to drive overall
company performance.
Messrs. Lynch and Wolsfeld
received bonuses in the amount of
$382,207 and $282,502,
respectively, in each case
representing 77.4% of their annual
base salary. A portion of the
annual incentive earned for fiscal
2023 was paid in the form of a
stock option grant made at the
beginning of fiscal 2023, resulting
in cash bonuses of $151,752 for
Mr. Lynch and $112,165 for
Mr. Wolsfeld.
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Element
Long-Term
Equity-Based
Incentive
Health and
Welfare
Benefits
Retirement
Plans
Perquisites
Key Characteristics
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. Options
granted prior to fiscal 2021
vested on the one-year
anniversary of the grant date.
Includes health, dental and life
insurance.
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
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 2023 Actions
No significant changes were made.
The fiscal 2023 stock option grant
was intended as partial payout of
the fiscal 2023 annual bonus
program.
Provide competitive health and
welfare benefits at a reasonable cost
and promote employee health.
Provide an opportunity for employees
to save and prepare financially for
retirement.
No significant changes were made.
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 2023.
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 August and generally recommends to the
Board of Directors any increases for the following fiscal year in August. Any increases in base salaries
are effective as of September 1.
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 NTIC, 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.
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Annualized base salary rates for fiscal 2022 and fiscal 2023 for our named executive officers were as
follows:
Name
G. Patrick Lynch ......................
Matthew C. Wolsfeld ................
Fiscal
2022
$ 470,224
347,557
Fiscal
2023
$ 493,735
364,935
% Change From
Fiscal 2022
5.0%
5.0%
The Board of Directors, upon recommendation of the Compensation Committee, recently set base salaries
for fiscal 2023. Both Mr. Lynch’s and Mr. Wolsfeld’s base salaries for fiscal 2023 increased by 5.0% of
their respective base salaries for fiscal 2022.
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, along with our stock
ownership guidelines, 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 NTIC and linking a significant portion of each executive’s annual compensation to the
achievement of such measures.
Under the annual bonus plan for fiscal 2023, the total amount available under the bonus plan for all plan
participants, including our two executive officers, as in past years, was a percent (25%) 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 (referred to as “Adjusted EBITOI”). For fiscal 2023, the
other adjustments included amounts paid under NTIC’s sales and management bonus plan and profit
sharing plan and a portion of stock-based compensation expense. As in past years, for fiscal 2023, for
each named executive officer participant, 75% 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% 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 (which for fiscal 2023 was seven participants), the
individual’s annual base salary for fiscal 2023 and the individual’s position and level of responsibility
within NTIC. Individual allocation percentages ranged from approximately 6% to 23%. Mr. Lynch’s
individual allocation percentage for fiscal 2023 was approximately 23% and Mr. Wolsfeld’s individual
allocation percentage for fiscal 2023 was approximately 17% of a total management bonus pool of
approximately $663,482.
Mr. Lynch’s individual performance objectives for fiscal 2023 related primarily to NTIC’s infrastructure
backbone and enterprise software platform, oversight of oil and gas sales and marketing, management of
pending litigation, 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 2023 related primarily to investor relations, subsidiary
profitability, subsidiary cash flow and management of NTIC’s information technology department. In the
case of both Mr. Lynch and Mr. Wolsfeld, the Compensation Committee determined each executive
achieved his individual performance objectives at a 100% achievement level.
Mr. Lynch received a total cash bonus of $151,752 for fiscal 2023 and Mr. Wolsfeld received a total
bonus of $112,165 for fiscal 2023. Additionally, a portion of the annual bonus earned was paid in the
form of a stock option grant on September 1, 2022.
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The structure and material terms of our annual bonus plan for fiscal 2024 are similar to the annual bonus
plan for fiscal 2023. As in past years, the payment of bonuses under the plan for fiscal 2024 will be
discretionary and may be paid to participants in cash and/or shares of NTIC common stock.
Long-Term Equity-Based Incentive Compensation. The long-term equity-based incentive compensation
component of our executive compensation program consists of annual option grants to our executives and
certain other employees. The stock options are typically granted on the first business day of each fiscal
year.
Accordingly, on September 1, 2022, NTIC granted Mr. Lynch an option to purchase 47,517 shares of
common stock and Mr. Wolsfeld an option to purchase 35,121 shares of common stock. In response to
stockholder concerns, these options vest annually over three years, as opposed to vesting in full on the
first anniversary of the date of grant. More recently, on September 1, 2023, NTIC granted Mr. Lynch an
option to purchase 45,381 shares of common stock and Mr. Wolsfeld an option to purchase 33,543 shares
of common stock. These stock options vest annually over three years.
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 anticipated amount to
be earned under the annual bonus plan and a portion of which it preferred to pay out in the form of a stock
option grant and 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, along with our stock ownership guidelines, 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 2023, equity-based
compensation comprised approximately 26% 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 our then current stockholder-approved stock incentive
plan.
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 – over three years and previously upon the one-year anniversary of the date of grant. 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 at the end of the
regular 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
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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 vesting period.
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 link 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 meaningful equity ownership in NTIC and
enable us to attract, retain and motivate our executives by maintaining competitive levels of total
compensation.
As described in more detail below, in November 2021, the Board of Directors adopted stock ownership
guidelines to align the interests of our executives with the interests of our stockholders, and 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% (subject to certain special limitations) and contribute such amounts to
a trust. We typically contribute an amount equal to 50% of the first 7% 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 plans 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 a potential change in control.
Under the terms of our stock incentive plans and the individual award documents provided to recipients of
awards under those plans, 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
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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. The average total
annual compensation will be determined based on the calculation used to determine total compensation in
the Summary Compensation Table. Accordingly, it will not include equity gains; only, the grant date fair
value of equity grants. Additionally, each of the CEO and CFO is eligible to receive 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 NTIC.
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 the
executive’s transition into 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 NTIC 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 NTIC’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 NTIC 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
75
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 NTIC and
our executives. The Compensation Committee reviews our severance arrangements periodically to ensure
that they remain necessary and appropriate.
Stock Ownership Guidelines
In November 2021, the Board of Directors adopted stock ownership guidelines that are intended to align
the interests of our executive officers with those of our stockholders. As of the date of this proxy
statement, each of our executive officers required to meet the stock ownership guidelines had met such
guideline. The stock ownership guidelines for our executive officers are as follows:
Position
Chief Executive Officer
Other Executive Officers
Hedging and Pledging Policies
Guideline
6x annual base salary
3x annual base salary
Our insider trading policy prohibits NTIC directors, officers, employees, consultants and their immediate
family members, other household members and controlled entities from engaging in hedging or
monetization transactions that hedge or offset, or are designed to hedge or offset, any decrease in the
market value of NTIC securities, including, without limitation, prepaid variable forward contracts, equity
swaps, collars and exchange funds. In addition, our insider trading policy limits the ability of the
individuals listed above to pledge NTIC securities. NTIC securities may only be pledged in an
insignificant manner if the individual has a compelling reason for the pledge and is able to demonstrate
the financial capacity to repay the loan without resort to the pledged securities. The proposed transaction
must be submitted at least two weeks prior to its proposed execution in order for the Chief Financial
Officer to review and approve the transaction.
Clawback Policy
We have a clawback policy pursuant to which we may recover certain incentive compensation from
current or former executive officers in the event a financial metric used to determine the vesting or
payment of incentive compensation to an executive was calculated incorrectly or the executive engaged in
egregious conduct that is substantially detrimental to NTIC. Effective as of October 2, 2023, we revised
this clawback policy to comply with the mandatory recovery of erroneously paid compensation rules of
the Nasdaq Stock Market.
76
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, serves as
our principal executive officer, and Matthew C. Wolsfeld, our Chief Financial Officer and Corporate
Secretary, 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 NTIC.
SUMMARY COMPENSATION TABLE – FISCAL 2023
Name and Principal
Position
G. Patrick Lynch ............
President and Chief
Executive Officer
Matthew C. Wolsfeld .....
Chief Financial Officer
and Corporate Secretary
Fiscal
Year
2023
2022
Salary
$ 493,735
470,224
Option
Awards(1)
$ 230,455
237,217
Non-Equity
Incentive Plan
Compensation(2)
$
151,752
169,310
All Other
Compensation(3)
$
13,102
13,102
Total
$ 889,044
889,853
2023
2022
364,935
347,557
170,337
175,334
112,165
125,142
12,875
12,875
660,312
660,908
__________________________
(1)
On September 1, 2022, each of the named executive officers was granted a stock option under the Northern
Technologies International Corporation 2019 Stock Incentive Plan. We refer you to the information under
the heading “Compensation Review—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, 2022 was $4.85 and was determined using the following specific
assumptions: risk free interest rate: 3.30%; expected life: 10.0 years; expected volatility: 45.2%; 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 2023 and 2022 performance,
respectively, but paid to such officers during fiscal 2024 and 2023, respectively. We refer you to the
information under “Compensation Review—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 2023 include the following
with respect to each named executive officer:
Name
G. Patrick Lynch ............................................. $ 8,750
Matthew C. Wolsfeld ...................................... 8,750
401(k) Match
Personal Use
of Auto
$ 4,352
4,125
77
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, 2023. Note that because of the grant date, the table set
forth below does not reflect option grants on September 1, 2023. We did not have any equity incentive
plan awards or stock awards outstanding at August 31, 2023. Share and per share data have been adjusted
to reflect our two-for-one stock split that was effective June 28, 2019.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END—FISCAL 2023
Name
G. Patrick Lynch .................
Matthew C. Wolsfeld ..........
Number of Securities
Underlying Unexercised
Options (#)
Exercisable
10,488
14,574
16,072
11,704
27,596
58,651
49,828
10,847
0
7,752
10,772
11,880
8,650
20,396
43,351
36,830
8,017
0
Option Awards
Number of Securities
Underlying Unexercised
Options (#)
Unexercisable(1)
0
0
0
0
0
0
24,914(2)
21,693(3)
47,517(4)
0
0
0
0
0
0
18,414(2)
16,034(3)
35,121(4)
Option
Exercise
Price ($)
10.05
7.43
6.70
9.18
18.23
10.80
8.24
16.97
11.38
10.05
7.43
6.70
9.18
18.23
10.80
8.24
16.97
11.38
Option
Expiration Date
08/31/2024
08/31/2025
08/31/2026
08/31/2027
08/31/2028
08/31/2029
08/31/2030
08/31/2031
08/31/2032
08/31/2024
08/31/2025
08/31/2026
08/31/2027
08/31/2028
08/31/2029
08/31/2030
08/31/2031
08/31/2032
__________________________
(1)
All options described in this table were granted under the Northern Technologies International Corporation
2019 Stock Incentive Plan or the Northern Technologies International Corporation Amended and Restated
2007 Stock Incentive Plan. Under these plans, upon the occurrence of a change in control, the unvested
and unexercisable options will be accelerated and become fully vested and immediately exercisable as of
the date of the change in control. For more information, we refer you to the discussion below under “—
Stock Incentive Plans.”
(2)
(3)
(4)
These options vest over a three-year period, with one-third of the underlying shares vesting on each of
September 1, 2021, 2022 and 2023 so long as the individual remains an employee of NTIC as of such date.
These options vest over a three-year period, with one-third of the underlying shares vesting on each of
September 1, 2022, 2023 and 2024 so long as the individual remains an employee of NTIC as of such date.
These options vest over a three-year period, with one-third of the underlying shares vesting on each of
September 1, 2023, 2024 and 2025 so long as the individual remains an employee of NTIC as of such date.
78
Option Exercises for Fiscal 2023
The following table summarizes all of the stock options exercised during fiscal 2023:
Name
G. Patrick Lynch ..............................................
Matthew C. Wolsfeld .......................................
Option Awards(1)
Number of Shares Acquired
on Exercise
(#)
36,284
11,610
27,218
8,582
Value Realized
on Exercise
($)
320,553
69,776
236,933
51,578
__________________________
(1)
The number of shares acquired upon exercise reflects the gross number of shares acquired absent any
netting for shares surrendered to pay the option exercise price and/or satisfy tax withholding requirements.
The value realized on exercise represents the gross number of shares acquired on exercise multiplied by the
market price of our common stock on the exercise date, less the per share exercise price.
Stock Incentive Plans
We have two stock incentive plans under which stock options are currently outstanding: the Northern
Technologies International Corporation Amended and Restated 2019 Stock Incentive Plan and the
Northern Technologies International Corporation Amended and Restated 2007 Stock Incentive Plan.
However, future stock incentive awards may only be granted under the Northern Technologies
International Corporation Amended and Restated 2019 Stock Incentive Plan. Under the terms of the 2019
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, restricted stock units, performance awards, and other stock-based awards. To date, only incentive
and non-statutory stock options 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 limits for non-
employee directors 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 the 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 option terms of ten years.
79
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
NTIC 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 NTIC
terminates for “cause”;
continue for a period of 12 months if the executive’s employment or service relationship with
NTIC 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 NTIC 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 NTIC, all rights of the participant under the plan and any
incentive award agreements then held by the participant will terminate and be forfeited without notice of
any kind, and the committee may rescind the exercise, vesting or issuance of, or payment in respect of,
any incentive awards of the participant that were exercised, vested or issued, or as to which such payment
was made, and require the participant to pay any amount received or the amount of any gain realized as a
result of such rescinded exercise, vesting, issuance or payment. 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 NTIC 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.
80
As described in more detail under “—Post-Termination Severance and Change in Control Arrangements”
if there is a change in control of NTIC, 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 executive’s employment with NTIC remains “at will,” the employment agreements
provide each executive with 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. The average total annual compensation will be determined based on the
calculation used to determine total compensation in the Summary Compensation Table. Accordingly, it
will not include equity gains; only, the grant date fair value of equity grants. Additionally, the CEO and
CFO are eligible to receive 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 NTIC. 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 NTIC, 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 (referred to as “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 NTIC, 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 NTIC.
81
“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% 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 NTIC had occurred on August 31, 2023, 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, 2023 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, 2023 (based on the closing sale price of our common
stock on the last trading day of fiscal 2023, August 31, 2023 — $12.90), and (ii) the exercise price of the
options.
Executive Officer
G. Patrick Lynch .............
Matthew C. Wolsfeld ......
Number of Unvested Options
Subject to Automatic Acceleration
94,124
69,569
Estimated Value of Automatic
Acceleration of Vesting
116,099
85,809
$
If the employment of our named executive officers was terminated as of August 31, 2023, 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:
Triggering Event
Involuntary
Termination
without
Cause
$1,778,897
29,940
116,099
$1,924,936
Qualifying
Change in
Control
Termination
$1,778,897
29,940
116,099
$1,924,936
Voluntary/
For Cause
Termination
0
$
0
0
0
$
Matthew C. Wolsfeld... Cash severance(1)
Benefits continuation(2)
Equity acceleration(3)
Total:
$
$
0
0
0
0
$ 990,915
29,940
85,809
$1,106,664
$ 990,915
29,940
85,809
$1,106,664
Death
0
0
0
0
0
0
0
0
$
$
$
$
Disability
0
$
0
0
0
$
$
$
0
0
0
0
82
__________________________
(1)
Represents 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. Does not include 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, since in light of the
assumed termination date of August 31, 2023, the last day of the fiscal year, such bonus would have been
earned.
(2)
(3)
Represents the value of medical, dental and vision benefit continuation for each executive and their family
for 18 months following the executive’s termination.
Represents the value of acceleration of all unvested shares that are subject to options, based on the
difference between the closing sale price of $12.90 per share as of the last trading day of fiscal 2023,
August 31, 2023, and the exercise price.
Pay Versus Performance Disclosure
Pay Versus Performance Table
As required by Section 953(a) of the Dodd-Frank Act and Item 402(v) of SEC Regulation S-K, we are
providing the following information about the relationship between “compensation actually paid” to our
NEOs, within the meaning of such rules, and certain financial performance measures of our Company.
The table below provides information regarding compensation actually paid to our CEO, our principal
executive officer (PEO), and compensation actually paid to our CFO, our other non-PEO named
executive officer, during each of the past two fiscal years, as well as total stockholder return and net
income (loss) for each of the past two fiscal years.
Summary
Compensation
Table Total for
PEO(1)
($)
889,044
889,853
Compensation
Actually Paid to
PEO(2)(3)
($)
979,459
607,859
Year
2023
2022
________________________
Average Summary
Compensation Table
Total for Non-PEO
Named Executive
Officers(4)
($)
660,312
660,908
Average
Compensation
Actually Paid to
Non-PEO Named
Executive
Officers(5)(6)
($)
Value of Initial
Fixed $100
Investment
Based On Total
Shareholder Return(7)
($)
727,138
452,477
80.74
72.35
Net Income(8)
($)
4,237,731
7,185,934
(1)
(2)
(3)
Amounts reported represent the Summary Compensation Table total for our CEO for each of the years
presented. See “Executive Compensation—Summary Compensation Table.”
Amounts reported represent compensation actually paid to our CEO for each of the years presented. The
dollar amounts in this column do not reflect the actual amount of compensation earned by or paid to our
CEO during the applicable year.
Compensation actually paid to our PEO consists of the following amounts deducted from or added to the
Summary Compensation Table total for our CEO for each of the years presented:
Summary Compensation Table Total for 2023
Deduct: Stock awards(a)
Deduct: Option awards(b)
Add: Year-end value of equity awards granted during the year that are
outstanding and unvested(c)
Patrick L. Lynch
$ 889,044
0
230,455
272,272
Add: Change in fair value of equity awards granted in prior years that are
27,498
outstanding and unvested(d)
83
Add: Change in fair value of equity awards granted in prior years that
vested during the year(e)
Add: Value of dividend equivalents accrued on equity awards during the
year
Compensation Actually Paid for 2023
Summary Compensation Table Total for 2022
Deduct: Stock awards(a)
Deduct: Option awards(b)
Add: Year-end value of equity awards granted during the year that are
outstanding and unvested(c)
Add: Change in fair value of equity awards granted in prior years that are
outstanding and unvested(d)
Add: Change in fair value of equity awards granted in prior years that
vested during the year(e)
Add: Value of dividend equivalents accrued on equity awards during the
year
Compensation Actually Paid for 2022
Patrick L. Lynch
21,099
0
979,458
$ 889,853
0
237,217
148,057
(128,556)
(64,278)
0
607,859
(a) Represents the total of the amounts reported in the “Stock Awards” column in the Summary
Compensation Table for the applicable year.
(b) Represents the total of the amounts reported in the “Option Awards” column in the Summary
Compensation Table for the applicable year.
(c) Represents the year-end value of equity awards granted during the applicable year that are outstanding
and unvested as of the end of such applicable year.
(d) Represents the amount of change as of the end of the applicable year (from the end of the prior fiscal
year) in fair value of any equity awards granted in prior years that are outstanding and unvested as of
the end of such applicable year.
(e) Represents the amount of change as of the vesting date (from the end of the prior fiscal year) in fair
value of any equity awards granted in prior years that vested during the applicable year.
Since we do not have a pension plan, all of the foregoing adjustments are equity award adjustments for
each applicable year and include the addition (or subtraction, as applicable) of the following: (i) the year-
end fair value of any equity awards granted in the applicable year that are outstanding and unvested as of
the end of such applicable year; (ii) the amount of change as of the end of the applicable year (from the end
of the prior fiscal year) in fair value of any equity awards granted in prior years that are outstanding and
unvested as of the end of such applicable year; (iii) for equity awards that are granted and vest in the same
applicable year, the fair value as of the vesting date; (iv) for equity awards granted in prior years that vest
in the applicable year, the amount equal to the change as of the vesting date (from the end of the prior fiscal
year) in fair value; (v) for equity awards granted in prior years that are determined to fail to meet the
applicable vesting conditions during the applicable year, a deduction for the amount equal to the fair value
at the end of the prior fiscal year; and (vi) the dollar value of any dividends or other earnings paid on equity
awards in the applicable year prior to the vesting date that are not otherwise reflected in the fair value of
such award or included in any other component of total compensation for such applicable year.
Adjustments as provided in clauses (iii) and (vi) are inapplicable for all of the years presented in the table.
The valuation assumptions used to calculate fair values did not materially differ from those disclosed at the
time of grant. The value of option awards is based on the fair value as of the end of the covered year or
change in fair value during the covered year, in each case based on our Black-Scholes option pricing
model, the assumptions of which are described in Note 10 to our consolidated financial statements included
in our Annual Report on Form 10-K for the year ended August 31, 2023.
84
(4)
(5)
(6)
Average Summary Compensation Table total for non-PEO named executive officers reflects the Summary
Compensation Table total for Matthew C. Wolsfeld.
The amounts in this column represent the compensation actually paid to Matthew C. Wolsfeld, our non-
PEO named executive officer, for each of the years presented. The dollar amounts in this column do not
reflect the actual average amount of compensation earned by or paid to the non-PEO during the applicable
year.
Average compensation actually paid to our non-PEO named executive officer consists of the following
amounts deducted from or added to the Summary Compensation Table total for our CFO for each of the
years presented:
Summary Compensation Table Total for 2023
Deduct: Stock awards(a)
Deduct: Option awards(b)
Add: Year-end value of equity awards granted during the year that are
outstanding and unvested(c)
Add: Change in fair value of equity awards granted in prior years that are
outstanding and unvested(d)
Add: Change in fair value of equity awards granted in prior years that
vested during the year(e)
Add: Value of dividend equivalents accrued on equity awards during the
year
Compensation Actually Paid for 2023
Matthew C. Wolsfeld
$ 660,312
0
170,337
201,243
20,325
15,595
0
727,138
Summary Compensation Table Total for 2022
Deduct: Stock awards(a)
Deduct: Option awards(b)
Add: Year-end value of equity awards granted during the year that are
$ 660,908
0
175,334
109,432
outstanding and unvested(c)
Add: Change in fair value of equity awards granted in prior years that are
outstanding and unvested(d)
Add: Change in fair value of equity awards granted in prior years that
vested during the year(e)
Add: Value of dividend equivalents accrued on equity awards during the
year
Compensation Actually Paid for 2022
(95,020)
(47,510)
0
452,477
(a) Represents the total of the amounts reported in the “Stock Awards” column in the Summary
Compensation Table for the applicable year.
(b) Represents the total of the amounts reported in the “Option Awards” column in the Summary
Compensation Table for the applicable year.
(c) Represents the year-end value of equity awards granted during the applicable year that are outstanding
and unvested as of the end of such applicable year.
(d) Represents the amount of change as of the end of the applicable year (from the end of the prior fiscal
year) in fair value of any equity awards granted in prior years that are outstanding and unvested as of
the end of such applicable year.
(e) Represents the amount of change as of the vesting date (from the end of the prior fiscal year) in fair
value of any equity awards granted in prior years that vested during the applicable year.
Since we do not have a pension plan, all of the foregoing adjustments are equity award adjustments for
each applicable year and include the addition (or subtraction, as applicable) of the following: (i) the average
85
year-end fair value of any equity awards granted in the applicable year that are outstanding and unvested as
of the end of such applicable year; (ii) the average amount of change as of the end of the applicable year
(from the end of the prior fiscal year) in fair value of any equity awards granted in prior years that are
outstanding and unvested as of the end of such applicable year; (iii) for equity awards that are granted and
vest in the same applicable year, the average fair value as of the vesting date; (iv) for equity awards granted
in prior years that vest in the applicable year, the average amount equal to the change as of the vesting date
(from the end of the prior fiscal year) in fair value; (v) for equity awards granted in prior years that are
determined to fail to meet the applicable vesting conditions during the applicable year, a deduction for the
amount equal to the average fair value at the end of the prior fiscal year; and (vi) the average dollar value of
any dividends or other earnings paid on equity awards in the applicable year prior to the vesting date that
are not otherwise reflected in the fair value of such award or included in any other component of total
compensation for such applicable year. Adjustments as provided in clauses (iii) and (vi) are inapplicable
for all of the years presented in the table.
The valuation assumptions used to calculate fair values did not materially differ from those disclosed at the
time of grant. The value of option awards is based on the fair value as of the end of the covered year or
change in fair value during the covered year, in each case based on our Black-Scholes option pricing
model, the assumptions of which are described in Note 10 to our consolidated financial statements included
in our Annual Report on Form 10-K for the year ended August 31, 2023.
(7)
(8)
The total shareholder return is calculated by the difference between our common stock price at the end of
the measurement period by our stock price at the beginning of the measurement period, including
dividends.
Amounts reported represent the amount of net income reflected in our audited consolidated financial
statements for the applicable year and is presented in thousands.
Pay Versus Performance Relationship
In accordance with Item 402(v) of SEC Regulation S-K, we are providing the following descriptions of
the relationships between information presented in the Pay versus Performance table above. The graphs
below illustrate a high correlation between compensation actually paid to our NEOs and our cumulative
total stockholder return (TSR) and little correlation between compensation actually paid to our NEOs
during 2022 and 2023 and our net income during those years.
86
Compensation Actually Paid and Company TSR. As demonstrated by the following graph, the amount of
compensation actually paid to our NEOs is aligned with our cumulative TSR over the two years presented
in the table. The alignment of compensation actually paid with our cumulative TSR over the period
presented is because a significant portion of the compensation actually paid to our NEOs is comprised of
equity awards, the value of which is driven by our stock price.
Compensation Actually Paid and Net Loss. As demonstrated by the following graph, the amount of
compensation actually paid to our NEOs increased despite a decrease in our net income. This is a result of
an increase in our stock price during fiscal 2023, which increased the compensation actually paid to our
NEOs, despite a decrease in our net income.
87
Compensation Committee Interlocks and Insider Participation
No member of the 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 the 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.
88
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 the lesser of: $120,000 or one percent (1%) of
the average of our total assets at year end for the last two completed fiscal years; 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 meet the
below criteria are deemed conclusively pre-approved:
o at arm’s length;
o at prices and on terms customarily available to unrelated third party vendors or customers
generally;
o
o
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.
89
Description of Related Party Transactions
Please see “Director Compensation” and “Executive Compensation” for information regarding a
consulting agreement 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 12.8% of the total voting power of NTIC. According to a Schedule 13D/A filed with the SEC on
October 22, 2019, Inter Alia Holding Company is an entity of which Mr. Lynch is a 47% 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.
We have entered into agreements with all of our directors and 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
directors or executive officers. We will be obligated to pay these amounts only if the director or
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 director or 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.
NTIC has not identified any arrangements or agreements relating to compensation provided by a third
party to NTIC’s directors or director nominees in connection with their candidacy or board service as
required to be disclosed pursuant to Nasdaq Rule 5250(b)(3).
90
STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS FOR
2025 ANNUAL MEETING OF STOCKHOLDERS
________________
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 2025 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 6, 2024, 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 SEC and as the rules of the
SEC make clear, simply submitting a proposal does not guarantee that it will be included.
Any other stockholder proposals to be presented at the 2025 Annual Meeting of Stockholders (other than
a matter brought pursuant to SEC Rule 14a-8) and any director nominations for the 2025 Annual Meeting
of Stockholders must be given in writing to our Corporate Secretary and must be delivered to or mailed to
and received at our principal executive offices not less than 90 days nor more than 120 days prior to the
anniversary date of the 2024 Annual Meeting of Stockholders; provided, however, that in the event that
the 2025 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 or director nomination must contain specific
information required by our Bylaws, a copy of which may be obtained by writing to our Corporate
Secretary. The Nominating and Corporate Governance Committee will evaluate director nominee
candidates recommended by stockholders in the same manner as those recommended by others. In
addition, if applicable, stockholders who intend to solicit proxies in support of director nominees other
than NTIC’s nominees at the 2025 Annual Meeting must also comply with the additional requirements
under Rule 14a-19 promulgated under the Exchange Act, as required by and in addition to our Bylaws,
including providing a statement that such stockholder intends to solicit the holders of shares representing
at least 67% of the voting power of NTIC’s shares entitled to vote on the election of directors in support
of director nominees other than NTIC’s nominees, as required by Rule 14a-19(b) promulgated under the
Exchange Act.
We encourage stockholders who wish to submit a proposal or nomination to seek independent counsel.
NTIC will not consider any proposal or nomination that is not timely or otherwise does not meet the
Bylaw and SEC requirements. We reserve the right to reject, rule out of order, or take other appropriate
action with respect to any proposal that does not comply with these and other applicable requirements.
COPIES OF FISCAL 2023 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, 2023. The exhibits to
our Form 10-K are available by accessing the SEC’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.
_________________________
91
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 4, 2023
Circle Pines, Minnesota
92
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, 2023
or
☐ 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 pursuant to Section 12(b) of the Act:
Title of each class
Common stock, par value $0.02 per share
Trading Symbol(s)
NTIC
Name of each exchange on which registered
Nasdaq Global Market
Securities registered pursuant to 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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES ☒ NO ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging
growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the
Exchange Act.
Large accelerated filer ☐
Accelerated filer ☐
Non-accelerated filer ☒
Smaller reporting company ☒
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect
the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any
of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the 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 28, 2023 (the last business day of the registrant’s second fiscal quarter) as reported by the Nasdaq Global Market
on that date was approximately $100.9 million.
As of November 10, 2023, 9,427,599 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 2024 Annual Meeting of Stockholders to be held January 19, 2024.
NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION
ANNUAL REPORT ON FORM 10-K
FISCAL YEAR ENDED AUGUST 31, 2023
TABLE OF CONTENTS
PART I ......................................................................................................................................................................................... 1
BUSINESS ....................................................................................................................................................... 1
RISK FACTORS ............................................................................................................................................ 15
UNRESOLVED STAFF COMMENTS ......................................................................................................... 36
PROPERTIES ................................................................................................................................................ 36
LEGAL PROCEEDINGS .............................................................................................................................. 37
MINE SAFETY DISCLOSURES .................................................................................................................. 37
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II ..................................................................................................................................................................................... 38
Page
Item 5.
Item 6.
Item 7.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES ........................................................................... 38
[RESERVED] ................................................................................................................................................. 38
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS ......................................................................................................................................... 39
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ............................... 53
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ............................................................... 54
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE ......................................................................................................................... 81
Item 9A. CONTROLS AND PROCEDURES .............................................................................................................. 81
OTHER INFORMATION .............................................................................................................................. 82
Item 9B.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS .............. 82
Item 9C.
Item 7A.
Item 8.
Item 9.
Item 10.
Item 11.
Item 12.
PART III .................................................................................................................................................................................... 83
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE ....................................... 83
EXECUTIVE COMPENSATION ................................................................................................................. 83
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS .................................................................................................... 83
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE .......................................................................................................................................... 85
PRINCIPAL ACCOUNTANT FEES AND SERVICES ............................................................................... 85
Item 13.
Item 14.
PART IV .................................................................................................................................................................................... 86
EXHIBIT AND FINANCIAL STATEMENT SCHEDULES ....................................................................... 86
FORM 10-K SUMMARY .............................................................................................................................. 89
Item 15.
Item 16.
_______________
This annual report on Form 10-K contains certain forward-looking statements that are within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are subject
to the safe harbor created by those sections. For more information, see “Part I. Item 1. Business – Forward-Looking
Statements.”
_______________
i
As used in this report, references to “NTIC,” the “Company,” “we,” “our,” or “us,” unless the context otherwise requires,
refer to Northern Technologies International Corporation and its wholly-owned and majority-owned subsidiaries, all of
which are consolidated on NTIC’s consolidated financial statements.
As used in this report, references to: (1) “NTIC China” refer to NTIC’s wholly-owned subsidiary in China, NTIC (Shanghai)
Co., Ltd.; (2) “NTI Europe” refer to NTIC’s wholly-owned subsidiary in Germany, NTIC Europe GmbH; (3) “Zerust
Mexico” refer to NTIC’s wholly-owned subsidiary in Mexico, ZERUST-EXCOR MEXICO, S. de R.L. de C.V.; (4) “Zerust
India” refer to NTIC’s wholly-owned subsidiary in India, HNTI Limited (formerly Harita-NTI Limited); (5) “Zerust Brazil”
refer to NTIC’s majority-owned Brazilian subsidiary, Zerust Prevenção de Corrosão S.A.; (6) “Natur-Tec India” refer to
NTIC’s majority-owned subsidiary in India, Natur-Tec India Private Limited; (7) “Natur Tec Lanka” refer to NTIC’s
majority-owned subsidiary in Sri Lanka, Natur Tec Lanka (Pvt) Ltd and (8) “NTI Asean” refer to NTIC’s majority-owned
holding company subsidiary, NTI Asean LLC, which holds investments in certain entities that operate in the Association of
Southeast Asian Nations (ASEAN) region.
NTIC’s consolidated financial statements do not include the accounts of any of its joint ventures. Except as otherwise
indicated, references in this report to NTIC’s joint ventures do not include any of NTIC’s wholly-owned or majority-owned
subsidiaries.
As used in this report, references to “EXCOR” refer to NTIC’s joint venture in Germany, Excor Korrosionsschutz –
Technologien und Produkte GmbH.
All trademarks, trade names, or service marks referred to in this report are the property of their respective owners.
ii
Item 1.
BUSINESS
Overview
PART I
Northern Technologies International Corporation (NTIC) develops and markets proprietary, environmentally beneficial
products and services in over 65 countries either directly or via a network of subsidiaries, joint ventures, independent
distributors, and agents. NTIC’s primary business is corrosion prevention products and services, marketed mainly
under the ZERUST® brand. NTIC has been selling its proprietary ZERUST® products and services to the automotive,
electronics, electrical, mechanical, military, and retail consumer markets for almost 50 years and, more recently, has
also expanded into the oil and gas industry. Additionally, NTIC markets and sells a portfolio of proprietary bio-based
and certified compostable (fully biodegradable) polymer resin compounds and finished products under the Natur-Tec®
brand. These products are intended to reduce NTIC’s customers’ carbon footprint and provide environmentally sound
waste disposal options.
NTIC’s ZERUST® rust and corrosion inhibiting products include plastic and paper packaging, liquids, coatings, rust
removers, cleaners, and diffusers as well as engineered solutions designed specifically for the oil and gas industry.
NTIC also offers worldwide, on-site, technical consulting for rust and corrosion prevention issues. NTIC’s technical
service consultants work directly with the end users of NTIC’s ZERUST® rust and corrosion inhibiting products to
analyze their specific needs and develop systems to meet their performance requirements. In North America, NTIC
sells its ZERUST® corrosion prevention solutions through a network of independent distributors and agents supported
by a direct sales force.
Internationally, NTIC sells its ZERUST® corrosion prevention solutions through its wholly-owned subsidiary in China,
NTIC (Shanghai) Co., Ltd. (NTIC China), its wholly-owned subsidiary in India, HNTI Limited (Zerust India), its
majority-owned joint venture holding company for NTIC’s joint venture investments in the Association of Southeast
Asian Nations (ASEAN) region, NTI Asean LLC (NTI Asean), and certain other majority-owned and wholly-owned
subsidiaries, and joint venture arrangements in North America, Europe, and Asia. NTIC also sells products directly to
its European joint venture partners through its wholly-owned subsidiary in Germany, NTIC Europe GmbH (NTI
Europe).
One of NTIC’s strategic initiatives is to expand into and penetrate other markets for its ZERUST® corrosion prevention
technologies. Consequently, for the past several years, NTIC has focused significant sales and marketing efforts on the
oil and gas industry, as the infrastructure that supports that industry is typically constructed using metals that are highly
susceptible to corrosion. NTIC believes that its ZERUST® corrosion prevention solutions will minimize maintenance
downtime on critical oil and gas industry infrastructure, extend the life of such infrastructure, and reduce the risk of
environmental pollution due to leaks caused by corrosion.
NTIC markets and sells its ZERUST® rust and corrosion prevention solutions to customers in the oil and gas industry in
a continuously increasing number of countries either directly, through its subsidiaries, or through its joint venture
partners and other strategic partners. The sale of ZERUST® corrosion prevention solutions to customers in the oil and
gas industry typically involves long sales cycles, often including multi-year trial periods with each customer and a slow
integration process thereafter.
Natur-Tec® bio-based and compostable plastics are manufactured using NTIC’s patented and/or proprietary
technologies and are intended to replace conventional petroleum-based plastics. The Natur-Tec® biopolymer resin
compound portfolio includes formulations that have been optimized for a variety of applications, including blown-film
extrusion, extrusion coating, injection molding, and engineered plastics. These resin compounds are certified to be fully
biodegradable in a commercial composting environment and are currently being used to produce finished products,
including can liners, shopping and grocery bags, lawn and leaf bags, branded apparel packaging bags and accessories,
and various foodservice items, such as disposable cutlery, drinking straws, food-handling gloves, and coated paper
products. In North America, NTIC markets its Natur-Tec® resin compounds and finished products primarily through a
network of regional and national distributors as well as independent agents. NTIC continues to see significant
opportunities for finished bioplastic products and, therefore, continues to strengthen and expand its North American
distribution network for finished Natur-Tec® bioplastic products.
1
Internationally, NTIC sells its Natur-Tec® resin compounds and finished products both directly and through its wholly-
owned subsidiary in China and majority-owned subsidiaries in India and Sri Lanka, and through distributors and certain
joint ventures.
NTIC’s Subsidiaries and Joint Venture Network
NTIC has ownership interests in 11 operating subsidiaries in North America, South America, Europe, and Asia, the
results of which are fully consolidated in NTIC’s consolidated financial statements. The following table sets forth a list
of NTIC’s operating subsidiaries as of November 17, 2023, the country in which the subsidiary is organized, and
NTIC’s ownership percentage in each subsidiary:
Subsidiary Name
HNTI Limited
Natur Tec Lanka (Pvt) Ltd
Natur-Tec India Private Limited
NTI Asean LLC
NTIC (Shanghai) Co., Ltd
NTIC Europe GmbH
Zerust Prevenção de Corrosão S.A.
Zerust Singapore Pte Ltd
Zerust Vietnam Co. Ltd
Zerust Taiwan Co., Ltd
ZERUST-EXCOR MEXICO, S. de R.L. de C.V.
____________________
Country
India
Sri Lanka(1)
India
United States
China
Germany
Brazil
Singapore(2)
Vietnam(3)
Taiwan(4)
Mexico
NTIC
Percent (%)
Ownership
100%
75%
75%
60%
100%
100%
85%
60%
60%
60%
100%
(1) Natur Tec Lanka (Pvt) Ltd. is 100% owned by Natur-Tec India Private Limited and, therefore, indirectly owned by
NTIC.
(2) Zerust Singapore Pte Ltd is 100% owned by NTI Asean LLC and, therefore, indirectly owned by NTIC.
(3) Zerust Vietnam Co. Ltd is 100% owned by Zerust Singapore Pte Ltd and, therefore, indirectly owned by NTIC.
(4) Zerust Taiwan Co., Ltd is 100% owned by Zerust Singapore Pte Ltd and, therefore, indirectly owned by NTIC.
NTIC participates in 15 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. NTIC accounts for the investments and financial results of its joint ventures in its consolidated financial
statements utilizing the equity method of accounting. The following table sets forth a list of NTIC’s operating joint
ventures as of November 17, 2023, the country in which the joint venture is organized, and NTIC’s ownership
percentage in each joint venture:
Joint Venture Name
ACOBAL SAS
CHONG WAH-NTIA SDN. BHD.
EXCOR KORROSIONSSCHUTZ – TECHNOLOGIEN
….UND PRODUKTE GMBH
EXCOR SP. Z.O.O.
EXCOR-ZERUST S.R.O.
KOREA ZERUST CO., LTD.
PT. CHEMINDO – NTIA
TAIYONIC LTD.
ZERUST – DNEPR
ZERUST (U.K.) LTD.
ZERUST A.Ş.
ZERUST AB
Country
France
Malaysia (1)
Germany
Poland
Czech Republic
South Korea (1)
Indonesia (1)
Japan
Ukraine
United Kingdom
Turkey
Sweden
NTIC
Percent (%)
Ownership
50%
30%
50%
50%
50%
30%
30%
50%
50%
50%
50%
50%
2
Joint Venture Name
ZERUST CONSUMER PRODUCTS, LLC
ZERUST OY
ZERUST SPECIALTY TECH CO. LTD.
____________________
(1) Indirect ownership interest through NTI Asean.
Country
United States
Finland
Thailand (1)
NTIC
Percent (%)
Ownership
50%
50%
30%
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 two reportable
business segments based on products sold, customer base, and distribution center: ZERUST® corrosion prevention
solutions and Natur-Tec® resin compounds and finished products.
ZERUST® Corrosion Prevention Solutions. In fiscal 2023, 77.3% 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 2023 included $61,728,364 in sales of ZERUST® rust and corrosion inhibiting products
and services, an increase of 7.4% from such sales in fiscal 2022. 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, odorless and non-toxic vapor that forms a passivating layer on any metal surfaces it
comes in contact with and thereby inhibits rust and corrosion. The corrosion inhibiting protection is maintained only as
long as the metal products to be protected remain enclosed within the ZERUST® packaging. Electron scanning shows
that once metal products are removed from the ZERUST® packaging, the ZERUST® protective layer 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 and/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 as compared to traditional methods of corrosion prevention in terms of labor, material, and capital expenditures
for equipment to apply, remove, and dispose of oils and greases, as well as environmental, health and safety benefits
provided by not having to handle and work with hazardous chemicals.
NTIC was the first in the world to develop the means of infusing volatile corrosion inhibiting chemical compounds
(VCIs) into polyethylene and polypropylene resins. Combining ZERUST® chemical compounds 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
customers the ability to ship and store ferrous, nonferrous, and mixed-metal products in a clean, dry, and corrosion-free
condition, at an overall savings in total process costs. In addition to plastic packaging, NTIC has also developed VCI
compounds 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, or bio-solvent based, and are marketed under brand names including Axxatec™,
Axxanol™, and Z-Maxx™. These liquids and coatings provide powerful protection in aggressively corrosive
environments, such as salt air, high humidity, and/or high temperatures. Products are formulated for most metal types
and protection levels. For exceptionally harsh environments, customers may choose to use a combination of NTIC’s
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liquids and coatings with ZERUST® plastic and/or 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, under the Axxaclean™ brand name,
designed to restore rusty parts to a usable condition without the use of labor-intensive, abrasive cleaners that damage
surfaces and commonly fail to remove rust from complex metal surfaces, like the teeth of small gears.
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®, 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 electronics cabinets, or can be used as extra protection when added to ZERUST®
packaging products. Diffusers work by permeating the interior air of an enclosure with an invisible and odorless
corrosion inhibiting vapor that settles as a protective layer on all metal surfaces that are within the range of a specific
“radius of protection” for a period of one or two years depending on the product model. This invisible and dry
protective layer revaporizes and dissipates into the air upon removal of a diffuser from an 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 corrosion
management processes, NTIC markets and offers unique corrosion management and consulting services to target
customers. This ZERUST® corrosion inhibition system (known as Z-CIS®) leverages NTIC’s global network to
dispatch highly-trained technical service engineers to customer sites to solve complex corrosion problems. 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 to mitigate the types of corrosion that commonly form
on the 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 2023
included $7,801,986 in sales made to customers in the oil and gas industry, an increase of 69.3% from such sales in
fiscal 2022. On September 19, 2022, NTIC announced the signing of an initial contract with BP Exploration (Caspian
Sea) Limited p.l.c. to supply chemical corrosion protection services for 12 storage tanks through December 2025,
representing the largest contract to date for oil and gas storage tank solutions. In fiscal 2023, sales of ZERUST®
corrosion prevention solutions to large customers in the oil and gas industry became more consistent, with these
customers beginning to re-order products. Sales within the U.S. also stabilized somewhat, and key customer
relationships were expanded. While NTIC believes these trends show increased acceptance of corrosion solutions for
the oil and gas industry, NTIC anticipates that its sales of ZERUST® products and services into the oil and gas industry
will continue to remain subject to significant volatility, specifically due to economic factors, such as potential crude oil
price changes and global supply/demand churn. NTIC anticipates that its sales of ZERUST® products and services into
the oil and gas industry may be subject to additional volatility due to uncertainty caused by certain environmental
policies and priorities of the current administration. Demand for ZERUST® oil and gas products around the world
depends primarily on market acceptance and the reach of NTIC’s distribution network. Because of the typical size of
individual orders and overall size of NTIC’s net sales derived from sales of oil and gas products, the timing of one or
more orders can materially affect NTIC’s sales compared to prior fiscal year period sales. Projects in South America,
Europe, the Middle East, and Southeast Asia are still a small but growing, strategically important part of the sales
growth picture.
The infrastructure/assets that support the oil and gas industry are 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 the service life and safety of pipelines,
petroleum storage tanks, spare parts in long-term storage, coastal/offshore assets, 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 being down for repair and maintenance.
Furthermore, there are also considerable health, safety, and environmental risks caused by corrosion that can greatly
increase economic losses. While the industry predominantly uses various paints/coatings, engineered alloys, cathodic
protection, etc. to mitigate corrosion, there are several situations where such options are not feasible and, in many such
cases, NTIC believes that its ZERUST® oil and gas corrosion prevention solutions are more effective at minimizing
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.
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NTIC’s rust and corrosion inhibiting products for the oil and gas industry include ZERUST® Flange Savers®, ZERUST®
Zif Tape, ZERUST® ReCAST-SSB solutions, and ZERUST® chemicals, including Zerion powders and gels, in addition
to many of the standard industrial 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-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 spaces under tank bottoms that are susceptible to significant corrosion. Tank bottoms are
typically made of steel plates, which are in direct contact with a foundation surface that may be concrete, sand/soil, or
asphalt/bitumen. It is typically not possible to protect this underside surface with traditional coatings. Cathodic
protection (CP) systems can only provide partial protection, but also 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. These are engineered solutions where each system is tailored to a customer’s
requirements depending on factors including the tank foundation design, specific environmental conditions, and tank
diameter.
ZERUST® Zerion powder-based inhibitor solutions include the following:
Zerion FVS is a unique inhibitor blend that is used in both the SSB Solutions and in internal pipeline
protection. This “best-in-class” product has been successfully deployed at multiple client sites in North and
South America, Europe, the Middle East, India as well as other parts of Asia.
Zerion FAN-5 is a lower cost inhibitor that is very effective at protecting metals upon contact. It can be used
to treat large volumes of water that may be used for hydrotesting. In combination with Zerion FVS, it offers a
more complete solution for the protection of pipelines.
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 designed for sealed void
spaces, protection of large/complex assets like heat exchangers, and heater-treaters.
Natur-Tec® Resin Compounds and Finished Products. NTIC manufactures and sells a broad range of bioplastic
packaging solutions, including bio-based and certified compostable (fully biodegradable) polymer resin compounds,
and finished products under the Natur-Tec® brand. NTIC’s consolidated net sales in fiscal 2023 included $18,174,588
in sales of Natur-Tec® resins and finished products, an increase of 8.8% compared to sales in fiscal 2022. Market
drivers such as volatile petroleum prices, reduced dependence on foreign oil, reduced carbon footprints, requirements by
multinational brands for sustainable packaging solutions that meet Circular Economy and environmentally responsible
end-of-life disposal mandates, and concerns about plastic residue in the environment have led to heightened interest in
using sustainable, bio-based and renewable plant-biomass resources for the manufacture of plastics and industrial
products. Plastics that are fully biodegradable in commercial 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 conventional plastics or mandating the use of certain biodegradable or compostable products, including regulations in
China, India and California, have also fueled this interest in bio-based 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
commercially compostable, or both.
Natur-Tec® resins and finished products sales in North America and finished product sales at NTIC’s majority-owned
subsidiary in India and at NTIC’s subsidiary in China, experienced reduced demand globally as a result of the COVID-
19 pandemic. The COVID-19 pandemic had a significant impact on demand from many large users of bioplastics,
including college campuses, stadiums, arenas, restaurants, and corporate office complexes. Additionally, demand for
5
apparel packaging solutions was impacted by ongoing COVID- related lockdowns and supply-chain bottlenecks in Asia.
Beginning in fiscal 2022 and throughout 2023, NTIC experienced a significant recovery in many of these areas to pre-
pandemic levels. NTIC anticipates that college campuses and other venues will return to pre-pandemic levels of
operation in 2024.
Resin Compounds. Natur-Tec® resin compounds are produced by blending commonly available base resins, such as
Ecoflex® from BASF, Ingeo® PLA from NatureWorks LLC, and Luminy® from Total-Corbion with organic and
inorganic fillers and proprietary polymer modifiers and compatibilizers 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 bio-based 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® resin compounds are sold in several grades tailored for a variety of applications, such as blown-film
extrusion, profile extrusion, thermoforming, extrusion coating, and injection molding.
Natur-Tec® flexible film resin compounds are fully commercially compostable and meet the 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 TÜV Austria in Europe. Natur-Tec® film
resin compounds can be used to produce film for applications, such as bags, including compost bags, lawn and leaf
bags, carry-out bags, agricultural film, and consumer and industrial packaging. Natur-Tec® film resin compounds are
also used to produce bags and covers for branded apparel packaging and to manufacture specialty foodservice items,
such as compostable drinking straws, thermoformed lids and disposable food-handling gloves.
The Natur-Tec® compostable extrusion coating resin compounds are bio-based 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
companies 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
resin compounds 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 resin compounds can be used for coating paper and paperboards for the manufacture of disposable cups, plates,
and other foodservice items.
The Natur-Tec® compostable injection molding resin compounds are bio-based 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® bio-based injection molding resin
compounds are made with at least 90% bio-based/renewable resource-based materials, per the ASTM D6866 standard,
and are meant to enhance sustainability by replacing petroleum-based plastics. Natur-Tec® bio-based 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 food and consumer goods packaging currently
marketed under the Natur-Bag® brand. The Natur-Bag® product line offers 15 different compostable trash bag sizes,
from 3-gallon to 96-gallon, as well as shopper bags, produce bags and gloves. The bags are available in various SKU
configurations, including 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. These products are certified fully commercially compostable and carry the
BPI Compostable logo in the United States and the TÜV Austria OK Compost logo in Europe. Furthermore, these
6
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. Prior to placing an order, 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 performance
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.
In China, NTIC sells its products and services through NTIC China. NTIC has wholly owned or majority-owned
subsidiaries to conduct its business in Brazil, Mexico, Vietnam, and Singapore. In addition, NTIC sells its ZERUST
products in India through this wholly-owned subsidiary, HNTI Limited.
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 various 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 long sales cycles, likely including multi-year trial periods with each
user 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 two NTIC direct sales employees as of August 31, 2023. Target customers for
Natur-Tec® finished products include individual consumers as well as 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 plastics converters and foodservice ware brands that would purchase Natur-Tec® resin
compounds to manufacture and sell their own finished bio-based and compostable end products, such as film, bags, and
cutlery. In June 2022, the State of California passed a law intended to reduce single-use plastics. Notably, the bill
provides that, by 2032, all packaging must be recyclable or compostable. Accordingly, NTIC expects the market in
California for bio-plastic packaging solutions to grow substantially in the coming decade.
Internationally, NTIC uses Natur-Tec India, Natur Tec Lanka, NTIC China and a network of international distributors to
market its Natur-Tec® resin compounds and finished products. The government of India recently announced a phased
ban on the manufacture and sale of single-use plastics beginning in July 2022. The first phase bans earbuds and plastic
sticks used in balloons and ice cream. The second phase bans plastic cigarette packets and plastic bags less than 100
microns thick. Notably, compostable plastics are exempt from this ban. Accordingly, NTIC expects the market in India
for bio-plastic packaging solutions to continue to grow substantially.
NTIC’s Natur-Tec® resin compounds and finished products are produced at facilities in India, China, Malaysia, and the
United States. NTIC’s Natur-Tec® resin compounds can be shipped to manufacturing facilities around the world, where
they then can be converted into finished products, such as film or pieces of cutlery. NTIC’s Natur-Tec® finished
products are manufactured using NTIC’s Natur-Tec® resin compounds by select sub-contractors.
7
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 resources, marketing capabilities, 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 to 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, reliability, product support, customer service, reputation, and
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 services. 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 has 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 may emerge, which likely would lead to the further commoditization of NTIC’s rust and
corrosion inhibiting products.
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 various 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 long sales cycles, likely including multi-year trial periods with each
user and a slow integration process thereafter.
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, improved 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 has encountered in the past and could continue to encounter
additional supply constraints for the base polymer resins used to manufacture NTIC’s Natur-Tec® resin compounds and
finished products since there are a limited number of suppliers of such base polymer 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 with 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 anticipates that it will spend between $4,400,000 and $4,800,000 in fiscal 2024 on research and development
activities.
8
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 1980, 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 patent in the
United States covering various corrosion inhibiting technologies, systems, and applications and now owns several
patents in these areas. These patents and patent applications have been extended to the countries of strategic relevance
to NTIC, including Australia, Brazil, Canada, China, Europe, Japan, India, Korea, Mexico, Russia, and Taiwan. In
addition, EXCOR owns several patents in the area covering various corrosion inhibiting technologies and has 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 the above-noted countries.
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®, ZERION®, AUTOFOG®, FLANGE SAVER®, and ACTIVPAK®. NTIC also
has a registered trademark on the use of the Color Yellow with respect to corrosion inhibiting packaging. Furthermore,
NTI®, ZERUST®, EXCOR®, the Color Yellow®, and NTI ASEAN®, as well as other marks, have been registered in the
European Union, and several new applications are pending.
NTIC requires its employees, consultants, and advisors with 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 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, NTIC manufactures select ZERUST® rust and corrosion inhibiting products, consisting primarily of liquids
and powders, at its corporate headquarters location in Circle Pines, Minnesota.
NTIC’s Natur-Tec® resin compounds and finished products are produced at facilities in India, China, Malaysia, and the
United States. NTIC’s Natur-Tec® resin compounds can be shipped to manufacturing facilities around the world,
where they then can be converted into finished products, such as film or piece of cutlery. NTIC’s Natur-Tec® finished
products are manufactured using NTIC’s Natur-Tec® resin compounds by select 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.
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Availability of Raw Materials
NTIC does not typically carry excess quantities of raw materials because of historically 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. Additionally, there is growing demand for these base resins, which has caused cost increases and,
occasionally, supply issues. During fiscal 2022, for example, NTIC experienced some delays in obtaining these base
resins due to production slowdowns, which resulted from manufacturing issues, labor shortages and power restrictions
in China, freight container shortages, and the war in Ukraine. While NTIC experienced longer lead times for raw
materials and experienced raw material cost increases during fiscal 2022 as a result of supply chain disruptions, lead
times and raw material costs declined during fiscal 2023. It is anticipated that these worldwide disruptions and supply
issues will subside in fiscal 2024.
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 suppliers, an
unexpected loss of supply over a short period of time, including as a result of future worldwide disruptions in supply,
may not allow NTIC time to replace these sources in the ordinary course of business.
Backlog
NTIC had an estimated order backlog of $5,337,717 as of August 31, 2023, compared to $5,856,655 as of August 31,
2022, which was generally across all business units. Sales relating to this backlog are expected to be realized during
first quarter of fiscal 2024. These are orders that are held by NTIC pending release instructions from the customers to
be used for 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 resin compounds are in compliance with all FDA requirements
and that NTIC does not require further FDA approval prior to the sale of its products.
Human Capital Management
Headcount and Employee Demographics
As of August 31, 2023, NTIC had a total of 86 full-time employees located in North America, consisting of 26 in sales
and marketing, 26 in research and development and lab, 18 in administration, and 16 in production. As of August 31,
2023, NTIC’s wholly-owned subsidiary in India, HNTI Limited, had 58 full-time employees, NTIC’s wholly owned
subsidiary in China had 35 full-time employees, its majority-owned subsidiary in Brazil had 20 full-time employees, its
majority-owned subsidiary in India, Natur Tec India, had 9 full-time employees, its majority-owned subsidiary in
Singapore, Zerust Singapore, had 1 full-time employee, its majority-owned subsidiary in Taiwan, Zerust Taiwan, had 9
full-time employees, its majority-owned subsidiary in Vietnam, Zerust Vietnam, had 6 full-time employees its wholly
owned subsidiary in Mexico had no full-time employees, and its holding company, NTI Asean, had no full-time
employees.
As of August 31, 2023, of our global workforce, 41% are female and 27% are racially or ethnically diverse. Of our
management team, 40% are female and 23% are racially or ethnically diverse. Of our eight Board members, nearly 40%
are female and nearly 40% are racially or ethnically diverse. Of our U.S. workforce, 6% are veterans.
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Turnover
NTIC continually monitors employee turnover rates as its success depends upon retaining highly trained engineering,
manufacturing and operations personnel. The average tenure of our employees is nine years.
Management Team
NTIC believes its management team has the experience necessary to effectively execute its strategy and advance its
product and technology leadership. The average tenure of the members of NTIC’s management team is 16 years.
Employee Unions, Collective Bargaining Agreements and Work Councils
There are no unions representing NTIC’s employees, and NTIC believes that its relations with its employees are good.
Health, Safety and Environment
Health, safety and environment (HSE) are the cornerstones of NTIC. NTIC is in the business of converting unique,
environmentally beneficial materials science into value added products and services for industrial and consumer
applications. NTIC believes that it is responsible to its worldwide customers, its people, its communities and its
stockholders, and NTIC takes these responsibilities seriously. NTIC is dedicated to investing in the future of the planet
and NTIC’s people and intends to continue to invest in HSE protection and improvements in a timely manner consistent
with available technology.
NTIC is guided by its Policy Statement on HSE, which sets forth NTIC’s HSE objectives, including ensuring that all
activities across the value chain are conducted in a manner which is consistent with NTIC’s quality management
standard and HSE programs, ensuring that business activities are conducted to prevent harm and protect health and
safety, and developing, manufacturing, distributing and marketing products and services with full regard for HSE
aspects. To accomplish these objectives, NTIC intends to, among other things, establish targets within its quality
management standard and HSE programs to measure progress and ensure continuous improvement, provide safe and
healthy workplaces for its employees, contractors and other service providers, and provide continued training to enable
employees to meet their responsibility to contribute to compliance with NTIC’s HSE objectives.
NTIC monitors conditions that could lead to safety incidents and keeps track of injuries through reporting systems in
accordance with the laws in the jurisdictions in which NTIC operates. NTIC tracks this data to assess the quality of its
safety performance. NTIC defines lost time incidents as work-related incidents where a worker sustains an injury that
results in time away from work. NTIC had only one lost time incident in each 2023 and 2022.
Diversity and Inclusion
Diversity and inclusion are embedded in NTIC’s values and integrated into its strategies. NTIC’s Human Rights Policy
was designed to align with the United Nations Global Compact and core elements of the United Nations Universal
Declaration of Human Rights. NTIC is committed to providing an environment free of discrimination and harassment,
where all individuals are treated with respect and dignity, can contribute fully, and have equal opportunities. NTIC has
worked to build a diverse and inclusive workforce and is committed to equal opportunity. NTIC invests in building
diverse talent pools and provides training to improve skills where appropriate. NTIC upholds and supports the right to
equal treatment without discrimination or harassment.
Education
NTIC offers an educational assistance benefit program to eligible employees. NTIC may reimburse all or part of the
registration and tuition costs for full-time employees who continue their education in a work-related field. In addition to
educational assistance for formal education, NTIC may arrange training programs that enable employees to progress in
their technical, commercial, or financial knowledge of NTIC’s business.
Compensation and Benefits
NTIC’s compensation program is designed to attract and retain talented employees in the industry by offering
competitive compensation and benefits. NTIC has established fair and competitive pay levels that are based on local
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markets and job descriptions and are not based on gender, age, ethnicity, nationality or other personal characteristics or
beliefs. NTIC provides compensation and benefits that are competitive and comply with applicable laws, and NTIC
commits to a fair and living wage.
NTIC’s employees have immediate eligibility to participate in NTIC’s 401(k) employee savings plan. Employees are
immediately vested upon contributing to the 401(k) employee savings plan. NTIC matches 401(k) contributions made
by employes and may also make profit-sharing contributions. NTIC believes these profit-sharing contributions are a
meaningful way of sharing NTIC’s success with its employees.
To further the goal of sharing NTIC’s success with its employees and incentivizing strong employee performance,
NTIC may award cash bonuses to its employees. Additionally, NTIC has an employee stock purchase plan, which
allows employees to purchase NTIC stock at a 10% discount to fair market value. NTIC believes that this gives
employees an interest in providing for the continued success of the business, encourages regular and scheduled
investing, and is a means of supplementing individual savings programs.
As part of its compensation package, NTIC provides employees with access to a medical plan with an employee-funded
health savings account option. The medical plan has no co-pay, and employees are not required to contribute toward
premium costs. Dental, vision, life, and long and short-term disability insurance plans are also available to NTIC’s
employees.
NTIC prides itself on offering employment arrangements that include competitive time off policies and flexibility.
NTIC’s full-time employees are eligible for paid holidays and vacation time based on the length of their service, ranging
from 15 to 25 days. NTIC’s part-time employees receive compensation for paid holidays as well. NTIC offers
employees the opportunity to work remotely, requiring Tuesday in-person attendance for office staff employees and
permitting remote work in the discretion of individual employees the remaining days of the week.
Values and Ethics
In connection with NTIC’s core values, NTIC acts in accordance with its Code of Ethics. NTIC’s Code of Ethics
requires its employees, officers and directors to be honest, trustworthy, conscientious and dedicated to the highest
standards of ethical business practices. Each employee, officer and director must know and abide by applicable laws.
Additional Information
Additional information about our human capital and people, including our HSE Policy, Human Rights Policy, Code of
Ethics, is included on the Commitment to Environmental, Social and Governance (ESG) page of the Investor Relations
portion of our corporate website. Information contained or referenced on our website is not incorporated by reference
and does not form a part of this Annual Report on Form 10-K.
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 is 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.
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. These forward-looking statements are subject to the safe harbor created by those sections. In
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addition, NTIC or others on NTIC’s behalf may make forward-looking statements from time to time in oral
presentations, including telephone conferences and/or web casts open to the public, in press releases or reports, on
NTIC’s Internet web site, or otherwise. All statements other than statements of historical facts included in this report or
expressed by NTIC orally from time to time that address activities, events, or developments that NTIC expects,
believes, or anticipates will or may occur in the future are forward-looking statements, including, in particular, the
statements about NTIC’s plans, objectives, strategies, and prospects regarding, among other things, NTIC’s financial
condition, results of operations and business, the anticipated effect of COVID-19 and its acquisition of Zerust India on
NTIC’s business, operating results and financial condition, and the outcome of contingencies, such as legal proceedings.
NTIC has identified some of these forward-looking statements in this report with words like “believe,” “can,” “may,”
“could,” “would,” “might,” “forecast,” “possible,” “potential,” “project,” “will,” “should,” “expect,” “intend,” “plan,”
“predict,” “anticipate,” “estimate,” “approximate,” “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 “Part II. Item 7. 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. 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 are described under “Part I. Item 1A. Risk Factors.” All forward-looking
statements included in this report are expressly qualified in their entirety by the foregoing cautionary statements. NTIC
wishes to caution readers not to place undue reliance on any forward-looking statement that speaks only as of the date
made and to recognize that forward-looking statements are predictions of future results, which may not occur as
anticipated. Actual results could differ materially from those anticipated in the forward-looking statements and from
historical results due to the uncertainties and factors described above and others that NTIC may consider immaterial or
does not anticipate at this time. Although NTIC believes that the expectations reflected in its forward-looking
statements are reasonable, NTIC does not know whether its expectations will prove correct. NTIC’s expectations
reflected in its forward-looking statements can be affected by inaccurate assumptions NTIC might make or by known or
unknown uncertainties and factors, including those described above. The risks and uncertainties described above are
not exclusive, and further information concerning NTIC and its business, including factors that potentially could
materially affect its financial results or condition, may emerge from time to time. NTIC assumes no obligation to
update, amend, or clarify forward-looking statements to reflect actual results or changes in factors or assumptions
affecting such forward-looking statements. NTIC advises you, however, to consult any further disclosures NTIC makes
on related subjects in its annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K
that NTIC files with or furnishes to the SEC.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
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, 2023, are as follows:
Name
G. Patrick Lynch
Age
56
President and Chief Executive Officer
Position with NTIC
Matthew C. Wolsfeld
49
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.
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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 offices held, as of November 10, 2023, are as follows:
Name
Vineet R. Dalal
Gautam Ramdas
Brian Haglund
Age
54
Position with NTIC
Vice President and Director – Global Market Development – Natur-Tec®
50
39
Vice President and Director – Global Market Development – Oil & Gas
Vice President of Operations – North America
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 for 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.
Brian Haglund, an employee of NTIC since 2018, is currently serving as Vice President of Operations – North America.
Prior to joining NTIC, Mr. Haglund held various leadership roles within Textron, a Fortune 500 industrial
conglomerate. During his tenure with Textron, Mr. Haglund led various global operations and manufacturing facilities
across the US, in China, and in Germany focusing on aerospace and industrial manufacturing. Mr. Haglund received an
M.B.A. degree with a concentration in Finance from The Miller College of Business through Ball State University. He
also holds a B.A. degree in Supply Chain Management from Eli Broad College of Business through Michigan State
University.
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Item 1A. RISK FACTORS
The following are the most material factors known to NTIC that could materially adversely affect its business, operating
results, or financial condition.
Risk Factors Summary
This summary is not complete and should be read in conjunction with the risk factors set forth below.
Risks Related to NTIC’s Business and Industry
Any weakness in the global economy, and in particular in the United States, Europe, India and China, and in
the automotive industry, has negatively impacted and in the future may negatively impact NTIC’s business,
operating results, and financial condition.
COVID-19 has adversely impacted and may continue to adversely impact NTIC’s business, operating results
and financial condition.
NTIC’s business in the past has been and in the future may be negatively impacted by inflation.
Supply chain disruptions in the past have interrupted and in the future could interrupt product manufacturing,
increase product costs and result in lost sales, which have had and in the future may have a material adverse
effect on NTIC’s business, operating results and financial condition.
Disruptions to the distribution channels for NTIC’s products in the past have negatively impacted and in the
future may negatively impact NTIC’s business, operating results, and financial condition.
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.
Increases in prices for raw materials and components used in NTIC’s products in the past have adversely
affected and in the future could adversely affect NTIC’s operating results.
NTIC relies on others for its production and any interruptions of these arrangements could disrupt NTIC’s
ability to fill its customers’ orders.
Changes to trade regulation, quotas, duties, or tariffs, caused by the changing U.S. and geopolitical
environments or otherwise, have negatively impacted in the past and in the future may negatively impact
NTIC’s business, operating results, and financial condition.
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.
NTIC has limited staffing, faces challenges caused by its aging workforce and given its limited resources, it
may not effectively manage its growth.
The evolution of the automotive industry towards electric vehicles could adversely affect NTIC’s business.
Risks Related to NTIC’s Joint Ventures
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 receiving.
Since a significant portion of NTIC’s earnings results from its equity income from joint ventures which varies
quarter to quarter, NTIC’s earnings are subject to quarterly fluctuations.
Risks Related to NTIC’s International Operations and the Foreign Markets in which NTIC Operates
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.
If sales of NTIC’s products and services by its joint venture in Germany 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’s acquisition of the remaining 50% ownership interest of HNTI Limited and any future similar
acquisitions involve risk.
The ongoing war between Russia and Ukraine may adversely affect NTIC’s business and results of operations.
The ongoing war between Israel and Hamas may adversely affect NTIC’s business and results of operations.
The operations of NTIC China may be adversely affected by China’s evolving economic, political, and social
conditions, as well as increasing tensions between the United States and China.
Intellectual property rights are difficult to enforce in China, which could harm NTIC’s business, results of
operations, or financial condition.
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Uncertainties with respect to the Chinese legal system may adversely affect the operations of NTIC China.
Failure to comply with the U.S. Foreign Corrupt Practices Act could subject NTIC to penalties and legal
expenses.
Fluctuations in foreign currency exchange rates could result in declines in NTIC’s earnings and changes in
NTIC’s foreign currency translation adjustments.
Economic uncertainty in developing markets could adversely affect NTIC’s revenue and earnings.
Risks Related to NTIC’s Products
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 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.
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.
No assurance can be provided that NTIC’s investments in 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 will be successful.
NTIC’s strategy of expanding its corrosion prevention solutions into the oil and gas industry and continuing
the expansion 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 dependence on manufacturing and logistical services provided by contractors could give rise to
product defect or warranty liability.
The commercial success of NTIC’s Natur-Tec® resin compounds and finished products depends on the
widespread market acceptance of products manufactured with bio-based and biodegradable resins.
NTIC relies on its joint ventures, distributors, manufacturer’s sales representatives, and other agents to market
and sell its products.
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, and the sale of ZERUST® rust and corrosion inhibiting
products into the oil and gas industry is risky in light of the hazards typically associated with such operations
and the significant amount of potential liability involved.
The sale of ZERUST® rust and corrosion inhibiting products into the oil and gas industry is somewhat seasonal
and dependent upon oil prices.
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.
Risks Related to Governmental Regulation, Laws, and Compliance
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.
Fluctuations in NTIC’s effective tax rate could have a significant impact on NTIC’s financial position, results
of operations, or cash flows.
Certain of NTIC’s operations are subject to regulation by the U.S. Food and Drug Administration.
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.
NTIC has identified a material weakness in its internal controls, and cannot provide assurances that this
weakness will be effectively remediated or that additional material weaknesses will not occur in the future.
Any changes in U.S. generally accepted accounting principles might adversely affect NTIC’s operating results.
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 and the price and trading volume has been, and may continue to be, volatile.
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.
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Risks Related to NTIC’s Business and Industry
Any weakness in the global economy, and in particular in the United States, Europe, India and China, and in the
automotive industry, has negatively impacted and in the future may negatively impact NTIC’s business, operating
results, and financial condition.
From time to time, the U.S. and world economies suffer from uncertainty, volatility, disruption, and other adverse
conditions, which has adversely impacted and in the future may adversely impact the business community and the
financial markets. Adverse economic and financial market conditions have negatively affected and in the future may
negatively affect NTIC’s customers and its markets, thereby negatively impacting NTIC’s business and operating
results. For example, weak market conditions could extend the length of NTIC’s sales cycle and cause potential
customers to delay, defer, or decline to make purchases of NTIC’s products and services due to uncertainties
surrounding the future performance of their businesses, limitations on their capital expenditures due to internal budget
constraints, the inability to obtain financing in the capital markets, and the adverse effects of the economy on their
business and financial condition. As a result, if economic and financial market conditions weaken or deteriorate, then
NTIC’s business, financial condition, and operating results, including its ability to grow and expand its business and
operations, could be materially and adversely affected.
NTIC’s operating results are especially dependent upon the economic health of the economies in the United States,
Europe, India and China. 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 or other events that may adversely affect the automotive industry, such as the recent UAW strike, may result in
an adverse effect on NTIC’s net sales and its other operating results. Accordingly, any weakness in the global
economy, particularly the United States, Europe, India and China, and in the automotive industry, including decreased
production resulting from the ongoing microchip shortage, have negatively impacted and may continue to negatively
impact NTIC’s business, operating results, and financial condition.
COVID-19 has adversely impacted and may continue to adversely impact NTIC’s business, operating results and
financial condition.
As a result of COVID-19 and related government mandated restrictions on NTIC’s business, as well as the businesses of
its joint ventures, customers and suppliers, disruption to NTIC’s business and the manufacture and sale of its products
and services continued to occur during fiscal 2023, including in particular in China. While demand in China improved
in fiscal 2023 as a result of government restrictions being lifted, NTIC has continued to experience softened demand.
This decreased demand may have a material adverse effect on NTIC’s business, operating results and financial
condition in fiscal 2024. Due to the international reach of COVID-19, NTIC anticipates that its international
subsidiaries and joint ventures will continue to be adversely impacted by the causes listed above, as well as other local
issues that may arise, which will likely continue to have a material adverse effect on NTIC’s international subsidiaries
and joint venture operations and equity in income from joint ventures. A resurgence of COVID-19 and any related
government mandated restrictions could have a significant adverse effect on economies and financial markets globally,
which could have a significant adverse effect on NTIC’s business, operating results and financial condition. Any of
these events could materially adversely affect NTIC’s business, operating results and financial condition and could
adversely affect NTIC’s stock price.
NTIC’s business in the past has been and in the future may be negatively impacted by inflation.
Increases in inflation may have a negative impact on NTIC’s business. While the persistent inflation experienced in
fiscal 2022 began stabilizing in fiscal 2023, initial increases in inflation impacted the cost of raw materials, the overall
demand for NTIC’s products, labor, and the margins NTIC and its joint ventures are able to realize on the sale of
products, all of which have had and could continue to have a negative impact on NTIC’s business, financial position,
results of operations and cash flows. Sustained levels of high inflation caused the U.S. Federal Reserve and other central
banks to increase interest rates, which could increase the cost of capital available to NTIC and depress economic
growth, could also negatively impact our business.
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Supply chain disruptions in the past have interrupted and in the future could interrupt product manufacturing,
increase product costs and result in lost sales, which may have a material adverse effect on NTIC’s business,
operating results and financial condition.
Supply chain disruptions, which were initially brought about by the impact of COVID-19, persisted during fiscal 2023.
These disruptions resulted in longer lead times for raw materials and increased product costs and shipping expenses.
While NTIC took steps to minimize the impact of these increased costs by working closely with its suppliers and
customers and, in some cases, identifying new suppliers of certain raw materials, and while these issues improved in
late fiscal 2023 and are expected to continue improving in fiscal 2024, there can be no assurances that unforeseen events
impacting the supply chain will not have a material adverse effect on NTIC in the future. Additionally, the impacts
supply chain disruptions have on NTIC’s third-party manufacturers are not within NTIC’s control. Prolonged supply
chain disruptions impacting NTIC and its third-party manufacturers could interrupt product manufacturing, increase
product costs and result in lost sales, which may have a material adverse effect on NTIC’s business, operating results
and financial condition.
Disruptions to the distribution channels for NTIC’s products in the past have negatively impacted and in the future
may negatively impact NTIC’s business, operating results, and financial condition.
During fiscal 2022 and fiscal 2023, NTIC experienced supply chain disruptions, initially as a result of the COVID-19
pandemic, shipping container shortages, and changes in global demand. While these conditions had improved by the
end of fiscal 2023 and are expected to continue to stabilize in fiscal 2024, it is possible that NTIC may encounter similar
conditions again in the future. Similar delays and elevated costs in the future could have a material adverse effect on
NTIC’s consolidated results of operations. Furthermore, transportation delays, increased shipping containers rates,
closures or disruptions of businesses and facilities or social, economic, political or labor instability in the affected areas
may impact the operations of NTIC’s suppliers, which could in turn adversely affect NTIC, and its revenues and
operating costs. Any of these disruptions may negatively impact NTIC’s business, operating results, and financial
condition.
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. Among the limited source suppliers NTIC does business with are the manufacturers of plastic resins
used in Natur-Tec® products. NTIC generally acquires these and other 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, and
NTIC may be forced to find new suppliers for certain raw materials. The rapid growth in demand for bioplastics
products globally has increased the demand and the price for plastic resins, and limited suppliers of such plastic resins
may experience shortages caused by demand outpacing their production capabilities, which could result in NTIC’s
inability to produce its Natur-Tec® products promptly or in the volumes demanded. Any such shortages, constraints, or
delays 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.
Increases in prices for raw materials and components used in NTIC’s products in the past have adversely affected
and in the future 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. In light of increased global demand for bioplastics, production slowdowns due to manufacturing
issues, labor shortages and power restrictions in China, freight container shortages, the war in Ukraine, and the lingering
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effects of COVID-19, the prices of certain plastic resins increased in fiscal 2022 and, through the majority of fiscal
2023, remained above historical levels. Although resin prices began dropping in late fiscal 2023, future elevated prices
could adversely affect gross margins on NTIC’s Natur-Tec® products. Similarly, if shortages of resins arise again in the
future, the cost and/or production of NTIC’s products could be adversely affected. Additionally, the war between Russia
and Ukraine and the resulting sanctions by U.S. and European governments have resulted in and may continue to result
in commodity price fluctuations, which have decreased our margins and the margins of our joint ventures and resulted
in decreased joint venture profitability, which will likely continue during fiscal 2024. The war between Israel and
Hamas may have similar impacts during fiscal 2024. Finally, changes to international trade agreements could result in
additional tariffs, duties, or other charges on raw materials or components we import into the U.S.
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, thus adversely affecting NTIC’s net sales and other operating results.
Changes to trade regulation, quotas, duties, or tariffs, caused by the changing U.S. and geopolitical environments or
otherwise, have negatively impacted in the past and in the future may negatively impact NTIC’s business, operating
results, and financial condition.
There is significant uncertainty about the future relationship between the United States and other countries with respect
to trade policies, taxes, government regulations, and tariffs. Within recent years, for example, trade policy changes
included the imposition of additional tariffs on imported products in an effort to address trade imbalances, specifically
with China, the withdrawal of the U.S. from the Trans-Pacific Partnership, the renegotiation of the North American Free
Trade Agreement, and sanctions on Russia. In response to some of these actions, certain countries imposed retaliatory
actions against the U.S. NTIC and its subsidiaries and joint ventures engage in sales outside of the United States and is,
therefore, negatively impacted by such actions. Any changes or potential changes in trade policies in the United States
and the potential corresponding actions by other countries in which NTIC does business could adversely and materially
affect NTIC’s business, results of operations, and financial condition.
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 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, including the imposition of higher
tariffs, the withdrawal from the Trans-Pacific Partnership and sanctions on Russia, 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.
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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. Inadequate performance by any of NTIC’s
limited staff could have a negative impact on the performance of the company. In addition, none of NTIC’s employees
have 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, operating results, and financial condition.
Although we have not experienced any material labor shortage to date, we have observed an overall tightening and
increasingly competitive labor market in the past two years. A sustained labor shortage or increased turnover rates
within our employee base could lead to increased costs, such as increased overtime to meet demand and increased wage
rates to attract and retain employees and could negatively affect our ability to efficiently operate our manufacturing and
distribution facilities and overall business. If we are unable to hire and retain employees capable of performing at a
high-level, or if mitigation measures we may take to respond to a decrease in labor availability, such as overtime and
third-party outsourcing, have unintended negative effects, our business could be adversely affected. An overall labor
shortage, lack of skilled labor, increased turnover or labor inflation could have a material adverse impact on NTIC’s
operations, results of operations, liquidity or cash flows.
NTIC faces challenges caused by its aging workforce, and NTIC may not be able to recruit, train and retain
adequate replacements for its qualified and skilled employees.
Many of our employees are approaching retirement age. As these experienced employees retire, we may have difficulty
recruiting new employees with comparable qualifications and experience, and we may be unable to transfer our
employees’ institutional knowledge successfully to new qualified employees. Any such failures would be exacerbated at
times of peak demand. Our failure to recruit and train new employees and to ensure they obtain adequate qualifications
and experience could result in reduced revenues, loss of customer goodwill and a material negative impact on our
results of operations.
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, operating results, and
financial condition. 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.
The evolution of the automotive industry towards electric vehicles could adversely affect NTIC’s business.
The global automotive industry is experiencing a period of significant technological change, including the development
and use of electric vehicles, which do not contain as many components that require NTIC’s ZERUST® products and
solutions. During fiscal 2023, the automobile sector represented approximately 40-45% of ZERUST® industrial net sales
in North America and 55-60% of net sales of NTIC’s joint ventures. NTIC continues to seek additional applications of
its ZERUST® products and solutions related to electric vehicles and batteries. However, increased demand for electric
vehicles, which do not contain as many components requiring these products and solutions, will still adversely affect
NTIC’s net sales and other operating results and business.
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Risks Related to NTIC’s Joint Ventures
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 receiving.
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 in part 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 2023, NTIC
recognized $5,189,185 in fees and $5,639,198 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.
Risks Related to NTIC’s International Business and the Foreign Markets in which NTIC Operates
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 and majority-owned subsidiaries, and indirectly,
via a network of joint ventures, independent distributors, manufacturer’s sales representatives, and agents in over
65 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 requires management attention and financial
resources.
The sale and shipping of products and services across international borders subjects NTIC to extensive and complicated
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.
Several factors, including implications of withdrawal by the U.S. from, or revision to, international trade agreements,
foreign policy changes between the U.S. and other countries, weakened international economic conditions, or the impact
of sovereign debt defaults by certain European countries, could adversely affect our international net sales.
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Additionally, the expansion of our existing international operations and entry into additional international markets
require significant management attention and financial resources. In many of the countries in which NTIC sells its
products directly or indirectly through NTIC China, Zerust Brazil, Natur-Tec India, Natur-Tec Lanka, Zerust Mexico,
Zerust Singapore, Zerust Taiwan, Zerust Vietnam, and 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 experience
internationally;
laws and business practices favoring local companies;
adverse currency exchange rate fluctuations;
longer payment cycles and difficulties enforcing agreements and collecting receivables through certain foreign
legal systems;
national and international conflicts, including foreign policy changes or terrorist acts;
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.
Furthermore, in June 2016, the United Kingdom held a referendum in which voters approved an exit from the European
Union, commonly referred to as “Brexit.” The United Kingdom officially terminated its membership of the European
Union on January 31, 2020 and remained in a transition phase until December 31, 2020. Although the United Kingdom
and the European Union struck a bilateral trade and cooperation deal governing the future relationship between the
United Kingdom and the European Union, which became effective on May 1, 2021, political and economic
uncertainties remain, and it is possible that there will be increased regulatory complexities, which could affect NTIC’s
ability to sell its products in certain European Union countries and subject NTIC to heightened risks in that region. Any
of these effects of Brexit, and other similar referenda that NTIC cannot anticipate, could adversely affect its business,
operations, and financial results.
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 significantly decline or if NTIC’s
relationships with this joint venture were to significantly deteriorate, 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 EXCOR 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
$6,452,719 during fiscal 2023, NTIC had equity in income from joint ventures of $2,852,229 attributable to EXCOR.
Of the total fee income for services provided to joint ventures of $5,189,185 during fiscal 2023, fees of $816,089 were
attributable to EXCOR. Accordingly, if sales of NTIC’s products and services by this joint venture were to
significantly decline or if NTIC’s relationships with this joint venture were to significantly deteriorate such that the joint
venture terminated or was not motivated to sell NTIC’s products and services, NTIC’s operating results likely would be
adversely affected. While this is also true with respect to the other joint venture entities of which additional information
is provided in NTIC’s consolidated financial statements and in certain other sections of this report, the significance is
not as great as with EXCOR. While EXCOR’s financial performance has not significantly deteriorated, it's profitability
has decreased over the past few years as compared to prior years which has adversely affected NTIC’s financial results.
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NTIC’s acquisition of the remaining 50% ownership interest of HNTI and any future similar acquisitions involve
risk.
Effective as of September 1, 2021, NTIC acquired the remaining 50% ownership interest in its Indian joint venture,
HNTI. It is possible that as part of its succession planning efforts with respect to its joint venture partners, NTIC may
complete similar acquisitions in the future. Similar future acquisitions will depend, in part, on the availability of similar
opportunities or other suitable acquisition candidates at acceptable prices, terms, and conditions and the availability of
capital and personnel resources to complete such acquisitions and run and integrate the acquired business effectively.
These acquisitions involve risk and may harm NTIC’s business, reputation, financial condition, and operating results.
For instance, the benefits of the HNTI acquisition or any future acquisition may take more time than expected to
develop or integrate into NTIC’s operations, and NTIC cannot guarantee that either the HNTI or any future acquisitions
will, in fact, produce any long-term benefits. Acquisitions, such as the HNTI acquisition, involve a number of risks, the
occurrence of which could adversely affect NTIC’s business, reputation, financial condition, and operating results,
including:
diversion of management's attention to manage and integrate the acquired business;
disruption to existing operations and plans;
inability to effectively manage the expanded operations;
difficulties or delays, which may be exacerbated by the impact of COVID-19, in integrating and assimilating
information and financial systems, internal controls, operations, manufacturing processes and products of an
acquired business or in realizing projected efficiencies, growth prospects, cost savings, and other synergies;
potential loss of key employees, customers or suppliers of the acquired businesses or adverse effects on
existing business relationships with employees, customers or suppliers;
write-off of significant amounts of goodwill, other intangible assets, and/or long-lived assets as a result of
deterioration in the performance of an acquired business, adverse market conditions, changes in the
competitive landscape, changes in laws or regulations that restrict activities of an acquired business, or as a
result of a variety of other circumstances;
violation of confidentiality, intellectual property, and non-compete obligations or agreements by employees of
an acquired business or lack of or inadequate formal intellectual property protection mechanisms in place at an
acquired business;
adverse impact on overall profitability if NTIC’s expanded operations do not achieve the growth prospects, net
sales, net earnings, cost and/or revenue synergies, or other financial results projected in NTIC’s valuation
models, delays in the realization thereof or costs or charges incurred to achieve any revenue or cost synergies;
reallocation of amounts of capital from other operating initiatives and/or an increase in leverage and debt
service requirements to pay acquisition purchase prices, which could in turn restrict NTIC’s ability to access
additional capital when needed or limit its ability to pursue other important elements of its business strategy;
inaccurate assessment of additional post-acquisition, undisclosed, contingent or other liabilities or problems,
unanticipated costs associated with an acquisition; and
impacts as a result of purchase accounting adjustments, incorrect estimates made in the accounting for
acquisitions, incurrence of non-recurring charges, or other potential financial accounting or reporting impacts.
In addition, effective internal controls are necessary for NTIC to provide reliable and accurate financial reports and to
effectively prevent fraud. The integration of acquired businesses may result in NTIC’s systems and controls becoming
increasingly complex and more difficult to manage. NTIC devotes significant resources and time to comply with the
internal control over financial reporting requirements of the Sarbanes-Oxley Act of 2002. However, it cannot be certain
that these measures will ensure that NTIC designs, implements, and maintains adequate control over its financial
processes and reporting in the future, particularly in the context of acquisitions of other businesses. Any difficulties in
the assimilation of acquired businesses into NTIC’s internal control framework could harm its operating results or cause
NTIC to fail to meet its financial reporting obligations. Also, acquisitions require the consent of the lender under
NTIC’s loan agreement. NTIC cannot predict whether such approval would be forthcoming or the terms on which the
lender would approve such acquisitions. These risks, among others, could be heightened if NTIC completes a large
acquisition or multiple transactions within a relatively short period of time.
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The ongoing war between Russia and Ukraine may adversely affect NTIC’s business and results of operations.
Given the nature of NTIC’s business and its global operations, political, economic, and other conditions in foreign
countries and regions, including geopolitical risks, such as the ongoing war between Russia and Ukraine, may adversely
affect NTIC’s business and results of operations. In 2022, NTIC took actions to limit its operations in Russia and
Ukraine, which were adversely affected by the war between Russia and Ukraine, though these losses did not have a
material impact on NTIC’s operating results. NTIC terminated its joint venture in Russia in May 2022, which also did
not have an adverse effect on its results of operations or financial condition given the immateriality of the joint venture.
The broader consequences of this conflict, which may include additional international sanctions, embargoes, regional
instability, and geopolitical shifts; increased tensions between the United States and countries in which NTIC operates;
and the extent of the conflict’s effect on NTIC’s business and results of operations, as well as the global economy,
cannot be predicted.
To the extent the ongoing war between Russia and Ukraine adversely affects NTIC’s business, it may also have the
effect of heightening many other risks disclosed herein, any of which could materially and adversely affect NTIC’s
business and results of operations. Such risks include, but are not limited to, adverse effects on macroeconomic
conditions, including inflation, demand for NTIC’s products and potential recessionary economic conditions; increased
cyber security threats; adverse changes in trade policies, taxes, government regulations, and tariffs; NTIC’s ability to
implement and execute its business strategy, particularly with regard to its joint ventures; disruptions in global supply
chains; its exposure to foreign currency fluctuations; and constraints, volatility, or disruption in the capital markets.
The ongoing war between Israel and Hamas may adversely affect NTIC’s business and results of operations. On
October 7, 2023, Hamas, a U.S. designated terrorist organization, launched a series of coordinated attacks from the
Gaza Strip onto Israel. On October 8, 2023, Israel formally declared war on Hamas, and the armed conflict is ongoing
as of the date of this filing. Hostilities between Israel and Hamas could escalate and involve surrounding countries in the
Middle East. Although the length, impact and outcome of the military conflict between Israel and Hamas are highly
unpredictable, this conflict could lead to significant market and other disruptions, including disruptions to the oil and
gas industry, significant volatility in commodity prices and supply of energy resources, instability in financial markets,
supply chain interruptions, political and social instability and other material and adverse effects on macroeconomic
conditions. It is not possible at this time to predict or determine the ultimate consequences of this conflict.
To the extent the ongoing war between Israel and Hamas adversely affects NTIC’s business, it may also have the effect
of heightening many other risks disclosed herein, any of which could materially and adversely affect NTIC’s business
and results of operations. Such risks include, but are not limited to, adverse effects on the oil and gas industry, adverse
effects on macroeconomic conditions, including inflation, demand for NTIC’s products and potential recessionary
economic conditions; increased cyber security threats; adverse changes in trade policies, taxes, government regulations,
and tariffs; NTIC’s ability to implement and execute its business strategy, particularly with regard to its joint ventures;
disruptions in global supply chains; its exposure to foreign currency fluctuations; and constraints, volatility, or
disruption in the capital markets.
The operations of NTIC China may be adversely affected by China’s evolving economic, political, and social
conditions, as well as increasing tensions between the United States and China.
The results of operations and future prospects of NTIC China may be adversely affected by, among other things,
changes in China’s political, economic, and social conditions, escalating tensions between China and Taiwan, changes
in the relationship between China and its western trade partners, changes in policies of the Chinese government,
changes in laws and regulations or in the interpretation of existing laws and regulations, changes in foreign exchange
regulations, measures that may be introduced to control inflation, such as interest rate increases, changes in the rates or
methods of taxation, and increasing tensions between the United States and China. In addition, changes in demand
could result from increased competition with local Chinese manufacturers who have cost advantages or who may be
preferred suppliers for Chinese end users. Also, Chinese commercial laws, regulations, and interpretations applicable to
non-Chinese owned market participants, such as NTIC China, are continually changing, and such changes may require
NTIC China to change how it conducts its business. These laws, regulations, and interpretations could impose
restrictions on NTIC’s and NTIC China’s ownership or operations or NTIC’s interests in China and could adversely
affect NTIC’s business, results of operations, and financial condition.
Local regulations in China related to the electric power shortage that began in 2021 may adversely affect NTIC China’s
operations or the operations of our suppliers with facilities in China. For example, these regulations could result in
24
partial or complete factory shutdowns due to a lack of continuous supply of electrical power. Additionally, the price of
electric power may be increased, and peak-demand periods during which prices are higher may be extended by local
governments. Certain of our resin suppliers with facilities in China were adversely impacted by these regulations, which
contributed to constrained supply. Although NTIC China’s operations have not been significantly impacted by
regulations related to electric power shortages to date, such regulations may in the future decrease or shut down
production or increase product costs, which could adversely affect NTIC’s business, results of operations, and financial
condition.
Intellectual property rights are difficult to enforce in China, which could harm NTIC’s business, results of
operations, or financial condition.
Chinese commercial law is relatively undeveloped compared to commercial law in many of NTIC’s other major
markets, and limited protection of intellectual property is available in China as a practical matter. Although NTIC takes
precautions in the operation of NTIC China to protect NTIC’s intellectual property, any local manufacturer of products
that NTIC undertakes in China could subject NTIC to an increased risk that unauthorized parties will be able to copy or
otherwise obtain or use NTIC’s intellectual property, which could harm NTIC’s business. NTIC may also have limited
legal recourse in the event it encounters patent or trademark infringers, which could adversely affect NTIC’s business,
results of operations, and financial condition.
Uncertainties with respect to the Chinese legal system may adversely affect the operations of NTIC China.
NTIC China is subject to laws and regulations applicable to foreign investment in China. There are uncertainties
regarding the interpretation and enforcement of laws, rules, and policies in China. The Chinese legal system is based on
written statutes, and prior court decisions have limited precedential value. Because many laws and regulations are
relatively new, and the Chinese legal system is still evolving, the interpretations of many laws, regulations, and rules are
not always uniform. Moreover, the relative inexperience of China’s judiciary in many cases creates additional
uncertainty as to the outcome of any litigation, and the interpretation of statutes and regulations may be subject to
government policies reflecting domestic political agendas. Finally, enforcement of existing laws or contracts based on
existing law may be uncertain and sporadic. For the preceding reasons, it may be difficult for NTIC or NTIC China to
obtain timely or equitable enforcement of laws ostensibly designed to protect companies like NTIC or NTIC China,
which could adversely affect NTIC’s business, results of operations, and financial condition.
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, results of
operations, and financial condition.
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 its 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
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other remedial measures, including further changes or enhancements to its procedures, policies, and controls and
potential personnel changes and disciplinary actions.
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 putting 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, the Indian Rupee, the Chinese Renminbi, the South Korean
Won, and the English Pound against the U.S. dollar. NTIC’s fees for services provided to its joint ventures and
dividend distributions from these foreign entities are paid in foreign currencies; 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 NTIC’s 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, Mexico, 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 the impact of COVID-19 and 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.
Risks Related to NTIC’s Products
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 intensely competitive markets throughout the world. This intense competition could result
in pricing pressures, lower sales, reduced margins, and lower market share. With respect to its rust and corrosion
inhibiting products, NTIC competes on the basis of product innovation, quality, reliability, product support, customer
service, reputation, and price. With respect to its Natur-Tec® resin compounds and finished products, NTIC competes
on the basis of performance, brand awareness, distribution network, product availability, product offering, shelf life,
place of manufacture, and price. 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
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ZERUST® rust and corrosion inhibiting products and services, which has led to decreased pricing and smaller margins
for NTIC.
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 2023, 77.3% 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 are
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 may 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. 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. Additionally, projects NTIC completes for oil and gas
industry customers typically involve short turnaround times, and failure to meet these expectations could damage
NTIC’s ability to successfully promote its corrosion prevention solutions into the oil and gas industry.
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NTIC’s strategy of expanding its corrosion prevention solutions into the oil and gas industry and continuing the
expansion 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 the
expansion 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:
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;
reliance on key personnel and the need to hire and train local support in a timely manner in order to support
customer needs; and
NTIC’s dependence on manufacturing and logistical services provided by contractors could give rise to
product defect or warranty liability.
NTIC uses third-party manufacturers to produce the majority of its products. In addition, NTIC relies upon certain
contractors for logistical services. Although NTIC’s arrangements with its contract manufacturers and contractors may
contain provisions for warranty expense reimbursement, NTIC may remain responsible to its customers for warranty
service in the event of product defects and could experience an unanticipated product defect or warranty liability. In
addition, product defects could harm NTIC’s reputation amongst its customers.
The commercial success of NTIC’s Natur-Tec® resin compounds and finished products depends on the widespread
market acceptance of products manufactured with bio-based and biodegradable resins.
Although there is a developed market for petroleum-based plastics, the market for “bioplastics” which are plastics
produced with bio-based 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 bio-based and biodegradable resins, which may result, in part, from government action at
the federal, state or local level. For example, in June 2022, the State of California passed a law intended to reduce
single-use plastics. Internationally, the government of India announced a phased ban on the manufacture and sale of
single-use plastics beginning in July 2022. Similarly, in January 2021, China implemented a ban on single-use plastic
utensils, bags and certain other single-use plastic items. Despite these efforts and other measures taken at the federal,
state and local levels, including policies related to the collection of organics, 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. Additionally, while legislation has helped increase demand for bioplastics, a lack of
enforcement and higher costs associated with bioplastics have adversely impacted the demand anticipated to stem from
such legislation.
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 drives, 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.
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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 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 dependent on certain
macroeconomic factors, including seasonality of installations, fluctuations of crude oil prices, global events and
regulatory guidelines.
Seasonality of Installations: In the past, NTIC has experienced some seasonality with respect to the sale of its
ZERUST® rust and corrosion inhibiting products into the oil and gas industry, with sales during parts of the second and
third fiscal quarters being adversely affected by winter in the United States. However, in fiscal 2023, this seasonality
began to decrease somewhat as opportunities increased globally.
Fluctuations of Crude Oil Prices: The sale of NTIC’s ZERUST® rust and corrosion inhibiting products into the oil and
gas industry, particularly in the United States, has historically been hampered by low/unstable global crude oil prices.
Although the price of crude oil neared an all-time high in fiscal 2022, prices receded in 2023, and low global crude oil
prices have been and may in the future be caused by OPEC decisions and other macroeconomic factors affecting supply
and demand. NTIC believes low global crude oil prices constrain capital improvement budgets of its existing and
prospective customers and may result in personnel turnover at its oil and gas customers or prospects. The ongoing war
between Russia and Ukraine has escalated tensions between Russia and other countries, some of which have imposed
sanctions and taken other economic actions that contributed to high global crude oil prices in 2022 before receding in
2023 partially as a result of decreased inflationary pressures. Additional international sanctions on Russia may be
imposed, which could again increase these costs. NTIC believes the ongoing war between Russia and Ukraine may
create uncertainty among its existing and prospective customers, which may cause them to halt oil and gas projects or
elect to decrease capital improvement budgets, either of which could harm NTIC’s ability to sell its products into the oil
and gas industry. NTIC believes that similar impacts may result from the war between Israel and Hamas, particularly if
the war escalates and surrounding countries become involved.
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Global Events: The sale of Zerust Oil & Gas solutions to Oil & Gas sector clients is impacted by events like the
COVID-19 pandemic and geopolitical tensions in key oil producing regions like the Middle East. These affect the
ability of the teams to have face-to-face meetings, travel for site surveys and implementations, etc., with the added
effect of potential supply chain delays/impacts that could delay or postpone sales.
Regulatory Guidelines: The Oil & Gas sector is very conservative and, in addition to long-term trials on-site, client
decision makers typically default to guidelines from the American Petroleum Institute (API), Association of Materials
Protection and Performance (AMPP), Pipeline Hazardous Materials Safety Administration (PHMSA), European
Committee for the Study of Corrosion (CEOCOR), etc. Getting a new technology/solution approach included in these
guidelines typically takes years of committee lobbying, client support, field trials and lab validation. The Zerust
solutions have been included in several technical reports/committees from these groups though getting full validation is
likely to take a few more years.
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 expansion of
NTIC’s Natur-Tec® resin compounds and finished products will continue to require resources during fiscal 2024 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.
Risks Related to Governmental Regulation, Laws, and Compliance
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. These laws, rules, and regulations may be subject to change by
the Biden administration, which denied a key permit in the construction of the Keystone XL Pipeline, leading to the
abandonment of the project, and may in the future take action to further restrict such activities. Additionally, new
environmental laws, rules, and regulations with provisions similar to those of the Inflation Reduction Act of 2022,
which includes measures to reduce emissions, may be enacted, which may adversely affect NTIC’s business. Further,
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, including the
changes to U.S. federal tax laws included in the Inflation Reduction Act of 2022, such as a 1% excise tax on stock
repurchases, and revised tax law interpretations, also may adversely affect NTIC’s operating results.
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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, which 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 or jurisdictional regulations 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.
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 comply with all FDA requirements. However, failure to comply with FDA regulations
could subject NTIC to administrative, civil, or criminal penalties.
NTIC has identified a material weakness in its internal controls, and cannot provide assurances that this weakness
will be effectively remediated or that additional material weaknesses will not occur in the future.
If NTIC’s internal control over financial reporting or its disclosure controls and procedures are not effective, NTIC may
not be able to accurately report its financial results, which may cause investors to lose confidence in NTIC’s reported
financial information and may lead to a decline in its stock price.
NTIC’s management is responsible for establishing and maintaining adequate internal control over our financial
reporting, as defined in Rule 13a-15(f) under the Exchange Act, which is designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with U.S. generally accepted accounting principles. NTIC’s internal control over financial reporting
includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. 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 (iii) 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 financial statements.
During the preparation of NTIC’s consolidated financial statements included in this annual report on Form 10-K,
NTIC’s management identified a material weakness in NTIC’s internal control over financial reporting relating to the
probability assessment associated with the recognition of income related to employee retention credits that may be
available to NTIC under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and subsequent
legislation providing numerous tax provisions and other stimulus measures, including employee retention credits, which
are refundable tax credits against certain employment taxes. While NTIC is taking steps to remediate the material
weakness, NTIC cannot provide any assurance that such remedial measures, or any other remedial measures NTIC
takes, will be effective. If NTIC fails to maintain effective internal control over financial reporting, NTIC may not be
able to accurately report its financial results, which may, among other adverse consequences, cause investors to lose
confidence in NTIC’s reported financial information and lead to a decline in its stock price. In addition, a material
weakness will not be considered remediated until the applicable controls operate for a sufficient period of time and
management has concluded, through testing, that these controls are designed and operating effectively.
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Any change in accounting principles generally accepted in the United States of America requiring NTIC to
consolidate its joint ventures could adversely affect NTIC’s operating results.
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, 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.
Risks Related to NTIC’s Intellectual Property
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.
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 daily is often very low, and on some trading days, there is
no trading volume at all. During fiscal 2023, the daily trading volume ranged from 400 shares to 340,700 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 2023, the sale price of NTIC’s common stock ranged from a low of $10.10 per share to a high of $15.00
per share, and the daily trading volume ranged from 400 shares to 340,700 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 NTIC fails to meet its annual projected financial guidance or lowers its 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, operating results, and financial
condition as well as the market price of its common stock.
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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, 2023, NTIC had 9,427,599 shares of common stock outstanding, 22.4% of which 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 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.
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, 2023, Inter Alia Holding Company, or Inter Alia, beneficially owned approximately 12.8% 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 director, as well as two 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 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.
General Risk Factors
Climate change, or legal, regulatory, or market measures to address climate change, may negatively affect our
business and operations.
Climate change resulting from increased concentrations of carbon dioxide and other greenhouse gases in the atmosphere
may have an adverse impact on global temperatures, weather patterns and the frequency and severity of extreme
weather and natural disasters, such as hurricanes, tornadoes, earthquakes, wildfires or flooding. Climate change may
also cause water shortages, changes in rainfall and storm patterns, changes in sea levels and other negative weather and
climate patterns. Such weather conditions could pose physical risks to our facilities and disrupt operation of our supply
chain and may impact operational costs.
The increasing global focus on climate change and the need for corporate change also may lead to new regional, federal,
and/or global legal and regulatory requirements to reduce or mitigate the effects of greenhouse gases. The inconsistency
of regulations in the countries in which we operate may affect the costs of compliance with such legal or regulatory
requirements. Additionally, in the event that such regulation is enacted and is more aggressive than the sustainability
measures that we are currently undertaking to monitor our emissions and improve our energy efficiently, we may be
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subject to curtailment or reduced access to resources or experience significant increases in our costs of operation and
delivery. As a result, climate change could negatively affect our business and operations.
In addition, public company stockholders are increasingly sensitive to the climate change impacts and mitigation efforts
of companies, are increasingly seeking enhanced disclosure on the risks, challenges, governance implications, and
financial impacts of climate change faced by companies and are demanding that companies take a proactive approach to
addressing perceived environmental risks, including risks associated with climate change, relating to their operations. In
an effort to increase climate change disclosure, the SEC proposed climate disclosure rules that would require new
climate-related disclosure in SEC filings, as described below. Adverse publicity or climate-related litigation that may
result from such enhanced disclosure or stockholder perception could have a negative impact on our business.
New climate disclosure rules, if adopted by the SEC, may increase our costs and litigation risks, which would
materially and adversely affect our future results of operations and financial condition.
During fiscal 2022, the SEC proposed new climate disclosure rules, which if adopted, would require new climate-
related disclosure in SEC filings, including certain climate-related metrics and greenhouse gas emissions data,
information about climate-related targets and goals, transition plans, if any, and extensive attestation requirements. In
addition to requiring filers to quantify and disclose direct emissions data, the new rules also would require disclosure of
climate impact arising from the operations and uses by the filer’s business partners and contractors and end-users of the
filer’s products and/or services. We are currently assessing the impact of the new rules, if adopted as proposed, but at
this time, we cannot predict the costs of implementation or any potential adverse impacts resulting from the new rules if
adopted. However, we may incur increased costs relating to the assessment and disclosure of climate-related risks and
increased litigation risks related to disclosures made pursuant to the new rules, either of which could materially and
adversely affect our future results of operations and financial condition.
Severe weather could have a material adverse effect on NTIC’s business.
NTIC’s business has been and in the future could be materially and adversely affected by severe weather. NTIC’s
customers, including in particular NTIC’s oil and gas customers, may have operations located in parts of the southern
United States or other places and may be adversely affected by hurricanes and tropical storms, resulting in reduced
demand for NTIC’s products and services or increased operating costs. Furthermore, NTIC’s customers and raw
material suppliers’ operations have been and could in the future be adversely affected by such hurricanes and other
extreme or seasonal weather conditions. Adverse weather can also directly impede NTIC’s operations. Repercussions
of severe weather conditions may include:
curtailment of services or reduced demand for products;
weather-related damage to facilities and equipment, resulting in suspension of operations;
inability to deliver equipment, personnel and products to job sites in accordance with contract schedules or
increased transportation or other operating costs; and
loss of productivity.
These constraints could delay NTIC’s operations and materially increase NTIC’s operating and capital costs.
NTIC may grow its business through additional joint ventures, subsidiaries, 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;
34
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 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,
including terrorist attacks, attacks by computer viruses or hackers, power loss to computer systems, Internet outages,
and telecommunications or data network failure. Any such interruption could adversely affect NTIC’s business and
operating results.
NTIC’s current enterprise resource planning (“ERP”) system is outdated and in need of a, upgrade or conversion to
a new ERP system.
NTIC intends to implement a new ERP system during the next year. Implementing new or upgraded systems carries
substantial risk, including failure to operate as designed, failure to properly integrate with other systems, potential loss
of data or information, cost overruns, implementation delays, and disruption of operations. Third-party vendors are also
relied upon to design, program, maintain, and service the ERP system. Any failures of these vendors to properly deliver
their services could have a material adverse effect on NTIC’s business. NTIC plans to run parallel systems (existing
system with new system) for multiple quarters, however, any disruptions or malfunctions affecting NTIC’s ERP
system implementation plan could cause critical information upon which NTIC relies to be delayed, defective,
corrupted, inadequate, or inaccessible. NTIC may experience difficulties in its business operations, or difficulties in
operating its business under these systems, either of which could disrupt its operations, including its ability to timely
invoice customers, ship and track product orders, project inventory requirements, manage its supply chain, effectively
manage customer accounts receivable and pay suppliers within terms and otherwise adequately service its customers,
and could lead to increased costs and other difficulties. In the event NTIC experiences significant disruptions as a result
of the implementation or upgrade of new systems or otherwise, it may not be able to fix its systems in an efficient and
timely manner. NTIC may not realize the benefits it anticipates should all or part of the ERP system implementation
process prove to be ineffective. Accordingly, such events may disrupt or reduce the efficiency of NTIC’s entire
operations and have a material adverse effect on its operating results and cash flows.
NTIC’s business could be negatively impacted by cyber security threats.
In the ordinary course of NTIC’s business, NTIC uses its management information systems to store and access
proprietary business information. NTIC faces various cyber security threats, including cyber security attacks to its
information technology infrastructure and attempts by others to gain access to its proprietary or sensitive information.
The procedures and controls NTIC uses to monitor these threats and mitigate its exposure may not be sufficient to
prevent cyber security incidents. The result of these incidents could include disrupted operations, lost opportunities,
misstated financial data, liability for stolen assets or information, increased costs arising from the implementation of
additional security protective measures, litigation, and reputational damage. Any remedial costs or other liabilities
35
related to cyber security incidents may not be fully insured or indemnified by other means. Additionally, on July 26,
2023, the SEC issued final rules related to cyber security risk management and related disclosures. NTIC and its Audit
Committee continue to monitor and analyze the impact these rules may have on NTIC’s regulatory burden and cost of
compliance related to cyber security threats.
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 the overall size of NTIC’s net sales to joint ventures, the timing of one or more orders can
materially affect 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 the 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 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.
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,
and financial condition, such as natural or man-made disasters, an unexpected business loss of supply due to a force
majeure event 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.
Item 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
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 also purchased the property immediately adjacent to this
property, located at 4203 Woodland Road, which includes a 26,000 square foot industrial building, for $1,200,000 in
February 2023. NTIC continues to renovate this building, which will be used primarily for warehousing space and light
industrial production. NTIC owns this real estate and these buildings. NTIC also owns real estate and a building in
Beachwood, Ohio, which it uses for office, manufacturing, laboratory, and warehouse space. Additionally, NTIC has
contract warehousing agreements in California and Indiana to hold and release stock products to customers.
Internationally, NTIC’s subsidiaries in Brazil, India, Mexico, and China all lease office, warehouse, and laboratory
space. In July 2021, NTIC China entered into a purchase agreement to acquire an approximately 21,000 square feet
industrial building and the right to use certain real estate in the Qingpu District of Shanghai, China, which has been used
as China’s new corporate headquarters since February 2022. NTIC also leases office, warehouse, and laboratory space
in Chennai, India.
NTIC’s management considers its current properties suitable and adequate for its current and foreseeable needs.
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Item 3.
LEGAL PROCEEDINGS
For information regarding NTIC’s legal proceedings, see Note 15 to NTIC’s consolidated financial statements.
Item 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
NTIC’s common stock is listed for trading on the Nasdaq Global Market under the symbol “NTIC.”
Dividends
During fiscal 2023, NTIC’s Board of Directors declared cash dividends on the following dates in the following amounts
to holders of record of the Company’s common stock as of the following record dates:
Declaration Date
October 20, 2022
January 20, 2023
April 21, 2023
July 17, 2023
Amount
$0.07
$0.07
$0.07
$0.07
Record Date
November 3, 2022
February 1, 2023
May 3, 2023
August 2, 2023
Payable Date
November 16, 2022
February 15, 2023
May 17, 2023
August 16, 2023
On October 18, 2023, NTIC’s Board of Directors declared a cash dividend of $0.07 per share of NTIC’s common stock,
payable on November 15, 2023 to stockholders of record on November 1, 2023. The declaration of future dividends is
not guaranteed and will be determined by NTIC’s Board of Directors in light of conditions then existing, including
NTIC’s earnings, financial condition, cash requirements, restrictions in financing agreements, business conditions, and
other factors, including without limitation the effect of COVID-19 on its business, operating results, and financial
condition.
Number of Record Holders
As of August 31, 2023, there were 154 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 2023.
Issuer Purchases of Equity Securities
NTIC did not purchase any shares of its common stock or other equity securities of NTIC during the fourth quarter of
fiscal 2023. As of August 31, 2023, up to $2,640,548 in shares of NTIC common stock remained available for
repurchase under NTIC’s stock repurchase program.
Item 6.
[RESERVED]
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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 Subsidiaries and Joint Venture Network. This section provides a brief overview of NTIC’s
subsidiaries and its 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 2023 compared to 2022.
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.
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. 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 references Note 2 to NTIC’s consolidated financial
statements, which summarizes the effect of recently issued accounting pronouncements on NTIC’s results of
operations and financial condition.
Business Overview
NTIC develops and markets proprietary, environmentally beneficial products and services in over 65 countries either
directly or via a network of subsidiaries, joint ventures, independent distributors, and agents. NTIC’s primary business
is corrosion prevention marketed mainly under the ZERUST® brand. NTIC has been selling its proprietary ZERUST®
products and services to the automotive, electronics, electrical, mechanical, military, and retail consumer markets for
almost 50 years and, more recently, has also expanded into the oil and gas industry. Additionally, NTIC markets and
sells a portfolio of proprietary bio-based and certified compostable (fully biodegradable) polymer resin compounds and
finished products under the Natur-Tec® brand. These products are intended to reduce NTIC’s customers’ carbon
footprint and provide environmentally sound waste disposal options.
NTIC’s ZERUST® rust and corrosion inhibiting products include plastic and paper packaging, liquids, coatings, rust
removers, cleaners, and diffusers as well as engineered solutions designed specifically for the oil and gas industry.
NTIC also offers worldwide, on-site, technical consulting for rust and corrosion prevention issues. In North America,
NTIC sells its ZERUST® corrosion prevention solutions through a network of independent distributors and agents
supported by a direct sales force.
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Internationally, NTIC sells its ZERUST® corrosion prevention solutions through its wholly-owned subsidiary in China,
NTIC (Shanghai) Co., Ltd. (NTIC China), its wholly-owned subsidiary in India, HNTI Limited (Zerust India), its
majority-owned joint venture holding company for NTIC’s joint venture investments in the Association of Southeast
Asian Nations (ASEAN) region, NTI Asean LLC (NTI Asean), and certain majority-owned and wholly-owned
subsidiaries, and joint venture arrangements in North America, Europe, and Asia. NTIC also sells products directly to
its European joint venture partners through its wholly-owned subsidiary in Germany, NTIC Europe GmbH (NTI
Europe).
One of NTIC’s strategic initiatives is to expand into and penetrate other markets for its ZERUST® corrosion prevention
technologies. Consequently, for the past several years, NTIC has focused significant sales and marketing efforts on the
oil and gas industry, as the infrastructure that supports that industry is typically constructed using metals that are highly
susceptible to corrosion. In fiscal 2023, sales of ZERUST® corrosion prevention solutions to large customers in the oil
and gas industry became more consistent, with these customers beginning to re-order products. Sales within the U.S.
also stabilized, and key customer relationships have been expanded. The sale of ZERUST® corrosion prevention
solutions to customers in the oil and gas industry typically involves long sales cycles, often including multi-year trial
periods with each customer and a slow integration process thereafter.
With respect to NTIC’s Natur-Tec® business, NTIC markets its Natur-Tec® resin compounds and finished products in
North America primarily through a network of regional and national distributors as well as independent agents. NTIC
continues to see significant opportunities for finished bioplastic products and, therefore, continues to strengthen and
expand its North American distribution network for finished Natur-Tec® bioplastic products. Internationally, NTIC sells
its Natur-Tec® resin compounds and finished products both directly and through its wholly-owned subsidiary in China
and majority-owned subsidiaries in India and Sri Lanka and through distributors and certain joint ventures.
NTIC’s Subsidiaries and Joint Venture Network
NTIC has ownership interests in 11 operating subsidiaries in North America, South America, Europe, and Asia, which
are listed in “Part I. Item 1. Business” of this annual report on Form 10-K. The results of these subsidiaries are fully
consolidated in NTIC’s consolidated financial statements.
NTIC participates in 15 active joint venture arrangements in North America, Europe, and Asia, which are listed in “Part
I. Item 1. Business” of this annual report on Form 10-K. NTIC has historically funded its investments in joint ventures
with cash generated from operations. NTIC’s receives funds from its joint ventures as fees for services that NTIC
provides to its joint ventures and as dividend distributions. 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 services. NTIC
recognizes equity income from each joint venture based on the overall profitability of the joint venture. 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 each joint venture 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, what amount is paid 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 consolidated financial statements utilizing the equity method of accounting. NTIC considers EXCOR to
be individually significant to NTIC’s consolidated assets and income as of August 31, 2023 and 2022. Therefore, NTIC
provides certain additional information regarding this entity in the notes to NTIC’s consolidated financial statements
and in this section of this report.
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.
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Highlights of NTIC’s financial results for fiscal 2023 include the following, with increases or decreases in each case as
compared to fiscal 2022:
NTIC’s consolidated net sales increased 7.7% primarily as a result of an increase in sales of and demand for
both ZERUST® and Natur-Tec® products. 77.3% of NTIC’s consolidated net sales were derived from sales of
ZERUST® products and services, which increased 7.4%, and 22.7% of NTIC’s consolidated net sales were
derived from sales of Natur-Tec®, which increased 8.8%.
Cost of goods sold as a percentage of net sales decreased to 65.2% compared to 68.9% during fiscal 2022
primarily as a result of lower raw material prices overall and increased sales made to customers in the oil and
gas industry, which products carry higher margins than ZERUST® industrial products and Natur-Tec®
products.
NTIC’s total joint venture operations increased 10.9% to $11,641,904 compared to $10,493,600 during fiscal
2022. The increase was reflective of the one-time gain on the liquidation of previously written-off investment
in Tianjin Zerust of $1,986,027, offset by decreases in equity income and fees for services correlating to the
decrease in sales at the joint ventures. Net sales at the joint ventures decreased 3.3% to $100,682,316 compared
to $104,077,748 during fiscal 2022.
NTIC’s total operating expenses increased 17.6% to $33,425,089 compared to $28,414,117 during fiscal 2022.
This increase was primarily due to increased personnel expenses, including new hires, benefits and travel, sales
commissions, and expenses incurred during the current fiscal year periods in connection with Zerust Taiwan, a
new indirect, majority owned subsidiary, formed to assume the operations of a former joint venture in Taiwan.
NTIC incurred net income attributable to NTIC of $2,912,276, or $0.30 per diluted common share, compared
to $6,324,700, or $0.66 per diluted common share, for fiscal 2022. During fiscal 2022, $3,951,550, or $0.41
per diluted common share, was due to the gain from the Zerust India acquisition.
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
primarily upon shipment of the products.
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 primarily upon shipment of the products.
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 each joint venture 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
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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 based on licensing or other agreements with its
joint ventures. 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. Under NTIC’s
agreements with its joint ventures in which the fees for services are described, amounts are earned when product is
shipped from joint venture facilities, at which point a sale is deemed to have occurred and results in obligation of the
joint venture to pay the royalty and recognition of the fee by NTIC.
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.
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.
Remeasurement Gain on Acquisition of Equity Method Investee. Remeasurement gain on acquisition of equity
method investee consists of the gain resulting from the acquisition of the remaining 50% ownership interest of Zerust
India.
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 any borrowings under NTIC’s line of
credit with JPM.
Income Tax Expense. Income tax expense includes federal income taxes, foreign withholding taxes, income tax of
consolidated entities in foreign jurisdictions, state income tax, and changes to NTIC’s deferred tax valuation allowance.
NTIC utilizes the asset and 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.
42
Results of Operations
Fiscal Year 2023 Compared to Fiscal Year 2022
The following table sets forth NTIC’s results of operations for fiscal 2023 and fiscal 2022.
Fiscal 2023
Net sales ......................................................................... $
Cost of goods sold ...........................................................
Equity in income from joint ventures .............................
Fees for services provided to joint ventures ...................
Selling expenses ..............................................................
General and administrative expenses..............................
Research and development expenses ..............................
79,902,952
52,099,121
6,452,719
5,189,185
15,290,897
13,166,270
4,967,922
% of
Net
Sales
100.0%
65.2%
8.1%
6.5%
19.1%
16.5%
6.2%
Fiscal 2022
$
74,158,890
51,090,298
4,725,918
5,767,682
13,038,180
10,600,603
4,775,334
% of
Net
Sales
100.0%
68.9%
6.4%
7.8%
17.6%
14.3%
6.4%
$
$
Change
5,744,062
1,008,823
1,726,801
(578,497)
2,252,717
2,565,667
192,588
%
Change
7.7%
2.0%
36.5%
(10.0%)
17.3%
24.2%
4.0%
Net Sales. NTIC’s consolidated net sales increased 7.7% to $79,902,952 during fiscal 2023 compared to $74,158,890
during fiscal 2022. This increase was primarily a result of increased demand across all market segments, including
ZERUST® oil and gas.
The following table sets forth NTIC’s net sales by product segment for fiscal 2023 and fiscal 2022:
Fiscal 2023
Fiscal 2022
$
Change
Total ZERUST® sales ....................... $
Total Natur-Tec® sales .....................
Total net sales ................................... $
61,728,364
18,174,588
79,902,952
$
$
57,459,382
16,699,508
74,158,890
$
$
4,268,982
1,475,080
5,744,062
%
Change
7.4%
8.8%
7.7%
During fiscal 2023, 77.3% of NTIC’s consolidated net sales were derived from sales of ZERUST® products and
services, which increased 7.4% to $61,728,364 compared to $57,459,382 during fiscal 2022. This increase was
primarily a result of increased demand in North America.
The following table sets forth NTIC’s net sales of ZERUST® products for fiscal 2023 and fiscal 2022:
ZERUST® industrial net sales ................... $
ZERUST® joint venture net sales ..............
ZERUST® oil & gas net sales ....................
Total ZERUST® net sales ................... $
51,690,273
2,236,105
7,801,986
61,728,364
$
$
49,883,060
2,968,090
4,608,232
57,459,382
Fiscal 2023
Fiscal 2022
$
Change
$ 1,807,213
(731,985)
3,193,754
$ 4,268,982
%
Change
3.6%
(24.7%)
69.3%
7.4%
NTIC’s total ZERUST® net sales increased during fiscal 2023 compared to fiscal 2022 primarily due to increased
demand in North American ZERUST industrial business and sales to new and existing oil and gas customers. Overall,
demand for ZERUST® products and services depends heavily on the overall health of the markets in which NTIC sells
its products, including the automotive, oil and gas, agriculture, and mining markets in particular.
ZERUST® oil and gas net sales increased 69.3% during fiscal 2023 compared to fiscal 2022 primarily as a result of new
opportunities with new and existing customers. NTIC anticipates that its sales of ZERUST® products and services into
the oil and gas industry will continue to remain subject to significant volatility from quarter to quarter as sales are
recognized, specifically due to the volatility of oil prices. Demand for oil and gas products around the world depends
primarily on market acceptance and the reach of NTIC’s distribution network. Because of the typical size of individual
orders and overall size of NTIC’s net sales derived from sales of oil and gas products, the timing of one or more orders
can materially affect NTIC’s quarterly sales compared to prior fiscal year quarters.
During fiscal 2023, 22.7% of NTIC’s consolidated net sales were derived from sales of Natur-Tec® products, compared
to 22.5% during fiscal 2022. Sales of Natur-Tec® products increased 8.8% to $18,174,588 during fiscal 2023 compared
to $16,699,508 during fiscal 2022 as a result of increased global demand. The demand for Natur-Tec® products in most
43
markets has returned to pre-pandemic levels; however, there are lingering effects of COVID-19 in the apparel industry,
as well as corporate office complexes.
Cost of Goods Sold. Cost of goods sold increased 2.0% in fiscal 2023 compared to fiscal 2022 primarily as a result of
the increase in net sales, as described above. Cost of goods sold as a percentage of net sales decreased to 65.2% during
fiscal 2023 compared to 68.9% during fiscal 2022 primarily as a result of lower raw material prices and increased sales
made to customers in the ZERUST® oil and gas industry, which products carry higher margins than our ZERUST®
industrial products and a reallocation of certain personnel expenses from the cost of goods sold to general and
administrative expense. NTIC has taken certain actions to address inflationary pressures and pass on related cost
increases to its customers and some improvements from these actions, as well as some improvements in gross margin,
were realized during fiscal 2023.
Equity in Income from Joint Ventures. NTIC’s equity in income from joint ventures increased 36.5% to $6,452,719
during fiscal 2023 compared to $4,725,918 during fiscal 2022. The increase was reflective of the one-time gain on the
liquidation of previously written-off investment in Tianjin Zerust of $1,986,027, partially offset by decreases in equity
income correlating to the decrease in sales at the joint ventures. NTIC’s equity in income from joint ventures fluctuates
based on net sales and profitability of the joint ventures during the respective periods. Of the total equity in income from
joint ventures, NTIC had equity in income from joint ventures of $2,852,229 attributable to EXCOR during fiscal 2023.
NTIC had equity in income of all other joint ventures of $3,600,493 during fiscal 2023 primarily due to the $1,986,027
one-time gain noted above related to Tianjin Zerust.
Fees for Services Provided to Joint Ventures. NTIC recognized fee income for services provided to joint ventures of
$5,189,185 during fiscal 2023 compared to $5,767,682 during fiscal 2022, representing a decrease of 10.0%. Fee
income for services provided to joint ventures is traditionally a function of the sales made by NTIC’s joint ventures;
however, at various joint ventures, the fee income for services is a fixed amount that does not fluctuate with the change
in sales experienced by certain joint ventures. Net sales at the joint ventures decreased 3.3% to $100,682,316 during
fiscal 2023 compared to $104,077,748 during fiscal 2022. This decrease was primarily a result of decreased demand
during fiscal 2023 due in part to geopolitical uncertainty. Net sales of NTIC’s joint ventures are not included in NTIC’s
product sales and are not included in NTIC’s consolidated financial statements. Of the total fee income for services
provided to joint ventures, fees of $816,089 were attributable to EXCOR during fiscal 2023 compared to $834,725
attributable to EXCOR during fiscal 2022.
Selling Expenses. NTIC’s selling expenses increased 17.3% in fiscal 2023 compared to fiscal 2022 primarily due to an
increase in personnel expense in fiscal 2023 compared to fiscal 2022, as well as expenses incurred in fiscal 2023 in
connection with the startup of a new indirect, majority owned subsidiary formed to assume the operations of a former
joint venture in Taiwan and increased selling commissions. Selling expenses as a percentage of net sales increased to
19.1% for fiscal 2023 compared to 17.6% in fiscal 2022 primarily due to increased selling expenses, as noted above.
General and Administrative Expenses. NTIC’s general and administrative expenses increased 24.2% in fiscal 2023
compared to fiscal 2022 primarily due to increased professional services and travel and personnel expenses during fiscal
2023 compared to fiscal 2022, as well as expenses incurred during fiscal 2023 in connection with the startup of a new
indirect, majority owned subsidiary formed to assume the operations of a former joint venture in Taiwan, a reallocation
of certain personnel expenses from cost of good sold to general and administrative expense and increased stock option
expense. As a percentage of net sales, general and administrative expenses increased to 16.5% for fiscal 2023 from
14.3% for fiscal 2022 primarily due to the increase in general and administrative expenses, as noted above.
Research and Development Expenses. NTIC’s research and development expenses increased 4.0% in fiscal 2023
compared to fiscal 2022 primarily due to the timing of expenses incurred and an increase in expenses associated with
development efforts.
Interest Income. NTIC’s interest income decreased to $28,490 in fiscal 2023 compared to $49,241 in fiscal 2022
primarily due to changes to the invested cash balances.
Interest Expense. NTIC’s interest expense increased to $461,805 in fiscal 2023 compared to $89,096 in fiscal 2022
primarily due to increased outstanding borrowings under the line of credit, new term loans incurred by NTIC’s
subsidiary in China, and increased average interest rates during fiscal 2023.
44
Remeasurement Gain on Acquisition of Equity Method Investee. Authoritative guidance on accounting for business
combinations requires that an acquirer re-measure its previously held equity interest in the acquisition at its acquisition
date fair value and recognize the resulting gain or loss in earnings. As such, since NTIC acquired the remaining 50%
ownership interest of Zerust India effective September 1, 2021, NTIC recognized a gain of $3,951,550 during fiscal
2022. This gain is included in “Remeasurement gain on acquisition of equity method investee” on NTIC’s consolidated
statements of operations for fiscal 2022. There was no comparable gain during fiscal 2023.
Income Before Income Tax Expense. NTIC had income before income tax expense of $5,587,331 for fiscal 2023
compared to income before income tax expense of $9,059,770 for fiscal 2022.
Income Tax Expense. Income tax expense was $1,349,600 during fiscal 2023 compared to $1,873,836 during fiscal
2022 for an effective tax rate of 24.2% and 20.7% during both fiscal 2023 and 2022, respectively.
NTIC considers the earnings of certain foreign joint ventures to be indefinitely invested outside the United States on the
basis of estimates that NTIC’s future domestic cash generation will be sufficient to meet future domestic cash needs.
As a result, U.S. income and foreign withholding taxes have not been recognized on the cumulative undistributed
earnings of $20,493,861 and $21,256,923 as of August 31, 2023 and August 31, 2022, respectively. To the extent
undistributed earnings of NTIC’s joint ventures are distributed in the future, they are not expected to result in any
material additional income tax liability after the application of foreign tax credits.
Net Income Attributable to NTIC. Net income attributable to NTIC decreased to $2,912,276, or $0.30 per diluted
common share, for fiscal 2023 compared to $6,324,700, or $0.66 per diluted common share, for fiscal 2022. This
decrease was a primarily due to the $3,951,550 remeasurement gain on acquisition of equity method investee
recognized during fiscal 2022, which did not repeat in fiscal 2023, and to a lesser extent, the increase in operating
expenses, partially offset by the increase in gross profit.
NTIC anticipates that its earnings will continue to be adversely affected to some extent by inflation and worldwide
supply chain disruptions, among other factors. Additionally, NTIC anticipates that its quarterly net income will continue
to remain subject to significant volatility primarily due to the financial performance of its subsidiaries and joint
ventures, sales of its ZERUST® products and services into the oil and gas industry, and sales of its Natur-Tec®
bioplastics products, which sales fluctuate more on a quarterly basis than the traditional ZERUST® business.
Other Comprehensive Income – Foreign Currency Translations Adjustment. The changes in the foreign currency
translations adjustment were due to the fluctuation of the U.S. dollar compared to the Euro and other foreign currencies
during fiscal 2023 compared to fiscal 2022.
Liquidity and Capital Resources
Sources of Cash and Working Capital
NTIC’s working capital, defined as current assets less current liabilities, was $22,950,184 as of August 31, 2023,
including $5,406,173 in cash and cash equivalents, compared to $23,169,480 as of August 31, 2022, including
$5,333,890 in cash and cash equivalents and $5,590 in available for sale securities.
NTIC believes that a combination of its existing cash and cash equivalents, available for sale securities, forecasted cash
flows from future operations, anticipated distributions of earnings, anticipated fees to NTIC for services provided to its
joint ventures, and funds available through existing or anticipated financing arrangements will be adequate to fund its
existing operations, investments in new or existing joint ventures or subsidiaries, capital expenditures, debt repayments,
cash dividends, and any stock repurchases for at least the next 12 months. In fiscal 2024, NTIC expects to continue to
invest through its use of working capital in Zerust India, NTIC China, NTI Europe, its joint ventures, research and
development, marketing efforts, resources for the application of its corrosion prevention technology in the oil and gas
industry, and its Natur-Tec® bio-plastics business, although the amounts of these various investments are not known at
this time.
NTIC also expects to use some of its capital resources to continue to transition some of its joint ventures as needed or
appropriate, which may include additional acquisitions by NTIC of the remaining ownership interests of joint ventures
not owned by NTIC, the formation of one or more new subsidiaries to assume the operations of a joint venture, and
dissolutions or liquidations of one or more of its joint ventures. Some of these joint venture transactions may materially
45
impact NTIC’s results of operations for a particular reporting period. For example, the formation of a new indirect,
majority owned subsidiary of NTIC to assume the operations of a former joint venture increased NTIC’s operating
expenses during fiscal 2023.
NTIC traditionally has used the cash generated from its operations, distributions of earnings from joint ventures and
fees for services provided to its joint ventures to fund NTIC’s new technology investments and capital contributions to
new and existing subsidiaries and joint ventures. NTIC’s joint ventures traditionally have operated with little or no debt
and have been self-financed with minimal initial capital investment and minimal additional capital investment from
their respective owners. Therefore, NTIC believes there is limited exposure by NTIC’s joint ventures that could
materially impact their respective operations and/or liquidity.
In order to take advantage of new product and market opportunities to expand its business and increase its revenues and
assist with joint venture transitions, NTIC may decide to finance such opportunities by additional borrowings under its
revolving line of credit or raising additional financing through the issuance of debt or equity securities. There is no
assurance that any financing transaction will be available on terms acceptable to NTIC or at all or that any financing
transaction will not be dilutive to NTIC’s current stockholders.
Credit Agreement with JPMorgan Chase Bank, N.A.
On January 6, 2023, NTIC entered into a Credit Agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A.
(“JPM”), which provides NTIC with a senior secured revolving line of credit (the “Credit Facility”) of up to $10.0
million, and replaced NTIC’s prior loan agreement with PNC Bank, National Association. The Credit Facility includes a
$5.0 million sublimit for standby letters of credit. Borrowings of $3,600,000 were outstanding under the Credit Facility
as of August 31, 2023. Unless terminated earlier, the Credit Facility will mature on January 6, 2024, and the principal
amount thereunder, together with all accrued unpaid interest and other amounts owing thereunder, if any, will be
payable in full on such date. Borrowings under the Credit Agreement bear interest at a floating rate, at the option of
NTIC, equal to either the CB Floating Rate or the Adjusted SOFR Rate. The term “CB Floating Rate” means the greater
of the Prime Rate in the United States or 2.50%. The term “Adjusted SOFR Rate” means the term secured overnight
financing rate for either one, three or six months (depending on the interest period selected by NTIC) plus 0.10% per
annum. With respect to any borrowings using an Adjusted SOFR Rate, there is an applicable margin of 2.15% applied
per annum. There is no applicable margin with respect to borrowings using a CB Floating Rate. To secure the Credit
Agreement, the Company assigned to JPM a continuing security interest in all of its right, title and interested in
collateral made up for the assets of the Company.
The Credit Agreement contains customary affirmative and negative covenants, including, among other matters,
limitations on NTIC’s ability to incur additional debt, grant liens, engage in certain business operations and transactions,
make certain investments, modify its organizational documents or form any new subsidiaries, subject to certain
exceptions. Further, the Credit Agreement contains a negative covenant that restricts the ability of NTIC to redeem or
repurchase its common stock or pay dividends if the result of which would cause an event of default under the Credit
Agreement. The Credit Agreement also requires the Company to maintain a Fixed Charge Coverage Ratio of at least
1.25 to 1.00. The term “Fixed Charge Coverage Ratio” means the ratio, computed for the NTIC on a consolidated basis,
of net income plus income tax expense, plus amortization expense, plus depreciation expense, plus interest expense, and
plus dividends received from joint ventures, minus unfinanced capital expenditures and equity in income from joint
ventures, all computed for the twelve month period then ending, to scheduled principal payments made, plus scheduled
finance lease payments made, plus interest expense paid, plus income tax expense paid, and plus cash distributions and
dividends paid, all computed for the same twelve month period then ending. The Credit Agreement also contains
customary events of default, including, without limitation, payment defaults, material inaccuracy of representations and
warranties, covenant defaults, bankruptcy and insolvency proceedings, cross-defaults to certain other agreements,
breach of any financial covenant and change of control. Upon the occurrence and during the continuance of any event of
default, JPM may accelerate the payment of the obligations thereunder and exercise various other customary default
remedies. As of August 31, 2023, NTIC was in compliance with all debt covenants under the Credit Agreement.
46
Other Credit Arrangements
On each of April 10, 2023 and May 30, 2023, the Company’s wholly-owned subsidiary in China, NTIC China, entered
into a loan agreement with China Construction Bank Corporation. Each term loan provided NTIC China with a RMB
10,000,000 (USD $1.45 million). Each of the term loans matures after one year with the principal due at that time, after
which an extension of the loan agreement is required. Both term loans have an annual interest rate of 3.25% with
interest due monthly. Both term loans are secured by an office building owned by NTIC China and the loan agreements
contain certain financial and other covenants. NTIC was in compliance with the covenants as of August 31, 2023. The
current outstanding balance as of August 31, 2023 for both term loans is USD $2,757,176.
Uses of Cash and Cash Flow
Net cash provided by operating activities during fiscal 2023 was $5,541,219, which resulted principally from NTIC’s
net income, dividends received from joint ventures, depreciation and amortization expense, stock-based compensation
and a decrease in inventory, partially offset by deferred income tax and equity in income from joint ventures and an
increase in accounts receivable and a decrease in accounts payable. Net cash provided by operating activities during
fiscal 2022 was $1,146,078, which resulted principally from NTIC’s net income, dividends received from joint
ventures, depreciation and amortization expense, stock-based compensation and increases in accounts payable, partially
offset by the remeasurement gain on acquisition of equity method investee, deferred income tax and equity in income
from joint ventures and an increase in accounts receivable and inventory.
NTIC’s cash flows from operations are impacted by significant changes in certain components of NTIC’s working
capital, including inventory turnover and changes in receivables and payables. NTIC considers internal and external
factors when assessing the use of its available working capital, specifically when determining inventory levels and
credit terms of customers. Key internal factors include existing inventory levels, stock reorder points, customer
forecasts and customer requested payment terms. Key external factors include the availability of primary raw materials
and sub-contractor production lead times. NTIC’s typical contractual terms for trade receivables, excluding joint
ventures, are traditionally 30 days and 90 days for trade receivables from its joint ventures. Before extending unsecured
credit to customers, excluding NTIC’s joint ventures, NTIC reviews customers’ credit histories and will establish an
allowance for uncollectible accounts based upon factors surrounding the credit risk of specific customers and other
information. Accounts receivable over 30 days are considered past due for most customers. NTIC does not accrue
interest on past due accounts receivable. If accounts receivables in excess of the provided allowance are determined
uncollectible, they are charged to selling expense in the period that the determination is made. Accounts receivable are
deemed uncollectible based on NTIC exhausting reasonable efforts to collect. NTIC’s typical contractual terms for
receivables for services provided to its joint ventures are 90 days. NTIC records receivables for services provided to its
joint ventures on an accrual basis, unless circumstances exist that make the collection of the balance uncertain, in which
case the fee income will be recorded on a cash basis until there is consistency in payments. This determination is
handled on a case-by-case basis.
NTIC experienced an increase in trade receivables and a decrease in inventory as of August 31, 2023 compared to
August 31, 2022. Trade receivables, excluding joint ventures, as of August 31, 2023 increased $1,508,200 compared to
August 31, 2022, primarily related to a correlating increase in sales and timing differences.
Outstanding trade receivables, excluding joint ventures balances, increased by an average of 8 days to an average of 80
days from balances outstanding from these customers as of August 31, 2023 from an average of 72 days as of August
31, 2022.
Outstanding trade receivables from joint ventures as of August 31, 2023 decreased $509,949 compared to August 31,
2022 primarily due to the timing of payments. Outstanding balances from trade receivables from joint ventures
decreased an average of 66 days to an average of 20 days from balances outstanding from these customers as of August
31, 2023 from an average of 86 days as of August 31, 2022. The average days outstanding of trade receivables from
joint ventures as of August 31, 2023 were primarily due to the receivables balances at Zerust Consumer Products and
South Korea.
Outstanding receivables for services provided to joint ventures as of August 31, 2023 decreased $468,523 compared to
August 31, 2022, and the average days to pay decreased an average of 21 days to an average of 191 days from an
average of 112 days as of August 31, 2022.
47
Net cash used in investing activities during fiscal 2023 was $3,343,124, which was primarily the result of the purchase
of property and equipment, and investments in patents. Net cash used in investing activities during fiscal 2022 was
$7,108,174, which was primarily the result of the purchase of the remaining 50% ownership interest in Zerust India,
purchases of property and equipment, an investment in joint venture, and investments in patents.
Net cash provided by financing activities for fiscal 2023 was $2,053,798, which resulted from borrowings under the
term loan and proceeds from the exercise of stock options and NTIC’s employee stock purchase plan, partially offset by
repayments on the line of credit, dividends paid on NTIC common stock and dividends received by non-controlling
interest. Net cash provided by financing activities for fiscal 2022 was $3,188,377, which resulted from borrowings
under the line of credit and proceeds from the exercise of stock options and NTIC’s employee stock purchase plan,
partially offset by dividends paid on NTIC common stock and dividends received by non-controlling interest.
Stock Repurchase Program
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, 2023, up to
$2,640,548 in shares of NTIC common stock remained available for repurchase under NTIC’s stock repurchase
program. No repurchases occurred during fiscal 2023 or fiscal 2022.
Cash Dividends
During fiscal 2023, NTIC’s Board of Directors declared cash dividends on the following dates in the following amounts
to holders of record of NTIC common stock as of the following record dates:
Declaration Date
October 20, 2022
January 20, 2023
April 21, 2023
July 17, 2023
Amount
$0.07
$0.07
$0.07
$0.07
Record Date
November 3, 2022
February 1, 2023
May 3, 2023
August 2, 2023
Payable Date
November 16, 2022
February 15, 2023
May 17, 2023
August 16, 2023
The declaration of future dividends is not guaranteed and will be determined by NTIC’s Board of Directors in light of
conditions then existing, including NTIC’s earnings, financial condition, cash requirements, restrictions in financing
agreements, business conditions, and other factors, including without limitation the effect of COVID-19 on NTIC’s
business, operating results and financial condition.
Capital Expenditures and Commitments
NTIC spent $3,247,652 on capital expenditures during fiscal 2023, which related primarily to a new warehouse facility,
equipment and facility improvements, including the purchase of the property immediately adjacent to NTIC’s
headquarters in Circle Pines, Minnesota, which includes a 26,000 square foot industrial building, and related
renovations. The building will be used primarily for warehousing space and light industrial production. NTIC expects to
spend an aggregate of approximately $1,600,000 to $2,100,000 on capital expenditures during fiscal 2024, which it
expects will relate primarily to the installation of new Enterprise Resource Planning (ERP) software system and the
purchase of new equipment and facility improvements.
Inflation and Seasonality
Although inflation in the United States and abroad historically has had little effect on NTIC, inflationary pressures
adversely affected NTIC’s gross margins during fiscal 2023. NTIC believes there is some seasonality in its business.
NTIC’s net sales in the second fiscal quarter were adversely affected by the long Chinese New Year, the North
American holiday season, and overall less corrosion taking place at lower winter temperatures worldwide.
Market Risk
NTIC is exposed to some market risk stemming from changes in foreign currency exchange rates, commodity prices
and interest rates.
48
Because the functional currency of NTIC’s foreign operations and investments in its foreign joint ventures is the
applicable local currency, NTIC is exposed to foreign currency exchange rate risk arising from transactions in the
normal course of business. NTIC’s principal exchange rate exposure is with the Euro, the Japanese Yen, the Indian
Rupee, the Chinese Renminbi, the South Korean Won, and the English Pound against the U.S. Dollar. NTIC’s fees for
services provided to joint ventures and dividend distributions from these foreign entities are paid in foreign currencies
and, thus, fluctuations in foreign currency exchange rates could result in declines in NTIC’s reported net income. Since
NTIC’s investments in its joint ventures are accounted for using the equity method, any changes in foreign currency
exchange rates would be reflected as a foreign currency translation adjustment and would not change NTIC’s equity in
income from joint ventures reflected in its consolidated statements of operations. NTIC does not hedge against its
foreign currency exchange rate risk.
Some raw materials used in NTIC’s products are exposed to commodity price changes. The primary commodity price
exposures are with a variety of plastic and bioplastic resins.
Any outstanding advances under NTIC’s Credit Facility with JPM bear interest at a floating rate, at the option of NTIC,
equal to either the CB Floating Rate or the Adjusted SOFR Rate, as defined above. Borrowings of $3,600,000 were
outstanding under the Credit Facility as of August 31, 2023.
Both term loans undertaken by NTIC China with China Construction Bank Corporation have an annual interest rate of
3.25% with interest due monthly. The current outstanding balance as of August 31, 2023 for both term loans is USD
$2,757,176.
Related Party Transactions
Since NTIC’s joint ventures are considered related parties, NTIC recorded sales to its joint ventures as a separate line
item on the face of NTIC’s consolidated statements of operations and recorded fees for services provided to its joint
ventures as separate line items on the face of NTIC’s consolidated statements of operations. NTIC also records trade
receivables from joint ventures, receivables for fees for services provided to joint ventures, and NTIC’s investments in
joint ventures as separate line items on its consolidated balance sheets.
NTIC established its joint venture network approximately 30 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 16 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 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 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 13 to NTIC’s consolidated financial statements for other related party transaction disclosures.
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
49
those that are most important to the portrayal of its financial condition and results of operations and those 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 included in this report
include the accounts of Northern Technologies International Corporation, its wholly-owned subsidiaries, Northern
Technologies Holding Company, LLC, NTIC (Shanghai) Co., Ltd., NTIC Europe GmbH ZERUST-EXCOR MEXICO,
S. de R.L. de C.V., and HNTI Limited, 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,
Natur-Tec India Private Limited, Natur-Tec Lanka, Zerust Singapore Pte Ltd (Zerust Singapore), Zerust Vietnam Co.
Ltd (Zerust Vietnam) and Zerust Taiwan Co. Ltd (Zerust Taiwan). 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 anything 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.
Investments at Carrying Value
If NTIC is no longer able to exercise significant influence over operating and financial policy of a joint venture
previously accounted for under the equity method, it maintains the investment at the carrying value as of the date that
significant influence no longer exists and discontinues accruing the proportionate earnings or losses of the investment.
Investments are considered to be impaired when a decline in fair value is judged to be other-than-temporary. Fair value
is calculated based on publicly available market information or other estimates determined by management. NTIC
employs a systematic methodology on a quarterly basis that considers available quantitative and qualitative evidence in
evaluating potential impairment of its investments. If the cost of an investment exceeds its fair value, NTIC evaluates,
among other factors, general market conditions, credit quality of debt instrument issuers, the duration and extent to
which the fair value is less than cost, and for equity securities, its intent and ability to hold, or plans to sell, the
investment. NTIC also considers specific adverse conditions related to the financial health of and business outlook for
the investee, including industry and sector performance, changes in technology, and operational and financing cash flow
factors. Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded to
other income (expense), and a new cost basis in the investment is established.
Revenue Recognition
Revenue is measured based on consideration specified in the contract with a customer, adjusted for any applicable
estimates of variable consideration and other factors affecting the transaction price, including noncash consideration,
consideration paid or payable to customers, and significant financing components. While most of NTIC’s revenue is
50
contracted with customers through one-time purchase orders and short-term contracts, NTIC does have long-term
arrangements with certain customers. Revenue from all customers is recognized when a performance obligation is
satisfied by transferring control of a distinct good or service to a customer. The transaction price for NTIC’s products is
the invoiced amount. Revenue is recognized when transfer of control occurs as defined by the terms in the customer
agreement, generally upon shipment of product.
With respect to recording revenue related to fees earned for services provided to NTIC’s joint ventures, amounts are
earned when product is shipped from joint venture facilities, at which point a sale is deemed to have occurred and
results in obligation for the joint venture to pay the royalty and recognition of the fee by NTIC. 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 based
on licensing or other agreements with its joint ventures. NTIC receives fees for the 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 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 payment terms of net 30 days to unaffiliated customers. Payment terms for NTIC’s joint
ventures also are determined based on credit risk; however, additional consideration 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.
Goodwill Impairment
Goodwill represents the excess purchase price over the fair value of tangible net assets acquired in acquisitions after
amounts have been allocated to intangible assets. Goodwill is tested for impairment annually (at August 31), or more
frequently when events or changes in circumstances indicate that the asset might be impaired. Examples of such events
or circumstances include, but are not limited to, a significant adverse change in legal or business climate, an adverse
regulatory action or unanticipated competition.
51
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 Loss)
The functional currency of each international joint venture and subsidiary 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 (loss).
NTIC (excluding NTIC China, Zerust Brazil, Natur-Tec India, Natur-Tec Lanka, NTI Asean, Zerust Singapore, Zerust
Vietnam, Zerust Taiwan, Zerust Mexico, Zerust India, NTI Europe, and NTIC’s 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 net realizable value. 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.
Income Taxes
NTIC utilizes the asset and liability method of accounting for income taxes, which requires the recognition of deferred
tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated
financial statements. 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 operations in the period that includes the enactment date.
NTIC records net deferred tax assets to the extent NTIC believes these assets will more likely than not be realized. In
making such a determination, NTIC 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, including the prior three-year history. In the event NTIC determines that it would be able to realize its
deferred tax assets in the future in excess of their net recorded amount, NTIC makes an adjustment to the deferred tax
asset valuation allowance, which would reduce the provision for income taxes.
52
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.
Because the functional currency of NTIC’s foreign operations and investments in its foreign joint ventures is the
applicable local currency, NTIC is exposed to foreign currency exchange rate risk arising from transactions in the
normal course of business. NTIC’s principal exchange rate exposure is with the Euro, the Japanese Yen, the Indian
Rupee, the Chinese Renminbi, the South Korean Won, and the English Pound against the U.S. Dollar. NTIC’s fees for
services provided to joint ventures and dividend distributions from these foreign entities are paid in foreign currencies,
and, thus, fluctuations in foreign currency exchange rates could result in declines in NTIC’s reported net income. Since
NTIC’s investments in its joint ventures are accounted for using the equity method, any changes in foreign currency
exchange rates would be reflected as a foreign currency translation adjustment and would not change NTIC’s equity in
income from joint ventures reflected in its consolidated statements of operations. NTIC does not hedge against its
foreign currency exchange rate risk.
Some raw materials used in NTIC’s products are exposed to commodity price changes. The primary commodity price
exposures are with a variety of plastic resins.
With respect to interest rate risk, any outstanding advances under NTIC’s Credit Facility with JPM bear interest at a
floating rate, at the option of NTIC, equal to either the CB Floating Rate or the Adjusted SOFR Rate, as defined above.
Borrowings of $3,600,000 were outstanding under the Credit Facility as of August 31, 2023. Both term loans
undertaken by NTIC China with China Construction Bank Corporation have an annual interest rate of 3.25% with
interest due monthly. The current outstanding balance as of August 31, 2023 for both term loans is USD $2,757,176.
53
Item 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
The following items are included herein:
Report of Independent Registered Public Accounting Firm (PCAOB Firm ID # 23) .............................................. 55-56
57
Consolidated Balance Sheets as of August 31, 2023 and 2022 ................................................................................
58
Consolidated Statements of Operations for the years ended August 31, 2023 and 2022 .........................................
59
Consolidated Statements of Comprehensive Income for the years ended August 31, 2023 and 2022 .....................
60
Consolidated Statements of Equity for the years ended August 31, 2023 and 2022 ................................................
Consolidated Statements of Cash Flows for the years ended August 31, 2023 and 2022 ........................................
61
Notes to Consolidated Financial Statements ............................................................................................................ 62-80
Page
54
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the board of directors of
Northern Technologies International Corporation and Subsidiaries:
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Northern Technologies International Corporation
and Subsidiaries (the "Company") as of August 31, 2023 and 2022, the related consolidated statements of operations,
comprehensive income, equity, and cash flows, for each of the two years in the period ended August 31, 2023, and the
related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated
financial statements present fairly, in all material respects, the financial position of the Company as of August 31, 2023
and 2022, and the results of its operations and its cash flows for each of the two years in the period ended August 31,
2023, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to
express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting
firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to
be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules
and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. 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, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an
audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of
internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the
Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our
audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated
financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates
to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion
on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below,
providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate.
Employee Retention Credit
Critical Audit Matter Description
As described in Note 1 to the consolidated financial statements, the Company applied for the Employee
Retention Credit (ERC) in fiscal 2023. The Company qualified for ERCs based on qualified wages paid in the
first and second quarters of 2021 and filed for credits of $573,751 and $566,006, for each of those quarters
respectively, and recognized income related to these credits in the second and third fiscal quarters of fiscal
2023. In connection with the preparation of its consolidated financial statements for the fiscal year ended
August 31, 2023, the Company concluded in accordance with International Accounting Standard (IAS) 20,
Accounting for Government Grants and Disclosure of Government Assistance (“IAS 20”), as U.S. GAAP does
55
not provide for the accounting of government grants, the associated income was inappropriately recognized.
Pursuant to IAS 20, the Company cannot recognize income from the grant until it is “reasonably assured”
(similar to the “probable” threshold in U.S. GAAP) that the grant conditions will be met and that the grant will
be received, at which time grant income is recorded on a systematic basis over the periods in which the
Company recognizes the payroll expenses for which the grant is intended to compensate. As a result, the
Company restated the previously issued unaudited condensed consolidated financial statements for the three-
and six-months ended February 28, 2023 and three- and nine-months ended May 31, 2023.
We identified the accounting for the ERCs under IAS 20 and the related assessment of the realizability of the
ERCs as a critical audit matter. The evaluation of the realizability of the ERCs was complex due to the
judgment required to evaluate management’s estimates and assumptions.
How We Addressed the Matter in Our Audit
The primary procedures we performed to address this critical audit matter included:
Testing the design and implementation of internal controls surrounding accounting for significant or
complex accounting transactions.
Testing management’s process for determining the likelihood of the ERCs being granted. This
included gaining an understanding of qualifications and the work of management’s specialist.
Utilizing an internal tax specialist with specialized knowledge and skill in tax credits to assist in
testing the Company’s evaluation surrounding the eligibility for the ERC, calculation of the credit
amounts and the related probability assessment to recognize the related credit in earnings.
Evaluating the adequacy of the Company’s disclosure of these circumstances in the consolidated
financial statements.
/s/ Baker Tilly US, LLP
We have served as the Company's auditor since 2004.
Minneapolis, Minnesota
November 21, 2023
56
NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - AUGUST 31, 2023 AND 2022
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
Available for sale securities
Receivables:
Trade excluding joint ventures, less allowance for doubtful accounts
of $533,000 and $439,000 as of August 31, 2023 and 2022, respectively
Trade, joint ventures
Fees for services provided to joint ventures
Dividend receivable from joint venture
Income taxes
Inventories
Prepaid expenses
Total current assets
PROPERTY AND EQUIPMENT, NET
OTHER ASSETS:
Investments in joint ventures
Deferred income tax, net
Intangible asset, net
Goodwill
Patents and trademarks, net
Operating lease right of use assets
Total other assets
Total assets
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Line of credit
Term loan
Accounts payable
Income taxes payable
Accrued liabilities:
Payroll and related benefits
Other
Current portion of operating leases
Total current liabilities
LONG-TERM LIABILITIES:
Deferred income tax, net
Operating leases, less current portion
Total long-term liabilities
COMMITMENTS AND CONTINGENCIES (Note 15)
EQUITY:
Preferred stock, no par value; authorized 10,000 shares; none issued and
outstanding
Common stock, $0.02 par value per share; authorized 15,000,000
shares; issued and outstanding 9,424,101 and 9,232,483, respectively
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Stockholders’ equity
Non-controlling interests
Total equity
Total liabilities and equity
August 31, 2023
August 31, 2022
$
5,406,173
—
$
5,333,890
5,590
15,645,130
187,912
1,296,594
1,986,027
34,202
13,096,489
2,019,029
39,671,556
14,065,354
23,705,714
530,944
5,500,733
4,782,376
658,752
428,874
35,607,393
89,344,303
3,600,000
2,757,176
6,056,329
13,053
2,305,400
1,648,615
340,799
16,721,372
1,836,059
88,075
1,924,134
—
188,482
21,986,767
51,004,427
(6,823,403)
66,356,273
4,342,524
70,698,797
89,344,303
$
$
$
14,136,930
697,861
1,765,117
—
—
16,341,729
1,953,764
40,234,881
12,170,493
21,814,754
—
5,923,867
4,782,376
710,011
557,571
33,788,579
86,193,953
5,900,000
—
7,796,494
30,742
2,297,543
667,292
373,330
17,065,401
1,700,015
184,241
1,884,256
—
184,650
19,939,131
50,716,613
(7,245,132)
63,595,262
3,649,034
67,244,296
86,193,953
$
$
$
See notes to consolidated financial statements.
57
NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED AUGUST 31, 2023 AND 2022
NET SALES:
Net sales
Cost of goods sold
Gross profit
JOINT VENTURE OPERATIONS:
Equity in income from joint ventures
Fees for services provided to joint ventures
Total joint venture operations
OPERATING EXPENSES:
Selling expenses
General and administrative expenses
Research and development expenses
Total operating expenses
2023
2022
$
$
79,902,952
52,099,121
27,803,831
74,158,890
51,090,298
23,068,592
6,452,719
5,189,185
11,641,904
15,290,897
13,166,270
4,967,922
33,425,089
4,725,918
5,767,682
10,493,600
13,038,180
10,600,603
4,775,334
28,414,117
OPERATING INCOME
6,020,646
5,148,075
REMEASUREMENT GAIN ON ACQUISITION OF EQUITY METHOD
INVESTEE
INTEREST INCOME
INTEREST EXPENSE
INCOME BEFORE INCOME TAX EXPENSE
INCOME TAX EXPENSE
NET INCOME
—
28,490
(461,805)
5,587,331
1,349,600
4,237,731
3,951,550
49,241
(89,096)
9,059,770
1,873,836
7,185,934
NET INCOME ATTRIBUTABLE TO NON-CONTROLLING
INTERESTS
NET INCOME ATTRIBUTABLE TO NTIC
NET INCOME ATTRIBUTABLE TO NTIC PER COMMON SHARE:
Basic
Diluted
WEIGHTED AVERAGE COMMON SHARES
ASSUMED OUTSTANDING:
Basic
Diluted
1,325,455
861,234
2,912,276
$
6,324,700
0.31
0.30
$
$
0.69
0.66
$
$
$
9,359,504
9,693,482
9,216,216
9,635,028
CASH DIVIDENDS DECLARED PER COMMON SHARE
$
0.28
$
0.28
See notes to consolidated financial statements.
58
NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
YEARS ENDED AUGUST 31, 2023 AND 2022
NET INCOME
OTHER COMPREHENSIVE INCOME (LOSS) – FOREIGN
CURRENCY TRANSLATION ADJUSTMENT
COMPREHENSIVE INCOME
2023
4,237,731
$
2022
7,185,934
$
445,338
(3,912,128)
4,683,069
3,273,806
LESS: COMPREHENSIVE LOSS ATTRIBUTABLE TO
NON-CONTROLLING INTERESTS
(1,349,064)
(669,208)
COMPREHENSIVE INCOME ATTRIBUTABLE TO NTIC
$
3,334,005
$
2,604,598
See notes to consolidated financial statements.
59
NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
YEARS ENDED AUGUST 31, 2023 AND 2022
STOCKHOLDERS’ EQUITY
Common Stock
Shares
Amount
Additional
Paid-in
Capital
Accumulated
Other
Non-
Retained
Comprehensive
Controlling
Earnings
Loss
Interests
Total
Equity
BALANCE AT AUGUST 31, 2021
9,184,811
$ 183,696
$ 18,736,268
$ 46,973,092
$
(3,525,030)
$ 3,382,555
$ 65,750,581
Stock options exercised
Stock issued for employee stock
purchase plan
Stock option expense
Dividends paid to stockholders
Dividend received by non-controlling
interest
Net income
Other comprehensive loss
42,071
5,601
—
—
—
—
—
842
112
—
—
—
—
—
197,798
73,533
931,532
—
—
—
—
—
—
—
(2,581,179)
—
6,324,700
—
—
—
—
—
—
—
—
—
—
198,640
73,645
931,532
-
(2,581,179)
(402,729)
(402,729)
861,234
7,185,934
—
(3,720,102)
(192,026)
(3,912,128)
BALANCE AT AUGUST 31, 2022
9,232,483
$ 184,650
$ 19,939,131
$ 50,716,613
$
(7,245,132)
$ 3,649,034
$ 67,244,296
Stock options exercised
Stock issued for employee stock
purchase plan
Stock option expense
Dividends paid to stockholders
Dividend received by non-controlling
interest
Net income
Other comprehensive gain
184,432
7,186
—
—
—
—
—
3,689
143
—
—
—
—
—
634,581
75,321
1,337,734
—
—
—
—
—
—
—
(2,624,462)
—
2,912,276
—
—
—
—
—
—
—
—
—
—
638,270
75,464
1,337,734
-
(2,624,462)
(655,574)
(655,574)
1,325,455
4,237,731
—
421,729
23,609
445,338
BALANCE AT AUGUST 31, 2023
9,424,101
$ 188,482
$ 21,986,767
$ 51,004,427
$
(6,823,403)
$ 4,342,524
$ 70,698,797
See notes to consolidated financial statements.
60
NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED AUGUST 31, 2023 AND 2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
2023
2022
$
4,237,731
$
7,185,934
Stock-based compensation
Depreciation expense
Amortization expense
Loss on disposal of property and equipment
Remeasurement gain on acquisition of equity method investee
Change in allowance for doubtful accounts
Equity in income from joint ventures
Dividends received from joint ventures
Deferred income taxes
Changes in current assets and liabilities:
Receivables:
Trade, excluding joint ventures
Trade, joint ventures
Fees for services provided to joint ventures
Dividends receivable from joint venture
Income taxes
Inventories
Prepaid expenses and other
Accounts payable
Income tax payable
Accrued liabilities
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Zerust India business, net of cash acquired
Proceeds from the sale of available for sale securities
Investment in joint venture
Purchases of property and equipment
Proceeds from sale of property and equipment
Investments in patents
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividend received by non-controlling interest
Repayments on the line of credit
Proceeds from line of credit
Proceeds from term loan
Dividends paid on NTIC common stock
Proceeds from employee stock purchase plan
Proceeds from exercise of stock options
Net cash (used in) provided by financing activities
1,337,734
1,042,505
588,454
(8,534)
—
94,000
(6,452,719)
5,639,198
(395,001)
(1,956,234)
509,949
468,523
(1,986,027)
(34,202)
3,030,665
(3,061)
(1,509,226)
(16,077)
953,541
5,541,219
—
5,590
—
(3,247,652)
13,000
(114,062)
(3,343,124)
(655,574)
(2,300,000)
—
2,812,504
(2,624,462)
75,464
638,270
(2,053,798)
931,532
938,489
629,843
—
(3,951,550)
57,000
(4,725,918)
5,723,176
(81,500)
(2,091,353)
(73,053)
(259,550)
—
284,025
(4,818,860)
3,111
3,010,526
(493,091)
(1,122,683)
1,146,078
(5,062,003)
(956)
(341,392)
(1,496,674)
—
(207,149)
(7,108,174)
(402,729)
—
5,900,000
—
(2,581,179)
73,645
198,640
3,188,377
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
(72,014)
426,968
72,283
5,333,890
(2,346,751)
7,680,641
CASH AND CASH EQUIVALENTS AT END OF YEAR
$
5,406,173
$
5,333,890
See notes to consolidated financial statements.
61
NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED AUGUST 31, 2023 AND 2022
1.
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Business – Northern Technologies International Corporation and its Subsidiaries (collectively, the Company) develop
and market proprietary environmentally beneficial products and services in over 65 countries either directly or via a network of
subsidiaries, 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® products and services to
the automotive, electronics, electrical, mechanical, military, and retail consumer markets for almost 50 years and, more recently,
has also expanded into the oil and gas industry. Additionally, the Company markets and sells a portfolio of proprietary bio-based
and certified compostable (fully biodegradable) polymer resin compounds and finished products under the Natur-Tec® brand.
These products are intended to reduce the Company’s customers’ carbon footprint and provide environmentally sound waste
disposal options. The Company’s two operating segments are ZERUST and Natur-Tec.
The Company participates, either directly or indirectly, in 15 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.
Impact of COVID-19 – As a result of the novel coronavirus (COVID-19) and related government mandated restrictions on the
Company’s business, as well as the businesses of its joint ventures, customers and suppliers, disruption to the Company’s business
and the manufacture and sale of its products and services continued to occur during fiscal 2023, including in particular in China.
While demand in China improved during the third quarter of fiscal 2023 as a result of government restrictions that were lifted, the
Company continued to experience softened demand for its products in China during the remainder of fiscal 2023. The Company
may continue to experience softened demand into fiscal 2024 as the result of novel strains of COVID-19.
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), ZERUST-EXCOR
MEXICO, S. de R.L. de C.V (Zerust Mexico), NTIC Europe GmbH (NTI Europe), and HNTI Limited (Zerust India), NTIC’s
majority-owned subsidiary in India, Natur-Tec India Private Limited (Natur-Tec India), NTIC’s majority-owned subsidiary in
Brazil, Zerust Prevenção de Corrosão S.A. (Zerust Brazil), NTIC’s majority-owned subsidiary in Sri Lanka, Natur Tec Lanka (Pvt)
Ltd (Natur Tec Lanka), and NTIC’s majority-owned holding company, NTI Asean LLC (NTI Asean), and its wholly owned
subsidiaries Zerust Singapore Pte Ltd (Zerust Singapore), Zerust Vietnam Co. Ltd (Zerust Vietnam) and Zerust Taiwan Co. Ltd
(Zerust Taiwan). NTIC’s consolidated financial statements do not include the accounts of any of its joint ventures.
Non-Controlling Interests – The Company owns 75% of Natur-Tec India, 75% of Natur Tec Lanka, 85% of Zerust Brazil, 60% of
NTI Asean, Zerust Singapore Pte Ltd, Zerust Vietnam Co Ltd and Zerust Taiwan Co Ltd. The remaining ownership of the
consolidated entities are 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 results 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.
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.
When determining recognition of revenue arrangements the Company performs the following five steps: (1) identify the contracts
with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the
transaction price to the performance obligations in the contract; and (5) recognize revenue when or as the entity satisfies a
62
performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect
the consideration it is entitled to in exchange for the goods it transfers to, or services it performs for, the customer.
Generally, the Company’s performance obligations are satisfied when the customers take possession of the products, which
normally occurs at the shipping point or destination depending on the terms of the contracts. The Company’s services are
generally sold based upon quotes or contracts with customers that include a fixed or determinable price, and sales arrangements do
not contain any significant financing component for its customers. The Company does not recognize revenue related to product
warranties, nor does the Company incur significant contract costs. Customer arrangements do not generate contract assets or
liabilities.
Revenue Recognition – Revenue is measured based on consideration specified in the contract with a customer, adjusted for any
applicable estimates of variable consideration and other factors affecting the transaction price, including noncash consideration,
consideration paid or payable to customers, and significant financing components. Revenue from all customers is recognized when
a performance obligation is satisfied by transferring control of a distinct good or service to a customer.
Individually promised goods and services in a contract are considered a distinct performance obligation and accounted for
separately if the customer can benefit from the individual good or service on its own or with other resources that are readily
available to the customer and the good or service is separately identifiable from other promises in the arrangement. When an
arrangement includes multiple performance obligations, the consideration is allocated between the performance obligations in
proportion to their estimated standalone selling price. Costs related to products delivered are recognized in the period incurred,
unless criteria for capitalization of costs are met. Costs of revenues consist primarily of direct labor, manufacturing overhead,
materials, and components. The Company does not incur significant upfront costs to obtain a contract. If costs to obtain a contract
were to become material, the costs would be recorded as an asset and amortized to expense in a manner consistent with the related
recognition of revenue.
The Company excludes government assessed and imposed taxes on revenue generating transactions that are invoiced to customers
from revenue. The Company includes freight billed to customers in revenue. Shipping and handling costs associated with
outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included
in cost of goods sold.
The timing of revenue recognition, billing, and cash collections results in accounts receivable on the consolidated balance sheet.
Performance Obligations – A performance obligation is a promise in a contract to transfer a distinct good or service to the
customer. A contract’s transaction price is allocated to each distinct performance obligation in proportion to its standalone selling
price and recognized as revenue when, or as, the performance obligation is satisfied. The Company’s various performance
obligations and the timing or method of revenue recognition are discussed below. The Company’s technical
service consultants work directly with the end users of NTIC’s ZERUST® rust and corrosion inhibiting products to
analyze their specific needs and develop systems to meet their performance requirements.
The Company sells its products to both distributors and end-users. Each unit of product delivered under a customer order
represents a distinct and separate performance obligation, as the customer can benefit from each unit on its own or with other
resources that are readily available to the customer, and each unit of product is separately identifiable from other products in the
arrangement.
The transaction price for the Company’s products is the invoiced amount. The Company does not have variable consideration in
the form of refunds, credits, rebates, price concessions, pricing incentives, or other items impacting transaction price. The
purchase order pricing in arrangements with customers is deemed to approximate standalone selling price; therefore, the Company
does not need to allocate proceeds on a relative standalone selling price allocation between performance obligations. The
Company applies the practical expedient in paragraph 606-10-50-14 and does not disclose information about remaining
performance obligations that have original expected durations of one year or less. There are no material obligations that extend
beyond one year.
Revenue is recognized when transfer of control occurs, as defined by the terms in the customer agreement. The Company
immediately recognizes incidental items that are immaterial in the context of the contract. The Company has applied the practical
expedient in paragraph 606-10-25-16A and does not assess if immaterial items are promised goods or services. The Company has
also applied the practical expedient in paragraph 606-10-32-18 regarding the adjustment of the promised amount of consideration
for the effects of a significant financing component when the customer pays for that good or service within one year or less, as the
Company does not have any significant financing components in its customer arrangements since payment is received at or shortly
after the point of sale, generally thirty to ninety days.
63
The Company estimates returns based on an analysis of historical experience if the right to return products is granted to its
customers. The Company does not record a return asset, as non-conforming products are generally not returned. The Company’s
return policy does not vary by geography. The customer has no rotation or price protection rights, and the Company is not under a
warranty obligation.
Sales Commissions – Sales commissions paid to sales representatives are eligible for capitalization, as they are incremental costs
that would not have been incurred without entering into a specific sales arrangement and are recoverable through the expected
margin on the transaction. The Company has elected to apply the practical expedient provided by ASC 340-40-25-4 and recognize
the incremental costs of obtaining contracts as an expense when incurred, as the amortization period of the assets that would have
otherwise been recognized is one year or less. The Company records these costs as a selling expense.
Product Warranty – The Company offers warranties on various products and services. These warranties are assurance type
warranties that are not sold on a standalone basis; therefore, they are not considered distinct performance obligations. The
Company estimates the costs that may be incurred under its warranties and records a liability in the amount of such costs at the
time the revenue is recognized for the product sale.
International Revenue – The Company markets its products to numerous countries in North America, Europe, Latin America, Asia,
and other parts of the world. See Note 11, Segment and Geographic Information, for information regarding revenue
disaggregation by geography.
Trade Receivables – 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 $533,000 and $439,000 as of August 31, 2023 and 2022, respectively.
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.
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 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 that an
allowance for doubtful accounts related to its joint venture receivables was not necessary as of August 31, 2023 or 2022.
Employee Retention Credit (ERC) and Payroll Tax Deferral - On March 27, 2020, the Coronavirus Aid, Relief, and Economic
Security Act (“CARES Act”) was signed into law providing numerous tax provisions and other stimulus measures, including an
employee retention credit (“ERC”), which is a refundable tax credit against certain employment taxes. The Taxpayer Certainty and
Disaster Tax Relief Act of 2020 and the American Rescue Plan Act of 2021 extended and expanded the availability of the ERC.
The Company engaged tax advisors of a Big 4 accounting firm which determined the Company qualified for ERCs. The Company
then applied for the ERC in fiscal 2023 for the second and third quarters of that year of $573,751 and $566,006, respectively. The
Company has elected to account for the credit as a government grant. U.S. GAAP does not include grant accounting guidance for
for-profit entities, therefore, the Company has elected to follow the grant accounting model in International Accounting Standard
(IAS) 20, Accounting for Government Grants and Disclosure of Government Assistance. In accordance with IAS 20, the Company
cannot recognize any income from the grant until there is reasonable assurance (similar to the “probable” threshold in U.S. GAAP)
that any conditions attached to the grant will be met and that the grant will be received. Once it is reasonably assured that the grant
conditions will be met and that the grant will be received, grant income is recorded on a systematic basis over the periods in which
the Company recognizes the payroll expenses for which the grant is intended to compensate. No income was recognized in fiscal
64
2023 for the ERC. Income from the grant can be presented as either other income or as a reduction in the expenses for which the
grant was intended to compensate.
Fees for Services Provided to Joint Ventures – The Company provides services to its joint ventures including consulting, legal,
travel, insurance, technical, and marketing services based on licensing or other agreements with its joint ventures. 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. Under the Company’s agreements with its joint ventures, amounts are earned when product is shipped
from joint venture facilities, at which point a sale is deemed to have occurred and results in obligation for the joint venture to pay
the royalty and recognition of the fee by the Company. 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 not significant.
Inventories – Inventories are recorded at the lower of cost (first-in, first-out basis) or net realizable value.
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
Patents and Trademarks – Patents and trademarks, including acquisition costs, are stated at cost, less accumulated amortization.
Amortization is computed using the straight-line method over the estimated useful lives of the respective assets. Upon retirement,
the cost of assets disposed and the related accumulated amortization are removed from the accounts, and any resulting gain or loss
is credited or charged to operations.
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 a joint
venture’s cumulative losses exceeds 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 had positive equity as of August 31, 2023
and 2022. The Company considers any of its joint ventures to be significant and discloses entity specific financial information if
the joint venture’s income or assets make up more than 20% of the Company’s total assets or income.
The Company classifies distributions received from its joint ventures based on the nature of the distributions, generally, in
operating activities on the consolidated statements of cash flows.
If the Company is no longer able to exercise significant influence over operating and financial policy of a joint venture previously
accounted for under the equity method, it maintains the investment at the carrying value as of the date that significant influence no
longer exists and discontinues accruing the proportionate earnings or losses of the investment.
Investments are considered to be impaired when a decline in fair value is judged to be other-than-temporary. Fair value is
calculated based on publicly available market information or other estimates determined by management. The Company employs
a systematic methodology on a quarterly basis that considers available quantitative and qualitative evidence in evaluating potential
impairment of our investments. If the cost of an investment exceeds its fair value, the Company evaluates, among other factors,
general market conditions, credit quality, the duration and extent to which the fair value is less than cost, and for equity securities,
the Company’s intent and ability to hold, or plans to sell, the investment. The Company also considers specific adverse conditions
65
related to the financial health of and business outlook for the investee, including industry and sector performance, changes in
technology, and operational and financing cash flow factors. Once a decline in fair value is determined to be other-than-temporary,
an impairment charge is recorded to other income (expense), and a new cost basis in the investment is established. The Company
determined that there was no impairment of investments in joint ventures as of August 31, 2023.
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 whether 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. When evaluating assets for impairment, the Company groups long-lived
assets with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows
of other assets and liabilities. The Company determined that there were no indications that the carrying value of long-lived assets
was not recoverable as of August 31, 2023.
Acquisitions of Businesses - Business combinations are accounted for under the acquisition method. Identifiable assets acquired
and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the
acquisition date. Determining the fair value of assets acquired and liabilities and contingent liabilities assumed requires
management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect
to future cash inflows and outflows, probabilities of success, discount rates, and asset lives, among other items. The excess of the
fair value of the consideration transferred over the fair value of the Company’s share of the identifiable net assets acquired is
recorded as goodwill. Acquisition-related expenses are recognized separately from the business combination and are recognized as
general and administrative expense as incurred. The Company evaluates the materiality of required disclosures related to our
business combinations using quantitative and qualitative measures.
Goodwill and Other Intangible Assets- Goodwill represents the excess purchase price over the fair value of tangible net assets
acquired in acquisitions after amounts have been allocated to intangible assets. Goodwill is tested for impairment annually (at
August 31), or more frequently when events or changes in circumstances indicate that the asset might be impaired. Examples of
such events or circumstances include, but are not limited to, a significant adverse change in legal or business climate, an adverse
regulatory action or unanticipated competition.
The Company estimates the useful life of patents to be 17 years and customer relationships to be 15 years. This estimate is based
on a combination of factors, including the expected duration of patent protection, technological obsolescence, and market
conditions. Amortization of intangible assets is recorded using the straight-line method over their estimated useful lives.
The Company assesses qualitative factors to determine whether the existence of events or circumstances would indicate that it is
more likely than not that the fair value of the reporting unit is less than its carrying amount. If after assessing the totality of events
or circumstances, the Company were to determine that it is more likely than not that the fair value of the reporting unit is less than
its carrying amount, then the Company would perform a quantitative test that compares the fair value to its carrying value to
determine the amount of any impairment. The Company has determined there was no goodwill impairment as of August 31, 2023.
Income Taxes – The Company utilizes the asset and liability method of accounting for income taxes, which requires the
recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the
consolidated financial statements. 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 operations 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 assets in the future in excess of their net recorded
amount, the Company makes 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.
66
Foreign Currency Translation (Accumulated Other Comprehensive Income (Loss)) – The functional currency of NTIC China,
Zerust Brazil, Natur-Tec India, Natur Tec Lanka, Zerust Mexico, Zerust India, Zerust Singapore, Zerust Vietnam, Zerust Taiwan,
NTI Europe, 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, Natur Tec Lanka, Zerust India, Zerust Singapore, Zerust
Vietnam, Zerust Taiwan, NTI Asean, Zerust Mexico, NTI Europe, and NTIC’s 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 do 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.
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.
Common Stock – The Company issues authorized but unissued 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).
Subsequent Events – The Company has evaluated events occurring after the date of the consolidated financial statements for events
requiring disclosure in the consolidated financial statements.
Use of Estimates – The preparation of the consolidated 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 consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
2.
ACCOUNTING PRONOUNCEMENTS
In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-13,
Measurement of Credit Losses on Financial Instruments, which revises guidance for the accounting for credit losses on financial
instruments within its scope, and in November 2018, issued ASU No. 2018-19 and in April 2019, issued ASU No. 2019-04 and in
May 2019, issued ASU No. 2019-05, and in November 2019, issued ASU No. 2019-11, which amended the standard. The new
standard introduces an approach, based on expected losses, to estimate credit losses on certain types of financial instruments and
modifies the impairment model for available-for-sale debt securities. The new approach to estimating credit losses (referred to as
the current expected credit losses model) applies to most financial assets measured at amortized cost and certain other instruments,
including trade and other receivables, loans, held-to-maturity debt securities, net investments in leases and off-balance-sheet credit
exposures. This ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal
years. Entities are required to apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the
beginning of the first reporting period in which the guidance is adopted. The Company does not believe this accounting
pronouncement will have a material impact on the Company’s consolidated financial position or operating results.
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.
67
3.
INVENTORIES
Inventories consisted of the following:
Production materials
Finished goods
4.
PROPERTY AND EQUIPMENT, NET
Property and equipment, net consisted of the following:
Land
Buildings and improvements
Machinery and equipment
Less accumulated depreciation
$
August 31, 2023
4,960,355
8,136,134
$ 13,096,489
$
August 31, 2022
6,496,656
9,845,073
$ 16,341,729
August 31, 2023
496,965
17,250,392
5,984,364
23,731,721
(9,666,367)
14,065,354
$
$
August 31, 2022
310,365
14,778,759
5,643,320
20,732,444
(8,561,951)
12,170,493
$
$
On February 28, 2023, the Company purchased the property immediately adjacent to NTIC’s headquarters in Circle Pines,
Minnesota, which includes a 26,000 square foot industrial building, for $1,200,000. The building will be used primarily for
warehousing space and light industrial production. Depreciation expense was $1,042,505 for fiscal 2023 compared to $938,489 in
fiscal 2022.
5.
INTANGIBLE ASSETS, NET
Intangible assets, net consisted of the following:
Patents and trademarks
Customer relationships
Total intangible assets, net
Patents and trademarks
Customer relationships
Total intangible assets, net
As of August 31, 2023
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
$
$
$
$
3,339,717
6,347,000
9,686,717
$
$
(2,680,965)
(846,267)
(3,527,232)
As of August 31, 2022
Gross Carrying
Amount
Accumulated
Amortization
3,225,655
6,347,000
9,572,655
$
$
(2,515,644)
(423,133)
(2,938,777)
$
$
$
$
658,752
5,500,733
6,159,485
Net Carrying
Amount
710,011
5,923,867
6,633,878
Amortization expense related to intangible assets was $558,454 for fiscal 2023 compared to $629,843 for fiscal 2022.
As of August 31, 2023, future amortization expense related to intangible assets for each of the next five fiscal years and thereafter
is estimated as follows:
Fiscal 2024
Fiscal 2025
Fiscal 2026
Fiscal 2027
Fiscal 2028
Thereafter
Total
$
$
642,951
543,721
517,990
492,221
479,012
3,483,589
6,159,485
68
6.
INVESTMENTS IN JOINT VENTURES
The consolidated financial statements of the Company’s foreign joint ventures are initially prepared using the accounting
principles accepted in the respective joint ventures’ countries of domicile. Amounts related to foreign joint ventures reported in
the below tables and the accompanying consolidated financial statements have subsequently been adjusted to conform with U.S.
GAAP in all material respects. All material profits on sales recorded that remain on the consolidated balance sheet from the
Company to its joint ventures and from joint ventures to other joint ventures have been eliminated for financial reporting purposes.
Financial information from the audited and unaudited financial statements of the Company’s joint venture in Germany, Excor
Korrosionsschutz – Technologien und Produkte GmbH (EXCOR), and all the Company’s other joint ventures are summarized as
follows:
As of August 31, 2023
$
$
$
$
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
Net sales
Gross profit
Net income
Northern Technologies International
Corporation’s share of equity in
income of joint ventures
Northern Technologies International
Corporation’s dividends received from
joint ventures
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
Net sales
Gross profit
Net income
Northern Technologies International
Corporation’s share of equity in
income of joint ventures
Northern Technologies International
Corporation’s dividends received from
joint ventures
EXCOR
OTHER
Total
55,339,662 $ 27,862,458 $ 27,477,204
29,675,071
30,054,277
59,729,348
8,777,183
2,687,064
11,464,247
323,762
323,762
—
20,574,126
27,367,213
47,941,339
10,022,106
13,683,608
23,705,714
20,493,861
12,075,524
8,418,337
EXCOR
Fiscal Year Ended August 31, 2023
Total
100,682,316 $ 39,642,380 $ 61,039,936
21,080,172
19,016,389
3,203,887
5,730,311
3,600,490
2,852,229
40,096,561
8,934,198
6,452,719
OTHER
5,639,198
2,459,500
3,179,698
As of August 31, 2022
EXCOR
OTHER
Total
52,428,831 $ 26,047,914 $ 26,380,917
27,921,925
27,932,532
55,854,457
8,037,938
2,943,895
10,981,833
1,138,980
1,138,980
—
18,745,007
24,988,637
43,733,644
9,320,434
12,494,320
21,814,754
21,256,923
12,463,415
8,793,508
Fiscal Year Ended August 31, 2022
Total
EXCOR
104,077,748 $ 42,853,162 $ 61,224,586
20,718,247
20,312,400
41,030,647
2,814,382
6,487,855
9,302,237
1,488,929
3,236,989
4,725,918
OTHER
5,723,176
4,255,200
1,467,976
69
In August 2023, Tianjin Zerust (NTI ASEAN’s previously written-off joint venture in China) was deregistered and the remaining
cash was cleared by the Chinese authorities to be paid out to be shareholders. Subsequent to year end, NTI Asean received a final
liquidation of its ownership interest in the former joint venture of $1,986,027. This one-time equity gain on the liquidation of
previously written-off investment in Tianjin Zerust is included in joint venture operations. The final liquidation payment was
subject to withholding tax of $198,603 and minority income of $676,614 as NTIC owns 60% of NTI ASEAN. The transaction also
resulted in legal fees of $95,890, and a management bonus expense of $250,000.
7.
CORPORATE DEBT
On January 6, 2023, the Company entered into a Credit Agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A.
(“JPM”), which provides the Company with a senior secured revolving line of credit (the “Credit Facility”) of up to $10.0 million,
which includes a $5.0 million sublimit for standby letters of credit. Borrowings of $3,600,000 under the new Credit Agreement
were outstanding August 31, 2023. Borrowings of $5,900,000 were outstanding as of August 31, 2022 under the previous credit
agreement.
Unless terminated earlier, the Credit Facility will mature on January 6, 2024, and the principal amount thereunder, together with
all accrued unpaid interest and other amounts owing thereunder, if any, will be payable in full on such date. Borrowings under the
Credit Agreement bear interest at a floating rate, at the option of the Company, equal to either the CB Floating Rate or the
Adjusted SOFR Rate. The term “CB Floating Rate” means the greater of the Prime Rate in the United States or 2.50%. The term
“Adjusted SOFR Rate” means the term secured overnight financing rate for either one, three or six months (depending on the
interest period selected by the Company) plus 0.10% per annum. With respect to any borrowings using an Adjusted SOFR Rate,
there is an applicable margin of 2.15% applied per annum. There is no applicable margin with respect to borrowings using a CB
Floating Rate. The weighted average interest rate was 6.27 and 2.74 for fiscal 2023 and 2022, respectively.
To secure the Credit Agreement, the Company assigned JPM a continuing security interest in all of its right, title and interested in
collateral made up for the assets of the Company.
The Credit Agreement contains customary affirmative and negative covenants, including, among other matters, limitations on the
Company’s ability to incur additional debt, grant liens, engage in certain business operations and transactions, make certain
investments, modify its organizational documents or form any new subsidiaries, subject to certain exceptions. Further, the Credit
Agreement contains a negative covenant that restricts the ability of the Company to redeem or repurchase its common stock or pay
dividends if the result of which would cause an event of default under the Credit Agreement. The Credit Agreement also requires
the Company to maintain a Fixed Charge Coverage Ratio of at least 1.25 to 1.00. The term “Fixed Charge Coverage Ratio” means
the ratio, computed for the Company on a consolidated basis, of net income plus income tax expense, plus amortization expense,
plus depreciation expense, plus interest expense, and plus dividends received from joint ventures, minus unfinanced capital
expenditures and equity in income from joint ventures, all computed for the twelve month period then ending, to scheduled
principal payments made, plus scheduled finance lease payments made, plus interest expense paid, plus income tax expense paid,
and plus cash distributions and dividends paid, all computed for the same twelve month period then ending. The Company was in
compliance with all covenants as of August 31, 2023 and 2022.
The Credit Agreement also contains customary events of default, including, without limitation, payment defaults, material
inaccuracy of representations and warranties, covenant defaults, bankruptcy and insolvency proceedings, cross-defaults to certain
other agreements, breach of any financial covenant and change of control. Upon the occurrence and during the continuance of any
event of default, JPM may accelerate the payment of the obligations thereunder and exercise various other customary default
remedies.
In connection with the execution of the Credit Agreement described above, on January 6, 2023, the Amended and Restated Loan
Agreement dated August 31, 2021 between Northern Technologies International Corporation and PNC Bank, National Association
was terminated.
In accordance with ASC Topic No. 470, “Debt – Modifications and Extinguishments” (Topic 470), the transactions noted above
were determined to be a modification of the existing debt.
On each of April 10, 2023 and May 30, 2023, the Company’s wholly-owned subsidiary in China, NTIC China, entered into a loan
agreement with China Construction Bank Corporation. Each term loan provided NTIC China with a RMB 10,000,000 (USD
$1.45 million). Each of the term loans matures after one year with the principal due at that time, after which an extension of the
loan agreement is required. Both term loans have an annual interest rate of 3.25% with interest due monthly. Both term loans are
secured by an office building owned by NTIC China and the loan agreements contain certain financial and other covenants. The
Company was in compliance with the covenants as of August 31, 2023. The current outstanding balance as of August 31, 2023 for
both term loans was USD $2,757,176.
70
8.
STOCKHOLDERS’ EQUITY
During fiscal 2023, NTIC’s Board of Directors declared cash dividends on the following dates in the following amounts to holders
of record of NTIC common stock as of the following record dates:
Declaration Date
October 20, 2022
January 20, 2023
April 21, 2023
July 17, 2023
Amount
$0.07
$0.07
$0.07
$0.07
Record Date
November 3, 2022
February 1, 2023
May 3, 2023
August 2, 2023
Payable Date
November 16, 2022
February 15, 2023
May 17, 2023
August 16, 2023
During fiscal 2022, NTIC’s Board of Directors declared cash dividends on the following dates in the following amounts to holders
of record of NTIC common stock as of the following record dates:
Declaration Date
October 20, 2021
January 21, 2022
April 22, 2022
July 20, 2022
Amount
$0.07
$0.07
$0.07
$0.07
Record Date
November 3, 2021
February 2, 2022
May 4, 2022
August 3, 2022
Payable Date
November 17, 2021
February 16, 2022
May 18, 2022
August 17, 2022
During fiscal 2023 and fiscal 2022, the Company repurchased no shares of its common stock.
During fiscal 2023, the Company granted stock options under the Northern Technologies International Corporation 2019 Stock
Incentive Plan (as amended, the 2019 Plan) to purchase an aggregate of 277,613 shares of its common stock to various employees
and directors. The weighted average per share exercise price of the stock options is $11.41. The exercise price of the stock
options is equal to the fair market value of the Company’s common stock on the date of grant. During fiscal 2023, stock options to
purchase an aggregate of 265,209 shares of common stock were exercised at a weighted average exercise price of $6.46 per share,
resulting in the net issuance of 184,432 shares of common stock since some of the options were exercised on a net cashless
exercise basis.
During fiscal 2022, the Company granted stock options under the Northern Technologies International Corporation 2019 Stock
Incentive Plan (as amended, the 2019 Plan) to purchase an aggregate of 174,840 shares of its common stock to various employees
and directors. The weighted average per share exercise price of the stock options is $16.97. The exercise price of the stock
options is equal to the fair market value of the Company’s common stock on the date of grant. During fiscal 2022, stock options to
purchase an aggregate of 51,218 shares of common stock were exercised at a weighted average exercise price of $6.60 per share,
resulting in the net issuance of 42,071 shares of common stock since some of the options were exercised on a net cashless exercise
basis.
The Company issued 3,620 and 2,636 shares of common stock on September 1, 2022 and 2021, respectively, under the Northern
Technologies International Corporation Employee Stock Purchase Plan (ESPP). The Company issued 3,566 and 2,966 shares of
common stock on March 1, 2023 and 2022, respectively, under the ESPP. The ESPP is compensatory for financial reporting
purposes. As of August 31, 2023, 62,035 shares of common stock remained available for sale under the ESPP.
9.
NET INCOME PER COMMON SHARE
Basic net income per common share is computed by dividing net income by the weighted average number of common shares
outstanding. Diluted net income per share assumes the exercise of stock options using the treasury stock method, if dilutive.
71
The following is a reconciliation of the net income per share computation for fiscal 2023 and fiscal 2022:
Numerator:
Net income attributable to NTIC
August 31, 2023
August 31, 2022
$
2,912,276
$
6,324,700
Denominator:
Basic-weighted shares outstanding
Weighted shares assumed upon exercise of
stock options
Diluted – weighted shares outstanding
9,359,504
333,978
9,693,482
Basic net income per share:
Diluted net income per share:
$
$
0.31
0.30
$
$
9,216,216
418,812
9,635,028
0.69
0.66
The dilutive impact summarized above relates to the periods when the average market price of the Company’s common stock
exceeded the exercise price of the potentially dilutive option securities granted. Net income per common share was based on the
weighted average number of common shares outstanding during the periods when computing the basic net income per share.
When dilutive, stock options are included as equivalents using the treasury stock market method when computing the diluted net
income per share. Excluded from the computation of diluted net income per share as of August 31, 2023 were options outstanding
to purchase 322,246 shares of common stock. Excluded from the computation of diluted net income per share as of August 31,
2022 were options outstanding to purchase 600,094 shares of common stock.
10.
STOCK-BASED COMPENSATION
The Company has three stock-based compensation plans under which stock options or other stock-based awards have been
granted: the Northern Technologies International Corporation Amended and Restated 2019 Stock Incentive Plan, the Northern
Technologies International Corporation Amended and Restated 2007 Stock Incentive Plan (the 2007 Plan) and the Northern
Technologies International Corporation Employee Stock Purchase Plan. The 2019 Plan replaced the 2007 Plan with respect to
future grants; and, therefore, no further awards may be made under the 2007 Plan. The Compensation Committee of the Board of
Directors and the Board of Directors administer these plans.
The 2019 Plan provides for the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted
stock, stock unit awards, performance awards, and stock bonuses to eligible recipients to enable the Company and its subsidiaries
to attract and retain qualified individuals through opportunities for equity participation in the Company and to reward those
individuals who contribute to the achievement of the Company’s economic objectives. On January 15, 2021, the Company’s
stockholders approved certain amendments to the 2019 Plan, including an increase in the number of shares of common stock
available for issuance under the plan by an additional 800,000 shares. Subject to adjustment as provided in the 2019 Plan, up to a
maximum of 1,600,000 shares of the Company’s common stock are issuable under the 2019 Plan. Options granted generally have
a term of ten years and become exercisable over a one- or three- year period beginning on the one-year anniversary of the date of
grant. Options are granted at per share exercise prices equal to the market value of the Company’s common stock on the date of
grant. The Company issues new shares upon the exercise of options. As of August 31, 2023, options to purchase an aggregate of
1,117,570 shares of the Company’s common stock were outstanding under the 2019 Plan and 426,904 shares of the Company’s
common stock remain available for grant under the 2019 Plan. As of August 31, 2023, options to purchase an aggregate of 439,560
shares of the Company’s common stock were outstanding under the 2007 Plan.
The Company granted options to purchase an aggregate of 277,613 and 174,840 shares of its common stock during fiscal 2023 and
2022, respectively. The fair value of option grants is determined at the date of grant using the Black-Scholes option pricing model
with the assumptions listed below. The Company recognized compensation expense of $1,337,734 during fiscal 2023 and
compensation expense of $931,532 during fiscal 2022 related to the options that vested during such time period. As of August 31,
2023, the total compensation cost for non-vested options not yet recognized in the Company’s consolidated statements of
operations was $1,019,291. Stock-based compensation expense of $682,724 is expected during fiscal 2024 and $336,567 is
expected to be recognized during fiscal 2025, based on outstanding options as of August 31, 2023. 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.
72
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
Fiscal Year 2023
2.44%
45.2%
10 years
3.31%
Fiscal Year 2022
1.65%
45.4%
10 years
0.77%
Stock option activity during the periods indicated was as follows:
Outstanding at August 31, 2021
Options granted
Options exercised
Options terminated
Outstanding at August 31, 2022
Options granted
Options exercised
Options terminated
Number of
Shares (#)
1,426,651
174,840
(51,218)
(5,546)
1,544,727
277,613
(265,209)
—
Weighted Average
Exercise Price
Aggregate
Intrinsic Value
$
$
9.30
16.97
6.60
18.23
10.23
11.41
6.46
—
Outstanding at August 31, 2023
1,557,130
$
11.08
$
4,240,525
Exercisable at August 31, 2023
1,079,897
$
10.77
$
3,329,061
The weighted average per share fair value of options granted during fiscal 2023 and fiscal 2022 was $11.41 and $16.97, respectively.
The weighted average remaining contractual life of the options outstanding as of August 31, 2023 and 2022 was 6.25 years and 5.76
years, respectively.
11.
SEGMENT AND GEOGRAPHIC INFORMATION
Segment Information
The Company’s chief operating decision maker is its Chief Executive Officer. The Company’s business is organized into 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
almost 50 years and, more recently, has also expanded into the oil and gas industry. The Company also sells a portfolio of
proprietary 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:
ZERUST® net sales
Natur-Tec® net sales
Total net sales
Fiscal 2023
Fiscal 2022
$
$
61,728,364 $
18,174,588
79,902,952 $
57,459,382
16,699,508
74,158,890
The following table sets forth the Company’s cost of goods sold by segment:
Fiscal 2023
Fiscal 2022
Direct cost of goods sold
ZERUST®
Natur-Tec®
Indirect cost of goods sold
Total net cost of goods sold $
$
35,297,352 $
13,645,992
3,155,777
52,099,121 $
34,673,146
12,859,343
3,557,809
51,090,298
73
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.
All joint venture operations, including equity in income, fees for services, and related dividends, are related to ZERUST® products
and services.
Geographic Information
Net sales by geographic location for fiscal 2023 and fiscal 2022 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,
2023
28,554,354
2022
$
25,301,067
3,401,910
47,946,688
79,902,952
$
2,968,089
45,889,734
74,158,890
$
$
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 2023 and fiscal 2022, respectively, were as follows:
Germany
Poland
Japan
Sweden
France
Finland
Czech Republic
Thailand
United Kingdom
South Korea
Indonesia
Other
$
$
Fiscal 2023
816,089
810,977
658,934
498,463
479,515
388,627
365,018
340,657
283,418
266,562
130,081
150,844
5,189,185
% of Total
Fees for
Services
Provided to
Joint
Ventures
15.7% $
15.6%
12.7%
9.6%
9.2%
7.5%
7.0%
6.6%
5.5%
5.1%
2.5%
3.0%
100.0% $
Fiscal 2022
834,725
730,523
669,371
447,441
448,579
340,783
300,257
344,649
342,488
270,309
156,476
882,081
5,767,682
% of Total
Fees for
Services
Provided to
Joint
Ventures
14.5%
12.7%
11.6%
7.8%
7.8%
5.9%
5.2%
6.0%
5.9%
4.7%
2.7%
15.2%
100.0%
Sales to the Company’s joint ventures are included in the foregoing segment and geographic information; however, sales by the
Company’s joint ventures to other parties are not included. The foregoing segment and geographic information represents only
sales recognized directly by the Company and sold in that geographic territory.
See Note 6 for additional details on geographical information regarding equity in income from joint ventures.
74
The geographical distribution of total property and equipment and net sales is as follows:
China
Other
United States
Total property and equipment
At August 31, 2023
5,729,080
745,469
7,590,805
14,065,354
$
$
China
Brazil
India
Other
United States
Total net sales
Fiscal Year Ended
August 31, 2023
13,469,075
5,969,314
19,916,834
11,993,375
28,554,354
79,902,952
$
$
At August 31, 2022
$
$
$
$
5,826,898
565,022
5,778,573
12,170,493
Fiscal Year Ended
August 31, 2022
15,754,051
5,160,572
18,555,603
9,387,597
25,301,067
74,158,890
Long-lived assets consist of property and equipment. These assets are periodically reviewed to assure the net realizable value from
the estimated future production based on forecasted sales exceeds the carrying value of the assets.
Sales to the Company’s joint ventures are included in the foregoing segment and geographic information; however, sales by the
Company’s joint ventures to other parties are not included. The foregoing segment and geographic information represents only
sales recognized directly by the Company and sold in that geographic territory.
All joint venture operations, including equity in income, fees for services and related dividends, are primarily related to ZERUST®
products and services.
12.
EMPLOYEE RETENTION CREDIT
The Company engaged tax advisors of a Big 4 accounting firm which determined the Company qualified for Employee Retention
Credits. The Company qualified for Employee Retention Credits on qualified wages paid in the first and second quarters of 2021
and filed for credits in the second and third quarters of fiscal 2023, respectively. The Company recognizes government grants for
which there is a reasonable assurance of compliance with grant conditions and receipt of credits. In 2023, the Company filed for
$1,139,756 in Employee Retention Credits, but did not recognize the credits on the Company’s financial statements as there was
not reasonable assurances that the Company would receive the credits.
13.
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 $289,235 and $272,257 for fiscal 2023
and fiscal 2022, respectively.
14.
RELATED PARTY TRANSACTIONS
During both fiscal 2023 and fiscal 2022, the Company made consulting payments of $144,000 to Bioplastic Polymers LLC, an
entity owned by Ramani Narayan, Ph.D., a director of the Company. Dr. Narayan provides certain consulting services to the
Company relating to the Natur-Tec® business and bioplastics program.
75
15.
INCOME TAXES
The provision for income taxes for the fiscal years ended August 31, 2023 and 2022 was approximately as follows:
Current:
Federal
State
Foreign
Deferred:
Federal
State
Foreign
Fiscal Year Ended August 31,
2022
2023
$
$
—
26,000
1,857,000
1,883,000
—
—
(533,400)
(533,400)
—
98,000
1,894,000
1,992,000
—
—
(118,164)
(118,164)
$
1,349,600
$
1,873,836
Reconciliations of the expected federal income tax at the statutory rate of 21.0% with the provisions for income taxes for the fiscal
years ended August 31, 2023 and 2022 were approximately as follows:
Fiscal Year Ended August 31,
2023
2022
Tax computed at statutory rates
State income tax, net of federal benefit
Tax effect on equity in income of international joint ventures
Tax effect of foreign operations
Deemed repatriation
Foreign tax credit
Research and development credit
Valuation allowance
Stock based compensation
Non-controlling interest
Prior year true-up
Other
$
$
1,352,000 $
(20,000)
(1,354,000)
1,005,000
—
783,000
(710,000)
354,000
31,000
(59,000)
(51,000)
18,600
1,349,600 $
1,780,000
34,000
(988,000)
1,004,000
10,000
—
(244,000)
133,000
67,000
(72,000)
—
149,836
1,873,836
The Company has not provided U.S. income taxes or foreign withholding taxes with respect to its portion of the cumulative
undistributed earnings of certain foreign subsidiaries and joint ventures that are essentially permanent in duration. As a result of
the 2017 tax law changes, U.S. federal income taxes on dividends received from the Company’s foreign subsidiaries and joint
ventures after December 31, 2017 have been generally eliminated. However, the Company continues to be subject to foreign
withholding taxes upon repatriation of any undistributed earnings that are not essentially permanent in duration. The Company
recorded a tax expense of approximately $51,600 and $8,000 during fiscal 2023 and fiscal 2022, respectively, representing
changes in the deferred tax liability for foreign withholding taxes to be paid with respect to the portion of the cumulative
undistributed earnings of foreign subsidiaries and joint ventures that the Company determined were not essentially permanent in
duration.
The Company measures deferred tax assets and liabilities using enacted tax rates that will apply in the years in which the
temporary differences are expected to be recovered or paid. The tax effect of the temporary differences and tax carryforwards
comprising the net deferred taxes shown on the consolidated balance sheets as of August 31, 2023 and 2022 was approximately as
follows:
76
Stock-based compensation
Foreign tax credit carryforward
Capitalized research and experimentation
Other credit and loss carryforward
Other
Total deferred tax assets
Valuation allowance
Total deferred tax assets after valuation allowance
Right-of-use asset
Intangible assets
Unremitted foreign earnings
Other
Total deferred tax liabilities
Net deferred tax liabilities
August 31,
2023
556,700
4,036,000
1,106,000
6,034,000
1,048,800
12,781,500
(11,933,700)
847,800
(66,200)
(1,670,700)
(214,800)
(201,215)
(2,152,915)
(1,305,115)
$
$
2022
547,200
4,892,100
—
5,455,500
1,095,300
11,990,100
(11,592,900)
397,200
(98,300)
(1,777,200)
(163,200)
(58,500)
(2,097,200)
(1,700,000)
$
$
As of August 31, 2023, the Company has foreign tax credit carryforwards of $4,036,000. This amount begins to expire to the
extent not utilized by August 31, 2024. In addition, the Company had federal and state tax credit carryforwards of $4,503,600 as
of August 31, 2023, which begin to expire in fiscal 2024. These federal and state tax credit carryforwards consist primarily of
federal and Minnesota research and development credit carryforwards. The Company also has a deferred tax asset of $748,000 for
federal net operating loss carryforwards and $290,000 for state net operating loss carryforwards as of August 31, 2023. The
federal net operating loss carryforward has an indefinite carryforward period. The state net operating loss carryforward will begin
to expire to the extent not utilized by August 31, 2024. The Company has a deferred tax asset of $492,500 for foreign net
operating loss carryforwards, which will begin to expire to the extent not utilized by August 31, 2033.
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 its domestic deferred tax assets will not be realized due to the absence of objectively verifiable sources of
taxable income. On the basis of this evaluation, the Company has recorded a valuation allowance of $11,933,700 and $11,592,900
as of August 31, 2023 and 2022, respectively, to recognize only the portion of the deferred tax assets that is more likely than not to
be realized. The net deferred tax asset as of August 31, 2023 and 2022 relates entirely to non-US deferred tax assets which are
expected to be realized offset by deferred tax liability for withholding tax on cumulative undistributed earnings in foreign
subsidiaries and joint ventures that the Company determined were not essentially permanent. The change in the valuation
allowance totaled an increase of $340,800 and $145,400 for the years ended August 31, 2023 and 2022, respectively.
The following is a tabular reconciliation of the total amounts of approximated 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,
2023
319,000 $
100
42,100
361,200 $
$
$
2022
297,600
3,400
18,000
319,000
The entire amount of unrecognized tax benefits would affect the effective tax rate if recognized. It is not expected that the amount
of unrecognized tax benefits will change significantly in the next 12 months.
The Company recognizes interest related to unrecognized tax benefits and penalties as income tax expense. 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 as of both August 31, 2023 and August 31, 2022.
77
On August 16, 2022, the Inflation Reduction Act (“IRA”) was signed into law in the United States. Among other provisions, the
IRA includes a 15% corporate minimum tax rate applied to certain large corporations and a 1% excise tax on corporate stock
repurchases made after December 31, 2022. The IRA has not had a material impact on our consolidated financial statements.
The Company is subject to taxation in the United States and various states and foreign jurisdictions. With few exceptions, as of
August 31, 2023, the Company is no longer subject to federal, state, local, or foreign examinations by tax authorities for years
prior to August 31, 2020.
16.
COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company currently has operating leases for various buildings, equipment and vehicles. These leases are under non-cancelable
operating lease agreements with expiration dates between September 30, 2022 and May 31, 2028. The Company has the option to
extend certain leases to five or ten-year term(s) and has the right of first refusal on any sale.
The Company records lease liabilities within current liabilities or long-term liabilities based upon the length of time associated
with the lease payments. The Company records its long-term operating leases as right-of-use assets. Upon initial adoption, using
the modified retrospective transition approach, no leases with terms less than 12 months have been capitalized to the consolidated
balance sheet consistent with ASC 842. Instead, these leases are recognized in the consolidated statement of operations on a
straight-line expense throughout the lives of the leases. None of the Company’s leases contain common area maintenance or
security agreements.
The Company has made certain assumptions and judgments when applying ASC 842, the most significant of which is that the
Company elected the package of practical expedients available for transition that allow the Company to not reassess whether
expired or existing contracts contain leases under the new definition of a lease, lease classification for expired or existing leases
and whether previously capitalized initial direct costs would qualify for capitalization under ASC 842. Additionally, the Company
did not elect to use hindsight when considering judgments and estimates such as assessments of lessee options to extend or
terminate a lease or purchase the underlying asset. The Company has no contingent rent agreements.
Present Value of Leases
Right-of-use assets, net
Current portion of lease liability
Lease liability, less current portion
Total lease liability
August 31,
2023
August 31,
2022
$
428,874
$
557,571
340,799
88,075
428,874
373,330
184,241
557,571
$
$
As of August 31, 2023, the weighted-average remaining lease term was 1.21 years. The Company’s lease agreements do not
provide a readily determinable implicit rate nor is it available to the Company from its lessors. Instead, as of August 31, 2023, the
Company estimates the weighted-average discount rate for its operating leases to be 7.6% to present value based on the
incremental borrowing rate.
Future minimum payments as of August 31, 2023 under these long-term operating leases are as follows (in thousands):
Fiscal 2024
Fiscal 2025
Fiscal 2026
Thereafter
Total future minimum lease payments
Less amount representing interest
Present value of obligations under operating leases
Less current portion
Long-term operating lease obligations
$
$
340,799
93,568
11,166
9,639
455,172
(26,298)
428,874
(340,799)
88,075
Operating lease cost under these leases was approximately $373,330 and $272,336 as of August 31, 2023 and 2022, respectively.
78
Annual Bonus Plan
On August 28, 2023, 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, 2024. For fiscal 2024, as in past years, the total amount available under the bonus plan for all plan participants, including
executive officers, is dependent upon the Company’s earnings before interest, taxes, and other income (EBITOI), as adjusted to
take into account amounts to be paid under the bonus plan and certain other adjustments (Adjusted EBITOI). Each plan
participant’s percentage of the overall bonus pool is based upon the number of plan participants, the individual’s annual base
salary, and the individual’s position and level of responsibility within the Company. In the case of each of the Company’s
executive officer participants, 75% of the amount of their individual bonus payout will be determined based upon the Company’s
actual EBITOI for fiscal 2024 compared to a pre-established target EBITOI for fiscal 2024, and 25% of the payout will be
determined based upon such executive officer’s achievement of certain pre-established individual performance objectives. The
payment of bonuses under the plan is discretionary, and bonuses may be paid to executive officer participants in both cash and
shares of the Company’s common stock, the exact amount and percentages of which are determined by the Company’s Board of
Directors, upon recommendation of the Compensation Committee, after the completion of the Company’s consolidated financial
statements for fiscal 2024.
On August 26, 2022, 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, 2023. $2,000,000 was recognized for bonuses for the fiscal year ended August 31, 2023, $800,000 of the bonus is comprised
of stock options granted to management on September 1, 2022 that will be expensed over three years and $1,200,000 will be paid
out in cash and profit sharing subsequent to year end. This is compared to $1,733,336 recognized for bonuses for the fiscal year
ended August 31, 2022, $533,336 of the bonus comprised of stock options granted to management on September 1, 2021 and
$1,200,000 was paid out in cash and profit sharing subsequent to year end.
Concentrations
Two joint ventures (consisting of the Company’s joint ventures in United States and South Korea) accounted for 40.1% of the
Company’s trade joint venture receivables as of August 31, 2023, and two joint ventures (consisting of the Company’s joint
ventures in South Korea and Thailand) accounted for 46.6% of the Company’s trade joint venture receivables as of August 31,
2022.
Legal Matters
From time to time, the Company is subject to various other claims and legal actions in the ordinary course of its business. The
Company records a liability in its consolidated financial statements for costs related to claims, including future legal costs,
settlements and judgments, where the Company has assessed that a loss is probable and an amount could be reasonably estimated.
If the reasonable estimate of a probable loss is a range, the Company records the most probable estimate of the loss or the
minimum amount when no amount within the range is a better estimate than any other amount. The Company discloses a
contingent liability even if the liability is not probable or the amount is not estimable, or both, if there is a reasonable possibility
that material loss may have been incurred. In the opinion of management, as of August 31, 2023, the amount of liability, if any,
with respect to these matters, individually or in the aggregate, will not materially affect the Company’s consolidated results of
operations, financial position, or cash flows.
17.
SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental disclosures of cash flow information consisted of:
Cash paid for income tax
Cash paid for interest
Cash paid for operating leases
Fiscal Year Ended
August 31,
2023
$ 1,064,894
461,805
373,330
2022
$ 1,218,467
89,096
272,336
79
18.
FAIR VALUE MEASUREMENTS
Assets and liabilities that are measured at fair value on a recurring basis primarily relate to marketable equity securities. These
items are marked-to-market at each reporting period, and the Company estimates that market value approximates costs.
The following tables provide information by level for assets and liabilities that are measured at fair value on a recurring basis:
Available for sale securities
$
5,590
$
5,590
Fair value as of
August 31, 2022
Level 1
Level 2
$ —
Level 3
$ —
There were no transfers between Level 1, Level 2, or Level 3 during the fiscal year ended August 31, 2023 or 2022.
Fair Value Measurements
Using Inputs Considered as
19.
SUBSEQUENT EVENTS
On October 18, 2023, the Company’s Board of Directors declared a cash dividend of $0.07 per share of the Company’s common
stock, payable on November 15, 2023 to stockholders of record on November 1, 2023. The declaration of future dividends is not
guaranteed and will be determined by the Company’s Board of Directors in light of conditions then existing, including the
Company’s earnings, financial condition, cash requirements, restrictions in financing agreements, business conditions, and other
factors, including without limitation the effect of COVID-19 on its business, operating results, and financial condition.
80
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, and because of a
material weakness in NTIC’s control over the financial reporting as described below, NTIC’s Chief Executive Officer
and Chief Financial Officer concluded that NTIC’s disclosure controls and procedures were not 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), for Northern Technologies International
Corporation and its subsidiaries. This system is designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally
accepted accounting principles.
NTIC’s internal control over financial reporting includes those policies and procedures that (i) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with U.S. 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 (iii) 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 financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements,
and even when determined to be effective, can only provide reasonable assurance with respect to financial statement
preparation and presentation. In addition, projection of any evaluation of the effectiveness of internal control over
financial reporting to future periods is 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.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such
that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not
be prevented or detected on a timely basis. . Management, with the participation of NTIC’s President and Chief
Executive Officer and Chief Financial Officer, evaluated the effectiveness of NTIC’s internal control over financial
reporting as of August 31, 2023. In making this evaluation, management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework (2013). Based on
this assessment, and because of the material weakness in NTIC’s control over the financial reporting as described
below, management concluded that the Company’s internal control over financial reporting was not effective as of
August 31, 2023.
81
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law
providing numerous tax provisions and other stimulus measures, including an employee retention credit, which is a
refundable tax credit against certain employment taxes. The Taxpayer Certainty and Disaster Tax Relief Act of 2020
and the American Rescue Plan Act of 2021 extended and expanded the availability of the employee retention credit.
NTIC engaged tax advisors of a Big 4 accounting firm which determined NTIC qualified for ERCs. NTIC qualified for
employee retention credits on qualified wages paid in the first and second quarters of 2021 and filed for and recognized
income from the employee retention credits in the second and third quarters of fiscal 2023. In connection with the
preparation of its consolidated financial statements for the fiscal year ended August 31, 2023 included in this report,
NTIC concluded that it should have accounted for the employee retention credits as government grants in accordance
with International Accounting Standard (IAS) 20, Accounting for Government Grants and Disclosure of Government
Assistance (“IAS 20”) since U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) do not provide for the
accounting of government grants. Pursuant to IAS 20, NTIC cannot recognize any income from the grant until it is
“reasonably assured” that the grant conditions will be met and that the grant will be received, at which time grant
income is recorded on a systematic basis over the periods in which NTIC recognizes the payroll expenses for which the
grant is intended to compensate. In connection with the preparation of its consolidated financial statements for the
fiscal year ended August 31, 2023 included in this report, NTIC determined that it was not yet reasonably assured that
the grant conditions will be met, requiring the restatement of its previously issued consolidated financial statements for
the three and six months ended February 28, 2023 and three and nine months ended May 31, 2023. This control
deficiency resulted in the restatement of NTIC’s consolidated financial statements for the three and six months ended
February 28, 2023 and the three and nine months ended May 31, 2023. Accordingly, management determined that this
control deficiency constitutes a material weakness in NTIC’s internal control over financial reporting.
NTIC’s management is taking steps to remediate the material weakness in its internal control over financial reporting
relating to the proper accounting treatment of the employee retention credits. These steps will include the preparation of
a technical accounting memorandum for any material unusual transactions including careful evaluation of any
probability assessments or other areas of judgement involved, such as the employee retention credits, to determine the
correct accounting treatment for such transactions. Management believes the additional control procedures designed,
and when implemented, will fully remediate the material weakness.
This report does not include an attestation report of NTIC’s independent registered public accounting firm regarding
internal control over financial reporting. Management’s report was not subject to attestation by NTIC’s independent
registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit NTIC to
provide only management’s report in this report.
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, 2023 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 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
82
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors
PART III
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
Part I under the heading “Executive Officers of the Registrant.”
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 2023, there were 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.
83
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, 2023. NTIC’s equity compensation plans as of August 31, 2023 were the Northern Technologies
International Corporation Amended and Restated 2019 Stock Incentive Plan, 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 $50,000 in options to purchase
shares of NTIC common stock to NTIC’s directors in consideration for their services as directors of NTIC and an
automatic annual grant of $10,000 in options to purchase shares of NTIC common stock to NTIC’s Chair of the Board
in consideration for his services as Chair, in each case on the first day of each fiscal year, and automatic initial pro rata
grants of $50,000 in options to purchase shares of NTIC common stock to NTIC’s new directors in consideration for
their services as directors of NTIC on the first date of their appointment as directors, options and other awards granted
in the future under the Northern Technologies International Corporation Amended and Restated 2019 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. No future grants of options or other stock awards will be made under the
Northern Technologies International Corporation Amended and Restated 2007 Stock Incentive Plan.
(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))
1,557,130(1)(2)
—
1,557,130(1)(2)
$11.08
—
$11.08
488,939(3)
—
488,939(3)
Plan Category
Equity compensation plans
approved by security holders
Equity compensation plans not
approved by security holders
Total
______________________
(1) Amount includes 439,560 shares of NTIC common stock issuable upon the exercise of stock options outstanding
as of August 31, 2023 under the Northern Technologies International Corporation Amended and Restated 2007
Stock Incentive Plan and 1,117,570 shares of NTIC common stock issuable upon the exercise of stock options
outstanding as of August 31, 2023 under the Northern Technologies International Corporation Amended and
Restated 2019 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 426,904 shares available as of August 31, 2023 for future issuance under Northern Technologies
International Corporation Amended and Restated 2019 Stock Incentive Plan and 62,035 shares available at August
31, 2023 for future issuance under the Northern Technologies International Corporation Employee Stock Purchase
Plan.
84
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 ACCOUNTANT 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.
85
PART IV
Item 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES
Financial Statements
NTIC’s consolidated financial statements are included in Item 8 of Part III of this report.
Financial Statement Schedules
All financial statement schedules are omitted because they are inapplicable since NTIC is a smaller reporting company.
Exhibits
The exhibits being filed or furnished with this report are listed below. Each management contract or compensatory plan
or arrangement required to be filed as an exhibit to this report is asterisked below.
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.
Item No.
3.1
Item
Restated Certificate of Incorporation of Northern
Technologies International Corporation
3.2
Second Amended and Restated Bylaws of Northern
Technologies International Corporation
4.1
Specimen Stock Certificate Representing Common
Stock of Northern Technologies International
Corporation
4.2
10.1
10.2
Description of Common Stock of Northern
Technologies International Corporation
Northern Technologies International Corporation
Amended and Restated 2019 Stock Incentive Plan*
Form of Incentive Stock Option Agreement for
Northern Technologies International Corporation
Amended and Restated 2019 Stock Incentive Plan*
Method of Filing
Incorporated by reference to Exhibit 3.1 to
NTIC’s Quarterly Report on Form 10-Q for
the fiscal quarter ended February 28, 2023
(File No. 001-11038)
Incorporated by reference to Exhibit 3.1 to
NTIC’s Current Report on Form 8-K as
filed with the Securities and Exchange
Commission on November 21, 2022 (File
No. 001-11038)
Incorporated by reference to Exhibit 4.1 to
NTIC’s Registration Statement on Form 10
(File No. 001-19331) (Filed on paper -
hyperlink is not required pursuant to Rule
105 of Regulation S-T)
Filed herewith
Incorporated by reference to Exhibit 10.1 to
NTIC’s Current Report on Form 8-K as
filed with the Securities and Exchange
Commission on January 15, 2021 (File No.
001-11038)
Incorporated by reference to Exhibit 10.2 to
NTIC’s Current Report on Form 8-K as
filed with the Securities and Exchange
Commission on January 25, 2019 (File No.
001-11038)
86
Item No.
10.3
Item
Form of Non-Statutory Stock Option Agreement
for Northern Technologies International
Corporation Amended and Restated 2019 Stock
Incentive Plan*
10.4
Northern Technologies International Corporation
Amended and Restated 2007 Stock Incentive Plan*
10.5
10.6
Form of Incentive Stock Option Agreement for
Northern Technologies International Corporation
Amended and Restated 2007 Stock Incentive Plan*
Form of Non-Statutory Stock Option Agreement
for Northern Technologies International
Corporation Amended and Restated 2007 Stock
Incentive Plan*
10.7
Northern Technologies International Corporation
Employee Stock Purchase Plan*
10.8
Material Terms of Northern Technologies
International Corporation Annual Bonus Plan*
10.9
Form of Indemnification Agreement between
Northern Technologies International Corporation
and its Directors and Officers*
Executive Employment Agreement dated as of
November 18, 2011 between Northern
Technologies International Corporation and G.
Patrick Lynch*
Confidential Information, Inventions Assignment,
Noncompetition and Non-Solicitation Agreement
dated as of November 18, 2011 between Northern
Technologies International Corporation and G.
Patrick Lynch*
10.10
10.11
10.12
Method of Filing
Incorporated by reference to Exhibit 10.3 to
NTIC’s Current Report on Form 8-K as
filed with the Securities and Exchange
Commission on January 25, 2019 (File No.
001-11038)
Incorporated by reference to Exhibit 10.1 to
NTIC’s Current Report on Form 8-K as
filed with the Securities and Exchange
Commission on January 24, 2011 (File No.
001-11038)
Incorporated by reference to Exhibit 10.2 to
NTIC’s Current Report on Form 8-K as
filed with the Securities and Exchange
Commission on January 24, 2011 (File No.
001-11038)
Incorporated by reference to Exhibit 10.3 to
NTIC’s Current Report on Form 8-K as
filed with the Securities and Exchange
Commission on January 24, 2011 (File No.
001-11038)
Incorporated by reference to Exhibit 10.11
to NTIC’s Annual Report on Form 10-KSB
for the fiscal year ended August 31, 2006
(File No. 001-11038)
Incorporated by reference to Exhibit 10.6 to
NTIC’s Annual Report on Form 10-K for
the fiscal year ended August 31, 2015 (File
No. 001-11038)
Incorporated by reference to Exhibit 10.1 to
NTIC’s Current Report on Form 8-K as
filed with the Securities and Exchange
Commission on October 23, 2019 (File No.
001-11038)
Incorporated by reference to Exhibit 10.13
to NTIC’s Annual Report on Form 10-K for
the fiscal year ended August 31, 2011 (File
No. 001-11038)
Incorporated by reference to Exhibit 10.14
to NTIC’s Annual Report on Form 10-K for
the fiscal year ended August 31, 2011 (File
No. 001-11038)
Executive Employment Agreement dated as of
November 18, 2011 between Northern
Technologies International Corporation and
Matthew C. Wolsfeld*
Incorporated by reference to Exhibit 10.15
to NTIC’s Annual Report on Form 10-K for
the fiscal year ended August 31, 2011 (File
No. 001-11038)
87
Item No.
10.13
Item
Confidential Information, Inventions Assignment,
Noncompetition and Non-Solicitation Agreement
dated as of November 18, 2011 between Northern
Technologies International Corporation and
Matthew C. Wolsfeld*
Method of Filing
Incorporated by reference to Exhibit 10.16
to NTIC’s Annual Report on Form 10-K for
the fiscal year ended August 31, 2011 (File
No. 001-11038)
Credit Agreement between JPMorgan Chase Bank,
N.A. and Northern Technologies International
Corporation, dated December 19, 2022
Incorporated by reference to Exhibit 10.1 to
NTIC’s Quarterly Report on Form 10-Q for
the fiscal quarter ended February 28, 2023
(File No. 001-11038)
Consulting Agreement dated January 11, 2017 by
and among Northern Technologies International
Corporation, BioPlastic Polymers LLC, and
Ramani Narayan, Ph.D.
Incorporated by reference to Exhibit 10.2 to
NTIC’s Quarterly Report on Form 10-Q for
the fiscal quarter ended November 30, 2016
(File No. 001-11038)
Amendment to Consulting Agreement effective
January 11, 2022 by and among Northern
Technologies International Corporation, BioPlastic
Polymers LLC, and Ramani Narayan, Ph.D.
Incorporated by reference to Exhibit 10.24
to NTIC’s Annual Report on Form 10-K for
the fiscal year ended August 31, 2022
(File No. 001-11038)
10.14
10.15
10.16
10.17
10.18
Incorporated by reference to Exhibit 10.1 to
NTIC’s Current Report on Form 8-K as
filed with the Securities and Exchange
Commission on July 8, 2021 (File No. 001-
11038)
Incorporated by reference to Exhibit 10.2 to
NTIC’s Current Report on Form 8-K as
filed with the Securities and Exchange
Commission on July 8, 2021 (File No. 001-
11038)
Incorporated by reference to Exhibit 14.1 to
NTIC’s Annual Report on Form 10-KSB for
the fiscal year ended August 31, 2004 (File
No. 001-11038)
Filed herewith
Filed herewith
Filed herewith
Filed herewith
Real Estate Purchase and Sales Contract dated July
7, 2021 between NTIC (Shanghai) Co., Ltd. And
Shanghai FASTO Investment Group Limited
Company (Official Chinese Version)
Unofficial English Summary of Real Estate
Purchase and Sales Contract dated July 7, 2021
between NTIC (Shanghai) Co., Ltd. and Shanghai
FASTO Investment Group Limited Company
14.1
Code of Ethics
21.1
Subsidiaries of the Registrant
23.1
Consent of Baker Tilly US, LLP
31.1
31.2
Certification of President and Chief Executive
Officer Pursuant to SEC Rule 13a-14(a), as
adopted pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002
Certification of Chief Financial Officer Pursuant to
SEC Rule 13a-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
88
Method of Filing
Furnished herewith
Furnished herewith
Filed herewith
Filed herewith
Item No.
32.1
Item
Certification of President and Chief Executive
Officer Pursuant to Rule 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
32.2
97.1
101
Certification of Chief Financial Officer Pursuant to
Rule 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
Northern Technologies International Corporation
Clawback Policy
The following materials from Northern
Technologies International Corporation’s Annual
Report on Form 10-K for the fiscal year ended
August 31, 2023, formatted in Inline XBRL
(Extensible Business Reporting Language): (i) the
Consolidated Balance Sheets, (ii) the Consolidated
Statements of Operations, (iii) the Consolidated
Statements of Comprehensive Income, (iv) the
Consolidated Statements of Equity, (v) the
Consolidated Statements of Cash Flows, and
(vi) Notes to Consolidated Financial Statements
104
Cover Page Interactive Data File (formatted as
Inline XBRL and contained in Exhibit 101)
__________________________
*
A management contract or compensatory plan or arrangement.
Contained in Exhibit 101
Item 16. FORM 10-K SUMMARY
None.
89
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 21, 2023
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 and in the capacities and on the dates indicated.
Name
Title
Date
/s/ G. Patrick Lynch
G. Patrick Lynch
President and Chief Executive Officer and
Director
(principal executive officer)
November 21, 2023
/s/ Matthew C. Wolsfeld, CPA
Matthew C. Wolsfeld, CPA
Chief Financial Officer and Corporate Secretary
(principal financial and accounting officer)
November 21, 2023
/s/ Richard J. Nigon
Richard J. Nigon
/s/ Nancy E. Calderon
Nancy E. Calderon
/s/ Sarah E. Kemp
Sarah E. Kemp
/s/ Sunggyu Lee, Ph.D.
Sunggyu Lee, Ph.D.
/s/ Ramani Narayan, Ph. D.
Ramani Narayan, Ph.D.
/s/ Cristina Pinho
Cristina Pinho
/s/ Konstantin von Falkenhausen
Konstantin von Falkenhausen
Chairman of the Board
November 21, 2023
November 21, 2023
November 21, 2023
November 21, 2023
November 21, 2023
November 21, 2023
November 21, 2023
Director
Director
Director
Director
Director
Director
90
Board of Directors
Mr. Richard J. Nigon
Chairman of the Board, NTIC
Senior Vice President, Cedar Point Capital, Inc.
Mr. G. Patrick Lynch
President & CEO, NTIC
Dr. Ramani Narayan
Distinguished Professor in the Department of
Chemical Engineering & Materials Science, Michigan
State University
Dr. Sunggyu Lee
Chief Technologist, Chemtech Innovators LLC
Mr. Konstantin von Falkenhausen
Partner, B Capital Partners AG
Ms. Sarah E. Kemp
Vice President, International Government Affairs, Intel
Corporation
Ms. Nancy E. Calderon
Former Partner, KPMG LLP
Ms. Cristina Pinho
Former Corporate Exectuive Director, Brazialian
Petroleum and Gas Institiute
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 US, LLP
Minneapolis, MN
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.
51 Mercedes Way
Edgewood, NY 11717
(855) 588-5049
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, MN 55014
(763) 225-6600
investors@ntic.com
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
8:00 am (local time) on Friday, January 19, 2024 at
NTIC’s corporate headquarters:
Northern Technologies International Corporation
4201 Woodland Road
Circle Pines, MN 55014
(763) 225-6600